-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LoE48PdPT8VQQgbNE/JtOuGcC+XolzJZJ5bqZJv/J4YV/1lMDfOa1lLL1mwqx3oW dk6dzmoR3mHlEra8EpSM4w== 0000315066-98-001754.txt : 19980818 0000315066-98-001754.hdr.sgml : 19980818 ACCESSION NUMBER: 0000315066-98-001754 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980817 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY CONTRAFUND CENTRAL INDEX KEY: 0000024238 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046056833 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01400 FILM NUMBER: 98692574 BUSINESS ADDRESS: STREET 1: FIDELITY INVESTMENTS COMPANY STREET 2: 82 DEVONSHIRE STREET MAIL ZONE ZZ2 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: (617)439-1220 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAIL ZONE ZH1 CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY CONTRAFUND INC DATE OF NAME CHANGE: 19850618 FORMER COMPANY: FORMER CONFORMED NAME: CONTRAFUND INC DATE OF NAME CHANGE: 19810203 N-30D 1 FIDELITY (REGISTERED TRADEMARK) CONTRAFUND SEMIANNUAL REPORT JUNE 30, 1998 CONTENTS PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES. PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME. FUND TALK 6 THE MANAGER'S REVIEW OF FUND PERFORMANCE, STRATEGY AND OUTLOOK. INVESTMENT CHANGES 10 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S INVESTMENTS OVER THE PAST SIX MONTHS. INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS WITH THEIR MARKET VALUES. FINANCIAL STATEMENTS 26 STATEMENTS OF ASSETS AND LIABILITIES, OPERATIONS, AND CHANGES IN NET ASSETS, AS WELL AS FINANCIAL HIGHLIGHTS. NOTES 30 NOTES TO THE FINANCIAL STATEMENTS. 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. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: As the first half of 1998 drew to a close, benign inflation, low interest rates and moderate economic growth provided a solid foundation for strong stock and bond performance. Investors seemed to put concerns about the financial and economic turmoil in Asia aside for the most part, responding instead to stronger-than-expected corporate earnings and a sound domestic economy. The bond markets tended to benefit from the moderate growth in the economy and a historically low rate of inflation, as well their traditional status as a refuge from volatility in the equity markets. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that there is no assurance that a money market fund will achieve its goal of maintaining a stable net asset value of $1.00 per share, and that these types of funds are neither insured nor guaranteed by any agency of the U.S. government. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. If you have questions, please call us at 1-800-544-8888. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10 MONTHS YEAR YEARS YEARS FIDELITY CONTRAFUND 17.31% 29.73% 152.70% 691.81% FIDELITY CONTRAFUND 13.79% 25.84% 145.12% 668.05% (INCL. 3.00% SALES CHARGE) S&P 500 (REGISTERED TRADEMARK) 17.71% 30.16% 182.41% 448.92% GROWTH FUNDS AVERAGE 15.10% 25.38% 141.15% 360.50% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the growth funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. The past six months average represents a peer group of 1,012 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 JUNE 30, 1998 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS FIDELITY CONTRAFUND 29.73% 20.37% 22.99% FIDELITY CONTRAFUND 25.84% 19.64% 22.61% (INCL. 3.00% SALES CHARGE) S&P 500 30.16% 23.08% 18.56% GROWTH FUNDS AVERAGE 25.38% 18.19% 16.13% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a slightly different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER 10 YEARS Contrafund S&P 500 00022 SP001 1988/06/30 9700.00 10000.00 1988/07/31 9769.29 9962.00 1988/08/31 9553.73 9623.29 1988/09/30 9946.35 10033.24 1988/10/31 10208.10 10312.17 1988/11/30 10131.11 10164.70 1988/12/31 9987.60 10342.59 1989/01/31 10650.81 11099.66 1989/02/28 10587.64 10823.28 1989/03/31 11148.21 11075.46 1989/04/30 11866.69 11650.28 1989/05/31 12482.52 12122.12 1989/06/30 12403.57 12053.02 1989/07/31 13540.50 13141.41 1989/08/31 13927.37 13398.98 1989/09/30 14195.81 13344.05 1989/10/31 13769.46 13034.46 1989/11/30 14085.28 13300.37 1989/12/31 14297.43 13619.58 1990/01/31 13539.11 12705.70 1990/02/28 13820.28 12869.61 1990/03/31 14118.50 13210.65 1990/04/30 13973.65 12880.38 1990/05/31 15294.33 14136.22 1990/06/30 15490.31 14040.10 1990/07/31 15200.61 13995.17 1990/08/31 14016.26 12730.00 1990/09/30 13428.34 12110.05 1990/10/31 13496.50 12057.98 1990/11/30 14297.43 12836.92 1990/12/31 14860.19 13195.07 1991/01/31 16307.66 13770.38 1991/02/28 17541.02 14754.96 1991/03/31 18568.81 15112.03 1991/04/30 18671.59 15148.30 1991/05/31 19862.12 15802.71 1991/06/30 18748.67 15078.94 1991/07/31 20076.24 15781.62 1991/08/31 21086.90 16155.65 1991/09/30 21146.86 15885.85 1991/10/31 21754.97 16098.72 1991/11/30 20607.27 15449.94 1991/12/31 23021.18 17217.41 1992/01/31 23677.64 16897.17 1992/02/29 24446.01 17116.83 1992/03/31 23782.57 16783.05 1992/04/30 24040.57 17276.48 1992/05/31 24298.58 17361.13 1992/06/30 23708.85 17102.45 1992/07/31 24307.79 17801.94 1992/08/31 23856.28 17437.00 1992/09/30 24261.72 17642.76 1992/10/31 24805.38 17704.51 1992/11/30 26003.26 18308.23 1992/12/31 26680.15 18533.42 1993/01/31 27525.13 18689.10 1993/02/28 27706.72 18943.27 1993/03/31 29030.75 19342.98 1993/04/30 29226.91 18874.88 1993/05/31 30384.21 19380.72 1993/06/30 30394.02 19436.93 1993/07/31 30727.48 19359.18 1993/08/31 32218.25 20092.89 1993/09/30 32286.91 19938.18 1993/10/31 32571.33 20350.90 1993/11/30 31345.37 20157.56 1993/12/31 32396.69 20401.47 1994/01/31 33415.65 21095.12 1994/02/28 33175.90 20523.44 1994/03/31 31864.09 19628.62 1994/04/30 32255.52 19879.87 1994/05/31 32075.67 20205.90 1994/06/30 30837.93 19710.85 1994/07/31 31462.09 20357.37 1994/08/31 32773.89 21192.02 1994/09/30 32340.15 20672.82 1994/10/31 33260.53 21137.95 1994/11/30 31747.72 20368.11 1994/12/31 32033.36 20670.17 1995/01/31 31514.99 21206.15 1995/02/28 32784.47 22032.55 1995/03/31 33979.90 22682.73 1995/04/30 35513.87 23350.74 1995/05/31 36370.77 24284.07 1995/06/30 38677.00 24848.19 1995/07/31 41639.13 25672.15 1995/08/31 42189.25 25736.59 1995/09/30 42961.52 26822.67 1995/10/31 42178.67 26726.92 1995/11/30 43289.47 27900.23 1995/12/31 43655.09 28437.59 1996/01/31 44642.55 29405.60 1996/02/29 44914.71 29678.19 1996/03/31 46161.34 29963.99 1996/04/30 47589.51 30405.66 1996/05/31 47988.91 31189.82 1996/06/30 47625.82 31308.66 1996/07/31 45398.84 29925.44 1996/08/31 47129.59 30556.57 1996/09/30 49066.09 32276.29 1996/10/31 50639.49 33166.47 1996/11/30 53580.56 35673.52 1996/12/31 53231.67 34966.83 1997/01/31 55302.84 37151.56 1997/02/28 53850.48 37442.83 1997/03/31 52450.93 35904.30 1997/04/30 53632.20 38047.79 1997/05/31 56855.01 40364.14 1997/06/30 59204.71 42172.45 1997/07/31 64225.10 45528.11 1997/08/31 62119.36 42977.63 1997/09/30 66266.65 45331.51 1997/10/31 64250.78 43817.44 1997/11/30 64148.06 45845.75 1997/12/31 65474.17 46632.92 1998/01/31 65291.63 47148.68 1998/02/28 69943.17 50549.04 1998/03/31 73514.86 53137.66 1998/04/30 74344.50 53672.23 1998/05/31 72769.59 52749.60 1998/06/30 76805.31 54892.29 IMATRL PRASUN SHR__CHT 19980630 19980714 162822 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Contrafund on June 30, 1988 and the current 3.00% sales charge was paid. As the chart shows, by June 30, 1998, the value of the investment would have grown to $76,805 - a 668.05% increase on the initial investment. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $54,892 - a 448.92% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP While U.S. equity markets did not perform as well in the second quarter as they did in the first, the Standard & Poor's 500 Index - a measure of the U.S. stock market - still produced a return of 17.71% for the six-month period that ended June 30, 1998. Recent volatility in the U.S. equity markets was triggered in part by renewed concerns over corporate profits and continued problems with Asian economies and stock markets. In mid-June, the major U.S. indexes along with Asian markets continued to sell off, driven by the fear that problems with Asian currencies and the Japanese economy may take longer than expected to be resolved. Contributing to the decline were concerns that Asia's crisis will inhibit the earnings growth of American companies. In typical fashion, however, U.S. stocks rebounded late in the period amid news that the economy grew stronger than expected - 5.4% annually - with inflation at 1.1%, a 34-year low. Overall, market sentiment during the past six-month period was influenced by the same factors that have supported U.S. stock prices over the past year - stable growth in the U.S. economy, low interest rates and low inflation. An interview with Will Danoff, Portfolio Manager of Fidelity Contrafund Q. HOW DID THE FUND PERFORM, WILL? A. For the six months that ended June 30, 1998, the fund posted a return of 17.31%. This topped the growth funds average, which returned 15.10% according to Lipper Analytical Services. The Standard & Poor's 500 Index returned 17.71% during this time. For the 12 months that ended June 30, 1998, the fund returned 29.73%. The Lipper group and S&P 500 index returned 25.38% and 30.16% during that time, respectively. I'd add that the overall market environment was tougher than the index indicated. The average stock in the S&P 500 appreciated 12%, and the Russell 3000 Index - which comprises both small and large companies - rose only 5% during the six-month period. Q. DID WE SEE MORE OF THE "NARROWNESS" THAT CHARACTERIZED THE STOCK MARKET THROUGH MUCH OF 1996 AND 1997? A. We did. Despite the strong S&P 500 showing, the larger, more well-known companies in the index were responsible for most of the gains. In fact, 60% of all the companies listed on the New York Stock Exchange actually declined in value during the period. The appreciation of the S&P 500 index surprised me, because the companies in the index have generated earnings growth of only around 2% so far in 1998. Thus, much of the index gain was due solely to price-to-earnings (P/E) ratio expansion. Normally, sluggish earnings growth produces poor results in the stock market, but the opposite occurred for the larger companies during the last six months. This trend made it difficult for active fund managers to top the return of the index. Q. CAN YOU IDENTIFY SOME OF THE FACTORS THAT HELPED THE FUND'S PERFORMANCE DURING THE PERIOD? A. The fund was positioned relatively well to capitalize on the strong U.S. economy, while avoiding those industries that were vulnerable to the severe economic weakness in Southeast Asia. For instance, several of the fund's cable TV stocks performed well, including Tele-Communications, Inc. and Comcast. When I bought these stocks over a year ago, the cable TV industry was out of favor among investors. New products - such as Internet access - and the consolidation of subscriber territories helped turn the industry around. As prospects brightened, I continued to increase the fund's exposure to cable stocks during the period. Time Warner, the fund's second-largest position at the end of the period and a leading entertainment company with an extensive cable business, also performed well. Another example was the fund's weighting in the retail sector, which jumped from around 7% six months ago to around 10% at the end of June. Retail stocks generally benefited from the healthy domestic economy and aided fund performance. Specifically, the fund's positions in Home Depot and the Gap performed well. Both of these companies are leaders in their respective retailing segments and have been able to grow their store bases by more than 20% annually. On the flip side of my strategy, the fund had less exposure to the semiconductor sector than the index. This below-market weighting turned out positively as the sector was one of the hardest hit by the problems emanating from Southeast Asia. Q. THE FUND'S TECHNOLOGY STAKE WAS INCREASED FROM AROUND 10% TO 18% DURING THE PERIOD. WHY DID TECHNOLOGY STOCKS APPEAL TO YOU? A. As the Asian economies continued to slow during the period, finding companies with rapid earnings growth became more difficult. With the help of Fidelity's able research staff, I was able to identify and build positions in several companies that were growing their earnings by 20% or more despite the tough global economy. Many of these companies were in the constantly changing technology sector. The fastest-growing and most exciting opportunities were in the Internet and telecommunications capital equipment sub-sectors. The Internet is still in its infancy period, but it has already changed the way people communicate, work, shop and gather information. In fact, industry consultants estimate that Internet usage is doubling every three months. The fund's positions in Internet-related companies such as America Online and Yahoo!, which have both shown strong revenue growth, were positive contributors. The telecommunications capital equipment industry provides the electronic infrastructure on which the Internet operates, and I felt many of the companies in this area were well-positioned to benefit from increased global data traffic. The fund's investments in WorldCom, Lucent Technologies, Northern Telecom, Alcatel and Cisco Systems performed well. Q. AS SHAREHOLDERS SCAN THE FUND'S LIST OF INVESTMENTS, THEY MAY COME TO THE CONCLUSION THAT THE FUND BECAME SOMEWHAT MORE GROWTH-ORIENTED DURING THE PERIOD. WOULD THIS BE ACCURATE? A. That would be a valid observation. Over the past six months, I've been both surprised and frustrated by how sharply many stocks have appreciated despite less than stellar earnings forecasts. For example, the S&P 500 index has risen 108% in the last three years ended June 30, while earnings for the index rose only 16%. That's a significant disparity and an indication that the vast majority of price appreciation of the S&P 500 index during that time has been P/E expansion, not earnings growth. In this difficult environment - in which most stocks look expensive relative to their growth rates - I've invested heavily in companies that were growing their earnings rapidly. I've emphasized companies that I felt would be able to sustain their growth rates despite the Asian crisis. In my opinion, these types of companies better justified the high P/E flavor prevalent in the market. For example, the fund added to its position in Associates First Capital during the period, one of the leading finance companies in its field. Associates' shares were just as expensive as most banks, but the company had a superb historical record and was growing its loan base close to 20% annually - more than twice that of the average financial institution. While many of the fund's holdings are not contrarian bets in the traditional sense of the term - that is, companies that are out of favor among investors - some holdings did reflect this approach. For instance, I bought a stake in pharmaceutical company Warner-Lambert at a time when much of the market was concerned about side effects of one of the company's drug products. In the last year, Warner-Lambert has introduced two new products with enormous potential. The company has also been able to grow its earnings by nearly 40% - more than twice the industry growth rate - while maintaining the same P/E multiple as the rest of the drug industry. At the end of the period, both Associates First Capital and Warner-Lambert were among the fund's largest 25 positions and each had contributed positively to performance. Q. WHICH INVESTMENTS FAILED TO MEET YOUR EXPECTATIONS OVER THE PAST SIX MONTHS? A. Although I did strip the fund of many of its energy-related positions, I held onto some - and other economically sensitive stocks - - for too long after the Asian crisis began in the summer of 1997. In retrospect, I should have sold these groups more aggressively during the second half of 1997. Some energy stocks that hurt performance included Schlumberger and Diamond Offshore. Every cyclical group performed worse than the market during the period, with the exception being the airline industry, which benefited from falling oil prices. Other cyclical stocks that detracted from performance included Sealed Air, a specialty chemicals company; oil refinery Tosco; and Remec, a supplier to the aerospace and defense industry. I've also been disappointed with my difficulty adapting to the current expensive level of the market and thus missing many good opportunities, particularly in the pharmaceuticals area. The drug companies maintained their strong earnings momentum with the help of a record number of new product approvals and produced better-than-index returns despite trading at high valuations during the period. The fund has increased its commitment to the pharmaceutical sector, but its low exposure to these stocks throughout the period detracted from performance. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I've been surprised by the market's strength this year. Corporate earnings growth has slowed, but stocks have continued to appreciate, propelled by higher P/E ratios and lower interest rates. Going forward, I'll continue to emphasize those companies with exceptional growth opportunities that justify the high valuations in today's market. WILL DANOFF DISCUSSES SEVERAL PORTFOLIO-RELATED CHANGES: "I MADE A COUPLE OF STRATEGIC MOVES DURING THE PERIOD THAT I FEEL HELPED THE FUND'S OVERALL PERFORMANCE. FIRST, I REDUCED THE TOTAL NUMBER OF INDIVIDUAL POSITIONS IN THE FUND FROM AROUND 600 AT THE BEGINNING OF THE PERIOD TO APPROXIMATELY 350. TYPICALLY, THE FUND WILL RECEIVE MOST OF ITS PERFORMANCE BOOST OR DRAG FROM ITS TOP HOLDINGS, AND THIS STREAMLINING OF POSITIONS ENABLED ME TO CONCENTRATE ON MY VERY BEST IDEAS. "ANOTHER CHANGE I MADE WAS TO REDUCE THE FUND'S ENERGY-RELATED EXPOSURE CONSIDERABLY, FROM 13% AT THE BEGINNING OF 1998 TO UNDER 1% AT THE END OF THE PERIOD. THIS STRATEGY WAS IN LINE WITH MY ATTEMPT TO TRY TO CONTAIN THE FUND'S EXPOSURE TO SECTORS THAT WERE VULNERABLE TO THE ASIAN CRISIS. SINCE ASIA ACCOUNTS FOR CLOSE TO 20% OF WORLDWIDE OIL DEMAND, THE ENERGY SECTOR WAS QUITE SUSCEPTIBLE TO THE RECESSION IN JAPAN AS WELL AS TO THE DEPRESSED ECONOMIES OF SOUTHEAST ASIA. AS ASIAN OIL DEMAND CONTINUED TO TAIL OFF DURING THE PERIOD, OIL PRICES PLUMMETED BY MORE THAN 40%. BECAUSE OF THE EXTREMELY WEAK PRICING ENVIRONMENT, ENERGY STOCKS LAGGED THE S&P 500 AND MANY STOCKS IN THE SECTOR DECLINED." FUND FACTS GOAL: TO INCREASE THE VALUE OF THE FUND'S SHARES OVER THE LONG TERM BY INVESTING IN COMPANIES WHOSE VALUE IS NOT FULLY RECOGNIZED BY THE PUBLIC FUND NUMBER: 022 TRADING SYMBOL: FCNTX START DATE: MAY 17, 1967 SIZE: AS OF JUNE 30, 1998, MORE THAN $35.4 BILLION MANAGER: WILL DANOFF, SINCE 1990; MANAGER, VIP II: CONTRAFUND, SINCE 1995; FIDELITY SELECT RETAILING PORTFOLIO, 1986-1989; JOINED FIDELITY IN 1986 (CHECKMARK) THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. INVESTMENT CHANGES TOP TEN STOCKS AS OF JUNE 30, 1998 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO WORLDCOM, INC. 3.0 1.2 TIME WARNER, INC. 2.9 1.5 TYCO INTERNATIONAL LTD. 2.6 1.9 LUCENT TECHNOLOGIES, INC. 2.2 1.2 MICROSOFT CORP. 1.9 1.0 CVS CORP. 1.7 1.2 AMERICA ONLINE, INC. 1.5 0.1 GILLETTE CO. 1.4 0.5 CBS CORP. 1.3 1.4 AMERICAN EXPRESS CO. 1.3 0.7 TOP FIVE MARKET SECTORS AS OF JUNE 30, 1998 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 18.0 10.9 FINANCE 11.8 12.7 MEDIA & LEISURE 10.5 8.5 RETAIL & WHOLESALE 10.3 7.5 UTILITIES 9.5 5.3 ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JUNE 30, 1998 * AS OF DECEMBER 31, 1997 ** ROW: 1, COL: 1, VALUE: 85.0 ROW: 1, COL: 2, VALUE: 4.8 ROW: 1, COL: 3, VALUE: 1.1 ROW: 1, COL: 4, VALUE: 9.1 STOCKS 85.8% BONDS 4.7% SHORT-TERM INVESTMENTS 9.5% FOREIGN INVESTMENTS 14.1% STOCKS 86.0% BONDS 4.8% CONVERTIBLE SECURITIES 0.1% SHORT-TERM INVESTMENTS 9.1% FOREIGN INVESTMENTS 6.9% ROW: 1, COL: 1, VALUE: 85.8 ROW: 1, COL: 2, VALUE: 4.7 ROW: 1, COL: 3, VALUE: 0.0 ROW: 1, COL: 4, VALUE: 9.5 ** * INVESTMENTS JUNE 30, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 85.7% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 0.2% AEROSPACE & DEFENSE - 0.1% Orbital Sciences Corp. (a) 766,000 $ 28,629 DEFENSE ELECTRONICS - 0.1% Remec, Inc. (a)(d) 2,039,050 23,194 TOTAL AEROSPACE & DEFENSE 51,823 BASIC INDUSTRIES - 1.5% CHEMICALS & PLASTICS - 1.5% Avery Dennison Corp. 755,200 40,592 Crompton & Knowles Corp. 2,049,317 51,617 Cytec Industries, Inc. (a) 1,109,800 49,109 du Pont (E.I.) de Nemours & Co. 412,500 30,783 MacDermid, Inc. 85,700 2,421 Monsanto Co. 4,170,000 232,999 Sealed Air Corp. (a) 3,866,624 142,098 549,619 CONSTRUCTION & REAL ESTATE - 0.6% BUILDING MATERIALS - 0.2% Masco Corp. 1,044,200 63,174 REAL ESTATE - 0.0% Grand Palais Management Co. LP (a)(f) 398,400 -- REAL ESTATE INVESTMENT TRUSTS - 0.4% Crescent Real Estate Equities, Inc. 477,000 16,039 Equity Office Properties Trust 2,192,000 62,198 Starwood Hotels & Resorts Trust 1,207,568 58,341 136,578 TOTAL CONSTRUCTION & REAL ESTATE 199,752 DURABLES - 1.1% AUTOS, TIRES, & ACCESSORIES - 0.7% AutoZone, Inc. (a) 680,300 21,727 Breed Technologies, Inc. 1,643,700 25,169 Danaher Corp. 3,788,400 138,987 SPX Corp. (a)(d) 1,256,100 80,861 266,744 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED CONSUMER ELECTRONICS - 0.1% General Motors Corp. Class H 443,800 $ 20,914 Gemstar International Group Ltd. (a) 837,800 31,365 52,279 TEXTILES & APPAREL - 0.3% Jones Apparel Group, Inc. 509,000 18,610 Kellwood Co. 19,000 679 NIKE, Inc. Class B 463,700 22,576 Warnaco Group, Inc. Class A 1,209,900 51,345 93,210 TOTAL DURABLES 412,233 ENERGY - 0.8% ENERGY SERVICES - 0.1% ENSCO International, Inc. 696,300 12,098 Smith International, Inc. (a) 1,140,200 39,693 51,791 OIL & GAS - 0.7% Anadarko Petroleum Corp. 302,500 20,324 British Petroleum PLC ADR 461,330 40,712 Burlington Resources, Inc. 807,508 34,773 Royal Dutch Petroleum Co. 586,900 32,169 Tosco Corp. 3,722,800 109,357 237,335 TOTAL ENERGY 289,126 FINANCE - 11.8% BANKS - 2.6% Banc One Corp. 3,855,710 215,197 Bank of New York Co., Inc. 1,572,900 95,455 Comerica, Inc. 691,550 45,815 Credito Italiano Ord. 8,205,000 42,540 Fifth Third Bancorp 305,700 19,259 M&T Bank Corp. 59,830 33,146 North Fork Bancorp., Inc. 3,299,789 80,639 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED BANKS - CONTINUED Providian Financial Corp. 482,800 $ 37,930 U.S. Bancorp 6,968,848 299,660 Wells Fargo & Co. 213,400 78,745 948,386 CREDIT & OTHER FINANCE - 3.0% American Express Co. 4,086,500 465,861 Associates First Capital Corp. 5,330,249 409,763 Greenpoint Financial Corp. 2,486,900 93,570 Household International, Inc. 2,523,264 125,532 UniCapital Corp. 262,700 5,024 1,099,750 FEDERAL SPONSORED CREDIT - 1.7% Freddie Mac 5,588,000 262,985 Fannie Mae 5,812,900 353,134 616,119 INSURANCE - 3.0% AFLAC, Inc. 2,007,000 60,837 ACE Ltd. 1,842,600 71,861 Allmerica Financial Corp. 615,889 40,033 Allstate Corp. 2,454,800 224,768 AMBAC, Inc. 542,800 31,754 American International Group, Inc. 763,900 111,529 Aon Corp. 841,350 59,105 Berkshire Hathaway, Inc. Class A (a) 330 25,841 General Re Corp. 380,000 96,330 Hartford Financial Services Group, Inc. 82,200 9,402 Life RE Corp. 87,300 7,159 Mutual Risk Management Ltd. 663,200 24,165 Progressive Corp. 538,300 75,900 SunAmerica, Inc. 2,089,550 120,019 Torchmark Corp. 779,300 35,653 UNUM Corp. 1,439,200 79,876 1,074,232 SAVINGS & LOANS - 0.9% Dime Bancorp., Inc. 2,309,400 69,138 Golden State Bancorp 350,900 10,439 Washington Mutual, Inc. 5,728,290 248,823 328,400 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED SECURITIES INDUSTRY - 0.6% Travelers Group, Inc. (The) 3,888,099 $ 235,716 TOTAL FINANCE 4,302,603 HEALTH - 6.9% DRUGS & PHARMACEUTICALS - 4.2% American Home Products Corp. 3,774,400 195,325 Amgen, Inc. 524,200 34,270 Biogen, Inc. 566,300 27,749 Bristol-Myers Squibb Co. 1,975,800 227,094 Elan Corp. PLC ADR (a) 1,166,600 75,027 Forest Laboratories, Inc. (a) 1,398,400 49,993 Merck & Co., Inc. 1,159,700 155,110 Pfizer, Inc. 1,770,900 192,475 Quintiles Transnational Corp. (a) 337,100 16,581 Schering-Plough Corp. 2,008,700 184,047 Warner-Lambert Co. 5,212,400 361,610 Xoma, Inc. (a)(e) 1,098 4 1,519,285 MEDICAL EQUIPMENT & SUPPLIES - 1.4% Allegiance Corp. 887,500 45,484 Becton, Dickinson & Co. 729,800 56,651 Boston Scientific Corp. 87,400 6,260 Cardinal Health, Inc. 1,549,050 145,223 Guidant Corp. 1,073,300 76,540 Omnicare, Inc. 1,101,200 41,983 Sofamor/Danek Group, Inc. (a) 826,300 71,527 Steris Corp. (a) 276,100 17,558 Sybron International Corp. (a) 1,405,500 35,489 U.S. Surgical Corp. 570,900 26,047 522,762 MEDICAL FACILITIES MANAGEMENT - 1.3% Columbia/HCA Healthcare Corp. 2,928,200 85,284 HEALTHSOUTH Corp. (a) 2,152,500 57,445 Health Management Associates, Inc. Class A (a) 5,820,425 194,620 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL FACILITIES MANAGEMENT - CONTINUED Oxford Health Plans, Inc. (a) 975,700 $ 14,940 Trigon Healthcare, Inc. (a) 437,900 15,847 United HealthCare Corp. 1,671,200 106,121 474,257 TOTAL HEALTH 2,516,304 HOLDING COMPANIES - 0.2% Tele-Communications, Inc. (TCI Ventures Group), Series A (a) 4,462,940 89,538 INDUSTRIAL MACHINERY & EQUIPMENT - 6.7% ELECTRICAL EQUIPMENT - 2.6% Alcatel Alsthom Compagnie Generale d'Electricite SA 1,419,510 288,234 American Power Conversion Corp. 1,719,100 51,573 General Instrument Corp. (a) 2,907,100 79,037 L-3 Communications Holdings, Inc. 450,600 14,729 Loral Space & Communications Ltd. (a)(d) 12,847,667 362,947 Philips Electronics NV 879,000 74,715 Rayovac Corp. (d) 2,673,900 60,664 931,899 INDUSTRIAL MACHINERY & EQUIPMENT - 3.0% Illinois Tool Works, Inc. 327,900 21,867 Kaydon Corp. 1,254,100 44,285 Mannesmann AG Ord. 791,900 80,110 New Holland NV 544,100 10,678 Stanley Works 109,200 4,539 Tyco International Ltd. 14,933,610 940,817 1,102,296 POLLUTION CONTROL - 1.1% Republic Services, Inc. 3,154,200 75,701 USA Waste Services, Inc. (a) 3,888,292 191,984 Waste Management, Inc. 3,599,100 125,969 393,654 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,427,849 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - 10.5% BROADCASTING - 6.5% Citadel Communications Corp. 343,500 $ 5,496 CBS Corp. 15,316,218 486,290 Comcast Corp. Class A (d) 2,117,300 84,163 Comcast Corp. Class A special 2,579,000 104,691 Jacor Communications, Inc. Class A (a) 501,400 29,583 MediaOne Group, Inc. 2,782,900 122,274 Metromedia Fiber Network, Inc. Class A 15,200 709 NTL, Inc. (a) 914,900 48,947 Scandinavian Broadcasting Corp. (a)(d) 855,900 25,837 Scripps E.W. Co. Class A 297,400 16,301 TCA Cable TV, Inc. 640,000 38,400 Tele-Communications, Inc.: (TCI Group), Series A (a) 8,143,430 313,013 (Liberty Media Group), Series A 257,300 9,986 Time Warner, Inc. 12,261,820 1,047,619 USA Networks, Inc. (a) 814,400 20,462 2,353,771 ENTERTAINMENT - 1.2% Disney (Walt) Co. 1,135,400 119,288 Premier Parks, Inc. (a) 1,837,800 122,443 Viacom, Inc. (a): Class A 1,206,000 70,551 Class B (non-vtg.) 2,034,300 118,498 430,780 LEISURE DURABLES & TOYS - 0.1% Harley-Davidson, Inc. 473,100 18,333 Mattel, Inc. 327,400 13,853 32,186 PUBLISHING - 0.9% ACNielsen Corp. 22,200 561 Cognizant Corp. 4,646,200 292,711 Dow Jones & Co., Inc. 78,600 4,382 Meredith Corp. 34,400 1,615 Thomson Corp. 84,700 2,464 Ziff-Davis, Inc. 1,469,200 20,385 322,118 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED RESTAURANTS - 1.8% Darden Restaurants, Inc. 3,091,700 $ 49,081 McDonald's Corp. 5,159,400 355,999 Papa John's International, Inc. (a) 1,295,500 51,091 Pizzaexpress PLC 1,491,600 21,443 ShowBiz Pizza Time, Inc. (a) 561,000 22,615 Starbucks Corp. (a) 2,490,100 133,065 Wendy's International, Inc. 1,113,900 26,177 659,471 TOTAL MEDIA & LEISURE 3,798,326 NONDURABLES - 5.3% BEVERAGES - 1.7% Cadbury-Schweppes PLC Ord. 5,247,304 81,165 Coca-Cola Co. (The) 4,474,600 382,578 Coca-Cola Enterprises, Inc. 1,027,400 40,325 PepsiCo, Inc. 2,336,100 96,218 600,286 FOODS - 1.4% American Italian Pasta Co. Series A (d) 1,398,400 52,090 Campbell Soup Co. 863,900 45,895 Earthgrains Co. 425,900 23,797 Flowers Industries, Inc. 1,633,000 33,374 Heinz (H.J.) Co. 80,000 4,490 Hershey Foods Corp. 902,500 62,273 Keebler Foods Co. (a) 2,501,300 68,786 Nestle SA (Reg.) 50,365 107,538 Quaker Oats Co. 931,100 51,152 Wrigley (Wm.) Jr. Co. 734,400 71,971 521,366 HOUSEHOLD PRODUCTS - 2.2% Colgate-Palmolive Co. 205,100 18,049 Dial Corp. 1,769,900 45,907 Gillette Co. 9,142,500 518,265 Estee Lauder Companies, Inc. 1,019,500 71,046 Unilever NV Ord. 1,785,080 141,353 794,620 TOTAL NONDURABLES 1,916,272 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) PRECIOUS METALS - 0.2% Euro-Nevada Mining Ltd. 2,193,800 $ 29,968 Franco-Nevada Mining Corp. 2,440,500 48,469 78,437 RETAIL & WHOLESALE - 10.2% APPAREL STORES - 1.6% Charming Shoppes, Inc. (a)(d) 10,620,500 50,447 Gap, Inc. 4,792,500 295,338 Limited, Inc. (The) 2,580,000 85,463 TJX Companies, Inc. 6,696,600 161,555 592,803 DRUG STORES - 2.0% CVS Corp. 16,209,420 631,154 Rite Aid Corp. 1,626,800 61,107 Walgreen Co. 453,900 18,752 711,013 GENERAL MERCHANDISE STORES - 1.5% Costco Companies, Inc. 2,101,200 132,507 Dillards, Inc. Class A 635,000 26,313 Federated Department Stores, Inc. (a) 708,600 38,132 Kohls Corp. (a) 898,900 46,630 Proffitts, Inc. (a) 1,085,700 43,835 Stein Mart, Inc. (a)(d) 2,550,300 34,429 Wal-Mart Stores, Inc. 3,464,700 210,481 532,327 GROCERY STORES - 2.0% Dominick's Supermarkets, Inc. (a)(d) 1,556,700 69,370 Meyer (Fred), Inc. (a) 7,088,650 301,268 Richfood Holdings, Inc. Class A 2,079,050 43,010 Safeway, Inc. (a) 7,659,200 311,634 Whole Foods Market, Inc. (a) 329,300 19,923 745,205 RETAIL & WHOLESALE, MISCELLANEOUS - 3.1% AgriBioTech, Inc. 96,300 2,666 Best Buy Co., Inc. (a) 301,300 10,884 Boots Co. PLC Class L (The) 1,746,240 28,918 Brylane, Inc. (a) 221,900 10,207 CDnow, Inc. 61,400 1,236 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED Circuit City Stores, Inc. - Circuit City Group 2,426,900 $ 113,761 Home Depot, Inc. 3,977,650 330,394 Lowe's Companies, Inc. 1,021,000 41,414 N2K, Inc. (d) 1,138,900 22,351 Office Depot, Inc. (a) 2,194,800 69,273 PETsMART, Inc. (a) 1,143,400 11,434 School Specialty, Inc. 513,775 8,413 Staples, Inc. (a) 6,619,200 191,543 Tandy Corp. 2,335,000 123,901 U.S. Office Products Co. (d) 1,438,494 28,051 Viking Office Products, Inc. (a) 3,019,100 94,724 Williams-Sonoma, Inc. 881,700 28,049 1,117,219 TOTAL RETAIL & WHOLESALE 3,698,567 SERVICES - 1.9% ADVERTISING - 0.7% CMG Information Services, Inc. (a) 489,100 34,604 Interpublic Group of Companies, Inc. 851,650 51,685 Lamar Advertising Co. Class A 275,300 9,876 Outdoor Systems, Inc. (a) 4,570,787 127,982 Preview Travel, Inc. 137,700 4,733 Young & Rubicam, Inc. 429,000 13,728 242,608 EDUCATIONAL SERVICES - 0.3% Apollo Group, Inc. Class A 2,278,350 75,328 Devry, Inc. (a) 894,700 19,627 94,955 LEASING & RENTAL - 0.1% Hertz Corp. Class A 399,800 17,716 United Rentals, Inc. 488,100 20,500 38,216 PRINTING - 0.0% Big Flower Holdings, Inc. (a) 355,300 10,659 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - CONTINUED SERVICES - 0.8% APAC Teleservices, Inc. 1,069,400 $ 6,249 Consolidation Capital Corp. 1,032,200 23,208 Hays PLC 1,957,100 32,802 Medpartners, Inc. (a) 4,723,400 37,787 Nova Corp. 262,100 9,370 PMT Services, Inc. 364,600 9,275 Robert Half International, Inc. (a) 2,031,950 113,535 Service Corp. International 361,600 15,504 ServiceMaster Co. 1,613,400 61,410 309,140 TOTAL SERVICES 695,578 TECHNOLOGY - 18.0% COMMUNICATIONS EQUIPMENT - 5.6% Advanced Fibre Communication, Inc. (d) 4,807,700 192,608 Ascend Communications, Inc. 1,899,800 94,159 Aspect Telecommunications Corp. (a) 469,900 12,864 Ciena Corp. (a) 1,498,700 104,347 Cisco Systems, Inc. (a) 4,024,850 370,538 Inter-Tel, Inc. 635,100 10,162 Intermedia Communications, Inc. (a) 937,714 39,325 Lucent Technologies, Inc. 9,570,900 796,179 Nokia Corp. AB sponsored ADR 262,200 19,026 Northern Telecom Ltd. 3,790,100 215,360 RELTEC Corp. (a) 230,900 10,391 Tellabs, Inc. (a) 2,592,400 185,681 2,050,640 COMPUTER SERVICES & SOFTWARE - 7.8% Affiliated Computer Services, Inc. Class A 1,162,900 44,772 America Online, Inc. (a) 5,223,400 553,680 Aspect Development, Inc. (a) 266,600 20,162 Automatic Data Processing, Inc. 2,751,600 200,523 Axent Technologies, Inc. 120,100 3,678 Aztec Technology Partners, Inc. 313,985 2,394 BMC Software, Inc. (a) 2,036,900 105,791 BEA Systems, Inc. (a) 135,400 3,106 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED CBT Group PLC sponsored ADR 941,800 $ 50,386 CNET, Inc. (a) 555,700 37,927 Cambridge Technology Partners Massachusetts, Inc. (a) 393,300 21,484 Cap Gemini Sogeti SA 460,507 72,162 Ceridian Corp. (a) 1,954,300 114,815 CheckFree Holdings Corp. (a) 673,100 19,814 Ciber, Inc. 222,000 8,436 Computer Associates International, Inc. 502,700 27,931 DST Systems, Inc. (a) 265,900 14,890 Documentum, Inc. (a)(d) 1,090,000 52,320 ECI Telecom Ltd. 202,200 7,658 EarthLink Network, Inc. (a) 288,600 22,150 Electronic Arts, Inc. (a) 939,207 50,717 Equifax, Inc. 132,800 4,822 Fair, Isaac & Co., Inc. 60,200 2,288 HBO & Co. 2,063,600 72,742 International Network Services 4,400 180 Intuit, Inc. (a) 192,000 11,760 J.D. Edwards & Co. 908,200 38,996 Legato Systems, Inc. 360,900 14,075 Lycos, Inc. (a)(d) 1,464,700 110,402 Mercury Interactive Group Corp. 63,200 2,820 Microsoft Corp. (a) 6,457,300 699,810 Networks Associates, Inc. (a) 480,200 22,990 Paychex, Inc. 1,054,800 42,917 Policy Management Systems Corp. (a) 769,000 30,183 RealNetworks, Inc. 680,300 25,384 Sabre Group Holdings, Inc. Class A (a) 820,300 31,171 Sapient Corp. 227,800 12,016 Shared Medical Systems Corp. 77,300 5,677 Siebel Systems, Inc. (a) 150,100 4,841 SportsLine USA, Inc. 923,100 33,751 Technology Solutions, Inc. 76,300 2,418 Yahoo, Inc. (a) 1,447,450 227,973 2,832,012 COMPUTERS & OFFICE EQUIPMENT - 2.5% Celestica, Inc. (sub-vtg.) 1,271,000 23,150 Dell Computer Corp. (a) 2,643,100 245,313 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - CONTINUED EMC Corp. (a) 4,090,500 $ 183,306 Gateway 2000, Inc. 218,300 11,051 MMC Networks, Inc. 235,900 7,519 Symbol Technologies, Inc. 1,856,450 70,081 Unisys Corp. (a) 10,082,100 284,819 Xerox Corp. 714,000 72,560 897,799 ELECTRONIC INSTRUMENTS - 0.8% Thermo Instrument Systems, Inc. (a) 1,779,975 46,724 Thermo Electron Corp. (a) 5,061,500 173,040 Waters Corp. (a) 1,410,800 83,149 302,913 ELECTRONICS - 1.2% Broadcom Corp. Class A 78,800 5,802 Intel Corp. 362,600 26,878 PMC-Sierra, Inc. (a) 515,000 24,141 Sanmina Corp. (a) 717,200 31,109 Texas Instruments, Inc. 2,143,600 124,999 Uniphase Corp. (a)(d) 1,807,100 113,452 Vitesse Semiconductor Corp. (a)(d) 3,809,800 117,628 444,009 PHOTOGRAPHIC EQUIPMENT - 0.1% Eastman Kodak Co. 302,600 22,109 TOTAL TECHNOLOGY 6,549,482 TRANSPORTATION - 0.6% AIR TRANSPORTATION - 0.4% Southwest Airlines Co. 2,469,550 73,160 Viad Corp. 2,110,400 58,564 131,724 RAILROADS - 0.1% Norfolk Southern Corp. 1,589,900 47,399 TRUCKING & FREIGHT - 0.1% C.H. Robinson Worldwide, Inc. 953,200 23,711 Swift Transportation Co., Inc. (a) 1,548,000 30,670 54,381 TOTAL TRANSPORTATION 233,504 .COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 9.2% CELLULAR - 1.0% AirTouch Communications, Inc. 2,501,200 $ 146,164 Bell Canada International, Inc. 1,192,700 28,035 Orange PLC (a) 1,965,673 20,816 SkyTel Communications, Inc. (d) 3,091,500 72,360 Teleglobe, Inc. 373,700 9,981 Vodafone Group PLC sponsored ADR 634,300 79,961 357,317 GAS - 0.6% Enron Corp. 2,723,000 147,212 Williams Companies, Inc. 1,494,200 50,429 197,641 TELEPHONE SERVICES - 7.6% AT&T Corp. 7,484,000 427,524 BCE, Inc. 2,191,100 93,078 E Spire Communications, Inc. (a) 1,434,000 32,355 Exodus Communications, Inc. (a) 758,100 33,925 Global Telesystems Group, Inc. (a) 927,600 45,221 MCI Communications Corp. 6,915,400 401,957 McLeodUSA, Inc. Class A (a) 2,791,600 108,523 NEXTLINK Communications, Inc. Class A (a)(d) 1,501,600 56,873 Qwest Communications International, Inc. 5,767,718 201,149 Sprint Corp. 945,000 66,623 Telefonica de Espana SA Ord. 3,017,356 139,387 U.S. LEC Corp. Class A (d) 568,200 11,861 WorldCom, Inc. (a) 22,334,915 1,081,847 Winstar Communications, Inc. (a) 1,532,600 65,806 2,766,129 TOTAL UTILITIES 3,321,087 TOTAL COMMON STOCKS (Cost $22,602,754) 31,130,100 PREFERRED STOCKS - 0.4% SHARES VALUE (NOTE 1) (000S) CONVERTIBLE PREFERRED STOCKS - 0.1% BASIC INDUSTRIES - 0.0% CHEMICALS & PLASTICS - 0.0% Sealed Air Corp., Series A, $2.00 472,792 $ 19,857 CONSTRUCTION & REAL ESTATE - 0.0% REAL ESTATE INVESTMENT TRUSTS - 0.0% Vornado Realty Trust, Series A, $3.25 156,300 8,968 RETAIL & WHOLESALE - 0.1% APPAREL STORES - 0.1% TJX Companies, Inc., Series E, $7.00 52,900 28,037 TOTAL CONVERTIBLE PREFERRED STOCKS 56,862 NONCONVERTIBLE PREFERRED STOCKS - 0.3% UTILITIES - 0.3% TELEPHONE SERVICES - 0.3% Telecom Italia Spa 3,137,000 15,226 Telecom Italia Mobile Spa de Risp 25,840,600 86,048 TOTAL NONCONVERTIBLE PREFERRED STOCKS 101,274 TOTAL PREFERRED STOCKS (Cost $95,628) 158,136 U.S. TREASURY OBLIGATIONS - 4.8% MOODY'S RATINGS (C) PRINCIPAL (UNAUDITED) AMOUNT (000S) 7 5/8%, 2/15/25 Aaa $ 252,110 317,422 6 7/8%, 8/15/25 Aaa 261,500 302,848 6% 2/15/26 Aaa 218,000 226,788 6.75% 8/15/26 Aaa 270,600 309,794 6.5% 11/15/26 Aaa 272,000 302,048 6.625% 2/15/27 Aaa 240,500 271,577 TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,656,653) 1,730,477 CASH EQUIVALENTS - 9.1% SHARES VALUE (NOTE 1) (000S) Taxable Central Cash Fund (b) 2,156,830,933 $ 2,156,831 MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.66%, dated 6/30/98 due 7/1/98 $ 1,163,855 1,163,672 TOTAL CASH EQUIVALENTS (Cost $3,320,503) 3,320,503 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $27,675,538) $ 36,339,216 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.61%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (d) Affiliated company (see Note 7 of Notes to Financial Statements). (e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $4,000 or 0% of net assets. (f) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION COST SECURITY DATE (000S) Grand Palais Managment Co. LP 7/24/96 $ - INCOME TAX INFORMATION At June 30 ,998, the aggregate cost of investment securities for income tax purposes was $27,709,548,000. Net unrealized appreciation aggregated $8,629,668,000, of which $8,942,840,000 related to appreciated investment securities and $313,172,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1998 (UNAUDITED) ASSETS INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 36,339,216 AGREEMENTS OF $1,163,672) (COST $27,675,538) - SEE ACCOMPANYING SCHEDULE CASH 1,110 FOREIGN CURRENCY HELD AT VALUE (COST $25,291) 25,384 RECEIVABLE FOR INVESTMENTS SOLD 525,301 RECEIVABLE FOR FUND SHARES SOLD 86,411 DIVIDENDS RECEIVABLE 19,329 INTEREST RECEIVABLE 43,632 OTHER RECEIVABLES 4,386 TOTAL ASSETS 37,044,769 LIABILITIES PAYABLE FOR INVESTMENTS PURCHASED $ 937,453 PAYABLE FOR FUND SHARES REDEEMED 74,138 ACCRUED MANAGEMENT FEE 12,817 OTHER PAYABLES AND ACCRUED EXPENSES 6,684 COLLATERAL ON SECURITIES LOANED, AT VALUE 590,813 TOTAL LIABILITIES 1,621,905 NET ASSETS $ 35,422,864 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 23,412,133 UNDISTRIBUTED NET INVESTMENT INCOME 116,245 ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 3,230,761 INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 8,663,725 AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR 648,576 SHARES OUTSTANDING $ 35,422,864 NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $54.62 ($35,422,864 (DIVIDED BY) 648,576 SHARES) MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $54.62) $56.31
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) INVESTMENT INCOME $ 117,253 DIVIDENDS (INCLUDING $363 RECEIVED FROM AFFILIATED ISSUERS) INTEREST (INCLUDING INCOME ON SECURITIES LOANED OF $5,588) 102,613 TOTAL INCOME 219,866 EXPENSES MANAGEMENT FEE $ 96,986 BASIC FEE PERFORMANCE ADJUSTMENT (21,816) TRANSFER AGENT FEES 31,645 ACCOUNTING AND SECURITY LENDING FEES 607 NON-INTERESTED TRUSTEES' COMPENSATION 84 CUSTODIAN FEES AND EXPENSES 490 REGISTRATION FEES 155 AUDIT 83 LEGAL 67 REPORTS TO SHAREHOLDERS 706 MISCELLANEOUS 169 TOTAL EXPENSES BEFORE REDUCTIONS 109,176 EXPENSE REDUCTIONS (6,850) 102,326 NET INVESTMENT INCOME 117,540 REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES (INCLUDING REALIZED GAIN (LOSS) OF 3,359,930 $(6,754) ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN CURRENCY TRANSACTIONS 612 3,360,542 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES 1,739,386 ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 156 1,739,542 NET GAIN (LOSS) 5,100,084 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 5,217,624 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED YEAR ENDED JUNE 30, 1998 DECEMBER 31, (UNAUDITED) 1997 INCREASE (DECREASE) IN NET ASSETS OPERATIONS $ 117,540 $ 254,060 NET INVESTMENT INCOME NET REALIZED GAIN (LOSS) 3,360,542 2,589,111 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 1,739,542 2,841,489 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,217,624 5,684,660 FROM OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS - (211,835) FROM NET INVESTMENT INCOME FROM NET REALIZED GAIN (45,528) (2,742,867) TOTAL DISTRIBUTIONS (45,528) (2,954,702) SHARE TRANSACTIONS 3,688,258 8,043,743 NET PROCEEDS FROM SALES OF SHARES REINVESTMENT OF DISTRIBUTIONS 44,984 2,914,929 COST OF SHARES REDEEMED (4,221,570) (6,778,358) NET INCREASE (DECREASE) IN NET ASSETS RESULTING (488,328) 4,180,314 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 4,683,768 6,910,272 NET ASSETS BEGINNING OF PERIOD 30,739,096 23,828,824 END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 35,422,864 $ 30,739,096 INCOME OF $116,245 AND $38,086, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 73,072 175,809 ISSUED IN REINVESTMENT OF DISTRIBUTIONS 940 65,437 REDEEMED (84,674) (147,380) NET INCREASE (DECREASE) (10,662) 93,866
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, 1998 (UNAUDITED) 1997 1996 1995 1994 1993 SELECTED PER-SHARE DATA NET ASSET VALUE, $ 46.63 $ 42.15 $ 38.02 $ 30.28 $ 30.84 $ 27.47 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME .18 D .42 D .46 .03 .06 .14 NET REALIZED AND 7.88 8.97 7.50 10.93 (.40) 5.66 UNREALIZED GAIN (LOSS) TOTAL FROM INVESTMENT 8.06 9.39 7.96 10.96 (.34) 5.80 OPERATIONS LESS DISTRIBUTIONS FROM NET INVESTMENT - (.35) (.38) (.09) - (.11) INCOME IN EXCESS OF NET - - - - - (.07) INVESTMENT INCOME FROM NET REALIZED GAIN (.07) (4.56) (3.45) (3.13) (.22) (2.25) TOTAL DISTRIBUTIONS (.07) (4.91) (3.83) (3.22) (.22) (2.43) NET ASSET VALUE, $ 54.62 $ 46.63 $ 42.15 $ 38.02 $ 30.28 $ 30.84 END OF PERIOD TOTAL RETURN B, C 17.31% 23.00% 21.94% 36.28% (1.12)% 21.43% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END OF $ 35,423 $ 30,739 $ 23,829 $ 14,858 $ 8,694 $ 6,208 PERIOD (IN MILLIONS) RATIO OF EXPENSES TO .67% A .70% .83% .98% 1.03% 1.08% AVERAGE NET ASSETS RATIO OF EXPENSES TO .63% A, E .67% E .79% E .96% E 1.00% E 1.06% E AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET INVESTMENT .73% A .91% 1.28% .44% .59% .46% INCOME TO AVERAGE NET ASSETS PORTFOLIO TURNOVER RATE 209% A 144% 159% 223% 235% 255% AVERAGE COMMISSION $ .0305 $ .0310 $ .0358 RATE F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. NOTES TO FINANCIAL STATEMENTS For the period ended June 30, 1998 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Contrafund (the fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company organized as a Massachusetts business trust and is authorized to issue an unlimited number of shares. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade date and settlement on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date , except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED the fair market value of the securities received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 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, passive foreign investment companies (PFIC), market discount, partnerships, non-taxable dividends, and losses deferred due to wash sales and excise tax regulations. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the Plan) non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Under the Plan, deferred amounts are treated as though equivalent dollar amounts had been invested in shares of a cross-section of Fidelity funds, including shares of the fund. Deferred amounts remain in the fund until distributed in accordance with the Plan. 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 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED 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. 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., (formerly FMR Texas, 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, restricted securities (excluding 144A issues) amounted to $0 or 0% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $31,751,083,000 and $31,913,449,000, respectively, of which U.S. government and government agency obligations aggregated $1,547,821,0000 and $1,307,108,000, 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 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED .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 annualized rate of .46% of average net assets after the performance adjustment. SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $3,628,000 on sales of shares of the fund of which $3,611,000 was retained. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .20% of average net assets. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $4,907,000 for the period. 5. SECURITY LENDING. The fund loaned securities to certain brokers who paid the fund negotiated lenders' fees. These fees are included in interest income. The fund receives U.S. Treasury obligations and/or cash as collateral against the loaned securities, in an amount at least equal to 102% of the market value of the loaned securities at the inception of each loan. This collateral must be maintained at not less than 100% of the market value of the loaned securities during the period of the loan. At period end, the value of the securities loaned and the value of collateral amounted to $583,959,000 and $590,813,000, respectively. 6. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of the fund's expenses. For the period, the fund's expenses were reduced by $6,132,000 under this arrangement. 6. EXPENSE REDUCTIONS - CONTINUED In addition, the fund has entered into arrangements with its custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $1,000 and $717,000, respectively, under these arrangements. 7. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME APAC Teleservices, Inc. $ - $ 23,881 $ - $ - Advanced Fibre Communication, Inc. 54,123 12,902 - 192,608 American Italian Pasta Co. Series A 9,561 - - 52,090 Anaren Microwave, Inc. - 2,248 - - Bally Total Fitness Holding Corp. - 1,844 - - Bedford Property Investors, Inc. - 173 - - Big Flower Holdings, Inc. - 11,691 - - Breed Technologies, Inc. 13,370 16,431 - - Charming Shoppes, Inc, 121 - - 50,447 Comcast Corp. Class A 21,654 21,370 106 84,163 Documentum, Inc. 14,789 - - 52,320 Dominick's Supermarkets, Inc. 14,827 3,334 - 69,370 ENSCO International, Inc. 2,185 29,700 - - Engineering Animation, Inc. 1,056 3,054 - - Franco-Nevada Mining Corp. - - - - Intermedia Communications, Inc. - 6,646 - - Kaydon Corp. 1,169 9,594 156 - Loral Space & Communications Ltd. 46,637 23,325 - 362,947 Lycos, Inc. 17,195 2,756 - 110,402 N2K, Inc. 11,196 2,930 - 22,351 NEXTLINK Communications, Inc. Class A 7,427 7,626 - 56,873 Orion Network Systems, Inc. 435 6,495 - - Quality Food Centers, Inc. - 22,008 - - Rayovac Corp. 6,671 - - 60,664 Remec, Inc. 19,984 - - 23,194 Richfood Holdings, Inc. Class A - 2,176 101 - SPX Corp. 17,635 - - 80,861 Scandinavian Broadcasting Corp. - - - 25,837 SkyTel Communications, Inc. 13,899 6,172 - 72,360 Smith International, Inc. 28,522 59,639 - - Stein Mart, Inc. 4,829 8,882 - 34,429 Swisher International Group, Inc. Class A - 1,384 - - 7. TRANSACTIONS WITH AFFILIATED COMPANIES - CONTINUED SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES - CONTINUED AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME U.S. LEC Corp. Class A $ 478 $ - $ - $ 11,861 U.S.A. Floral Products, Inc. - 6,805 - - Uniphase Corp. 14,092 16,618 - 113,452 U.S. Office Products Co. 1,075 - - 28,051 Virgin Express Holdings PLC sponsored ADR - - - - Vitesse Semiconductor Corp. 5,596 2,218 - 117,628 TOTALS $ 328,526 $ 311,902 $ 363 $ 1,621,908 MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpress(registered trademark) provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. (PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS 1 For mutual fund and brokerage trading. 2 For quotes.* 3 For account balances and holdings. 4 To review orders and mutual fund activity. 5 To change your PIN. *0 To speak to a Fidelity representative. BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (COMPUTER_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 and we'll send you an America Online CD or disk with up to 50 free hours of Web access. (COMPUTER_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 2300 Litton Lane - KH1A Hebron, KY 41048 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. 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Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ NEW YORK 1055 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 16850 SW 72 Avenue Tigard, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 6150 Poplar Road Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 4017 Northwest Parkway Dallas, TX 1155 Dairy Ashford Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX 19740 IH 45 North Spring, TX UTAH 215 South State Street Salt Lake City, UT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President Robert C. Pozen, Senior Vice President Abigail Johnson, Vice President Will Danoff, Vice President Eric D. Roiter, Secretary Richard A. Silver, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Contrafund II Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export and Multinational Fund Fidelity Fifty SM Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(registered trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Selector Small Cap Stock Fund Stock Selector TechnoQuant Growth Fund SM Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) TouchTone Xpress (registered trademark) 1-800-544-5555 AUTOMATED LINE FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----