UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4118
Fidelity Securities Fund
(Exact name of registrant as specified in charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address of principal executive offices) (Zip code)
Eric D. Roiter, Secretary
82 Devonshire St.
Boston, Massachusetts 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end: | July 31 |
Date of reporting period: | January 31, 2006 |
Item 1. Reports to Stockholders
Fidelity® Real Estate Income Fund |
Semiannual Report January 31, 2006 |
Contents | ||||
Chairman’s Message | 3 | Ned Johnson’s message to shareholders. | ||
Shareholder Expense | 4 | An example of shareholder expenses. | ||
Example | ||||
Investment Changes | 6 | A summary of major shifts in the fund’s | ||
investments over the past six months. | ||||
Investments | 7 | A complete list of the fund’s investments | ||
with their market values. | ||||
Financial Statements | 25 | Statements of assets and liabilities, | ||
operations, and changes in net assets, | ||||
as well as financial highlights. | ||||
Notes | 29 | Notes to the financial statements. | ||
Report of Independent | 35 | |||
Registered Public | ||||
Accounting Firm | ||||
Board Approval of | 37 | |||
Investment Advisory | ||||
Contracts and | ||||
Management Fees |
To view a fund’s proxy voting guidelines and proxy voting record for the 12 month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission’s (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines. 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 and the financial statements contained herein are submitted for the general informa tion 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. A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N Q. Forms N Q are available on the SEC’s web site at http://www.sec.gov. A fund’s Forms N Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund’s portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity’s web site at http://www.fidelity.com/holdings. NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE Neither the fund nor Fidelity Distributors Corporation is a bank. |
Semiannual Report 2
Chairman’s Message
(photograph of Edward C. Johnson 3d)
Dear Shareholder:
During the past year or so, much has been reported about the mutual fund industry, and much of it has been more critical than I believe is warranted. Allegations that some companies have been less than forthright with their shareholders have cast a shadow on the entire industry. I continue to find these reports disturbing, and assert that they do not create an accurate picture of the industry overall. Therefore, I would like to remind every one where Fidelity stands on these issues. I will say two things specifically regarding allegations that some mutual fund companies were in violation of the Securities and Exchange Commission’s forward pricing rules or were involved in so called “market timing” activities.
First, Fidelity has no agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not a new policy. This is not to say that some one could not deceive the company through fraudulent acts. However, we are extremely diligent in preventing fraud from occurring in this manner and in every other. But I underscore again that Fidelity has no so called “agreements” that sanction illegal practices.
Second, Fidelity continues to stand on record, as we have for years, in opposition to predatory short term trading that adversely affects shareholders in a mutual fund. Back in the 1980s, we initiated a fee which is returned to the fund and, therefore, to investors to discourage this activity. Further, we took the lead several years ago in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. I am confident we will find other ways to make it more difficult for predatory traders to operate. However, this will only be achieved through close cooperation among regulators, legislators and the industry.
Yes, there have been unfortunate instances of unethical and illegal activity within the mutual fund industry from time to time. That is true of any industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. But we are still concerned about the risk of over regulation and the quick application of simplistic solutions to intricate problems. Every system can be improved, and we support and applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors’ holdings.
For nearly 60 years, Fidelity has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/ Edward C. Johnson 3d
Edward C. Johnson 3d
3 Semiannual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (August 1, 2005 to January 31, 2006).
Actual Expenses |
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the fund, as a share holder in the underlying affiliated central funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund’s annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the share holder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount. In addition, the fund, as a shareholder in the underlying affiliated central funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund’s annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Semiannual Report |
4 |
Expenses Paid | ||||||||||||
Beginning | Ending | During Period* | ||||||||||
Account Value | Account Value | August 1, 2005 | ||||||||||
August 1, 2005 | January 31, 2006 | to January 31, 2006 | ||||||||||
Actual | $ | 1,000.00 | $ | 1,016.50 | $ | 4.32 | ||||||
Hypothetical (5% return per year | ||||||||||||
before expenses) | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 |
* Expenses are equal to the Fund’s annualized expense ratio of .85%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one half year period). The fees and expenses of the underlying affiliated central funds in which the fund invests are not included in the fund’s annualized expense ratio.
5 Semiannual Report |
Investment Changes | ||||
Top Five Stocks as of January 31, 2006 | ||||
% of fund’s | % of fund’s net assets | |||
net assets | 6 months ago | |||
MFA Mortgage Investments, Inc. Series A, 8.50% | 1.0 | 0.8 | ||
LaSalle Hotel Properties Series A, 10.25% | 0.9 | 0.7 | ||
Anworth Mortgage Asset Corp. Series A, 8.625% | 0.9 | 0.7 | ||
Newcastle Investment Corp. Series B, 9.75% | 0.9 | 0.7 | ||
Apartment Investment & Management Co. | ||||
Series T, 8.00% | 0.9 | 0.8 | ||
4.6 | ||||
Top Five Bonds as of January 31, 2006 | ||||
(with maturities greater than one year) | % of fund’s | % of fund’s net assets | ||
net assets | 6 months ago | |||
Thornburg Mortgage, Inc. 8% 5/15/13 | 1.0 | 0.6 | ||
Taberna Preferred Funding II Ltd./Taberna | ||||
Preferred Funding II, Inc. Series 2005 2A | ||||
Class E1, 7.1906% 11/5/35 | 0.7 | 0.6 | ||
MeriStar Hospitality Corp. 9% 1/15/08 | 0.7 | 0.6 | ||
Banc of America Large Loan, Inc. floater Series | ||||
2003 BBA2 Class A3, 4.79% 11/15/15 | 0.7 | 0.6 | ||
Wrightwood Capital LLC 9% 6/1/14 | 0.7 | 0.6 | ||
3.8 |
The information in the above tables is based on the combined investments of the fund and its pro rata share of the investments of Fidelity’s fixed income central fund.
Percentages are adjusted for the effect of futures and swap contacts, if applicable. For an unaudited list of holdings for each fixed income central fund, visit fidelity.com.
Semiannual Report |
6 |
Investments January 31, 2006 | ||||||
Showing Percentage of Net Assets | ||||||
Common Stocks 13.8% | ||||||
Shares | Value (Note 1) | |||||
CONSUMER DISCRETIONARY – 0.7% | ||||||
Hotels, Restaurants & Leisure 0.2% | ||||||
Starwood Hotels & Resorts Worldwide, Inc. unit | 20,200 | $ 1,228,362 | ||||
Household Durables – 0.5% | ||||||
KB Home | 17,400 | 1,325,880 | ||||
Ryland Group, Inc. | 23,600 | 1,707,696 | ||||
3,033,576 | ||||||
TOTAL CONSUMER DISCRETIONARY | 4,261,938 | |||||
FINANCIALS – 13.1% | ||||||
Real Estate 13.1% | ||||||
Acadia Realty Trust (SBI) | 75,400 | 1,608,282 | ||||
AMB Property Corp. (SBI) | 13,200 | 689,040 | ||||
American Financial Realty Trust (SBI) | 48,000 | 596,640 | ||||
American Home Mortgage Investment Corp. | 4,000 | 114,400 | ||||
Annaly Mortgage Management, Inc. | 104,000 | 1,292,720 | ||||
Anworth Mortgage Asset Corp. | 268,900 | 2,210,358 | ||||
Apartment Investment & Management Co. Class A | 20,000 | 850,400 | ||||
AvalonBay Communities, Inc. | 14,700 | 1,462,356 | ||||
Bimini Mortgage Management, Inc. | 70,600 | 665,758 | ||||
Boston Properties, Inc. | 9,300 | 727,818 | ||||
Capital Lease Funding, Inc. | 90,600 | 964,890 | ||||
CarrAmerica Realty Corp. | 22,400 | 824,320 | ||||
CenterPoint Properties Trust (SBI) | 30,600 | 1,518,984 | ||||
Cogdell Spencer, Inc. | 25,000 | 466,250 | ||||
DiamondRock Hospitality Co. | 106,300 | 1,381,900 | ||||
Eagle Hospitality Properties Trust, Inc. | 69,000 | 587,880 | ||||
Education Realty Trust, Inc. | 45,900 | 598,077 | ||||
Equity Lifestyle Properties, Inc. | 84,330 | 3,879,180 | ||||
Equity Residential (SBI) | 75,100 | 3,184,991 | ||||
Federal Realty Investment Trust (SBI) | 35,800 | 2,392,156 | ||||
Fieldstone Investment Corp. | 156,217 | 1,946,464 | ||||
General Growth Properties, Inc. | 73,840 | 3,810,144 | ||||
Glenborough Realty Trust, Inc. | 48,400 | 952,512 | ||||
GMH Communities Trust | 55,900 | 901,667 | ||||
Health Care Property Investors, Inc. | 5,000 | 138,750 | ||||
Healthcare Realty Trust, Inc. | 15,500 | 543,120 | ||||
HomeBanc Mortgage Corp., Georgia | 220,100 | 1,833,433 | ||||
Host Marriott Corp. | 118,300 | 2,360,085 | ||||
Inland Real Estate Corp. | 194,600 | 2,983,218 | ||||
Innkeepers USA Trust (SBI) | 37,500 | 666,000 | ||||
Kimco Realty Corp. | 71,900 | 2,522,971 |
See accompanying notes which are an integral part of the financial statements.
7 Semiannual Report |
Investments continued | ||||
Common Stocks continued | ||||
Shares | Value (Note 1) | |||
FINANCIALS – continued | ||||
Real Estate continued | ||||
Lexington Corporate Properties Trust | 72,600 | $ 1,611,720 | ||
MFA Mortgage Investments, Inc. | 95,000 | 615,600 | ||
MortgageIT Holdings, Inc. | 157,500 | 2,118,375 | ||
Nationwide Health Properties, Inc. | 38,100 | 871,347 | ||
Newcastle Investment Corp. | 74,700 | 2,031,840 | ||
Origen Financial, Inc. (c) | 75,000 | 518,250 | ||
Plum Creek Timber Co., Inc. | 8,300 | 306,602 | ||
ProLogis Trust | 56,366 | 2,887,067 | ||
Saxon Capital, Inc. | 238,200 | 2,844,108 | ||
Simon Property Group, Inc. | 30,604 | 2,535,235 | ||
Spirit Finance Corp. (c) | 200,000 | 2,408,000 | ||
Spirit Finance Corp. | 209,300 | 2,519,972 | ||
Sunstone Hotel Investors, Inc. | 15,000 | 442,500 | ||
The Mills Corp. | 13,000 | 538,850 | ||
Thornburg Mortgage, Inc. (SBI) | 11,000 | 281,930 | ||
Trizec Properties, Inc. | 83,700 | 1,949,373 | ||
Trustreet Properties, Inc. | 76,900 | 1,129,661 | ||
United Dominion Realty Trust, Inc. (SBI) | 98,600 | 2,505,426 | ||
Ventas, Inc. | 93,800 | 2,870,280 | ||
Vornado Realty Trust | 16,300 | 1,439,942 | ||
77,100,842 | ||||
HEALTH CARE – 0.0% | ||||
Health Care Providers & Services – 0.0% | ||||
American Retirement Corp. (a) | 100 | 2,723 | ||
TOTAL COMMON STOCKS | ||||
(Cost $64,410,584) | 81,365,503 | |||
Preferred Stocks 31.3% | ||||
Convertible Preferred Stocks 1.7% | ||||
FINANCIALS – 1.7% | ||||
Real Estate 1.7% | ||||
Crescent Real Estate Equities Co. Series A, 6.75% | 17,700 | 374,532 | ||
Equity Office Properties Trust Series B, 5.25% | 74,000 | 3,700,000 | ||
Glenborough Realty Trust, Inc. Series A, 7.75% | 24,330 | 615,549 | ||
Trustreet Properties, Inc. Series C, 7.50% | 27,300 | 583,128 | ||
Windrose Medical Properties Trust 7.50% | 190,000 | 4,911,500 | ||
10,184,709 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
8 |
Preferred Stocks continued | ||||||
Shares | Value (Note 1) | |||||
Nonconvertible Preferred Stocks 29.6% | ||||||
CONSUMER DISCRETIONARY – 0.1% | ||||||
Hotels, Restaurants & Leisure 0.1% | ||||||
Hilton Hotels Corp. 8.00% | 4,800 | $ 123,360 | ||||
La Quinta Properties, Inc. (depositary shares) Series A, 9.00% | 10,000 | 251,700 | ||||
375,060 | ||||||
FINANCIALS – 29.5% | ||||||
Diversified Financial Services – 0.7% | ||||||
DRA CRT Acquisition Corp. Series A, 8.50% | 25,000 | 600,000 | ||||
Red Lion Hotels Capital Trust 9.50% | 135,000 | 3,550,500 | ||||
4,150,500 | ||||||
Real Estate 28.2% | ||||||
Accredited Mortgage Loan Trust Series A, 9.75% | 172,595 | 4,358,024 | ||||
Affordable Residential Communties, Inc. Series A, 8.25% | 83,000 | 1,630,950 | ||||
Alexandria Real Estate Equities, Inc.: | ||||||
Series B, 9.10% | 101,200 | 2,595,780 | ||||
Series C, 8.375% | 65,000 | 1,666,600 | ||||
American Home Mortgage Investment Corp.: | ||||||
Series A, 9.375% | 120,000 | 3,115,200 | ||||
Series B, 9.25% | 87,000 | 2,248,950 | ||||
Annaly Mortgage Management, Inc. Series A, 7.875% | 207,000 | 5,112,900 | ||||
Anthracite Capital, Inc. Series C, 9.375% | 46,000 | 1,187,720 | ||||
Anworth Mortgage Asset Corp. Series A, 8.625% | 217,827 | 5,332,405 | ||||
Apartment Investment & Management Co.: | ||||||
Series G, 9.375% | 66,600 | 1,754,244 | ||||
Series Q, 10.10% | 115,940 | 2,950,673 | ||||
Series R, 10.00% | 96,800 | 2,485,824 | ||||
Series T, 8.00% | 204,400 | 5,134,528 | ||||
Series V, 8.00% | 40,000 | 1,004,000 | ||||
Ashford Hospitality Trust, Inc. Series A, 8.55% | 100,000 | 2,590,000 | ||||
Bedford Property Investors, Inc.: | ||||||
Series A, 8.75% (c) | 69,000 | 3,586,620 | ||||
Series B, 7.625% | 24,800 | 611,320 | ||||
Capital Automotive (REIT) Series B, 8.00% | 5,000 | 125,000 | ||||
Capital Lease Funding, Inc. Series A, 8.125% | 2,000 | 48,980 | ||||
CBL & Associates Properties, Inc. Series B, 8.75% | 60,000 | 3,108,000 | ||||
Cedar Shopping Centers, Inc. 8.875% | 110,000 | 2,953,500 | ||||
CenterPoint Properties Trust Series D, 5.377% | 2,050 | 1,783,500 | ||||
Colonial Properties Trust: | ||||||
(depositary shares) Series D, 8.125% | 3,500 | 88,795 | ||||
Series C, 9.25% | 30,000 | 762,300 |
See accompanying notes which are an integral part of the financial statements.
9 Semiannual Report |
Investments continued | ||||
Preferred Stocks continued | ||||
Shares | Value (Note 1) | |||
Nonconvertible Preferred Stocks continued | ||||
FINANCIALS – continued | ||||
Real Estate continued | ||||
Colonial Properties Trust: – continued | ||||
Series E, 7.62% | 78,679 | $ 1,934,717 | ||
Commercial Net Lease Realty, Inc. Series A, 9.00% | 19,200 | 499,200 | ||
Cousins Properties, Inc. Series A, 7.75% | 131,700 | 3,378,105 | ||
Crescent Real Estate Equities Co. Series B, 9.50% | 53,900 | 1,390,620 | ||
Developers Diversified Realty Corp. (depositary shares): | ||||
Series F, 8.60% | 7,200 | 187,704 | ||
Series G, 8.00% | 42,800 | 1,104,668 | ||
Digital Realty Trust, Inc.: | ||||
Series A, 8.50% | 160,000 | 4,107,200 | ||
Series B, 7.875% | 76,100 | 1,879,670 | ||
Duke Realty Corp. (depositary shares) Series B, 7.99% | 74,700 | 3,772,350 | ||
Eagle Hospitality Properties Trust, Inc. Series A, 8.25% | 184,000 | 4,636,800 | ||
Eastgroup Properties, Inc. Series D, 7.95% | 103,900 | 2,670,230 | ||
Entertainment Properties Trust Series A 9.50% | 20,000 | 513,200 | ||
Equity Inns, Inc. Series B, 8.75% | 60,000 | 1,545,000 | ||
Federal Realty Investment Trust Series B, 8.50% | 11,600 | 296,380 | ||
FelCor Lodging Trust, Inc. (depositary shares) Series C, 8.00% | 40,000 | 994,000 | ||
Glimcher Realty Trust: | ||||
Series F, 8.75% | 62,000 | 1,596,500 | ||
Series G, 8.125% | 72,000 | 1,812,960 | ||
Hersha Hospitality Trust Series A, 8.00% | 80,000 | 2,000,000 | ||
Highwoods Properties, Inc.: | ||||
Series A, 8.625% | 214 | 218,815 | ||
Series B, 8.00% | 30,971 | 782,947 | ||
Home Properties of New York, Inc. Series F, 9.00% | 5,000 | 130,000 | ||
Host Marriott Corp.: | ||||
Class C, 10.00% | 8,500 | 214,965 | ||
Series E, 8.875% | 50,000 | 1,341,000 | ||
HRPT Properties Trust Series B, 8.75% | 41,200 | 1,054,720 | ||
Impac Mortgage Holdings, Inc. Series C, 9.125% | 150,000 | 3,253,500 | ||
Innkeepers USA Trust Series C, 8.00% | 67,400 | 1,678,260 | ||
Kilroy Realty Corp. Series E, 7.80% | 44,000 | 1,111,440 | ||
LaSalle Hotel Properties: | ||||
Series A, 10.25% | 208,200 | 5,375,724 | ||
Series B, 8.375% | 19,400 | 497,610 | ||
Lexington Corporate Properties Trust Series B, 8.05% | 124,500 | 3,143,625 | ||
LTC Properties, Inc. Series F, 8.00% | 79,300 | 2,010,255 | ||
MFA Mortgage Investments, Inc. Series A, 8.50% | 229,400 | 5,611,124 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
10 |
Preferred Stocks continued | ||||||
Shares | Value (Note 1) | |||||
Nonconvertible Preferred Stocks continued | ||||||
FINANCIALS – continued | ||||||
Real Estate continued | ||||||
Mid-America Apartment Communities, Inc. Series H, 8.30% | 87,800 | $ 2,260,850 | ||||
Nationwide Health Properties, Inc. 7.677% | 36,939 | 3,789,941 | ||||
New Plan Excel Realty Trust (depositary shares) Series D, | ||||||
7.80% | 42,106 | 2,136,880 | ||||
Newcastle Investment Corp. Series B, 9.75% | 199,700 | 5,180,218 | ||||
Omega Healthcare Investors, Inc. Series D, 8.375% | 159,800 | 4,145,212 | ||||
Parkway Properties, Inc. Series D, 8.00% | 140,000 | 3,626,000 | ||||
Prime Group Realty Trust Series B, 9.00% | 60,000 | 1,278,000 | ||||
ProLogis Trust Series C, 8.54% | 6,478 | 370,866 | ||||
PS Business Parks, Inc.: | ||||||
(depositary shares) Series F, 8.75% | 21,500 | 554,700 | ||||
Series D, 9.50% | 65,800 | 1,673,294 | ||||
RAIT Investment Trust: | ||||||
Series A, 7.75% | 105,900 | 2,583,960 | ||||
Series B, 8.375% | 111,300 | 2,810,325 | ||||
Realty Income Corp. 8.25% | 76,800 | 2,050,560 | ||||
Saul Centers, Inc. 8.00% | 155,800 | 4,005,618 | ||||
Simon Property Group, Inc.: | ||||||
Series G, 7.89% | 29,600 | 1,528,840 | ||||
Series J, 8.375% | 17,100 | 1,084,995 | ||||
SNH Capital Trust I Series Z, 10.125% | 43,300 | 1,106,315 | ||||
Strategic Hotel Capital, Inc. 8.50% (c) | 119,500 | 3,002,438 | ||||
Taubman Centers, Inc. Series A, 8.30% | 48,727 | 1,235,229 | ||||
The Mills Corp.: | ||||||
Series B, 9.00% | 40,000 | 1,006,800 | ||||
Series C, 9.00% | 63,100 | 1,618,515 | ||||
Series E, 8.75% | 44,100 | 1,106,910 | ||||
United Dominion Realty Trust, Inc. Series B, 8.60% | 12,500 | 327,000 | ||||
Winston Hotels, Inc. Series B, 8.00% | 35,600 | 881,100 | ||||
166,343,668 |
See accompanying notes which are an integral part of the financial statements.
11 Semiannual Report
Investments continued | ||||||
Preferred Stocks continued | ||||||
Shares | Value (Note 1) | |||||
Nonconvertible Preferred Stocks continued | ||||||
FINANCIALS – continued | ||||||
Thrifts & Mortgage Finance – 0.6% | ||||||
Fannie Mae 7.00% | 20,000 | $ 1,094,000 | ||||
MFH Financial Trust I 9.50% (c) | 22,660 | 2,356,640 | ||||
3,450,640 | ||||||
TOTAL FINANCIALS | 173,944,808 | |||||
TOTAL NONCONVERTIBLE PREFERRED STOCKS | 174,319,868 | |||||
TOTAL PREFERRED STOCKS | ||||||
(Cost $184,669,783) | 184,504,577 | |||||
Corporate Bonds 26.0% | ||||||
Principal | ||||||
Amount | ||||||
Convertible Bonds 0.5% | ||||||
FINANCIALS – 0.5% | ||||||
Real Estate 0.5% | ||||||
Affordable Resources Communities LP 7.5% 8/15/25 (c) | $ 3,000,000 | 2,926,200 | ||||
Essex Portfolio LP 3.625% 11/1/25 (c) | 400,000 | 420,080 | ||||
3,346,280 | ||||||
Nonconvertible Bonds – 25.5% | ||||||
CONSUMER DISCRETIONARY – 3.8% | ||||||
Hotels, Restaurants & Leisure 1.0% | ||||||
Felcor Lodging LP 9% 6/1/11 (d) | 1,500,000 | 1,661,250 | ||||
Hilton Hotels Corp. 7.625% 5/15/08 | 1,680,000 | 1,750,628 | ||||
HMH Properties, Inc. 7.875% 8/1/08 | 90,000 | 90,900 | ||||
Host Marriott LP 7% 8/15/12 | 1,000,000 | 1,026,250 | ||||
Landry’s Seafood Restaurants, Inc. 7.5% 12/15/14 | 1,000,000 | 945,000 | ||||
5,474,028 | ||||||
Household Durables – 2.8% | ||||||
Beazer Homes USA, Inc. 8.375% 4/15/12 | 1,000,000 | 1,045,000 | ||||
D.R. Horton, Inc.: | ||||||
4.875% 1/15/10 | 1,000,000 | 972,500 | ||||
9.375% 3/15/11 | 1,300,000 | 1,365,000 | ||||
K. Hovnanian Enterprises, Inc.: | ||||||
6% 1/15/10 | 420,000 | 406,350 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
12 |
Corporate Bonds continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount | ||||||||
Nonconvertible Bonds continued | ||||||||
CONSUMER DISCRETIONARY – continued | ||||||||
Household Durables – continued | ||||||||
K. Hovnanian Enterprises, Inc.: – continued | ||||||||
6.25% 1/15/16 | $ 1,000,000 | $ 936,250 | ||||||
7.75% 5/15/13 | 2,000,000 | 2,020,000 | ||||||
KB Home: | ||||||||
5.875% 1/15/15 | 1,000,000 | 940,400 | ||||||
6.25% 6/15/15 | 100,000 | 96,500 | ||||||
7.75% 2/1/10 | 1,500,000 | 1,545,000 | ||||||
Kimball Hill, Inc. 10.5% 12/15/12 (c) | 100,000 | 97,000 | ||||||
Ryland Group, Inc. 9.125% 6/15/11 | 1,000,000 | 1,065,000 | ||||||
Standard Pacific Corp.: | ||||||||
6.5% 8/15/10 | 500,000 | 483,750 | ||||||
9.25% 4/15/12 | 1,500,000 | 1,552,500 | ||||||
Stanley-Martin Communities LLC 9.75% 8/15/15 (c) | 1,520,000 | 1,398,400 | ||||||
WCI Communities, Inc.: | ||||||||
7.875% 10/1/13 | 470,000 | 453,550 | ||||||
9.125% 5/1/12 | 2,250,000 | 2,295,000 | ||||||
16,672,200 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 22,146,228 | |||||||
FINANCIALS – 21.1% | ||||||||
Real Estate 20.4% | ||||||||
Ahold Lease Series 2001 A1 pass thru trust certificates | ||||||||
7.82% 1/2/20 | 1,433,258 | 1,526,419 | ||||||
American Health Properties, Inc. 7.5% 1/15/07 | 1,000,000 | 1,021,911 | ||||||
American Real Estate Partners/American Real Estate | ||||||||
Finance Corp.: | ||||||||
7.125% 2/15/13 | 1,000,000 | 1,012,500 | ||||||
8.125% 6/1/12 | 3,190,000 | 3,317,600 | ||||||
Archstone-Smith Trust 5% 8/15/07 | 300,000 | 300,173 | ||||||
Arden Realty LP: | ||||||||
5.2% 9/1/11 | 740,000 | 744,831 | ||||||
5.25% 3/1/15 | 400,000 | 399,208 | ||||||
7% 11/15/07 | 1,000,000 | 1,033,908 | ||||||
8.5% 11/15/10 | 1,000,000 | 1,145,084 | ||||||
Bay Apartment Communities, Inc. 6.625% 1/15/08 | 840,000 | 862,893 | ||||||
Brandywine Operating Partnership LP 4.5% 11/1/09 | 1,000,000 | 967,153 | ||||||
Camden Property Trust: | ||||||||
4.375% 1/15/10 | 2,370,000 | 2,291,863 |
See accompanying notes which are an integral part of the financial statements.
13 Semiannual Report
Investments continued | ||||||||
Corporate Bonds continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount | ||||||||
Nonconvertible Bonds continued | ||||||||
FINANCIALS – continued | ||||||||
Real Estate continued | ||||||||
Camden Property Trust: – continued | ||||||||
7% 11/15/06 | $ 943,000 | $ 956,029 | ||||||
CarrAmerica Realty Corp.: | ||||||||
3.625% 4/1/09 | 1,000,000 | 948,930 | ||||||
5.25% 11/30/07 | 1,525,000 | 1,518,932 | ||||||
CB Richard Ellis Services, Inc. 9.75% 5/15/10 | 1,932,000 | 2,096,220 | ||||||
CenterPoint Properties Trust 5.75% 8/15/09 | 100,000 | 100,747 | ||||||
Colonial Properties Trust 7% 7/14/07 | 2,450,000 | 2,500,340 | ||||||
Commercial Net Lease Realty, Inc.: | ||||||||
6.15% 12/15/15 | 100,000 | 100,561 | ||||||
6.25% 6/15/14 | 500,000 | 510,979 | ||||||
Crescent Real Estate Equities LP 7.5% 9/15/07 (d) | 1,500,000 | 1,526,250 | ||||||
Crescent Real Estate Equities LP/Crescent Finance Co. | ||||||||
9.25% 4/15/09 | 2,500,000 | 2,634,375 | ||||||
Developers Diversified Realty Corp.: | ||||||||
4.625% 8/1/10 | 1,505,000 | 1,454,644 | ||||||
5% 5/3/10 | 1,000,000 | 982,762 | ||||||
6.625% 1/15/08 | 550,000 | 562,998 | ||||||
7.5% 7/15/18 | 200,000 | 223,778 | ||||||
Duke Realty LP: | ||||||||
5.25% 1/15/10 | 200,000 | 199,510 | ||||||
6.8% 2/12/09 | 1,500,000 | 1,560,317 | ||||||
EOP Operating LP: | ||||||||
5.13% 10/1/10 (d) | 3,000,000 | 3,024,858 | ||||||
8.375% 3/15/06 | 1,000,000 | 1,004,013 | ||||||
Evans Withycombe Residential LP 7.625% 4/15/07 | 1,675,000 | 1,702,951 | ||||||
Federal Realty Investment Trust 6.125% 11/15/07 | 1,200,000 | 1,215,532 | ||||||
First Industrial LP: | ||||||||
5.25% 6/15/09 | 1,000,000 | 995,201 | ||||||
7.375% 3/15/11 | 2,100,000 | 2,262,590 | ||||||
7.6% 5/15/07 | 1,000,000 | 1,024,640 | ||||||
Health Care REIT, Inc.: | ||||||||
6% 11/15/13 | 1,000,000 | 992,289 | ||||||
7.5% 8/15/07 | 450,000 | 462,772 | ||||||
8% 9/12/12 | 2,450,000 | 2,709,774 | ||||||
Healthcare Realty Trust, Inc. 8.125% 5/1/11 | 2,790,000 | 3,060,962 | ||||||
Heritage Property Investment Trust, Inc. 4.5% 10/15/09 | 1,500,000 | 1,443,776 | ||||||
Highwoods/Forsyth LP: | ||||||||
7% 12/1/06 | 500,000 | 505,292 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
14 |
Corporate Bonds continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount | ||||||||
Nonconvertible Bonds continued | ||||||||
FINANCIALS – continued | ||||||||
Real Estate continued | ||||||||
Highwoods/Forsyth LP: – continued | ||||||||
7.125% 2/1/08 | $ 950,000 | $ 979,138 | ||||||
Hospitality Properties Trust 6.75% 2/15/13 | 610,000 | 645,873 | ||||||
HRPT Properties Trust 6.5% 1/15/13 | 200,000 | 208,193 | ||||||
iStar Financial, Inc.: | ||||||||
5.01% 3/16/09 (d) | 500,000 | 500,203 | ||||||
5.125% 4/1/11 | 1,000,000 | 980,050 | ||||||
6.5% 12/15/13 | 1,000,000 | 1,021,250 | ||||||
7% 3/15/08 | 1,800,000 | 1,856,250 | ||||||
Liberty Property LP 7.25% 8/15/07 | 1,500,000 | 1,538,435 | ||||||
Mack Cali Realty LP 7.25% 3/15/09 | 100,000 | 105,051 | ||||||
MeriStar Hospitality Corp. 9% 1/15/08 | 4,000,000 | 4,160,000 | ||||||
MeriStar Hospitality Operating Partnership LP/MeriStar | ||||||||
Hospitality Finance Corp. III 9.125% 1/15/11 | 1,250,000 | 1,362,500 | ||||||
Nationwide Health Properties, Inc.: | ||||||||
6% 5/20/15 | 1,000,000 | 976,758 | ||||||
7.23% 11/8/06 | 300,000 | 304,305 | ||||||
8.25% 7/1/12 | 1,300,000 | 1,434,609 | ||||||
Omega Healthcare Investors, Inc. 7% 4/1/14 | 2,970,000 | 3,014,550 | ||||||
Post Apartment Homes LP: | ||||||||
5.125% 10/12/11 | 1,500,000 | 1,482,860 | ||||||
7.7% 12/20/10 | 2,500,000 | 2,746,755 | ||||||
Price Development Co. LP 7.29% 3/11/08 | 1,650,000 | 1,672,688 | ||||||
ProLogis Trust 7.1% 4/15/08 | 775,000 | 807,062 | ||||||
Reckson Operating Partnership LP 7.75% 3/15/09 | 2,600,000 | 2,788,464 | ||||||
Security Capital Industrial Trust 7.95% 5/15/08 | 97,000 | 101,883 | ||||||
Senior Housing Properties Trust: | ||||||||
7.875% 4/15/15 | 355,000 | 369,200 | ||||||
8.625% 1/15/12 | 2,500,000 | 2,743,750 | ||||||
Shurgard Storage Centers, Inc.: | ||||||||
5.875% 3/15/13 | 1,000,000 | 1,000,105 | ||||||
7.75% 2/22/11 | 500,000 | 544,885 | ||||||
Simon Property Group LP 5.375% 8/28/08 | 550,000 | 552,122 | ||||||
Tanger Properties LP 9.125% 2/15/08 | 300,000 | 321,000 | ||||||
The Rouse Co.: | ||||||||
3.625% 3/15/09 | 1,000,000 | 932,332 | ||||||
5.375% 11/26/13 | 2,000,000 | 1,883,484 | ||||||
7.2% 9/15/12 | 3,220,000 | 3,350,072 | ||||||
Thornburg Mortgage, Inc. 8% 5/15/13 | 5,995,000 | 5,905,068 |
See accompanying notes which are an integral part of the financial statements.
15 Semiannual Report
Investments continued | ||||||||
Corporate Bonds continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount | ||||||||
Nonconvertible Bonds continued | ||||||||
FINANCIALS – continued | ||||||||
Real Estate continued | ||||||||
Trustreet Properties, Inc. 7.5% 4/1/15 | $ 3,500,000 | $ 3,508,750 | ||||||
United Dominion Realty Trust: | ||||||||
5% 1/15/12 | 1,000,000 | 967,704 | ||||||
7.95% 7/12/06 | 2,200,000 | 2,229,049 | ||||||
United Dominion Realty Trust, Inc. 6.5% 6/15/09 | 325,000 | 338,356 | ||||||
Ventas Realty LP/Ventas Capital Corp.: | ||||||||
6.5% 6/1/16 (c) | 1,730,000 | 1,721,350 | ||||||
6.625% 10/15/14 | 2,170,000 | 2,202,550 | ||||||
6.75% 6/1/10 | 2,100,000 | 2,152,500 | ||||||
8.75% 5/1/09 | 800,000 | 864,000 | ||||||
9% 5/1/12 | 3,261,000 | 3,721,616 | ||||||
Vornado Realty LP: | ||||||||
4.5% 8/15/09 | 1,000,000 | 971,426 | ||||||
5.625% 6/15/07 | 2,700,000 | 2,708,608 | ||||||
120,580,369 | ||||||||
Thrifts & Mortgage Finance – 0.7% | ||||||||
Wrightwood Capital LLC 9% 6/1/14 (g) | 4,000,000 | 4,000,000 | ||||||
TOTAL FINANCIALS | 124,580,369 | |||||||
HEALTH CARE – 0.4% | ||||||||
Health Care Providers & Services – 0.4% | ||||||||
Beverly Enterprises, Inc. 7.875% 6/15/14 | 1,030,000 | 1,143,300 | ||||||
Extendicare Health Services, Inc. 6.875% 5/1/14 | 1,500,000 | 1,466,250 | ||||||
2,609,550 | ||||||||
TELECOMMUNICATION SERVICES – 0.2% | ||||||||
Wireless Telecommunication Services – 0.2% | ||||||||
American Tower Corp. 7.125% 10/15/12 | 1,000,000 | 1,040,000 | ||||||
TOTAL NONCONVERTIBLE BONDS | 150,376,147 | |||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $153,679,979) | 153,722,427 | |||||||
Asset Backed Securities 4.3% | ||||||||
ABSC NIMS Trust: | ||||||||
Series 2003-HE4 Class A, 7% 8/17/33 (c) | 35,460 | 35,416 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
16 |
Asset Backed Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount | ||||||||
ABSC NIMS Trust: continued | ||||||||
Series 2003-HE5 Class A, 7% 8/17/33 (c) | $ 46,629 | $ 46,570 | ||||||
Series 2003-HE7 Class A, 7% 12/15/33 (c) | 8,098 | 8,094 | ||||||
Ameriquest Mortgage Securities, Inc. Series 2004-R9 | ||||||||
Class M9, 7.03% 10/25/34 (c)(d) | 2,000,000 | 1,861,268 | ||||||
Conseco Finance Securitizations Corp. Series 2000-4 | ||||||||
Class A4, 7.73% 4/1/31 | 576,410 | 522,492 | ||||||
Countrywide Home Loans, Inc. Series 2004-11N | ||||||||
Class N, 5.25% 4/25/36 (c) | 161,506 | 160,755 | ||||||
Crest Clarendon Street Ltd./Crest Clarendon Corp. | ||||||||
Series 2002-1A Class D, 9% 12/28/35 (c) | 500,000 | 564,040 | ||||||
Crest Dartmouth Street Ltd./Crest Dartmouth Street Corp. | ||||||||
Series 2003-1A Class D, 9% 6/28/38 (c) | 850,000 | 936,199 | ||||||
Crown Castle Towers LLC/Crown Atlantic Holdings Sub | ||||||||
LLC/Crown Communication, Inc. Series 2005-1 | ||||||||
Class D, 5.612% 6/15/35 (c) | 2,000,000 | 1,953,733 | ||||||
Diversified REIT Trust: | ||||||||
Series 2000-1A Class G, 6.971% 3/8/10 (c) | 1,720,000 | 1,742,322 | ||||||
Series 2003-SMU Class D, 6.78% 3/18/11 (c)(d) | 1,785,000 | 1,702,840 | ||||||
Fairfield Street Solar Corp. Series 2004-A1 Class E1, | ||||||||
7.765% 11/28/39 (c)(d) | 550,000 | 552,497 | ||||||
Gramercy Real Estate CDO Ltd. Series 2005-1A Class H, | ||||||||
6.6229% 7/25/35 (c)(d) | 2,000,000 | 1,971,400 | ||||||
Green Tree Financial Corp. Series 1996-4 Class M1, | ||||||||
7.75% 6/15/27 | 1,788,179 | 1,469,363 | ||||||
GSAMP Trust Series 2005-HE3 Class B3, 7.03% | ||||||||
6/25/35 (d) | 1,259,000 | 1,088,254 | ||||||
Guggenheim Structured Real Estate Funding | ||||||||
Ltd./Guggenheim Structured Real Estate Funding LLC | ||||||||
Series 2005-2A: | ||||||||
Class D, 6.08% 8/26/30 (c)(d) | 735,000 | 728,091 | ||||||
Class E, 6.53% 8/26/30 (c)(d) | 1,420,000 | 1,414,462 | ||||||
Park Place Securities NIM Trust Series 2004-WHQN2 | ||||||||
Class A, 4% 2/25/35 (c) | 174,531 | 172,785 | ||||||
Park Place Securities NIMS Trust Series 2004-WCW1 | ||||||||
Class NOTE, 5.65% 9/25/34 (c) | 202,497 | 201,484 | ||||||
Park Place Securities, Inc. Series 2004-WHQ2 Class | ||||||||
M10, 7.03% 2/25/35 (c)(d) | 1,500,000 | 1,311,255 |
See accompanying notes which are an integral part of the financial statements.
17 Semiannual Report
Investments continued | ||||||
Asset Backed Securities continued | ||||||
Principal | Value (Note 1) | |||||
Amount | ||||||
Taberna Preferred Funding II Ltd./Taberna Preferred | ||||||
Funding II, Inc. Series 2005-2A Class E1, 7.1906% | ||||||
11/5/35 (c)(d) | $ 4,210,000 | $ 4,210,000 | ||||
Taberna Preferred Funding III Ltd. Series 2005-3A | ||||||
Class D, 6.52% 2/5/36 (c)(d) | 3,000,000 | 3,000,000 | ||||
TOTAL ASSET BACKED SECURITIES | ||||||
(Cost $25,985,148) | 25,653,320 | |||||
Collateralized Mortgage Obligations 2.7% | ||||||
Private Sponsor 2.6% | ||||||
Countrywide Home Loans, Inc.: | ||||||
Series 2002-38 Class B3, 5% 2/25/18 (c) | 210,843 | 193,289 | ||||
Series 2002-R2 Class 2B3, 5.0294% 7/25/33 (c)(d) . | 272,358 | 172,051 | ||||
Series 2003-40 Class B3, 4.5% 10/25/18 | 265,699 | 232,390 | ||||
Series 2003-R2 Class B3, 5.5% 5/25/43 (c) | 588,591 | 476,005 | ||||
Series 2003-R3: | ||||||
Class B2, 5.5% 11/25/33 | 1,862,273 | 1,674,058 | ||||
Class B3, 5.5% 11/25/33 | 557,624 | 447,557 | ||||
Series 2004-R1 Class 1B3, 5.5% 11/25/34 (d) | 643,788 | 498,605 | ||||
Diversified REIT Trust Series 2000-1A Class F, 6.971% | ||||||
3/8/10 (c) | 1,512,000 | 1,571,234 | ||||
Residential Finance LP/Residential Finance Development | ||||||
Corp.: | ||||||
floater: | ||||||
Series 2002-A Class B10, 20.62% 10/10/34 (d) | 546,728 | 576,799 | ||||
Series 2003-B Class B9, 16.37% 7/10/35 (c)(d) | 955,962 | 1,013,320 | ||||
Series 2004-C Class B5, 5.79% 9/10/36 (d) | 392,695 | 395,641 | ||||
Series 2005-A Class B6, 6.44% 3/10/37 (c)(d) | 1,976,626 | 1,971,684 | ||||
Series 2005-B Class B6, 6.04% 6/10/37 (c)(d) | 987,809 | 979,166 | ||||
Series 2005-D Class B6, 6.6194% 12/15/37 (c)(d) | 499,219 | 499,219 | ||||
Residential Funding Mortgage Securities I, Inc. Series | ||||||
2002-S20 Class M3, 5.25% 12/25/17 | 85,730 | 78,962 | ||||
Residential Funding Securities Corp. Series 2002-RM1 | ||||||
Class BI1, 5.5% 12/25/17 (c) | 178,612 | 152,343 | ||||
Resix Finance Ltd. floater: | ||||||
Series 2003-D Class B8, 10.94% 12/10/35 (c)(d) | 722,984 | 744,673 | ||||
Series 2004-A Class B7, 8.69% 2/10/36 (c)(d) | 681,526 | 683,229 | ||||
Series 2004-B Class B7, 8.44% 2/10/36 (c)(d) | 819,108 | 831,395 | ||||
Series 2005-C Class B7, 7.54% 9/10/37 (c)(d) | 1,991,072 | 1,951,250 | ||||
TOTAL PRIVATE SPONSOR | 15,142,870 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
18 |
Collateralized Mortgage Obligations continued | ||||||
Principal | Value (Note 1) | |||||
Amount | ||||||
U.S. Government Agency 0.1% | ||||||
Fannie Mae REMIC Trust: | ||||||
Series 2003-W1 Subordinate REMIC Pass-Through | ||||||
Certificate, Class B3, 5.75% 12/25/42 | $ 333,190 | $ 275,584 | ||||
Series 2003-W4 Subordinate REMIC Pass-Through | ||||||
Certificate, Class 2B3, 5.0438% 10/25/42 (c)(d) | 83,428 | 53,349 | ||||
Series 2003-W10 Subordinate REMIC Pass-Through | ||||||
Certificate, Class 2B3, 4.9628% 6/25/43 (d) | 194,769 | 120,122 | ||||
Series 2001-W3 Subordinate REMIC Pass-Through | ||||||
Certificate, Class B3, 7% 9/25/41 | 291,218 | 262,237 | ||||
Series 2002-W1 Subordinate REMIC Pass-Through | ||||||
Certificate, Class 3B3, 4.8609% 2/25/42 (c)(d) | 169,652 | 110,619 | ||||
TOTAL U.S. GOVERNMENT AGENCY | 821,911 | |||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||
(Cost $15,938,276) | 15,964,781 | |||||
Commercial Mortgage Securities 11.2% | ||||||
Asset Securitization Corp. Series 1997-D4 Class B2, | ||||||
7.525% 4/14/29 | 515,000 | 545,045 | ||||
Banc of America Commercial Mortgage, Inc. Series | ||||||
2003-2: | ||||||
Class BWD, 6.947% 10/11/37 (c) | 428,054 | 428,253 | ||||
Class BWE, 7.226% 10/11/37 (c) | 579,945 | 579,883 | ||||
Class BWF, 7.55% 10/11/37 (c) | 511,890 | 512,845 | ||||
Class BWG, 8.155% 10/11/37 (c) | 496,109 | 492,598 | ||||
Class BWH, 9.073% 10/11/37 (c) | 260,383 | 262,676 | ||||
Class BWJ, 9.99% 10/11/37 (c) | 428,054 | 430,860 | ||||
Class BWK, 10.676% 10/11/37 (c) | 336,329 | 340,441 | ||||
Class BWL, 10.1596% 10/11/37 (c) | 567,123 | 533,039 | ||||
Banc of America Large Loan, Inc. floater: | ||||||
Series 2003-BBA2 Class A3, 4.79% 11/15/15 (c)(d) . | 4,000,000 | 4,002,780 | ||||
Series 2005-BOCA Class M, 6.57% 12/15/16 (c)(d) . | 1,790,000 | 1,776,191 | ||||
Bank of America Large Loan, Inc. floater: | ||||||
Series 2005-ESHA Class K, 6.27% 7/14/08 (c)(d) | 3,000,000 | 3,001,518 | ||||
Series 2005-MIB1 Class K, 6.47% 3/15/22 (c)(d) | 700,000 | 680,567 | ||||
Capital Trust RE CDO Ltd. floater Series 2005-1A | ||||||
Class D, 5.99% 3/20/50 (c)(d) | 2,250,000 | 2,230,200 | ||||
CS First Boston Mortgage Securities Corp.: | ||||||
floater Series 2004-HC1A Class E, 8.22% | ||||||
12/15/21 (c)(d) | 2,000,000 | 1,999,996 |
See accompanying notes which are an integral part of the financial statements.
19 Semiannual Report
Investments continued | ||||||||
Commercial Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount | ||||||||
CS First Boston Mortgage Securities Corp.: – continued | ||||||||
Series 1998-C1 Class F, 6% 5/17/40 (c) | $ 4,250,000 | $ 3,713,773 | ||||||
Series 2004-FL1A Class G, 7.3495% 5/15/14 (c)(d) | . | 2,000,000 | 2,004,184 | |||||
Series 2004-TF2A Class AX, 1.4596% | ||||||||
11/15/19 (c)(d)(f) | 40,590,371 | 483,025 | ||||||
Series 2004-TFLA Class AX, 1.0096% | ||||||||
2/15/14 (c)(d)(f) | 18,568,514 | 40,851 | ||||||
EQI Financing Partnership I LP Series 1997-1 Class C, | ||||||||
7.58% 2/20/17 (c) | 2,500,000 | 2,506,395 | ||||||
First Chicago/Lennar Trust I: | ||||||||
Series 1997-CHL1 Class E, 7.6884% 4/29/39 (c)(d) | . | 3,500,000 | 3,561,798 | |||||
weighted average coupon Series 1997-CHL1 Class D, | ||||||||
7.6884% 4/29/39 (c)(d) | 1,750,000 | 1,750,000 | ||||||
Global Signal Trust: | ||||||||
Series 2004-1 Class D, 5.098% 1/15/34 (c) | 3,000,000 | 2,938,588 | ||||||
Series 2004-1A: | ||||||||
Class F, 8.08% 1/15/34 (c)(d) | 2,860,000 | 2,968,213 | ||||||
Class G, 10% 1/15/34 (c)(d) | 2,640,000 | 2,733,659 | ||||||
GMAC Commercial Mortgage Securities, Inc. Series | ||||||||
1997-C2 Class F, 6.75% 4/15/29 (d) | 2,767,000 | 2,418,963 | ||||||
J.P. Morgan Commercial Mortgage Finance Corp.: | ||||||||
Series 1997-C5 Class F, 7.5605% 9/15/29 | 2,000,000 | 2,176,367 | ||||||
Series 1999-C7 Class F, 6% 10/15/35 (c) | 350,000 | 352,533 | ||||||
Series 1999-C8: | ||||||||
Class G, 6% 7/15/31 (c) | 1,385,000 | 1,367,688 | ||||||
Class H, 6% 7/15/31 (c) | 2,638,000 | 2,008,837 | ||||||
Series 2000-C9 Class G, 6.25% 10/15/32 (c) | 2,425,000 | 2,395,900 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp. | ||||||||
Series 2001 A: | ||||||||
Class G, 6% 10/15/32 (c)(d) | 2,895,000 | 2,265,338 | ||||||
Class X, 1.7164% 10/15/32 (c)(d)(f) | 20,059,974 | 677,044 | ||||||
Merrill Lynch Financial Asset, Inc. Series 2005-CA16: | ||||||||
Class F, 4.384% 7/12/15 | CAD | 710,000 | 534,451 | |||||
Class G, 4.384% 7/12/15 | CAD | 355,000 | 257,617 | |||||
Class H, 4.384% 7/12/15 | CAD | 236,000 | 148,877 | |||||
Class J, 4.384% 7/12/15 | CAD | 355,000 | 205,226 | |||||
Class K, 4.384% 7/12/15 | CAD | 355,000 | 191,637 | |||||
Class L, 4.384% 7/12/15 | CAD | 236,000 | 119,102 | |||||
Class M, 4.384% 7/12/15 | CAD | 995,000 | 327,933 | |||||
Merrill Lynch Mortgage Investors, Inc.: | ||||||||
Series 1999-C1 Class G, 6.71% 11/15/31 (c) | 3,359,000 | 3,056,690 | ||||||
Series 2001-HRPA Class G, 6.778% 2/3/16 (c) | 820,000 | 845,884 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
20 |
Commercial Mortgage Securities continued | ||||||
Principal | Value (Note 1) | |||||
Amount | ||||||
Mezz Capital Commercial Mortgage Trust Series | ||||||
2004-C1: | ||||||
Class D, 6.988% 9/15/13 | $ 750,000 | $ 762,629 | ||||
Class E, 7.983% 10/15/13 | 1,453,000 | 1,499,208 | ||||
Class X, 7.8498% 1/15/18 (d)(f) | 7,174,544 | 2,811,524 | ||||
Morgan Stanley Capital I, Inc.: | ||||||
Series 1997-C1 Class F, 6.85% 2/15/20 (c) | 500,000 | 504,411 | ||||
Series 1997-HF1 Class G, 6.86% 7/15/29 (c) | 555,000 | 561,129 | ||||
Wrightwood Capital Real Estate CDO Ltd. floater Series | ||||||
2005-1A Class F, 6.1438% 11/21/40 (c)(d) | 250,000 | 247,236 | ||||
TOTAL COMMERCIAL MORTGAGE SECURITIES | ||||||
(Cost $65,147,354) | 66,253,602 | |||||
Floating Rate Loans 2.6% | ||||||
CONSUMER DISCRETIONARY – 0.3% | ||||||
Specialty Retail – 0.3% | ||||||
Toys ’R’ US, Inc. term loan 7.3913% 12/9/08 (d) | 1,500,000 | 1,490,625 | ||||
FINANCIALS – 2.3% | ||||||
Diversified Financial Services – 0.4% | ||||||
Landsource Communication Development LLC Tranche B, | ||||||
term loan 7% 3/31/10 (d) | 2,200,000 | 2,216,500 | ||||
Real Estate 1.9% | ||||||
Apartment Investment & Management Co. term loan: | ||||||
6.35% 11/2/09 (d) | 200,000 | 201,750 | ||||
6.42% 11/2/09 (d) | 2,000,000 | 2,020,000 | ||||
Capital Automotive (REIT) term loan 6.31% | ||||||
12/16/10 (d) | 100,000 | 100,375 | ||||
General Growth Properties, Inc.: | ||||||
Tranche A, term loan 6.22% 11/12/07 (d) | 2,475,219 | 2,475,219 | ||||
Tranche B, term loan 6.57% 11/12/08 (d) | 1,487,151 | 1,487,151 | ||||
Lion Gables Realty LP term loan 6.1612% 9/30/06 (d) . | 563,187 | 565,299 | ||||
LNR Property Corp. Tranche B, term loan 7.2784% | ||||||
2/3/08 (d) | 3,919,880 | 3,949,279 | ||||
Newkirk Master LP Tranche B, term loan 6.1706% | ||||||
8/11/08 (d) | 86,766 | 87,309 | ||||
Shea Mountain House LLC Tranche B, term loan 6.34% | ||||||
5/11/11 (d) | 350,000 | 350,875 | ||||
11,237,257 | ||||||
TOTAL FINANCIALS | 13,453,757 |
See accompanying notes which are an integral part of the financial statements.
21 Semiannual Report
Investments continued | ||||||
Floating Rate Loans continued | ||||||
Principal | Value (Note 1) | |||||
Amount | ||||||
HEALTH CARE – 0.0% | ||||||
Health Care Providers & Services – 0.0% | ||||||
Beverly Enterprises, Inc. term loan 7.025% | ||||||
10/22/08 (d) | $ 195,500 | $ 195,622 | ||||
TOTAL FLOATING RATE LOANS | ||||||
(Cost $15,081,972) | 15,140,004 | |||||
Preferred Securities 0.2% | ||||||
FINANCIALS – 0.2% | ||||||
Diversified Financial Services – 0.2% | ||||||
Crest Clarendon Street 2002-1 Ltd. Series 2002-1A Class PS, | ||||||
18.0472% 12/28/35 (c)(d) | 500,000 | 554,938 | ||||
Crest Dartmouth Street 2003 1 Ltd. Series 2003-1A Class PS, | ||||||
34.124% 6/28/38 (c)(d) | 590,000 | 717,153 | ||||
1,272,091 | ||||||
TOTAL PREFERRED SECURITIES | ||||||
(Cost $1,183,725) | 1,272,091 | |||||
Fixed Income Funds 4.2% | ||||||
Shares | ||||||
Fidelity Ultra-Short Central Fund (e) | ||||||
(Cost $24,999,977) | 251,145 | 24,978,882 | ||||
Money Market Funds 3.3% | ||||||
Fidelity Cash Central Fund, 4.46% (b) | ||||||
(Cost $19,287,610) | 19,287,610 | 19,287,610 | ||||
TOTAL INVESTMENT PORTFOLIO 99.6% | ||||||
(Cost $570,384,408) | 588,142,797 | |||||
NET OTHER ASSETS – 0.4% | 2,257,207 | |||||
NET ASSETS 100% | $ 590,400,004 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
22 |
Currency Abbreviation | ||
CAD | — | Canadian dollar |
Legend (a) Non-income producing (b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund’s holdings as of its most recent quarter end is available upon request. (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 $107,938,129 or 18.3% of net assets. (d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (e) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited list of holdings for each fixed-income central fund, as of the investing fund’s report date, is available upon request or at fidelity.com. The reports are located just after the fund’s financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central fund’s financial statements, which are not covered by the investing fund’s Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC’s web site, www.sec.gov, or upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. (g) Restricted securities – Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $4,000,000 or 0.7% of net assets. |
Additional information on each holding is as follows:
Acquisition | Acquisition | |||||
Security | Date | Cost | ||||
Wrightwood | ||||||
Capital LLC 9% | ||||||
6/1/14 | 1/1/05 | $ | 4,000,000 |
See accompanying notes which are an integral part of the financial statements.
23 Semiannual Report
Investments continued
Affiliated Central Funds
Information regarding fiscal year to date income received by the fund from the affiliated Central funds is as follows:
Fund | Income received | |||
Fidelity Cash Central Fund | $ | 436,595 | ||
Fidelity Ultra Short Central Fund | 536,439 | |||
Total | $ | 973,034 |
Additional information regarding the fund’s fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows:
Value, | Purchases | Sales | Value, end of | % ownership, | ||||||||||||||||
beginning of | Proceeds | period | end of period | |||||||||||||||||
Fund | period | |||||||||||||||||||
Fidelity Ultra Short | ||||||||||||||||||||
Central Fund | $ | 24,983,905 | $ | — | $ | — | $ | 24,978,882 | 0.4% |
Other Information
The composition of credit quality ratings as a percentage of net assets is as follows (ratings are unaudited):
U.S.Government and | ||
U.S.Government Agency | ||
Obligations | 0.5% | |
AAA,AA,A | 3.2% | |
BBB | 17.2% | |
BB | 16.7% | |
B | 7.3% | |
CCC,CC,C | 0.1% | |
Not Rated | 4.8% | |
Equities | 45.1% | |
Short Term Investments and Net | ||
Other Assets | 5.1% | |
100.0% |
We have used ratings from Moody’s® Investors Services, Inc. Where Moody’s ratings are not available, we have used S&P® ratings.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report 24
Financial Statements | ||||||||
Statement of Assets and Liabilities | ||||||||
January 31, 2006 | ||||||||
Assets | ||||||||
Investment in securities, at value See accompanying | ||||||||
schedule: | ||||||||
Unaffiliated issuers (cost $526,096,821) | $ | 543,876,305 | ||||||
Affiliated Central Funds (cost $44,287,587) | 44,266,492 | |||||||
Total Investments (cost $570,384,408) | $ | 588,142,797 | ||||||
Receivable for investments sold | 624,581 | |||||||
Receivable for fund shares sold | 608,143 | |||||||
Dividends receivable | 633,307 | |||||||
Interest receivable | 3,806,628 | |||||||
Prepaid expenses | 2,919 | |||||||
Other affiliated receivables | 587 | |||||||
Other receivables�� | 7,232 | |||||||
Total assets | 593,826,194 | |||||||
Liabilities | ||||||||
Payable for investments purchased | $ | 125,670 | ||||||
Payable for fund shares redeemed | 2,838,236 | |||||||
Accrued management fee | 285,304 | |||||||
Other affiliated payables | 130,097 | |||||||
Other payables and accrued expenses | 46,883 | |||||||
Total liabilities | 3,426,190 | |||||||
Net Assets | $ | 590,400,004 | ||||||
Net Assets consist of: | ||||||||
Paid in capital | $ | 565,761,930 | ||||||
Undistributed net investment income | 874,500 | |||||||
Accumulated undistributed net realized gain (loss) on | ||||||||
investments and foreign currency transactions | 6,012,785 | |||||||
Net unrealized appreciation (depreciation) on | ||||||||
investments and assets and liabilities in foreign | ||||||||
currencies | 17,750,789 | |||||||
Net Assets, for 50,571,556 shares outstanding | $ | 590,400,004 | ||||||
Net Asset Value, offering price and redemption price per | ||||||||
share ($590,400,004 ÷ 50,571,556 shares) | $ | 11.67 |
See accompanying notes which are an integral part of the financial statements.
25 Semiannual Report
Financial Statements continued | ||||||
Statement of Operations | ||||||
Six months ended January 31, 2006 | ||||||
Investment Income | ||||||
Dividends | $ | 8,301,756 | ||||
Interest | 10,341,365 | |||||
Income from affiliated Central Funds | 973,034 | |||||
Total income | 19,616,155 | |||||
Expenses | ||||||
Management fee | $ | 1,796,441 | ||||
Transfer agent fees | 662,495 | |||||
Accounting fees and expenses | 141,055 | |||||
Independent trustees’ compensation | 1,383 | |||||
Custodian fees and expenses | 9,092 | |||||
Registration fees | 32,345 | |||||
Audit | 44,520 | |||||
Legal | 6,449 | |||||
Miscellaneous | 2,348 | |||||
Total expenses before reductions | 2,696,128 | |||||
Expense reductions | (19,062) | 2,677,066 | ||||
Net investment income (loss) | 16,939,089 | |||||
Realized and Unrealized Gain (Loss) | ||||||
Net realized gain (loss) on: | ||||||
Investment securities: | ||||||
Unaffiliated issuers | 11,194,671 | |||||
Foreign currency transactions | 6,269 | |||||
Total net realized gain (loss) | 11,200,940 | |||||
Change in net unrealized appreciation (depreciation) on: | ||||||
Investment securities | (18,452,467) | |||||
Assets and liabilities in foreign currencies | (7,583) | |||||
Total change in net unrealized appreciation | ||||||
(depreciation) | (18,460,050) | |||||
Net gain (loss) | (7,259,110) | |||||
Net increase (decrease) in net assets resulting from | ||||||
operations | $ | 9,679,979 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
26 |
Statement of Changes in Net Assets | ||||||||
Six months ended | Year ended | |||||||
January 31, | July 31, | |||||||
2006 | 2005 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 16,939,089 | $ | 29,546,754 | ||||
Net realized gain (loss) | 11,200,940 | 10,712,768 | ||||||
Change in net unrealized appreciation (depreciation) . | (18,460,050) | 27,324,066 | ||||||
Net increase (decrease) in net assets resulting | ||||||||
from operations | 9,679,979 | 67,583,588 | ||||||
Distributions to shareholders from net investment income . | (22,306,069) | (26,821,897) | ||||||
Distributions to shareholders from net realized gain | (14,457,481) | (7,090,927) | ||||||
Total distributions | (36,763,550) | (33,912,824) | ||||||
Share transactions | ||||||||
Proceeds from sales of shares | 91,428,338 | 342,677,417 | ||||||
Reinvestment of distributions | 32,059,169 | 29,547,608 | ||||||
Cost of shares redeemed | (173,457,719) | (161,193,200) | ||||||
Net increase (decrease) in net assets resulting from | ||||||||
share transactions | (49,970,212) | 211,031,825 | ||||||
Redemption fees | 51,179 | 148,704 | ||||||
Total increase (decrease) in net assets | (77,002,604) | 244,851,293 | ||||||
Net Assets | ||||||||
Beginning of period | 667,402,608 | 422,551,315 | ||||||
End of period (including undistributed net investment | ||||||||
income of $874,500 and undistributed net invest- | ||||||||
ment income of $6,241,480, respectively) | $ | 590,400,004 | $ | 667,402,608 | ||||
Other Information | ||||||||
Shares | ||||||||
Sold | 7,751,729 | 29,225,235 | ||||||
Issued in reinvestment of distributions | 2,748,575 | 2,535,568 | ||||||
Redeemed | (14,774,163) | (13,702,129) | ||||||
Net increase (decrease) | (4,273,859) | 18,058,674 |
See accompanying notes which are an integral part of the financial statements.
27 Semiannual Report
Financial Highlights | ||||||||||
Six months ended | ||||||||||
January 31, | Years ended July 31, | |||||||||
2006 | 2005 | 2004 | 2003 F | |||||||
Selected Per Share Data | ||||||||||
Net asset value, beginning of | ||||||||||
period | $ 12.17 | $ 11.49 | $ 10.91 | $ 10.00 | ||||||
Income from Investment | ||||||||||
Operations | ||||||||||
Net investment income (loss) D | .32 | .60 | .59 | .27 | ||||||
Net realized and unrealized | ||||||||||
gain (loss) | (.13) | .83 | .60 | .71 | ||||||
Total from investment opera- | ||||||||||
tions | 19 | 1.43 | 1.19 | .98 | ||||||
Distributions from net investment | ||||||||||
income | (.42) | (.57) | (.55) | (.07) | ||||||
Distributions from net realized | ||||||||||
gain | (.27) | (.18) | (.07) | |||||||
Total distributions | (.69) | (.75) | (.62) | (.07) | ||||||
Redemption fees added to paid | ||||||||||
in capital | — H | — H | .01 | — H | ||||||
Net asset value, end of period . | $ 11.67 | $ 12.17 | $ 11.49 | $ 10.91 | ||||||
Total ReturnB,C | 1.65% | 12.90% | 11.31% | 9.83% | ||||||
Ratios to Average Net AssetsE,G | ||||||||||
Expenses before reductions | 85%A | .85% | .85% | .97%A | ||||||
Expenses net of fee waivers, | ||||||||||
if any | 85%A | .85% | .85% | .97%A | ||||||
Expenses net of all reductions | .85%A | .85% | .85% | .94%A | ||||||
Net investment income (loss) . | 5.36%A | 5.13% | 5.25% | 5.10%A | ||||||
Supplemental Data | ||||||||||
Net assets, end of period | ||||||||||
(000 omitted) | $ 590,400 | $667,403 | $422,551 | $228,545 | ||||||
Portfolio turnover rate | 26%A | 30% | 61% | 41%A |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Amounts do not include the activity of the affiliated central funds. F For the period February 4, 2003 (commencement of operations) to July 31, 2003. G Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expense ratios before reductions for start up periods may not be representative of longer term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund. H Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report |
28 |
Notes to Financial Statements
For the period ended January 31, 2006 |
1. Significant Accounting Policies.
Fidelity Real Estate Income Fund (the fund) is a non diversified fund of Fidelity Securi ties Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open end management investment company organized as a Massachusetts business trust. The fund may invest in affiliated money market central funds (Money Market Central Funds) and fixed income Central Investment Portfolios (CIPs), collectively referred to as Central Funds, which are open end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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, which are also consistently followed by the Central Funds:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Investments in open end mutual funds, including Central Funds, are valued at their closing net asset value each business day. Short term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange traded funds. Because the fund’s
29 Semiannual Report
Notes to Financial Statements continued | ||
1. Significant Accounting Policies continued | ||
Security Valuation continued |
utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts’ terms.
Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions, including the fund’s investment activity in the Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex dividend date, except for certain dividends from foreign securities where the ex dividend date may have passed, which 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered return of capital distribu tions or capital gain distributions. Interest income and distributions from the Central Funds, are accrued as earned. Interest income includes coupon interest and amortiza tion of premium and accretion of discount on debt securities. The fund follows the provisions of Emerging Issues Task Force Issue No. 99 20 (EITF 99 20), “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets” for certain lower credit quality securitized assets that have contractual cash flows (for example, asset backed securities, collateralized mortgage obligations and commercial mortgage backed securities). Under EITF 99 20, if there is a change in the estimated cash flows for any of these securities, based on an evaluation of current information, then the estimated yield is adjusted on a prospective basis over the
Semiannual Report |
30 |
1. Significant Accounting Policies continued |
Investment Transactions and Income continued |
remaining life of the security. Investment income is recorded net of foreign taxes with held 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 each fund in the trust.
Income Tax Information and Distributions to Shareholders. Each year, the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex dividend date. Income and capital gain distribu tions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund claimed a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book tax differences will reverse in a subsequent period.
Book tax differences are primarily due to passive foreign investment companies (PFIC), partnerships, and losses deferred due to wash sales.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ | 26,548,761 | ||
Unrealized depreciation | (8,973,012) | |||
Net unrealized appreciation (depreciation) | $ | 17,575,749 | ||
Cost for federal income tax purposes | $ | 570,567,048 |
Short Term Trading (Redemption) Fees. Shares held in the fund less than 90 days are subject to a redemption fee equal to .75% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the fund and accounted for as an addition to paid in capital.
31 Semiannual Report
Notes to Financial Statements continued | ||
2. Operating Policies. |
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non government securities. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transac tions 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. Information regarding restricted securities is included at the end of the fund’s Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The fund may be contrac tually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $77,554,878 and $134,890,093, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment manage ment related services for which the fund pays a monthly management fee. The manage ment fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund’s average net assets and a group fee rate that averaged .27% during the
Semiannual Report |
32 |
4. Fees and Other Transactions - continued
Management Fee continued
period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .57% of the fund’s average net assets.
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 shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual ized rate of .21% 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.
Affiliated Central Funds. The fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Invest ments Money Management, Inc. (FIMM), an affiliate of FMR.
The fund may also invest in CIPs managed by FIMM. The Ultra Short Central Fund seeks to obtain a high level of current income consistent with preservation of capital by invest ing in U.S. dollar denominated money market and investment grade debt securities.
The fund’s Schedule of Investments lists the CIP as an investment of the fund but does not include the underlying holdings of the CIP. Based on its investment objectives, the CIP may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. In addition, the CIP may also participate in delayed delivery and when issued securities, derivatives, and mortgage dollar rolls. These strategies are consistent with the investment objectives of the fund and may involve certain economic risks, including the risk that a counterparty to one or more of these transactions may be unable or unwilling to comply with the terms of the governing agreement. This may result in a decline in value of the CIP and the fund.
A complete unaudited list of holdings for the CIP, as of the fund’s report date, is available upon request or at fidelity.com. The reports are located just after the fund’s financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the CIP’s financial statements, which are not covered by the fund’s Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC’s web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
33 Semiannual Report
Notes to Financial Statements continued
4. Fees and Other Transactions - continued
Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $7,624 for the period.
5. Committed Line of Credit. |
The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the “line of credit”) to be utilized for temporary or emergency purposes to fund share holder redemptions or for other short term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Expense Reductions. |
Many of the brokers with whom FMR places trades on behalf of the fund provided services to the fund in addition to trade execution. These services included payments of certain expenses on behalf of the fund totaling $9,131 for the period. In addition, through arrangements with the fund’s custodian and transfer agent, credits realized as a result of uninvested cash balances were used to reduce the fund’s expenses. During the period, these credits reduced the fund’s custody and transfer agent expenses by $8,488 and $1,443, respectively.
7. Other. |
The fund’s organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
Semiannual Report |
34 |
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Securities Fund and Shareholders of Fidelity Real Estate Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Real Estate Income Fund (the Fund), a fund of Fidelity Securities Fund, including the schedule of investments, as of January 31, 2006, and the related statement of operations for the six months then ended, the statement of changes in net assets for the six months ended January 31, 2006 and the year ended July 31, 2005 and the financial highlights for the six months ended January 31, 2006, the years ended July 31, 2005 and July 31, 2004, and for the period from February 4, 2003 (commencement of operations) to July 31, 2003. These financial statements and financial highlights are the responsibility of the Fund’s manage ment. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of January 31, 2006, by correspondence with the custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Real Estate Income Fund as of January 31, 2006, the results of its operations for the six months then ended, the changes in its net assets for the six months ended January 31, 2006 and the year ended July 31, 2005 and its financial highlights for the six months ended January 31, 2005, the years ended July 31, 2005 and July 31, 2004, and for the period from February 4, 2003 (commencement of operations) to July 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Boston, Massachusetts March 13, 2006 |
35 Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Real Estate Income Fund
On January 19, 2006, the Board of Trustees, including the Independent Trustees (together, the Board), voted to approve a general research services agreement (the Agreement) between FMR, FMR Co., Inc. (FMRC), Fidelity Investments Money Manage ment, Inc. (FIMM), and Fidelity Research & Analysis Company (FRAC) (together, the Investment Advisers) for the fund, effective January 20, 2006, pursuant to which FRAC may provide general research and investment advisory support services to FMRC and FIMM. The Board considered that it has approved previously various sub advisory agreements for the fund with affiliates of FMR that allow FMR to obtain research, non discretionary advice, or discretionary portfolio management at no additional expense to the fund. The Board, assisted by the advice of fund counsel and independent Trustees’ counsel, considered a broad range of information and determined that it would be beneficial for the fund to access the research and investment advisory support services supplied by FRAC at no additional expense to the fund.
The Board reached this determination in part because the new arrangement will involve no changes in (i) the contractual terms of and fees payable under the fund’s manage ment contract or sub advisory agreements; (ii) the investment process or strategies employed in the management of the fund’s assets; (iii) the nature or level of services provided under the fund’s management contract or sub advisory agreements; (iv) the day to day management of the fund or the persons primarily responsible for such man agement; or (v) the ultimate control or beneficial ownership of FMR, FMRC, or FIMM. The Board also considered that the establishment of the Agreement would not necessi tate prior shareholder approval of the Agreement or result in an assignment and termination of the fund’s management contract or sub advisory agreements under the Investment Company Act of 1940.
Because the Board was approving an arrangement with FRAC under which the fund will not bear any additional management fees or expenses and under which the fund’s portfolio manager would not change, it did not consider the fund’s investment perfor mance, competitiveness of management fee and total expenses, costs of services and profitability, or economies of scale to be significant factors in its decision.
In connection with its future renewal of the fund’s management contract and sub advisory agreements, the Board will consider: (i) the nature, extent, and quality of services provided to the fund, including shareholder and administrative services and investment performance; (ii) the competitiveness of the fund’s management fee and total expenses; (iii) the costs of the services and profitability, including the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering, and servicing the fund and its shareholders; and (iv) whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have
37 Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees continued
appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the fund’s Agreement is fair and reasonable, and that the fund’s Agreement should be approved.
Semiannual Report |
38 |
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.
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.
* 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 guar anteed 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.
39 Semiannual Report
To Write Fidelity
We’ll give your correspondence immediate attention and send you written confirmation upon completion of your request.
(such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 |
Buying shares Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 Overnight Express Fidelity Investments Attn: Distribution Services 100 Crosby Parkway KC1H Covington, KY 41015 Selling shares Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0035 Overnight Express Fidelity Investments Attn: Distribution Services 100 Crosby Parkway KC1H Covington, KY 41015 General Correspondence Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 |
Buying shares Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 Selling shares Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0035 Overnight Express Fidelity Investments Attn: Distribution Services 100 Crosby Parkway KC1H Covington, KY 41015 General Correspondence Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 |
Semiannual Report 40
Investment Adviser Fidelity Management & Research Company Boston, MA Investment Sub Advisers FMR Co., Inc. Fidelity Research & Analysis Company (formerly Fidelity Management & Research (Far East) Inc.) Fidelity Management & Research (U.K.) Inc. Fidelity Investments Japan Limited Fidelity International Investment Advisers Fidelity International Investment Advisers (U.K.) Limited General Distributor Fidelity Distributors Corporation Boston, MA Transfer and Service Agent Fidelity Service Company, Inc. Boston, MA Custodian Citibank, N.A. New York, NY |
The Fidelity Telephone Connection | ||
Mutual Fund 24-Hour Service | ||
Exchanges/Redemptions | ||
and Account Assistance | 1-800-544-6666 | |
Product Information | 1-800-544-6666 | |
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 (FAST®) (automated phone logo) | 1-800-544-5555 | |
(automated phone logo) Automated line for quickest service |
REI-USAN-0306 1.789734.102 |
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the Fidelity Securities Fund: Fidelity Real Estate Income Fund's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Fidelity Securities Fund: Fidelity Real Estate Income Fund's (the "Fund") disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Fund is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the Fund's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Not applicable. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Securities Fund
By: | /s/Christine Reynolds |
Christine Reynolds | |
President and Treasurer | |
Date: | March 17, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/Christine Reynolds |
Christine Reynolds | |
President and Treasurer | |
Date: | March 17, 2006 |
By: | /s/Paul M. Murphy |
Paul M. Murphy | |
Chief Financial Officer | |
Date: | March 17, 2006 |