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 811-2841
Fidelity Capital Trust
(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: | October 31 |
Date of reporting period: | October 31, 2006 |
Item 1. Reports to Stockholders
Fidelity®
Disciplined Equity
Fund
Annual Report
October 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results | ||
Board Approval of 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.
Annual Report
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.
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.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity® Disciplined Equity Fund | 16.16% | 8.93% | 9.30% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Disciplined Equity Fund on October 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Standard & Poor's 500SM Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Steven Snider, Portfolio Manager of Fidelity® Disciplined Equity Fund for most of the period covered by this report.
U.S. equity investors had much to feel good about during the 12-month period ending October 31, 2006. On October 3, the Dow Jones Industrial AverageSM closed above its all-time high set back in January 2000. On October 19 - the 19th anniversary of the 1987 stock market crash - the Dow made history again, recording its first close above 12,000. The Dow finished the 12-month period with a gain of 18.47%. The Standard & Poor's 500SM Index and the NASDAQ Composite® Index also did well, returning 16.34% and 12.49%, respectively. There were a number of reasons for the equity market's impressive results, particularly the consistently strong quarterly earnings reported by U.S. corporations. The Federal Reserve Board also played a significant role. Though its inflation fighting efforts caused investors anguish at times, the Board seemed to successfully accomplish its mission of engineering a "soft landing" - where inflation doesn't get too hot and economic growth doesn't get too cold - leading to what Wall Street calls a "Goldilocks economy."
The fund gained 16.16% during the past year, slightly trailing the S&P 500®. The fund benefited versus the index from strong stock selection within the materials, industrials, information technology and financials sectors, while stock and industry selection within health care and consumer discretionary dragged down returns somewhat. Retailer JCPenney was the top contributor, benefiting from improved operating efficiency and a good economy. Steel producer Nucor was another good performer for the fund, benefiting from increased overseas demand. Rail transportation company CSX added value, its stock boosted by substantial demand for long-haul shipping. Agricultural producer Archer-Daniels-Midland did well, as it experienced growth in its sweeteners and starches division and a boom in ethanol demand. Conversely, the fund's overweighted position in capital goods company Caterpillar and out-of-index holding in homebuilder Toll Brothers were negatives, as both stocks declined due to concerns about a slowdown in the housing market and rising mortgage rates. Untimely trading in energy services company Schlumberger also dampened returns. Another disappointment was health care giant Aetna, whose shares lost ground when a major sell-off earlier in 2006 hit HMO stocks hard. Of these detractors, only Caterpillar was still held by the fund at period end.
Note to shareholders: Keith Quinton became Portfolio Manager of the fund on October 9, 2006.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, 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 (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the accompanying table 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.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table 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 shareholder 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.
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.
Beginning | Ending | Expenses Paid | |
Actual | $ 1,000.00 | $ 1,048.30 | $ 4.75 |
Hypothetical (5% return per year before expenses) | $ 1,000.00 | $ 1,020.57 | $ 4.69 |
* Expenses are equal to the Fund's annualized expense ratio of .92%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Annual Report
Investment Changes
Top Ten Stocks as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
JPMorgan Chase & Co. | 3.7 | 1.3 |
Merck & Co., Inc. | 3.4 | 0.3 |
Morgan Stanley | 3.2 | 1.4 |
International Business Machines Corp. | 3.1 | 2.1 |
Exxon Mobil Corp. | 2.9 | 4.5 |
Hewlett-Packard Co. | 2.8 | 2.5 |
Citigroup, Inc. | 2.3 | 2.4 |
JCPenney Co., Inc. | 2.2 | 2.4 |
TXU Corp. | 2.2 | 1.3 |
Marathon Oil Corp. | 2.1 | 0.3 |
27.9 | ||
Top Five Market Sectors as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Financials | 22.0 | 23.0 |
Information Technology | 15.2 | 13.5 |
Health Care | 12.2 | 10.0 |
Consumer Discretionary | 10.9 | 11.2 |
Industrials | 9.9 | 10.9 |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2006 * | As of April 30, 2006 ** | ||||||
Stocks and | Stocks and | ||||||
Short-Term | Short-Term | ||||||
* Foreign investments | 3.4% | ** Foreign investments | 0.9% |
Annual Report
Investments October 31, 2006
Showing Percentage of Net Assets
Common Stocks - 98.9% | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - 10.9% | |||
Auto Components - 0.3% | |||
Autoliv, Inc. | 334,000 | $ 18,995 | |
Automobiles - 0.2% | |||
General Motors Corp. (d) | 500,000 | 17,460 | |
Diversified Consumer Services - 0.3% | |||
Sotheby's Class A (ltd. vtg.) | 500,000 | 19,000 | |
Hotels, Restaurants & Leisure - 2.0% | |||
Jack in the Box, Inc. (a) | 149,400 | 8,383 | |
McDonald's Corp. | 2,825,000 | 118,424 | |
Yum! Brands, Inc. | 500,000 | 29,730 | |
156,537 | |||
Household Durables - 0.2% | |||
Interface, Inc. Class A (a) | 1,000,000 | 14,550 | |
Whirlpool Corp. | 49,400 | 4,294 | |
18,844 | |||
Internet & Catalog Retail - 0.3% | |||
Priceline.com, Inc. (a) | 500,000 | 20,145 | |
Media - 1.0% | |||
McGraw-Hill Companies, Inc. | 1,250,000 | 80,213 | |
Multiline Retail - 5.6% | |||
Family Dollar Stores, Inc. | 1,000,000 | 29,450 | |
Federated Department Stores, Inc. | 500,000 | 21,955 | |
JCPenney Co., Inc. | 2,314,100 | 174,090 | |
Kohl's Corp. (a) | 2,163,600 | 152,750 | |
Nordstrom, Inc. | 1,137,200 | 53,846 | |
432,091 | |||
Specialty Retail - 0.9% | |||
American Eagle Outfitters, Inc. | 581,600 | 26,637 | |
AnnTaylor Stores Corp. (a) | 524,100 | 23,071 | |
Gymboree Corp. (a) | 410,500 | 19,072 | |
68,780 | |||
Textiles, Apparel & Luxury Goods - 0.1% | |||
Phillips-Van Heusen Corp. | 190,800 | 8,731 | |
TOTAL CONSUMER DISCRETIONARY | 840,796 | ||
CONSUMER STAPLES - 9.0% | |||
Beverages - 1.6% | |||
Coca-Cola Enterprises, Inc. | 5,000,000 | 100,150 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER STAPLES - continued | |||
Beverages - continued | |||
Molson Coors Brewing Co. Class B | 283,200 | $ 20,158 | |
Pepsi Bottling Group, Inc. | 68,900 | 2,179 | |
122,487 | |||
Food & Staples Retailing - 2.1% | |||
Kroger Co. | 5,250,000 | 118,073 | |
Longs Drug Stores Corp. | 149,100 | 6,417 | |
Safeway, Inc. | 1,240,000 | 36,406 | |
160,896 | |||
Food Products - 3.5% | |||
Archer-Daniels-Midland Co. | 3,231,600 | 124,417 | |
ConAgra Foods, Inc. | 750,000 | 19,613 | |
Corn Products International, Inc. | 561,400 | 20,317 | |
General Mills, Inc. | 1,428,100 | 81,145 | |
Hormel Foods Corp. | 187,000 | 6,753 | |
Sanderson Farms, Inc. (d) | 640,700 | 16,998 | |
269,243 | |||
Household Products - 0.3% | |||
Energizer Holdings, Inc. (a) | 250,000 | 19,538 | |
Personal Products - 0.1% | |||
NBTY, Inc. (a) | 378,600 | 10,533 | |
Tobacco - 1.4% | |||
Altria Group, Inc. | 500,000 | 40,665 | |
British American Tobacco PLC sponsored ADR | 500,000 | 27,500 | |
Loews Corp. - Carolina Group | 727,900 | 42,087 | |
110,252 | |||
TOTAL CONSUMER STAPLES | 692,949 | ||
ENERGY - 9.4% | |||
Energy Equipment & Services - 0.3% | |||
GlobalSantaFe Corp. | 500,000 | 25,950 | |
Oil, Gas & Consumable Fuels - 9.1% | |||
Chevron Corp. | 500,000 | 33,600 | |
ConocoPhillips | 2,297,268 | 138,387 | |
Exxon Mobil Corp. | 3,171,400 | 226,501 | |
Frontier Oil Corp. | 750,000 | 22,050 | |
Hess Corp. | 1,000,000 | 42,400 | |
Marathon Oil Corp. | 1,913,300 | 165,309 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
ENERGY - continued | |||
Oil, Gas & Consumable Fuels - continued | |||
Valero Energy Corp. | 1,300,000 | $ 68,029 | |
Western Refining, Inc. | 164,361 | 3,872 | |
700,148 | |||
TOTAL ENERGY | 726,098 | ||
FINANCIALS - 22.0% | |||
Capital Markets - 7.8% | |||
Bear Stearns Companies, Inc. | 500,000 | 75,675 | |
Goldman Sachs Group, Inc. | 750,000 | 142,343 | |
Knight Capital Group, Inc. Class A (a) | 411,700 | 7,678 | |
Lehman Brothers Holdings, Inc. | 1,063,800 | 82,806 | |
Merrill Lynch & Co., Inc. | 500,000 | 43,710 | |
Morgan Stanley | 3,265,700 | 249,597 | |
601,809 | |||
Commercial Banks - 1.1% | |||
Allied Irish Banks PLC sponsored ADR | 750,000 | 40,980 | |
Societe Generale Series A | 250,000 | 41,547 | |
82,527 | |||
Diversified Financial Services - 8.5% | |||
Bank of America Corp. | 2,868,300 | 154,515 | |
Citigroup, Inc. | 3,517,300 | 176,428 | |
ING Groep NV sponsored ADR | 850,000 | 37,681 | |
JPMorgan Chase & Co. | 6,100,000 | 289,378 | |
658,002 | |||
Insurance - 4.0% | |||
Allied World Assurance Co. Holdings Ltd. | 250,000 | 10,440 | |
Allstate Corp. | 2,300,000 | 141,128 | |
American Financial Group, Inc., Ohio | 357,900 | 17,129 | |
Assurant, Inc. | 300,000 | 15,798 | |
Axis Capital Holdings Ltd. | 400,000 | 13,140 | |
Lincoln National Corp. | 460,000 | 29,123 | |
Loews Corp. | 980,300 | 38,153 | |
Reinsurance Group of America, Inc. | 350,000 | 19,740 | |
The Chubb Corp. | 373,200 | 19,836 | |
304,487 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
FINANCIALS - continued | |||
Thrifts & Mortgage Finance - 0.6% | |||
Countrywide Financial Corp. | 1,250,000 | $ 47,650 | |
TOTAL FINANCIALS | 1,694,475 | ||
HEALTH CARE - 12.2% | |||
Health Care Equipment & Supplies - 1.2% | |||
Becton, Dickinson & Co. | 1,300,000 | 91,039 | |
Health Care Providers & Services - 2.2% | |||
AMERIGROUP Corp. (a) | 421,600 | 12,631 | |
CIGNA Corp. | 475,000 | 55,566 | |
Humana, Inc. (a) | 1,206,113 | 72,367 | |
Magellan Health Services, Inc. (a) | 196,800 | 8,588 | |
McKesson Corp. | 376,000 | 18,834 | |
167,986 | |||
Health Care Technology - 0.2% | |||
Emdeon Corp. (a) | 1,439,300 | 16,768 | |
Pharmaceuticals - 8.6% | |||
AstraZeneca PLC sponsored ADR | 651,700 | 38,255 | |
Johnson & Johnson | 2,250,000 | 151,650 | |
King Pharmaceuticals, Inc. (a) | 1,375,000 | 23,004 | |
Merck & Co., Inc. | 5,863,400 | 266,316 | |
Pfizer, Inc. | 2,500,000 | 66,625 | |
Wyeth | 2,225,000 | 113,542 | |
659,392 | |||
TOTAL HEALTH CARE | 935,185 | ||
INDUSTRIALS - 9.9% | |||
Aerospace & Defense - 3.1% | |||
General Dynamics Corp. | 360,000 | 25,596 | |
Goodrich Corp. | 1,000,000 | 44,090 | |
Lockheed Martin Corp. | 1,000,000 | 86,930 | |
Raytheon Co. | 1,636,700 | 81,753 | |
238,369 | |||
Airlines - 0.4% | |||
Continental Airlines, Inc. Class B (a) | 788,900 | 29,095 | |
Commercial Services & Supplies - 0.8% | |||
Allied Waste Industries, Inc. | 1,573,700 | 19,120 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INDUSTRIALS - continued | |||
Commercial Services & Supplies - continued | |||
Manpower, Inc. | 400,000 | $ 27,108 | |
Waste Management, Inc. | 500,000 | 18,740 | |
64,968 | |||
Industrial Conglomerates - 0.3% | |||
McDermott International, Inc. (a) | 450,000 | 20,115 | |
Machinery - 3.8% | |||
Caterpillar, Inc. | 2,430,300 | 147,544 | |
Cummins, Inc. | 265,000 | 33,650 | |
Deere & Co. | 750,000 | 63,848 | |
Gardner Denver, Inc. (a) | 539,600 | 18,341 | |
Terex Corp. (a) | 500,000 | 25,880 | |
289,263 | |||
Road & Rail - 1.5% | |||
CSX Corp. | 3,346,600 | 119,373 | |
TOTAL INDUSTRIALS | 761,183 | ||
INFORMATION TECHNOLOGY - 15.2% | |||
Communications Equipment - 2.3% | |||
Cisco Systems, Inc. (a) | 3,118,000 | 75,237 | |
CommScope, Inc. (a) | 500,000 | 15,955 | |
Motorola, Inc. | 3,790,400 | 87,407 | |
178,599 | |||
Computers & Peripherals - 6.9% | |||
Brocade Communications Systems, Inc. (a) | 4,903,100 | 39,764 | |
Hewlett-Packard Co. | 5,629,100 | 218,071 | |
International Business Machines Corp. | 2,555,700 | 235,968 | |
Lexmark International, Inc. Class A (a) | 560,000 | 35,610 | |
529,413 | |||
Electronic Equipment & Instruments - 0.7% | |||
Arrow Electronics, Inc. (a) | 550,000 | 16,418 | |
Ingram Micro, Inc. Class A (a) | 1,000,000 | 20,610 | |
Solectron Corp. (a) | 6,000,000 | 20,040 | |
57,068 | |||
Internet Software & Services - 0.3% | |||
RealNetworks, Inc. (a) | 1,730,400 | 19,000 | |
Office Electronics - 1.5% | |||
Xerox Corp. (a) | 7,000,000 | 119,000 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INFORMATION TECHNOLOGY - continued | |||
Semiconductors & Semiconductor Equipment - 1.9% | |||
Freescale Semiconductor, Inc. Class B (a) | 750,000 | $ 29,498 | |
Lam Research Corp. (a) | 1,500,000 | 74,175 | |
Novellus Systems, Inc. (a) | 950,000 | 26,268 | |
ON Semiconductor Corp. (a) | 2,460,000 | 15,301 | |
145,242 | |||
Software - 1.6% | |||
BEA Systems, Inc. (a) | 1,000,000 | 16,270 | |
BMC Software, Inc. (a) | 1,151,300 | 34,896 | |
Oracle Corp. (a) | 4,000,000 | 73,880 | |
125,046 | |||
TOTAL INFORMATION TECHNOLOGY | 1,173,368 | ||
MATERIALS - 3.1% | |||
Chemicals - 0.3% | |||
OM Group, Inc. (a) | 330,700 | 18,850 | |
Metals & Mining - 2.8% | |||
AK Steel Holding Corp. (a) | 1,381,600 | 20,627 | |
Allegheny Technologies, Inc. | 500,000 | 39,365 | |
Chaparral Steel Co. | 500,000 | 20,795 | |
Commercial Metals Co. | 886,800 | 23,598 | |
Nucor Corp. | 1,557,500 | 90,974 | |
Oregon Steel Mills, Inc. (a) | 390,700 | 21,254 | |
216,613 | |||
TOTAL MATERIALS | 235,463 | ||
TELECOMMUNICATION SERVICES - 3.6% | |||
Diversified Telecommunication Services - 3.6% | |||
AT&T, Inc. | 3,211,000 | 109,977 | |
BellSouth Corp. | 1,950,000 | 87,945 | |
Qwest Communications International, Inc. (a) | 8,800,400 | 75,947 | |
273,869 | |||
UTILITIES - 3.6% | |||
Electric Utilities - 1.4% | |||
Allegheny Energy, Inc. (a) | 1,000,000 | 43,030 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
UTILITIES - continued | |||
Electric Utilities - continued | |||
Exelon Corp. | 500,000 | $ 30,990 | |
FirstEnergy Corp. | 515,000 | 30,308 | |
104,328 | |||
Independent Power Producers & Energy Traders - 2.2% | |||
TXU Corp. | 2,712,200 | 171,221 | |
TOTAL UTILITIES | 275,549 | ||
TOTAL COMMON STOCKS (Cost $6,571,020) | 7,608,935 |
U.S. Treasury Obligations - 0.1% | ||||
Principal Amount (000s) | ||||
U.S. Treasury Bills, yield at date of purchase 4.69% to 4.78% 11/2/06 to 12/7/06 (e) | $ 9,200 | 9,181 |
Money Market Funds - 1.7% | |||
Shares | |||
Fidelity Cash Central Fund, 5.34% (b) | 115,404,494 | 115,404 | |
Fidelity Securities Lending Cash Central Fund, 5.35% (b)(c) | 14,064,550 | 14,065 | |
TOTAL MONEY MARKET FUNDS (Cost $129,469) | 129,469 | ||
TOTAL INVESTMENT PORTFOLIO - 100.7% (Cost $6,709,670) | 7,747,585 | ||
NET OTHER ASSETS - (0.7)% | (53,480) | ||
NET ASSETS - 100% | $ 7,694,105 |
Futures Contracts | |||||
Expiration Date | Underlying Face Amount at Value (000s) | Unrealized Appreciation/ | |||
Purchased | |||||
Equity Index Contracts | |||||
192 S&P 500 Index Contracts | Dec. 2006 | $ 66,394 | $ 129 |
The face value of futures purchased as a percentage of net assets - 0.9% |
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) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $9,181,000. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 9,459 |
Fidelity Securities Lending Cash Central Fund | 87 |
Total | $ 9,546 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | October 31, 2006 | |
Assets | ||
Investment in securities, at value (including securities loaned of $13,915) - See accompanying schedule: Unaffiliated issuers (cost $6,580,201) | $ 7,618,116 | |
Fidelity Central Funds (cost $129,469) | 129,469 | |
Total Investments (cost $6,709,670) | $ 7,747,585 | |
Receivable for investments sold | 13,888 | |
Receivable for fund shares sold | 3,711 | |
Dividends receivable | 6,625 | |
Interest receivable | 1,022 | |
Other receivables | 114 | |
Total assets | 7,772,945 | |
Liabilities | ||
Payable for investments purchased | $ 56,855 | |
Payable for fund shares redeemed | 1,995 | |
Accrued management fee | 4,148 | |
Other affiliated payables | 1,530 | |
Other payables and accrued expenses | 247 | |
Collateral on securities loaned, at value | 14,065 | |
Total liabilities | 78,840 | |
Net Assets | $ 7,694,105 | |
Net Assets consist of: | ||
Paid in capital | $ 5,984,336 | |
Undistributed net investment income | 34,504 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 637,221 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 1,038,044 | |
Net Assets, for 249,577 shares outstanding | $ 7,694,105 | |
Net Asset Value, offering price and redemption price per share ($7,694,105 ÷ 249,577 shares) | $ 30.83 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended October 31, 2006 | |
Investment Income | ||
Dividends | $ 102,697 | |
Interest | 216 | |
Income from Fidelity Central Funds | 9,546 | |
Total income | 112,459 | |
Expenses | ||
Management fee | $ 38,113 | |
Performance adjustment | 7,295 | |
Transfer agent fees | 14,839 | |
Accounting and security lending fees | 1,120 | |
Custodian fees and expenses | 111 | |
Independent trustees' compensation | 26 | |
Appreciation in deferred trustee compensation account | 3 | |
Registration fees | 144 | |
Audit | 89 | |
Legal | 98 | |
Miscellaneous | 155 | |
Total expenses before reductions | 61,993 | |
Expense reductions | (522) | 61,471 |
Net investment income (loss) | 50,988 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 706,343 | |
Foreign currency transactions | (73) | |
Futures contracts | 6,505 | |
Total net realized gain (loss) | 712,775 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 236,111 | |
Futures contracts | 1,328 | |
Total change in net unrealized appreciation (depreciation) | 237,439 | |
Net gain (loss) | 950,214 | |
Net increase (decrease) in net assets resulting from operations | $ 1,001,202 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 50,988 | $ 42,091 |
Net realized gain (loss) | 712,775 | 440,256 |
Change in net unrealized appreciation (depreciation) | 237,439 | 215,352 |
Net increase (decrease) in net assets resulting | 1,001,202 | 697,699 |
Distributions to shareholders from net investment income | (39,181) | (34,684) |
Share transactions | 1,363,639 | 1,140,712 |
Reinvestment of distributions | 38,498 | 34,006 |
Cost of shares redeemed | (514,962) | (459,923) |
Net increase (decrease) in net assets resulting from share transactions | 887,175 | 714,795 |
Total increase (decrease) in net assets | 1,849,196 | 1,377,810 |
Net Assets | ||
Beginning of period | 5,844,909 | 4,467,099 |
End of period (including undistributed net investment income of $34,504 and undistributed net investment income of $22,960, respectively) | $ 7,694,105 | $ 5,844,909 |
Other Information Shares | ||
Sold | 47,296 | 44,473 |
Issued in reinvestment of distributions | 1,366 | 1,371 |
Redeemed | (17,935) | (17,831) |
Net increase (decrease) | 30,727 | 28,013 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended October 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, | $ 26.71 | $ 23.41 | $ 21.78 | $ 18.41 | $ 20.56 |
Income from Investment Operations | |||||
Net investment income (loss) B | .22 | .20 E | .12 | .10 | .03 |
Net realized and unrealized gain (loss) | 4.08 | 3.28 | 1.62 | 3.30 | (2.13) |
Total from investment operations | 4.30 | 3.48 | 1.74 | 3.40 | (2.10) |
Distributions from net investment income | (.18) | (.18) | (.11) | (.03) | (.05) |
Net asset value, | $ 30.83 | $ 26.71 | $ 23.41 | $ 21.78 | $ 18.41 |
Total Return A | 16.16% | 14.92% | 8.03% | 18.50% | (10.25)% |
Ratios to Average Net Assets C, F | |||||
Expenses before reductions | .92% | .89% | .89% | .92% | 1.01% |
Expenses net of fee waivers, | .92% | .89% | .89% | .92% | 1.01% |
Expenses net of all reductions | .91% | .87% | .88% | .90% | 1.00% |
Net investment income (loss) | .76% | .79% E | .51% | .50% | .16% |
Supplemental Data | |||||
Net assets, end of period | $ 7,694 | $ 5,845 | $ 4,467 | $ 3,720 | $ 2,777 |
Portfolio turnover rate D | 98% | 80% | 42% | 64% | 68% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expense of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Investment income per share reflects a special dividend which amounted to $.06 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .57%.
F 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. 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.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2006
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Disciplined Equity Fund (the Fund) is a fund of Fidelity Capital Trust (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 Fidelity 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 Fidelity 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 the Fidelity 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
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
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 Fidelity Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. 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 distributions or capital gain distributions. Interest income and income distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
1. Significant Accounting Policies - continued
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), Independent Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.
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 distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim 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 futures transactions, foreign currency transactions, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,116,104 | |
Unrealized depreciation | (78,323) | |
Net unrealized appreciation (depreciation) | 1,037,781 | |
Undistributed ordinary income | 34,006 | |
Undistributed long-term capital gain | 626,516 | |
Cost for federal income tax purposes | $ 6,709,804 |
The tax character of distributions paid was as follows:
October 31, 2006 | October 31, 2005 | |
Ordinary Income | $ 39,181 | $ 34,684 |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48), was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets, results of operations and financial statement disclosures.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
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. Upon settlement date, 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.
Futures Contracts. The Fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are
Annual Report
2. Operating Policies - continued
Futures Contracts - continued
made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Futures contracts involve, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $7,342,089 and $6,407,292, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management 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 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. In addition, the management fee is subject to a performance adjustment (up to a maximum of ± .20% of the Fund's average net assets over a 36 month performance period). The upward or downward adjustment to the management fee is based on the Fund's relative investment performance as compared to an appropriate benchmark index. For the period, the total annual management fee rate, including the performance adjustment, was .67% 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.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
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 rate of .22% of average net assets.
Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Investments in Fidelity Central Funds. The Fund may invest in Fidelity Central Funds. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request. In addition, the financial statements of the Fidelity Central Funds, 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 Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
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 $29 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 shareholder 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, which amounts to $18 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and
Annual Report
6. Security Lending - continued
maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Net income from lending portfolio securities during the period amounted to $87.
7. 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 $86 for the period. In addition, through arrangements with the Fund's custody 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 $1 and $435, respectively.
8. 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.
At the end of the period, Fidelity Freedom 2020 Fund and Fidelity Freedom 2030 Fund were the owners of record of approximately 17% and 13%, respectively, of the total outstanding shares of the Fund. The Fidelity Freedom Funds were the owners of record, in the aggregate, of approximately 56% of the total outstanding shares of the Fund.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
8. Other - continued
The United States Securities and Exchange Commission ("SEC") is conducting an investigation of FMR (covering the years 2002 to 2004) arising from gifts, gratuities and business entertainment provided by certain brokers to certain individuals who were employed on FMR's domestic equity trading desk during that period. FMR is in discussions with the SEC staff regarding the possible resolution of the matter, but as of period-end no final resolution has been reached.
In December 2006, the Independent Trustees completed their own investigation of the matter with the assistance of independent counsel. The Independent Trustees and FMR agree that, despite the absence of proof that the Fidelity mutual funds experienced diminished execution quality as a result of the improper receipt of gifts and business entertainment, the conduct at issue was serious and is worthy of redress. Accordingly, the Independent Trustees have requested and FMR has agreed to pay $42 million to Fidelity mutual funds, plus interest to be determined at the time that payment is made. A method of allocating this payment among the funds has not yet been determined. In addition, FMR has agreed to reimburse related legal expenses. The total payment to the Fund is not anticipated to have a material impact on the Fund's net assets.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Capital Trust and the Shareholders of Fidelity Disciplined Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Disciplined Equity Fund (a fund of Fidelity Capital Trust) at October 31, 2006, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Disciplined Equity Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 21, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 348 funds advised by FMR or an affiliate. Mr. McCoy oversees 350 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1978 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Disciplined Equity (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as Vice Chairman (2006-present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. | |
Marie L. Knowles (60) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach is Chairman of the Independent Trustees (2006-present). Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Sony Corporation (2006-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (73) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
James H. Keyes (66) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Capital Trust. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Capital Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Disciplined Equity. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
Keith Quinton (48) | |
Year of Election or Appointment: 2006 Mr. Quinton is Vice President of Disciplined Equity. Mr. Quinton also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Quinton worked as a portfolio manager. Mr. Quinton also serves as Vice President of FMR and FMR Co., Inc. (2002). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Disciplined Equity. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (47) | |
Year of Election or Appointment: 2003 Assistant Secretary of Disciplined Equity. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (48) | |
Year of Election or Appointment: 2004 President and Treasurer of Disciplined Equity. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Disciplined Equity. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Disciplined Equity. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Disciplined Equity. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Disciplined Equity. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Disciplined Equity. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (37) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Disciplined Equity. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Disciplined Equity. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (60) | |
Year of Election or Appointment: 1988 Assistant Treasurer of Disciplined Equity. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Disciplined Equity. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Disciplined Equity. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (48) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Disciplined Equity. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Disciplined Equity. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The Board of Trustees of Fidelity Disciplined Equity Fund voted to pay on December 4, 2006, to shareholders of record at the opening of business on December 1, 2006, a distribution of $2.49 per share derived from capital gains realized from sales of portfolio securities and a dividend of $0.19 per share from net investment income.
The fund hereby designates as a capital gain dividend with respect to the taxable year ended October 31, 2006, $637,483,193, or, if subsequently determined to be different, the net capital gain of such year.
The fund designates 100% of the dividends distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.
The fund designates 100% of the dividend distributed in December during the fiscal year as amounts which may be taken into account as a dividend for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on September 20, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 18,984,087,768.24 | 96.277 |
Withheld | 734,128,039.90 | 3.723 |
TOTAL | 19,718,215,808.14 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 18,972,066,364.22 | 96.216 |
Withheld | 746,149,443.92 | 3.784 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert M. Gates | ||
Affirmative | 18,939,072,824.91 | 96.049 |
Withheld | 779,142,983.23 | 3.951 |
TOTAL | 19,718,215,808.14 | 100.000 |
George H. Heilmeier | ||
Affirmative | 18,924,535,963.81 | 95.975 |
Withheld | 793,679,844.33 | 4.025 |
TOTAL | 19,718,215,808.14 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 18,871,094,149.22 | 95.704 |
Withheld | 847,121,658.92 | 4.296 |
TOTAL | 19,718,215,808.14 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 18,962,549,074.38 | 96.168 |
Withheld | 755,666,733.76 | 3.832 |
TOTAL | 19,718,215,808.14 | 100.000 |
James H. KeyesB | ||
Affirmative | 18,951,323,897.48 | 96.111 |
Withheld | 766,891,910.66 | 3.889 |
TOTAL | 19,718,215,808.14 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 18,948,733,631.68 | 96.098 |
Withheld | 769,482,176.46 | 3.902 |
TOTAL | 19,718,215,808.14 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 18,955,192,662.21 | 96.130 |
Withheld | 763,023,145.93 | 3.870 |
TOTAL | 19,718,215,808.14 | 100.000 |
William O. McCoy | ||
Affirmative | 18,901,077,394.54 | 95.856 |
Withheld | 817,138,413.60 | 4.144 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 18,956,972,615.07 | 96.139 |
Withheld | 761,243,193.07 | 3.861 |
TOTAL | 19,718,215,808.14 | 100.000 |
Cornelia M. Small | ||
Affirmative | 18,967,158,466.26 | 96.191 |
Withheld | 751,057,341.88 | 3.809 |
TOTAL | 19,718,215,808.14 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 18,918,672,661.66 | 95.945 |
Withheld | 799,543,146.48 | 4.055 |
TOTAL | 19,718,215,808.14 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 18,959,278,859.57 | 96.151 |
Withheld | 758,936,948.57 | 3.849 |
TOTAL | 19,718,215,808.14 | 100.000 |
A Denotes trust-wide proposal and voting results. B Effective on or about January 1, 2007. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Disciplined Equity Fund
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance, as well as the fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the fund.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Disciplined Equity Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board also stated that the relative investment performance of the fund compared favorably to its benchmark for all the periods shown. The Board also reviewed the fund's relative investment performance against a peer group defined by Morningstar.
The Board also considered that the fund's management fee is subject to upward or downward adjustment depending upon whether, and to what extent, the fund's investment performance for the performance period exceeds, or is exceeded by, the record (over the same period) of a Board-approved performance adjustment index. The Board realizes that the performance adjustment provides FMR with a strong economic incentive to seek to achieve superior performance for the fund's shareholders and helps to more closely align the interests of FMR and the fund's shareholders.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Annual Report
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps, and without giving effect to the fund's performance adjustment. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 9% means that 91% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked and the impact of the fund's performance adjustment, is also included in the chart and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Disciplined Equity Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. The Board also noted the effect of the fund's positive performance adjustment on the fund's management fee ranking. The Board noted that the performance adjustment for each year represents calculations for rolling 36-month periods that differ from the periods shown in the performance charts above.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of the fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses, as well as the fund's positive performance adjustment. As part of its review, the Board also considered current and historical total expenses of the fund compared to competitive fund median expenses. The fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the fund's total expenses ranked below its competitive median for 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Based on its review, the Board concluded that the fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered 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. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
(phone_graphic)
Fidelity Automated
Service Telephone (FAST®)
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
* 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.
Annual Report
To Write Fidelity
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
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
(letter_graphic)
For Retirement
Accounts
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
Annual Report
To Visit Fidelity
For directions and hours,
please call 1-800-544-9797.
Arizona
7001 West Ray Road
Chandler, AZ
15445 N. Scottsdale Road
Scottsdale, AZ
California
815 East Birch Street
Brea, CA
1411 Chapin Avenue
Burlingame, CA
851 East Hamilton Avenue
Campbell, CA
19200 Von Karman Avenue
Irvine, CA
601 Larkspur Landing Circle
Larkspur, CA
10100 Santa Monica Blvd.
Los Angeles, CA
27101 Puerta Real
Mission Viejo, CA
73-575 El Paseo
Palm Desert, CA
251 University Avenue
Palo Alto, CA
123 South Lake Avenue
Pasadena, CA
16995 Bernardo Ctr. Drive
Rancho Bernardo, CA
1220 Roseville Parkway
Roseville, CA
1740 Arden Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
11943 El Camino Real
San Diego, CA
8 Montgomery Street
San Francisco, CA
3793 State Street
Santa Barbara, CA
1200 Wilshire Boulevard
Santa Monica, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
Colorado
1625 Broadway
Denver, CO
9185 Westview Road
Lone Tree, CO
Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
Delaware
400 Delaware Avenue
Wilmington, DE
Florida
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
4671 Town Center Parkway
Jacksonville, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
3501 PGA Boulevard
Palm Beach Gardens, FL
3550 Tamiami Trail, South
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
2465 State Road 7
Wellington, FL
Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
Illinois
One North LaSalle Street
Chicago, IL
875 North Michigan Ave.
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1572 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
Indiana
4729 East 82nd Street
Indianapolis, IN
Kansas
5400 College Boulevard
Overland Park, KS
Maine
Three Canal Plaza
Portland, ME
Maryland
7315 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
238 Main Street
Cambridge, MA
405 Cochituate Road
Framingham, MA
416 Belmont Street
Worcester, MA
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
Michigan
500 E. Eisenhower Pkwy.
Ann Arbor, MI
280 Old N. Woodward Ave.
Birmingham, MI
43420 Grand River Avenue
Novi, MI
29155 Northwestern Hwy.
Southfield, MI
Minnesota
7600 France Avenue South
Edina, MN
Missouri
1524 South Lindbergh Blvd.
St. Louis, MO
Nevada
2225 Village Walk Drive
Henderson, NV
New Jersey
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
396 Route 17, North
Paramus, NJ
3518 Route 1 North
Princeton, NJ
530 Broad Street
Shrewsbury, NJ
New York
1055 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
980 Madison Avenue
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
200 Fifth Avenue
New York, NY
733 Third Avenue
New York, NY
11 Penn Plaza
New York, NY
2070 Broadway
New York, NY
1075 Northern Blvd.
Roslyn, NY
799 Central Park Avenue
Scarsdale, NY
North Carolina
4611 Sharon Road
Charlotte, NC
7011 Fayetteville Road
Durham, NC
Ohio
3805 Edwards Road
Cincinnati, OH
1324 Polaris Parkway
Columbus, OH
28699 Chagrin Boulevard
Woodmere Village, OH
Oregon
7493 SW Bridgeport Road
Tigard, OR
Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
Wexford, PA
Rhode Island
47 Providence Place
Providence, RI
Tennessee
6150 Poplar Avenue
Memphis, TN
Texas
10000 Research Boulevard
Austin, TX
4001 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
6560 Fannin Street
Houston, TX
6500 N. MacArthur Blvd.
Irving, TX
6005 West Park Boulevard
Plano, TX
14100 San Pedro
San Antonio, TX
1576 East Southlake Blvd.
Southlake, TX
19740 IH 45 North
Spring, TX
Utah
279 West South Temple
Salt Lake City, UT
Virginia
1861 International Drive
McLean, VA
Washington
411 108th Avenue, N.E.
Bellevue, WA
1518 6th Avenue
Seattle, WA
Washington, DC
1900 K Street, N.W.
Washington, DC
Wisconsin
595 North Barker Road
Brookfield, WI
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment
Advisors
Fidelity International Investment
Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
State Street Bank and Trust Company
Quincy, MA
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 graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
FDE-UANN-1206
1.784777.103
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Fidelity®
Capital Appreciation
Fund
Annual Report
October 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The managers' review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results | ||
Board Approval of 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.
Annual Report
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.
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.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity® Capital Appreciation Fund | 14.70% | 11.18% | 10.24% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Capital Appreciation Fund on October 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Standard & Poor's 500SM Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from J. Fergus Shiel, Portfolio Manager of Fidelity® Capital Appreciation Fund
U.S. equity investors had much to feel good about during the 12-month period ending October 31, 2006. On October 3, the Dow Jones Industrial AverageSM closed above its all-time high set back in January 2000. On October 19 - the 19th anniversary of the 1987 stock market crash - the Dow made history again, recording its first close above 12,000. The Dow finished the 12-month period with a gain of 18.47%. The Standard & Poor's 500SM Index and the NASDAQ Composite® Index also did well, returning 16.34% and 12.49%, respectively. There were a number of reasons for the equity market's impressive results, particularly the consistently strong quarterly earnings reported by U.S. corporations. The Federal Reserve Board also played a significant role. Though its inflation fighting efforts caused investors anguish at times, the Board seemed to successfully accomplish its mission of engineering a "soft landing" - where inflation doesn't get too hot and economic growth doesn't get too cold - leading to what Wall Street calls a "Goldilocks economy."
During the past year, the fund returned 14.70%, trailing the S&P 500®. On a sector basis, information technology detracted the most from performance versus the index, as both an overweighting and stock selection were detrimental. Our positioning within financials and health care also hurt results. Security software provider Symantec suffered from problems with integrating acquisitions, senior management changes and a slowdown in the data security market. Semiconductor manufacturer Broadcom also dragged down performance, as did telecommunications infrastructure provider Juniper Networks. Elsewhere, Career Education, a for-profit education company, was an unsuccessful turnaround story. I sold all the detractors I've mentioned except for Broadcom by period end. On the positive side, the materials sector added the most to performance versus the index, followed by telecommunication services and industrials. In all three cases, stock selection was the primary driver of relative outperformance. Allegheny Technologies, a maker of the titanium alloys used in commercial aircraft manufacturing, was the top contributor compared with the index. Further benefiting the fund was telecom services provider Qwest Communications International, which reported an acceleration of revenues. Energy services conglomerate Schlumberger also outperformed, riding healthy demand for exploration and production services. I sold the stock to nail down profits.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, 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 (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the accompanying table 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.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table 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 shareholder 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.
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.
Beginning | Ending | Expenses Paid | |
Actual | $ 1,000.00 | $ 985.60 | $ 4.35 |
Hypothetical (5% return per year before expenses) | $ 1,000.00 | $ 1,020.82 | $ 4.43 |
* Expenses are equal to the Fund's annualized expense ratio of .87%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Annual Report
Investment Changes
Top Ten Stocks as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
The Walt Disney Co. | 4.5 | 3.3 |
Morgan Stanley | 3.0 | 2.9 |
Qwest Communications International, Inc. | 2.9 | 2.1 |
Abercrombie & Fitch Co. Class A | 2.9 | 2.3 |
Monsanto Co. | 2.8 | 1.8 |
General Electric Co. | 2.7 | 0.0 |
Whirlpool Corp. | 2.5 | 0.7 |
Motorola, Inc. | 2.4 | 2.9 |
Google, Inc. Class A (sub. vtg.) | 2.4 | 0.9 |
Norfolk Southern Corp. | 2.4 | 1.5 |
28.5 | ||
Top Five Market Sectors as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Industrials | 19.8 | 18.7 |
Consumer Discretionary | 17.6 | 17.6 |
Information Technology | 16.0 | 20.7 |
Health Care | 12.8 | 8.6 |
Financials | 11.8 | 8.3 |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2006 * | As of April 30, 2006 ** | ||||||
Stocks 97.1% | Stocks 95.5% | ||||||
Short-Term | Short-Term | ||||||
* Foreign investments | 13.1% | ** Foreign investments | 12.6% |
Annual Report
Investments October 31, 2006
Showing Percentage of Net Assets
Common Stocks - 97.1% | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - 17.6% | |||
Automobiles - 0.4% | |||
Fiat Spa (a)(d) | 1,689,400 | $ 29,840 | |
Diversified Consumer Services - 0.2% | |||
Corinthian Colleges, Inc. (a) | 1,495,900 | 18,325 | |
Hotels, Restaurants & Leisure - 1.9% | |||
Ambassadors Group, Inc. | 378,511 | 10,367 | |
Las Vegas Sands Corp. (a) | 684,600 | 52,167 | |
Wynn Resorts Ltd. (a)(d) | 1,291,211 | 94,956 | |
157,490 | |||
Household Durables - 2.5% | |||
Whirlpool Corp. (d) | 2,443,109 | 212,379 | |
Media - 5.9% | |||
Dow Jones & Co., Inc. (d) | 2,173,300 | 76,261 | |
Mediacom Communications Corp. Class A (a) | 505,826 | 4,224 | |
The Walt Disney Co. (d) | 11,837,793 | 372,413 | |
Viacom, Inc. Class B (non-vtg.) (a) | 1,060,600 | 41,279 | |
494,177 | |||
Multiline Retail - 0.9% | |||
Target Corp. | 1,320,300 | 78,135 | |
Specialty Retail - 5.0% | |||
Abercrombie & Fitch Co. Class A | 3,156,000 | 241,907 | |
American Eagle Outfitters, Inc. | 1,942,900 | 88,985 | |
Gap, Inc. | 1,001,300 | 21,047 | |
Gymboree Corp. (a) | 1,209,382 | 56,188 | |
Wet Seal, Inc. Class A (a) | 943,900 | 5,890 | |
414,017 | |||
Textiles, Apparel & Luxury Goods - 0.8% | |||
Deckers Outdoor Corp. (a)(e) | 791,600 | 42,089 | |
Wolverine World Wide, Inc. | 791,100 | 22,436 | |
64,525 | |||
TOTAL CONSUMER DISCRETIONARY | 1,468,888 | ||
CONSUMER STAPLES - 4.1% | |||
Food & Staples Retailing - 2.7% | |||
Kroger Co. | 1,306,500 | 29,383 | |
Safeway, Inc. | 335,500 | 9,850 | |
Wal-Mart Stores, Inc. | 3,749,700 | 184,785 | |
224,018 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER STAPLES - continued | |||
Tobacco - 1.4% | |||
British American Tobacco PLC sponsored ADR | 1,050,800 | $ 57,794 | |
Reynolds American, Inc. (d) | 1,028,000 | 64,928 | |
122,722 | |||
TOTAL CONSUMER STAPLES | 346,740 | ||
ENERGY - 0.6% | |||
Oil, Gas & Consumable Fuels - 0.6% | |||
Cameco Corp. | 1,542,700 | 54,279 | |
FINANCIALS - 11.8% | |||
Capital Markets - 7.6% | |||
E*TRADE Financial Corp. (a) | 2,726,000 | 63,461 | |
Goldman Sachs Group, Inc. | 944,600 | 179,276 | |
Jefferies Group, Inc. | 2,284,000 | 65,619 | |
Morgan Stanley | 3,238,200 | 247,496 | |
UBS AG (NY Shares) | 1,348,700 | 80,706 | |
636,558 | |||
Commercial Banks - 0.6% | |||
Wells Fargo & Co. | 1,347,600 | 48,904 | |
Consumer Finance - 2.0% | |||
American Express Co. | 2,920,200 | 168,817 | |
Diversified Financial Services - 0.9% | |||
Bank of America Corp. | 412,164 | 22,203 | |
Citigroup, Inc. | 1,023,100 | 51,319 | |
73,522 | |||
Thrifts & Mortgage Finance - 0.7% | |||
Clayton Holdings, Inc. | 658,183 | 9,261 | |
Countrywide Financial Corp. | 1,179,000 | 44,943 | |
54,204 | |||
TOTAL FINANCIALS | 982,005 | ||
HEALTH CARE - 12.8% | |||
Biotechnology - 4.0% | |||
Biogen Idec, Inc. (a) | 3,951,616 | 188,097 | |
Genentech, Inc. (a) | 1,198,500 | 99,835 | |
MedImmune, Inc. (a) | 1,293,500 | 41,444 | |
329,376 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
HEALTH CARE - continued | |||
Health Care Equipment & Supplies - 0.5% | |||
Baxter International, Inc. | 883,200 | $ 40,601 | |
Health Care Providers & Services - 1.4% | |||
Brookdale Senior Living, Inc. | 1,265,300 | 60,886 | |
VCA Antech, Inc. (a) | 1,790,138 | 57,947 | |
118,833 | |||
Pharmaceuticals - 6.9% | |||
Bristol-Myers Squibb Co. | 1,591,800 | 39,397 | |
Elan Corp. PLC sponsored ADR (a) | 9,291,455 | 134,540 | |
Johnson & Johnson | 2,800,800 | 188,774 | |
Merck & Co., Inc. | 1,853,500 | 84,186 | |
Pfizer, Inc. | 2,662,800 | 70,964 | |
Schering-Plough Corp. | 2,795,000 | 61,881 | |
579,742 | |||
TOTAL HEALTH CARE | 1,068,552 | ||
INDUSTRIALS - 19.8% | |||
Airlines - 2.0% | |||
AMR Corp. (d) | 3,521,800 | 99,808 | |
Ryanair Holdings PLC sponsored ADR (a)(d) | 1,025,000 | 68,491 | |
168,299 | |||
Building Products - 0.1% | |||
Kingspan Group PLC (Ireland) | 303,200 | 6,440 | |
Commercial Services & Supplies - 1.3% | |||
Allied Waste Industries, Inc. | 3,062,901 | 37,214 | |
Fuel Tech, Inc. (a)(e) | 1,198,914 | 23,559 | |
RPS Group PLC | 851,900 | 3,786 | |
Stericycle, Inc. (a) | 668,632 | 47,279 | |
111,838 | |||
Electrical Equipment - 3.5% | |||
ABB Ltd. sponsored ADR | 6,009,600 | 89,663 | |
Alstom SA (a) | 806,800 | 74,455 | |
Rockwell Automation, Inc. | 1,275,700 | 79,093 | |
Schneider Electric SA | 508,100 | 52,791 | |
296,002 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INDUSTRIALS - continued | |||
Industrial Conglomerates - 4.0% | |||
General Electric Co. | 6,419,724 | $ 225,397 | |
McDermott International, Inc. (a) | 2,356,069 | 105,316 | |
330,713 | |||
Machinery - 2.7% | |||
Deere & Co. | 1,892,500 | 161,109 | |
Flow International Corp. (a)(d)(e) | 1,990,972 | 23,454 | |
Flowserve Corp. (a) | 712,100 | 37,741 | |
222,304 | |||
Road & Rail - 5.5% | |||
Burlington Northern Santa Fe Corp. | 2,557,500 | 198,283 | |
Norfolk Southern Corp. | 3,803,708 | 199,961 | |
Union Pacific Corp. | 690,500 | 62,580 | |
460,824 | |||
Trading Companies & Distributors - 0.7% | |||
WESCO International, Inc. (a) | 899,502 | 58,710 | |
TOTAL INDUSTRIALS | 1,655,130 | ||
INFORMATION TECHNOLOGY - 16.0% | |||
Communications Equipment - 4.1% | |||
Ciena Corp. (a) | 100 | 2 | |
Motorola, Inc. | 8,827,800 | 203,569 | |
Research In Motion Ltd. (a) | 1,025,500 | 120,476 | |
Sycamore Networks, Inc. (a) | 4,606,000 | 17,273 | |
341,320 | |||
Computers & Peripherals - 1.8% | |||
Apple Computer, Inc. (a) | 1,144,100 | 92,764 | |
Diebold, Inc. | 1,248,900 | 54,552 | |
147,316 | |||
Electronic Equipment & Instruments - 0.4% | |||
Daktronics, Inc. | 916,935 | 21,741 | |
Maxwell Technologies, Inc. (a)(d) | 530,600 | 9,524 | |
31,265 | |||
Internet Software & Services - 5.2% | |||
Akamai Technologies, Inc. (a) | 2,039,900 | 95,590 | |
DealerTrack Holdings, Inc. | 1,415,289 | 36,076 | |
Equinix, Inc. (a) | 544,300 | 37,230 | |
Google, Inc. Class A (sub. vtg.) (a) | 425,600 | 202,752 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INFORMATION TECHNOLOGY - continued | |||
Internet Software & Services - continued | |||
RealNetworks, Inc. (a) | 3,538,884 | $ 38,857 | |
VeriSign, Inc. (a) | 1,382,400 | 28,588 | |
439,093 | |||
Semiconductors & Semiconductor Equipment - 2.1% | |||
Broadcom Corp. Class A (a) | 3,946,653 | 119,465 | |
Spansion, Inc. Class A | 1,196,200 | 17,058 | |
Trident Microsystems, Inc. (a) | 1,994,500 | 42,164 | |
178,687 | |||
Software - 2.4% | |||
Activision, Inc. (a) | 2,331,800 | 35,956 | |
Autodesk, Inc. (a) | 1,038,800 | 38,176 | |
Electronic Arts, Inc. (a) | 1,965,700 | 103,966 | |
Salesforce.com, Inc. (a) | 481,500 | 18,788 | |
196,886 | |||
TOTAL INFORMATION TECHNOLOGY | 1,334,567 | ||
MATERIALS - 6.3% | |||
Chemicals - 4.1% | |||
Ecolab, Inc. | 997,700 | 45,246 | |
Monsanto Co. | 5,179,400 | 229,033 | |
Syngenta AG sponsored ADR | 2,095,000 | 67,522 | |
341,801 | |||
Metals & Mining - 1.6% | |||
Allegheny Technologies, Inc. | 1,209,910 | 95,256 | |
Titanium Metals Corp. (a) | 1,171,110 | 34,524 | |
129,780 | |||
Paper & Forest Products - 0.6% | |||
Weyerhaeuser Co. | 814,400 | 51,788 | |
TOTAL MATERIALS | 523,369 | ||
TELECOMMUNICATION SERVICES - 8.1% | |||
Diversified Telecommunication Services - 4.7% | |||
Cbeyond, Inc. (d) | 329,948 | 10,011 | |
France Telecom SA | 2,852,100 | 74,440 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
TELECOMMUNICATION SERVICES - continued | |||
Diversified Telecommunication Services - continued | |||
Level 3 Communications, Inc. (a) | 11,414,100 | $ 60,381 | |
Qwest Communications International, Inc. (a) | 28,121,500 | 242,689 | |
387,521 | |||
Wireless Telecommunication Services - 3.4% | |||
American Tower Corp. Class A (a) | 4,680,700 | 168,599 | |
Centennial Communications Corp. Class A | 3,527,506 | 18,202 | |
China Mobile (Hong Kong) Ltd. sponsored ADR (d) | 1,545,100 | 63,009 | |
Dobson Communications Corp. Class A | 4,683,000 | 36,340 | |
286,150 | |||
TOTAL TELECOMMUNICATION SERVICES | 673,671 | ||
TOTAL COMMON STOCKS (Cost $7,098,541) | 8,107,201 | ||
Convertible Preferred Stocks - 0.0% | |||
INFORMATION TECHNOLOGY - 0.0% | |||
Communications Equipment - 0.0% | |||
Chorum Technologies, Inc. Series E (a)(f) | 15,100 | 0 | |
Money Market Funds - 7.6% | |||
Shares | Value (Note 1) (000s) | ||
Fidelity Cash Central Fund, 5.34% (b) | 397,219,383 | $ 397,219 | |
Fidelity Securities Lending Cash Central Fund, 5.35% (b)(c) | 240,084,700 | 240,085 | |
TOTAL MONEY MARKET FUNDS (Cost $637,304) | 637,304 | ||
TOTAL INVESTMENT PORTFOLIO - 104.7% (Cost $7,736,072) | 8,744,505 | ||
NET OTHER ASSETS - (4.7)% | (391,740) | ||
NET ASSETS - 100% | $ 8,352,765 |
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) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Affiliated company |
(f) 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 $0 or 0.0% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost (000s) |
Chorum Technologies, Inc. Series E | 9/19/00 | $ 227 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 26,564 |
Fidelity Securities Lending Cash Central Fund | 1,952 |
Total | $ 28,516 |
Other Affiliated Issuers |
An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Fiscal year to date transactions with companies which are or were affiliates are as follows: |
Affiliate | Value, beginning of period | Purchases | Sales Proceeds | Dividend Income | Value, end of period |
Cost Plus, Inc. | $ - | $ 23,662 | $ 14,305 | $ - | $ - |
Deckers Outdoor Corp. | - | 28,935 | - | - | 42,089 |
Flow International Corp. | - | 25,398 | - | - | 23,454 |
Fuel Tech, Inc. | - | 16,887 | - | - | 23,559 |
Gymboree Corp. | 5,260 | 34,716 | 22,268 | - | - |
Monster Worldwide, Inc. | 218,042 | - | 225,153 | - | - |
New York Mortgage Trust, Inc. | 7,975 | - | 7,471 | 196 | - |
Total | $ 231,277 | $ 129,598 | $ 269,197 | $ 196 | $ 89,102 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 86.9% |
Switzerland | 2.9% |
Ireland | 2.5% |
France | 2.4% |
Canada | 2.1% |
Panama | 1.3% |
Others (individually less than 1%) | 1.9% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | October 31, 2006 | |
Assets | ||
Investment in securities, at value (including securities loaned of $233,301) - See accompanying schedule: Unaffiliated issuers (cost $7,027,548) | $ 8,018,099 | |
Fidelity Central Funds (cost $637,304) | 637,304 | |
Other affiliated issuers (cost $71,220) | 89,102 | |
Total Investments (cost $7,736,072) | $ 8,744,505 | |
Receivable for investments sold | 108,527 | |
Receivable for fund shares sold | 7,791 | |
Dividends receivable | 2,988 | |
Interest receivable | 1,603 | |
Other receivables | 260 | |
Total assets | 8,865,674 | |
Liabilities | ||
Payable for investments purchased | $ 251,678 | |
Payable for fund shares redeemed | 15,484 | |
Accrued management fee | 3,492 | |
Other affiliated payables | 1,641 | |
Other payables and accrued expenses | 529 | |
Collateral on securities loaned, at value | 240,085 | |
Total liabilities | 512,909 | |
Net Assets | $ 8,352,765 | |
Net Assets consist of: | ||
Paid in capital | $ 6,852,674 | |
Undistributed net investment income | 28,286 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 463,369 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 1,008,436 | |
Net Assets, for 304,747 shares outstanding | $ 8,352,765 | |
Net Asset Value, offering price and redemption price per share ($8,352,765 ÷ 304,747 shares) | $ 27.41 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended October 31, 2006 | |
Investment Income | ||
Dividends (including $196 received from other affiliated issuers) | $ 66,996 | |
Interest | 608 | |
Income from Fidelity Central Funds | 28,516 | |
Total income | 96,120 | |
Expenses | ||
Management fee | $ 44,069 | |
Performance adjustment | 7,673 | |
Transfer agent fees | 16,493 | |
Accounting and security lending fees | 1,193 | |
Custodian fees and expenses | 237 | |
Independent trustees' compensation | 30 | |
Appreciation in deferred trustee compensation account | 9 | |
Registration fees | 252 | |
Audit | 103 | |
Legal | 115 | |
Miscellaneous | 414 | |
Total expenses before reductions | 70,588 | |
Expense reductions | (2,725) | 67,863 |
Net investment income (loss) | 28,257 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 440,502 | |
Other affiliated issuers | 26,566 | |
Foreign currency transactions | (268) | |
Futures contracts | 7,164 | |
Total net realized gain (loss) | 473,964 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 518,840 | |
Assets and liabilities in foreign currencies | (9) | |
Futures contracts | 1,508 | |
Total change in net unrealized appreciation (depreciation) | 520,339 | |
Net gain (loss) | 994,303 | |
Net increase (decrease) in net assets resulting from operations | $ 1,022,560 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 28,257 | $ (3,320) |
Net realized gain (loss) | 473,964 | 682,010 |
Change in net unrealized appreciation (depreciation) | 520,339 | (103,351) |
Net increase (decrease) in net assets resulting | 1,022,560 | 575,339 |
Distributions to shareholders from net investment income | - | (2,359) |
Distributions to shareholders from net realized gain | (656,523) | (285,485) |
Total distributions | (656,523) | (287,844) |
Share transactions | 2,287,252 | 2,301,286 |
Reinvestment of distributions | 631,915 | 276,903 |
Cost of shares redeemed | (1,902,030) | (1,757,319) |
Net increase (decrease) in net assets resulting from share transactions | 1,017,137 | 820,870 |
Total increase (decrease) in net assets | 1,383,174 | 1,108,365 |
Net Assets | ||
Beginning of period | 6,969,591 | 5,861,226 |
End of period (including undistributed net investment income of $28,286 and accumulated net investment loss of $89, respectively) | $ 8,352,765 | $ 6,969,591 |
Other Information Shares | ||
Sold | 85,954 | 89,960 |
Issued in reinvestment of distributions | 24,967 | 10,812 |
Redeemed | (71,998) | (68,970) |
Net increase (decrease) | 38,923 | 31,802 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended October 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 26.22 | $ 25.05 | $ 23.53 | $ 16.28 | $ 18.57 |
Income from Investment Operations | |||||
Net investment income (loss) C | .10 | (.01) F | (.03) | (.06) | (.07) |
Net realized and unrealized gain (loss) | 3.55 | 2.40 | 1.58 | 7.31 | (2.22) |
Total from investment | 3.65 | 2.39 | 1.55 | 7.25 | (2.29) |
Distributions from net investment income | - | (.01) | (.01) | - | - |
Distributions from net realized gain | (2.46) | (1.21) | (.02) | - | - |
Total distributions | (2.46) | (1.22) | (.03) | - | - |
Net asset value, end of period | $ 27.41 | $ 26.22 | $ 25.05 | $ 23.53 | $ 16.28 |
Total Return A,B | 14.70% | 9.66% | 6.60% | 44.53% | (12.33)% |
Ratios to Average Net Assets D,G | |||||
Expenses before reductions | .91% | .94% | .94% | .91% | 1.07% |
Expenses net of fee waivers, if any | .91% | .94% | .94% | .91% | 1.07% |
Expenses net of all | .87% | .90% | .91% | .88% | 1.03% |
Net investment income | .36% | (.05)% F | (.12)% | (.31)% | (.35)% |
Supplemental Data | |||||
Net assets, end of period | $ 8,353 | $ 6,970 | $ 5,861 | $ 3,943 | $ 1,705 |
Portfolio turnover rate E | 198% | 109% | 72% | 54% | 80% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the former contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expense of any underlying Fidelity Central Funds.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
F Investment income per share reflects a special dividend which amounted to $.03 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.19)%.
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. 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.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2006
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Capital Appreciation Fund (the Fund) is a fund of Fidelity Capital Trust (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 Fidelity 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 Fidelity 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. Investments in open-end mutual funds, including the Fidelity 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 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.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
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 Fidelity Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. 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 distributions or capital gain distributions. Interest income distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), Independent Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.
Annual Report
1. Significant Accounting Policies - continued
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 distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim 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 futures transactions, foreign currency transactions, passive foreign investment companies (PFIC), deferred trustees compensation and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,068,585 | |
Unrealized depreciation | (70,578) | |
Net unrealized appreciation (depreciation) | 998,007 | |
Undistributed ordinary income | 24,731 | |
Undistributed long-term capital gain | 406,179 | |
Cost for federal income tax purposes | $ 7,746,498 |
The tax character of distributions paid was as follows:
October 31, 2006 | October 31, 2005 | |
Ordinary Income | $ 8,006 | $ 2,359 |
Long-term Capital Gains | 648,517 | 285,485 |
Total | $ 656,523 | $ 287,844 |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48), was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets, results of operations and financial statement disclosures.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
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. Upon settlement date, 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.
Futures Contracts. The Fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Losses may arise from changes in the value of the
Annual Report
2. Operating Policies - continued
Futures Contracts - continued
underlying instruments or if the counterparties do not perform under the contract's terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.
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 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.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $15,466,669 and $14,313,505, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management 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 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. In addition, the management fee is subject to a performance adjustment (up to a maximum of ± .20% of the Fund's average net assets over a 36 month performance period). The upward or downward adjustment to the management fee is based on the Fund's relative investment performance as compared to an appropriate benchmark index. For the period, the total annual management fee rate, including the performance adjustment, was .67% 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 rate of .21% of average net assets.
Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
4. Fees and Other Transactions with Affiliates - continued
Investments in Fidelity Central Funds. The Fund may invest in Fidelity Central Funds. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request. In addition, the financial statements of the Fidelity Central Funds, 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 Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
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 $128 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 shareholder 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, which amounts to $21 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments
Annual Report
6. Security Lending - continued
that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Net income from lending portfolio securities during the period amounted to $1,952.
7. 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 $2,405 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 $7 and $313, respectively.
8. 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.
The United States Securities and Exchange Commission ("SEC") is conducting an investigation of FMR (covering the years 2002 to 2004) arising from gifts, gratuities and business entertainment provided by certain brokers to certain individuals who were employed on FMR's domestic equity trading desk during that period. FMR is in discussions with the SEC staff regarding the possible resolution of the matter, but as of period-end no final resolution has been reached.
In December 2006, the Independent Trustees completed their own investigation of the matter with the assistance of independent counsel. The Independent Trustees and FMR agree that, despite the absence of proof that the Fidelity mutual funds experienced diminished execution quality as a result of the improper receipt of gifts and business entertainment, the conduct at issue was serious and is worthy of redress. Accordingly, the Independent Trustees have requested and FMR has agreed to pay $42 million to Fidelity mutual funds, plus interest to be determined at the time that payment is made. A method of allocating this payment among the funds has not yet been determined. In addition, FMR has agreed to reimburse related legal expenses. The total payment to the Fund is not anticipated to have a material impact on the Fund's net assets.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Capital Trust and the Shareholders of Fidelity Capital Appreciation Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Capital Appreciation Fund (a fund of Fidelity Capital Trust) at October 31, 2006, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Capital Appreciation Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 21, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 348 funds advised by FMR or an affiliate. Mr. McCoy oversees 350 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1978 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Capital Appreciation (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as Vice Chairman (2006-present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. | |
Marie L. Knowles (60) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach is Chairman of the Independent Trustees (2006-present). Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Sony Corporation (2006-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (73) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
James H. Keyes (66) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Capital Trust. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Capital Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. | |
Philip L. Bullen (47) | |
Year of Election or Appointment: 2006 Vice President of Capital Appreciation. Mr. Bullen also serves as Vice President of certain Equity Funds (2006-present). Mr. Bullen is Senior Vice President of FMR (2001-present) and FMR Co., Inc. (2001-present). Previously, Mr. Bullen served as President and a Director of Fidelity Research & Analysis Company (2001-2005), President and a Director of Fidelity Management & Research (U.K.) Inc. (2002-2006), and a Director of Strategic Advisers, Inc. (2002-2005). | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Capital Appreciation. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
J. Fergus Shiel (49) | |
Year of Election or Appointment: 2005 Vice President of Capital Appreciation. Mr. Shiel also serves as Vice President for other funds advised by FMR. Prior to his current responsibilities, Mr. Shiel worked as a research analyst and a portfolio manager until leaving Fidelity Investments in May 2003 to start his own investment firm. Mr. Shiel returned to Fidelity as a portfolio manager in September of 2005. Mr. Shiel also serves as Vice President of FMR and FMR Co., Inc. (2006). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Capital Appreciation. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (47) | |
Year of Election or Appointment: 2003 Assistant Secretary of Capital Appreciation. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (48) | |
Year of Election or Appointment: 2004 President and Treasurer of Capital Appreciation. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Capital Appreciation. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Capital Appreciation. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Capital Appreciation. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Capital Appreciation. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Capital Appreciation. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (37) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Capital Appreciation. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Capital Appreciation. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (60) | |
Year of Election or Appointment: 1986 Assistant Treasurer of Capital Appreciation. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Capital Appreciation. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Capital Appreciation. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (48) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Capital Appreciation. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Capital Appreciation. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The Board of Trustees of Fidelity Capital Appreciation Fund voted to pay on December 11, 2006, to shareholders of record at the opening of business on December 08, 2006, a distribution of $.11 per share derived from capital gains realized from sales of portfolio securities and a dividend of $1.34 per share from net investment income.
The fund hereby designates as a capital gain dividend with respect to the taxable year ended October 31, 2006, $406,153,698, or, if subsequently determined to be different, the net capital gain of such year.
The fund designates 100% of the dividends distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.
The fund designates 100% of the dividends distributed in December 2005, during the fiscal year as amounts which may be taken into account as a dividend for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on September 20, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 18,984,087,768.24 | 96.277 |
Withheld | 734,128,039.90 | 3.723 |
TOTAL | 19,718,215,808.14 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 18,972,066,364.22 | 96.216 |
Withheld | 746,149,443.92 | 3.784 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert M. Gates | ||
Affirmative | 18,939,072,824.91 | 96.049 |
Withheld | 779,142,983.23 | 3.951 |
TOTAL | 19,718,215,808.14 | 100.000 |
George H. Heilmeier | ||
Affirmative | 18,924,535,963.81 | 95.975 |
Withheld | 793,679,844.33 | 4.025 |
TOTAL | 19,718,215,808.14 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 18,871,094,149.22 | 95.704 |
Withheld | 847,121,658.92 | 4.296 |
TOTAL | 19,718,215,808.14 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 18,962,549,074.38 | 96.168 |
Withheld | 755,666,733.76 | 3.832 |
TOTAL | 19,718,215,808.14 | 100.000 |
James H. KeyesB | ||
Affirmative | 18,951,323,897.48 | 96.111 |
Withheld | 766,891,910.66 | 3.889 |
TOTAL | 19,718,215,808.14 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 18,948,733,631.68 | 96.098 |
Withheld | 769,482,176.46 | 3.902 |
TOTAL | 19,718,215,808.14 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 18,955,192,662.21 | 96.130 |
Withheld | 763,023,145.93 | 3.870 |
TOTAL | 19,718,215,808.14 | 100.000 |
William O. McCoy | ||
Affirmative | 18,901,077,394.54 | 95.856 |
Withheld | 817,138,413.60 | 4.144 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 18,956,972,615.07 | 96.139 |
Withheld | 761,243,193.07 | 3.861 |
TOTAL | 19,718,215,808.14 | 100.000 |
Cornelia M. Small | ||
Affirmative | 18,967,158,466.26 | 96.191 |
Withheld | 751,057,341.88 | 3.809 |
TOTAL | 19,718,215,808.14 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 18,918,672,661.66 | 95.945 |
Withheld | 799,543,146.48 | 4.055 |
TOTAL | 19,718,215,808.14 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 18,959,278,859.57 | 96.151 |
Withheld | 758,936,948.57 | 3.849 |
TOTAL | 19,718,215,808.14 | 100.000 |
A Denotes trust-wide proposal and voting results. B Effective on or about January 1, 2007. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Capital Appreciation Fund
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance, as well as the fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the fund.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Capital Appreciation Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the second quartile for the one-year period and the first quartile for the three- and five-year periods. The Board also stated that the relative investment performance of the fund compared favorably to its benchmark for all the periods shown. The Board also reviewed the fund's relative investment performance against a customized peer group based on a combination of categories defined by Morningstar.
The Board also considered that the fund's management fee is subject to upward or downward adjustment depending upon whether, and to what extent, the fund's investment performance for the performance period exceeds, or is exceeded by, the record (over the same period) of a Board-approved performance adjustment index. The Board realizes that the performance adjustment provides FMR with a strong economic incentive to seek to achieve superior performance for the fund's shareholders and helps to more closely align the interests of FMR and the fund's shareholders.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Annual Report
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps, and without giving effect to the fund's performance adjustment. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 9% means that 91% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked and the impact of the fund's performance adjustment, is also included in the chart and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Capital Appreciation Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. The Board also noted the effect of the fund's positive performance adjustment on the fund's management fee ranking. The Board noted that the performance adjustment for each year represents calculations for rolling 36-month periods that differ from the periods shown in the performance charts above.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of the fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses, as well as the fund's positive performance adjustment. As part of its review, the Board also considered current and historical total expenses of the fund compared to competitive fund median expenses. The fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the fund's total expenses ranked below its competitive median for 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Based on its review, the Board concluded that the fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered 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. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
(phone_graphic)
Fidelity Automated
Service Telephone (FAST®)
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
* 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.
Annual Report
To Write Fidelity
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
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
(letter_graphic)
For Retirement
Accounts
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
Annual Report
To Visit Fidelity
For directions and hours,
please call 1-800-544-9797.
Arizona
7001 West Ray Road
Chandler, AZ
15445 N. Scottsdale Road
Scottsdale, AZ
California
815 East Birch Street
Brea, CA
1411 Chapin Avenue
Burlingame, CA
851 East Hamilton Avenue
Campbell, CA
19200 Von Karman Avenue
Irvine, CA
601 Larkspur Landing Circle
Larkspur, CA
10100 Santa Monica Blvd.
Los Angeles, CA
27101 Puerta Real
Mission Viejo, CA
73-575 El Paseo
Palm Desert, CA
251 University Avenue
Palo Alto, CA
123 South Lake Avenue
Pasadena, CA
16995 Bernardo Ctr. Drive
Rancho Bernardo, CA
1220 Roseville Parkway
Roseville, CA
1740 Arden Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
11943 El Camino Real
San Diego, CA
8 Montgomery Street
San Francisco, CA
3793 State Street
Santa Barbara, CA
1200 Wilshire Boulevard
Santa Monica, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
Colorado
1625 Broadway
Denver, CO
9185 Westview Road
Lone Tree, CO
Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
Delaware
400 Delaware Avenue
Wilmington, DE
Florida
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
4671 Town Center Parkway
Jacksonville, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
3501 PGA Boulevard
Palm Beach Gardens, FL
3550 Tamiami Trail, South
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
2465 State Road 7
Wellington, FL
Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
Illinois
One North LaSalle Street
Chicago, IL
875 North Michigan Ave.
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1572 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
Indiana
4729 East 82nd Street
Indianapolis, IN
Kansas
5400 College Boulevard
Overland Park, KS
Maine
Three Canal Plaza
Portland, ME
Maryland
7315 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
238 Main Street
Cambridge, MA
405 Cochituate Road
Framingham, MA
416 Belmont Street
Worcester, MA
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
Michigan
500 E. Eisenhower Pkwy.
Ann Arbor, MI
280 Old N. Woodward Ave.
Birmingham, MI
43420 Grand River Avenue
Novi, MI
29155 Northwestern Hwy.
Southfield, MI
Minnesota
7600 France Avenue South
Edina, MN
Missouri
1524 South Lindbergh Blvd.
St. Louis, MO
Nevada
2225 Village Walk Drive
Henderson, NV
New Jersey
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
396 Route 17, North
Paramus, NJ
3518 Route 1 North
Princeton, NJ
530 Broad Street
Shrewsbury, NJ
New York
1055 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
980 Madison Avenue
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
200 Fifth Avenue
New York, NY
733 Third Avenue
New York, NY
11 Penn Plaza
New York, NY
2070 Broadway
New York, NY
1075 Northern Blvd.
Roslyn, NY
799 Central Park Avenue
Scarsdale, NY
North Carolina
4611 Sharon Road
Charlotte, NC
7011 Fayetteville Road
Durham, NC
Ohio
3805 Edwards Road
Cincinnati, OH
1324 Polaris Parkway
Columbus, OH
28699 Chagrin Boulevard
Woodmere Village, OH
Oregon
7493 SW Bridgeport Road
Tigard, OR
Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
Wexford, PA
Rhode Island
47 Providence Place
Providence, RI
Tennessee
6150 Poplar Avenue
Memphis, TN
Texas
10000 Research Boulevard
Austin, TX
4001 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
6560 Fannin Street
Houston, TX
6500 N. MacArthur Blvd.
Irving, TX
6005 West Park Boulevard
Plano, TX
14100 San Pedro
San Antonio, TX
1576 East Southlake Blvd.
Southlake, TX
19740 IH 45 North
Spring, TX
Utah
279 West South Temple
Salt Lake City, UT
Virginia
1861 International Drive
McLean, VA
Washington
411 108th Avenue, N.E.
Bellevue, WA
1518 6th Avenue
Seattle, WA
Washington, DC
1900 K Street, N.W.
Washington, DC
Wisconsin
595 North Barker Road
Brookfield, WI
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment
Advisors
Fidelity International Investment
Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
Brown Brothers Harriman & Co.
Boston, MA
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 graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
CAF-UANN-1206
1.784775.103
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Fidelity®
Stock Selector
Annual Report
October 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results | ||
Board Approval of 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.
Annual Report
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.
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 (circle7) MAY LOSE VALUE (circle7) NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity® Stock Selector | 15.29% | 7.55% | 7.40% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Stock Selector on October 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Standard & Poor's 500SM Index (S&P 500®) performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from James Catudal, Portfolio Manager of Fidelity® Stock Selector
U.S. equity investors had much to feel good about during the 12-month period ending October 31, 2006. On October 3, the Dow Jones Industrial AverageSM closed above its all-time high set back in January 2000. On October 19 - the 19th anniversary of the 1987 stock market crash - the Dow made history again, recording its first close above 12,000. The Dow finished the 12-month period with a gain of 18.47%. The Standard & Poor's 500SM Index and the NASDAQ Composite® Index also did well, returning 16.34% and 12.49%, respectively. There were a number of reasons for the equity market's impressive results, particularly the consistently strong quarterly earnings reported by U.S. corporations. The Federal Reserve Board also played a significant role. Though its inflation fighting efforts caused investors anguish at times, the Board seemed to successfully accomplish its mission of engineering a "soft landing" - where inflation doesn't get too hot and economic growth doesn't get too cold - leading to what Wall Street calls a "Goldilocks economy."
For the 12 months ending October 31, 2006, Fidelity Stock Selector returned 15.29%, slightly underperforming the S&P 500®. The fund trailed the benchmark primarily because of weak stock selection in health care and unfavorable industry positioning within financials. The single biggest detractor was HMO UnitedHealth Group. Its stock fell both because of a controversy over allegations of backdating stock options awarded to executives and because of investor concerns that business fundamentals favoring HMOs had peaked. Another disappointing health care investment was PDL Biopharma, which encountered problems associated with two drugs under development. Other holdings that held back results included technology companies Microsoft and EMC. Also harmful were my decisions to not own any shares of BellSouth and diversified financial company JPMorgan Chase, two strong performing index components. Conversely, good stock selection in industrials and technology boosted returns. Our top contributor was McDermott International, a diversified industrials company that received a boost when an energy-related division emerged from bankruptcy protection. Aviall, another industrials company, was acquired by Boeing at a premium to its stock price, also helping results. I took profits and sold the position. Other investments that paid off included tech companies Google and Research In Motion, and oil field services provider Cameron International.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, 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 (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the accompanying table 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.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table 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 shareholder 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.
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.
Annual Report
Investments - continued
Beginning | Ending | Expenses Paid | |
Actual | $ 1,000.00 | $ 1,037.30 | $ 4.42 |
Hypothetical (5% return per year before expenses) | $ 1,000.00 | $ 1,020.87 | $ 4.38 |
* Expenses are equal to the Fund's annualized expense ratio of .86%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Annual Report
Investment Changes
Top Ten Stocks as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
General Electric Co. | 4.2 | 4.9 |
American International Group, Inc. | 3.8 | 3.0 |
Microsoft Corp. | 3.5 | 3.0 |
Exxon Mobil Corp. | 2.6 | 2.4 |
Procter & Gamble Co. | 2.3 | 1.0 |
Johnson & Johnson | 2.1 | 2.2 |
AT&T, Inc. | 1.6 | 0.7 |
Cisco Systems, Inc. | 1.6 | 1.4 |
Google, Inc. Class A (sub. vtg.) | 1.6 | 1.0 |
Bank of America Corp. | 1.5 | 2.0 |
24.8 | ||
Top Five Market Sectors as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Financials | 21.3 | 21.9 |
Information Technology | 19.7 | 17.2 |
Health Care | 13.9 | 14.2 |
Industrials | 11.3 | 15.1 |
Energy | 8.4 | 9.7 |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2006* | As of April 30, 2006** | ||||||
Stocks 94.8% | Stocks 98.5% | ||||||
Short-Term | Short-Term | ||||||
* Foreign investments | 10.3% | ** Foreign investments | 8.6% |
Annual Report
Investments October 31, 2006
Showing Percentage of Net Assets
Common Stocks - 94.8% | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - 7.3% | |||
Hotels, Restaurants & Leisure - 0.9% | |||
Harrah's Entertainment, Inc. | 12,200 | $ 907 | |
Services Acquisition Corp. International (a)(d) | 204,400 | 2,136 | |
Sonic Corp. (a) | 18,600 | 423 | |
Starbucks Corp. (a) | 92,400 | 3,488 | |
Wynn Resorts Ltd. (a) | 8,900 | 655 | |
7,609 | |||
Household Durables - 0.7% | |||
Koninklijke Philips Electronics NV (NY Shares) | 62,300 | 2,170 | |
Sony Corp. sponsored ADR | 44,800 | 1,836 | |
Whirlpool Corp. | 22,200 | 1,930 | |
5,936 | |||
Media - 2.1% | |||
Clear Channel Communications, Inc. | 41,260 | 1,438 | |
E.W. Scripps Co. Class A | 36,040 | 1,783 | |
Lamar Advertising Co. Class A (a) | 7,800 | 450 | |
News Corp. Class B | 213,500 | 4,641 | |
The Walt Disney Co. | 25,600 | 805 | |
Time Warner, Inc. | 443,460 | 8,874 | |
17,991 | |||
Multiline Retail - 1.1% | |||
Target Corp. | 158,320 | 9,369 | |
Specialty Retail - 2.2% | |||
Best Buy Co., Inc. (d) | 67,800 | 3,746 | |
Esprit Holdings Ltd. | 167,000 | 1,617 | |
Lowe's Companies, Inc. | 84,900 | 2,559 | |
PETsMART, Inc. | 47,300 | 1,361 | |
Staples, Inc. | 186,282 | 4,804 | |
Tiffany & Co., Inc. | 59,300 | 2,118 | |
TJX Companies, Inc. | 96,400 | 2,791 | |
18,996 | |||
Textiles, Apparel & Luxury Goods - 0.3% | |||
Liz Claiborne, Inc. | 46,900 | 1,978 | |
TOTAL CONSUMER DISCRETIONARY | 61,879 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER STAPLES - 7.1% | |||
Beverages - 0.7% | |||
Molson Coors Brewing Co. Class B | 32,500 | $ 2,313 | |
PepsiCo, Inc. | 60,400 | 3,832 | |
6,145 | |||
Food & Staples Retailing - 0.9% | |||
CVS Corp. | 180,400 | 5,661 | |
Safeway, Inc. | 58,200 | 1,709 | |
7,370 | |||
Food Products - 0.8% | |||
Nestle SA sponsored ADR | 81,400 | 6,984 | |
Household Products - 3.3% | |||
Colgate-Palmolive Co. | 131,250 | 8,396 | |
Procter & Gamble Co. | 312,555 | 19,813 | |
28,209 | |||
Tobacco - 1.4% | |||
Altria Group, Inc. | 141,080 | 11,474 | |
TOTAL CONSUMER STAPLES | 60,182 | ||
ENERGY - 8.4% | |||
Energy Equipment & Services - 4.4% | |||
Baker Hughes, Inc. | 34,100 | 2,355 | |
Cameron International Corp. (a) | 169,200 | 8,477 | |
Halliburton Co. | 297,683 | 9,630 | |
Schlumberger Ltd. (NY Shares) | 190,185 | 11,997 | |
Smith International, Inc. | 123,600 | 4,880 | |
37,339 | |||
Oil, Gas & Consumable Fuels - 4.0% | |||
Exxon Mobil Corp. | 313,310 | 22,377 | |
OMI Corp. | 69,300 | 1,547 | |
Peabody Energy Corp. | 100,900 | 4,235 | |
Plains Exploration & Production Co. (a) | 71,700 | 3,032 | |
Ultra Petroleum Corp. (a) | 31,410 | 1,676 | |
Valero Energy Corp. | 26,580 | 1,391 | |
34,258 | |||
TOTAL ENERGY | 71,597 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
FINANCIALS - 21.3% | |||
Capital Markets - 4.0% | |||
Ameriprise Financial, Inc. | 76,080 | $ 3,918 | |
Charles Schwab Corp. | 193,100 | 3,518 | |
E*TRADE Financial Corp. (a) | 87,800 | 2,044 | |
Franklin Resources, Inc. | 27,700 | 3,157 | |
Goldman Sachs Group, Inc. | 24,700 | 4,688 | |
Investors Financial Services Corp. | 47,200 | 1,856 | |
Lehman Brothers Holdings, Inc. | 48,300 | 3,760 | |
Nomura Holdings, Inc. sponsored ADR | 85,400 | 1,505 | |
State Street Corp. | 115,900 | 7,444 | |
UBS AG (NY Shares) | 40,900 | 2,447 | |
34,337 | |||
Commercial Banks - 3.2% | |||
Commerce Bancorp, Inc., New Jersey | 29,400 | 1,027 | |
Industrial & Commercial Bank of China | 550,000 | 246 | |
Mizuho Financial Group, Inc. | 209 | 1,628 | |
Standard Chartered PLC (United Kingdom) | 169,868 | 4,779 | |
Sumitomo Mitsui Financial Group, Inc. | 154 | 1,685 | |
U.S. Bancorp, Delaware | 101,600 | 3,438 | |
Wachovia Corp. | 109,631 | 6,085 | |
Wells Fargo & Co. | 237,610 | 8,623 | |
27,511 | |||
Consumer Finance - 0.8% | |||
American Express Co. | 85,700 | 4,954 | |
Capital One Financial Corp. | 20,200 | 1,602 | |
6,556 | |||
Diversified Financial Services - 2.3% | |||
Bank of America Corp. | 238,320 | 12,838 | |
Citigroup, Inc. | 66,300 | 3,326 | |
The NASDAQ Stock Market, Inc. (a) | 92,100 | 3,291 | |
19,455 | |||
Insurance - 9.5% | |||
ACE Ltd. | 90,400 | 5,175 | |
AFLAC, Inc. | 55,900 | 2,511 | |
American International Group, Inc. | 487,030 | 32,714 | |
Berkshire Hathaway, Inc. Class A (a) | 64 | 6,750 | |
Endurance Specialty Holdings Ltd. | 30,100 | 1,073 | |
Everest Re Group Ltd. | 49,680 | 4,927 | |
Fidelity National Title Group, Inc. Class A | 95,182 | 2,095 | |
Hartford Financial Services Group, Inc. | 75,030 | 6,540 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
FINANCIALS - continued | |||
Insurance - continued | |||
Lincoln National Corp. | 58,100 | $ 3,678 | |
National Financial Partners Corp. | 68,100 | 2,683 | |
PartnerRe Ltd. | 41,500 | 2,902 | |
Prudential Financial, Inc. | 61,600 | 4,739 | |
W.R. Berkley Corp. | 138,382 | 5,101 | |
80,888 | |||
Real Estate Investment Trusts - 0.5% | |||
Equity Residential (SBI) | 53,600 | 2,927 | |
Vornado Realty Trust | 7,900 | 942 | |
3,869 | |||
Real Estate Management & Development - 0.3% | |||
Mitsui Fudosan Co. Ltd. | 67,000 | 1,650 | |
Move, Inc. (a) | 285,446 | 1,364 | |
3,014 | |||
Thrifts & Mortgage Finance - 0.7% | |||
Countrywide Financial Corp. | 44,972 | 1,714 | |
Hudson City Bancorp, Inc. | 246,600 | 3,386 | |
Washington Mutual, Inc. | 17,700 | 749 | |
5,849 | |||
TOTAL FINANCIALS | 181,479 | ||
HEALTH CARE - 13.9% | |||
Biotechnology - 2.4% | |||
Alexion Pharmaceuticals, Inc. (a) | 6,500 | 243 | |
Amgen, Inc. (a) | 52,090 | 3,954 | |
Biogen Idec, Inc. (a) | 56,700 | 2,699 | |
Celgene Corp. (a) | 20,100 | 1,074 | |
Cephalon, Inc. (a) | 36,000 | 2,526 | |
Genentech, Inc. (a) | 16,460 | 1,371 | |
Gilead Sciences, Inc. (a) | 43,700 | 3,011 | |
MedImmune, Inc. (a) | 82,800 | 2,653 | |
PDL BioPharma, Inc. (a) | 152,500 | 3,222 | |
20,753 | |||
Health Care Equipment & Supplies - 2.4% | |||
Alcon, Inc. | 1,500 | 159 | |
Baxter International, Inc. | 110,800 | 5,093 | |
Becton, Dickinson & Co. | 68,900 | 4,825 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
HEALTH CARE - continued | |||
Health Care Equipment & Supplies - continued | |||
C.R. Bard, Inc. | 42,900 | $ 3,516 | |
Conor Medsystems, Inc. (a) | 27,364 | 672 | |
Cooper Companies, Inc. | 46,000 | 2,651 | |
DJO, Inc. (a) | 76,100 | 3,062 | |
Medtronic, Inc. | 100 | 5 | |
St. Jude Medical, Inc. (a) | 22,300 | 766 | |
20,749 | |||
Health Care Providers & Services - 1.8% | |||
Brookdale Senior Living, Inc. | 4,500 | 217 | |
Cardinal Health, Inc. | 26,900 | 1,761 | |
Health Net, Inc. (a) | 72,100 | 2,993 | |
Healthways, Inc. (a) | 4,440 | 188 | |
Henry Schein, Inc. (a) | 72,700 | 3,612 | |
I-trax, Inc. (a) | 124,200 | 319 | |
McKesson Corp. | 21,300 | 1,067 | |
UnitedHealth Group, Inc. | 104,300 | 5,088 | |
15,245 | |||
Health Care Technology - 0.3% | |||
Emdeon Corp. (a) | 72,400 | 843 | |
IMS Health, Inc. | 49,300 | 1,373 | |
2,216 | |||
Life Sciences Tools & Services - 1.3% | |||
Affymetrix, Inc. (a) | 36,600 | 933 | |
Charles River Laboratories International, Inc. (a) | 71,500 | 3,069 | |
Invitrogen Corp. (a) | 78,670 | 4,564 | |
Millipore Corp. (a) | 32,700 | 2,110 | |
10,676 | |||
Pharmaceuticals - 5.7% | |||
Johnson & Johnson | 258,110 | 17,397 | |
Merck & Co., Inc. | 152,100 | 6,908 | |
Novartis AG sponsored ADR | 66,400 | 4,032 | |
Pfizer, Inc. | 328,640 | 8,758 | |
Roche Holding AG (participation certificate) | 25,644 | 4,487 | |
Wyeth | 138,300 | 7,057 | |
48,639 | |||
TOTAL HEALTH CARE | 118,278 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INDUSTRIALS - 11.3% | |||
Aerospace & Defense - 3.0% | |||
EDO Corp. | 86,200 | $ 2,061 | |
Honeywell International, Inc. | 254,360 | 10,714 | |
L-3 Communications Holdings, Inc. | 22,000 | 1,771 | |
United Technologies Corp. | 172,720 | 11,351 | |
25,897 | |||
Air Freight & Logistics - 0.5% | |||
FedEx Corp. | 33,900 | 3,883 | |
Airlines - 0.2% | |||
UAL Corp. (a) | 58,000 | 2,085 | |
Electrical Equipment - 0.4% | |||
Evergreen Solar, Inc. (a) | 106,200 | 924 | |
Suntech Power Holdings Co. Ltd. sponsored ADR | 43,500 | 1,131 | |
Vestas Wind Systems AS (a) | 43,200 | 1,217 | |
3,272 | |||
Industrial Conglomerates - 5.3% | |||
3M Co. | 17,930 | 1,414 | |
General Electric Co. | 1,033,400 | 36,278 | |
McDermott International, Inc. (a) | 173,100 | 7,738 | |
45,430 | |||
Machinery - 0.6% | |||
Danaher Corp. | 26,800 | 1,923 | |
Deere & Co. | 36,700 | 3,124 | |
5,047 | |||
Marine - 0.1% | |||
Alexander & Baldwin, Inc. | 12,221 | 563 | |
Road & Rail - 1.2% | |||
Laidlaw International, Inc. | 96,200 | 2,791 | |
Landstar System, Inc. | 75,600 | 3,511 | |
Norfolk Southern Corp. | 72,900 | 3,832 | |
10,134 | |||
TOTAL INDUSTRIALS | 96,311 | ||
INFORMATION TECHNOLOGY - 19.7% | |||
Communications Equipment - 4.3% | |||
Adtran, Inc. | 800 | 19 | |
Alcatel SA sponsored ADR | 230,500 | 2,927 | |
Cisco Systems, Inc. (a) | 573,640 | 13,842 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INFORMATION TECHNOLOGY - continued | |||
Communications Equipment - continued | |||
Comverse Technology, Inc. (a) | 92,400 | $ 2,012 | |
Corning, Inc. (a) | 143,560 | 2,933 | |
Harris Corp. | 60,800 | 2,590 | |
Juniper Networks, Inc. (a) | 27,380 | 471 | |
Motorola, Inc. | 174,040 | 4,013 | |
Nortel Networks Corp. (a) | 426,700 | 952 | |
QUALCOMM, Inc. | 96,200 | 3,501 | |
Research In Motion Ltd. (a) | 25,650 | 3,013 | |
36,273 | |||
Computers & Peripherals - 2.8% | |||
Apple Computer, Inc. (a) | 93,500 | 7,581 | |
Dell, Inc. (a) | 71,500 | 1,740 | |
EMC Corp. (a) | 265,200 | 3,249 | |
Hewlett-Packard Co. | 243,000 | 9,414 | |
Network Appliance, Inc. (a) | 42,200 | 1,540 | |
Sun Microsystems, Inc. (a) | 38,700 | 210 | |
23,734 | |||
Electronic Equipment & Instruments - 0.6% | |||
Agilent Technologies, Inc. (a) | 155,614 | 5,540 | |
Internet Software & Services - 1.9% | |||
eBay, Inc. (a) | 70,003 | 2,249 | |
Google, Inc. Class A (sub. vtg.) (a) | 28,900 | 13,768 | |
Yahoo!, Inc. (a) | 19,810 | 522 | |
16,539 | |||
IT Services - 0.8% | |||
First Data Corp. | 69,500 | 1,685 | |
Paychex, Inc. | 89,780 | 3,545 | |
Western Union Co. (a) | 63,600 | 1,402 | |
6,632 | |||
Semiconductors & Semiconductor Equipment - 4.0% | |||
Altera Corp. (a) | 50,000 | 922 | |
Analog Devices, Inc. | 41,500 | 1,321 | |
Applied Materials, Inc. | 474,500 | 8,252 | |
ARM Holdings PLC sponsored ADR | 190,900 | 1,252 | |
ASML Holding NV (NY Shares) (a) | 33,100 | 756 | |
Broadcom Corp. Class A (a) | 103,300 | 3,127 | |
Fairchild Semiconductor International, Inc. (a) | 122,200 | 1,969 | |
FormFactor, Inc. (a) | 33,200 | 1,268 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INFORMATION TECHNOLOGY - continued | |||
Semiconductors & Semiconductor Equipment - continued | |||
Freescale Semiconductor, Inc. Class A (a) | 44,400 | $ 1,748 | |
Intel Corp. | 37,440 | 799 | |
Intersil Corp. Class A | 93,900 | 2,202 | |
KLA-Tencor Corp. | 300 | 15 | |
Lam Research Corp. (a) | 2,500 | 124 | |
Linear Technology Corp. | 62,000 | 1,929 | |
Microchip Technology, Inc. | 71,200 | 2,345 | |
National Semiconductor Corp. | 130,200 | 3,163 | |
Samsung Electronics Co. Ltd. | 2,240 | 1,453 | |
Xilinx, Inc. | 66,200 | 1,689 | |
34,334 | |||
Software - 5.3% | |||
Adobe Systems, Inc. (a) | 107,700 | 4,120 | |
BEA Systems, Inc. (a) | 116,600 | 1,897 | |
Cognos, Inc. (a) | 63,700 | 2,324 | |
Electronic Arts, Inc. (a) | 2,000 | 106 | |
Microsoft Corp. | 1,030,160 | 29,576 | |
Opsware, Inc. (a) | 40,700 | 370 | |
Oracle Corp. (a) | 180,950 | 3,342 | |
Quest Software, Inc. (a) | 137,600 | 2,027 | |
Symantec Corp. (a) | 80,802 | 1,603 | |
45,365 | |||
TOTAL INFORMATION TECHNOLOGY | 168,417 | ||
MATERIALS - 2.1% | |||
Chemicals - 1.5% | |||
Ashland, Inc. | 46,700 | 2,760 | |
Monsanto Co. | 71,600 | 3,166 | |
Praxair, Inc. | 114,700 | 6,911 | |
12,837 | |||
Containers & Packaging - 0.3% | |||
Owens-Illinois, Inc. | 82,153 | 1,364 | |
Smurfit-Stone Container Corp. | 118,900 | 1,267 | |
2,631 | |||
Metals & Mining - 0.3% | |||
Alcoa, Inc. | 21,900 | 633 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
MATERIALS - continued | |||
Metals & Mining - continued | |||
Newmont Mining Corp. | 10,600 | $ 480 | |
Titanium Metals Corp. (a) | 56,246 | 1,658 | |
2,771 | |||
TOTAL MATERIALS | 18,239 | ||
TELECOMMUNICATION SERVICES - 2.9% | |||
Diversified Telecommunication Services - 2.6% | |||
AT&T, Inc. | 407,000 | 13,940 | |
Covad Communications Group, Inc. (a) | 474,400 | 631 | |
Level 3 Communications, Inc. (a) | 250,900 | 1,327 | |
Qwest Communications International, Inc. (a) | 235,000 | 2,028 | |
Verizon Communications, Inc. | 128,800 | 4,766 | |
22,692 | |||
Wireless Telecommunication Services - 0.3% | |||
American Tower Corp. Class A (a) | 69,500 | 2,503 | |
TOTAL TELECOMMUNICATION SERVICES | 25,195 | ||
UTILITIES - 0.8% | |||
Electric Utilities - 0.5% | |||
Exelon Corp. | 70,500 | 4,370 | |
Independent Power Producers & Energy Traders - 0.3% | |||
TXU Corp. | 45,200 | 2,853 | |
TOTAL UTILITIES | 7,223 | ||
TOTAL COMMON STOCKS (Cost $714,238) | 808,800 | ||
Money Market Funds - 5.5% | |||
Shares | Value (Note 1) (000s) | ||
Fidelity Cash Central Fund, 5.34% (b) | 41,752,928 | $ 41,753 | |
Fidelity Securities Lending Cash Central Fund, 5.35% (b)(c) | 5,449,800 | 5,450 | |
TOTAL MONEY MARKET FUNDS (Cost $47,203) | 47,203 | ||
TOTAL INVESTMENT PORTFOLIO - 100.3% (Cost $761,441) | 856,003 | ||
NET OTHER ASSETS - (0.3)% | (2,958) | ||
NET ASSETS - 100% | $ 853,045 |
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) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 786 |
Fidelity Securities Lending Cash Central Fund | 115 |
Total | $ 901 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.7% |
Switzerland | 2.1% |
Netherlands Antilles | 1.4% |
Bermuda | 1.0% |
Japan | 1.0% |
Canada | 1.0% |
Others (individually less than 1%) | 3.8% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | October 31, 2006 | |
Assets | ||
Investment in securities, at value (including securities loaned of $5,283) - See accompanying schedule: Unaffiliated issuers (cost $714,238) | $ 808,800 | |
Fidelity Central Funds (cost $47,203) | 47,203 | |
Total Investments (cost $761,441) | $ 856,003 | |
Receivable for investments sold | 14,100 | |
Receivable for fund shares sold | 296 | |
Dividends receivable | 401 | |
Interest receivable | 179 | |
Other receivables | 19 | |
Total assets | 870,998 | |
Liabilities | ||
Payable for investments purchased | $ 11,201 | |
Payable for fund shares redeemed | 635 | |
Accrued management fee | 416 | |
Other affiliated payables | 172 | |
Other payables and accrued expenses | 79 | |
Collateral on securities loaned, at value | 5,450 | |
Total liabilities | 17,953 | |
Net Assets | $ 853,045 | |
Net Assets consist of: | ||
Paid in capital | $ 767,678 | |
Undistributed net investment income | 3,711 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (12,906) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 94,562 | |
Net Assets, for 31,315 shares outstanding | $ 853,045 | |
Net Asset Value, offering price and redemption price per share ($853,045 ÷ 31,315 shares) | $ 27.24 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended October 31, 2006 | |
Investment Income | ||
Dividends | $ 11,113 | |
Interest | 1 | |
Income from Fidelity Central Funds | 901 | |
Total income | 12,015 | |
Expenses | ||
Management fee | $ 4,619 | |
Performance adjustment | 366 | |
Transfer agent fees | 1,716 | |
Accounting and security lending fees | 272 | |
Custodian fees and expenses | 60 | |
Independent trustees' compensation | 3 | |
Registration fees | 26 | |
Audit | 56 | |
Legal | 16 | |
Miscellaneous | 42 | |
Total expenses before reductions | 7,176 | |
Expense reductions | (111) | 7,065 |
Net investment income (loss) | 4,950 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 51,464 | |
Foreign currency transactions | 3 | |
Total net realized gain (loss) | 51,467 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 58,566 | |
Net gain (loss) | 110,033 | |
Net increase (decrease) in net assets resulting from operations | $ 114,983 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 4,950 | $ 8,731 |
Net realized gain (loss) | 51,467 | 65,400 |
Change in net unrealized appreciation (depreciation) | 58,566 | 16,325 |
Net increase (decrease) in net assets resulting | 114,983 | 90,456 |
Distributions to shareholders from net investment income | (3,858) | (9,003) |
Share transactions | 89,484 | 65,665 |
Reinvestment of distributions | 3,687 | 8,598 |
Cost of shares redeemed | (121,435) | (162,412) |
Net increase (decrease) in net assets resulting from share transactions | (28,264) | (88,149) |
Total increase (decrease) in net assets | 82,861 | (6,696) |
Net Assets | ||
Beginning of period | 770,184 | 776,880 |
End of period (including undistributed net investment income of $3,711 and undistributed net investment income of $2,687, respectively) | $ 853,045 | $ 770,184 |
Other Information Shares | ||
Sold | 3,483 | 2,910 |
Issued in reinvestment of distributions | 147 | 383 |
Redeemed | (4,751) | (7,146) |
Net increase (decrease) | (1,121) | (3,853) |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended October 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, | $ 23.74 | $ 21.41 | $ 19.96 | $ 16.83 | $ 19.54 |
Income from Investment Operations | |||||
Net investment income (loss) B | .16 | .25 E | .10 | .11 | .07 |
Net realized and unrealized gain (loss) | 3.46 | 2.33 | 1.47 | 3.08 | (2.64) |
Total from investment operations | 3.62 | 2.58 | 1.57 | 3.19 | (2.57) |
Distributions from net investment income | (.12) | (.25) | (.12) | (.06) | (.14) |
Net asset value, end of period | $ 27.24 | $ 23.74 | $ 21.41 | $ 19.96 | $ 16.83 |
Total Return A | 15.29% | 12.12% | 7.91% | 19.01% | (13.30)% |
Ratios to Average Net Assets C, F | |||||
Expenses before reductions | .88% | .84% | .85% | .86% | .94% |
Expenses net of fee waivers, | .88% | .84% | .85% | .86% | .94% |
Expenses net of all reductions | .87% | .79% | .81% | .82% | .83% |
Net investment income (loss) | .61% | 1.11% E | .46% | .63% | .39% |
Supplemental Data | |||||
Net assets, end of period | $ 853 | $ 770 | $ 777 | $ 790 | $ 744 |
Portfolio turnover rate D | 109% | 136% | 134% | 159% | 255% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expense of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .49%.
F 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. 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.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2006
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Stock Selector (the Fund) is a fund of Fidelity Capital Trust (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 Fidelity 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 Fidelity 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. Investments in open-end mutual funds, including the Fidelity 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 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.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
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 Fidelity Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. 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 distributions or capital gain distributions. Interest income distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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.
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
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.
In addition, the Fund will claim 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 foreign currency transactions, deferred trustees compensation and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 97,561 |
Unrealized depreciation | (17,380) |
Net unrealized appreciation (depreciation) | 80,181 |
Undistributed ordinary income | 2,248 |
Undistributed long-term capital gain | 894 |
Cost for federal income tax purposes | $ 775,822 |
The tax character of distributions paid was as follows:
October 31, 2006 | October 31, 2005 | |
Ordinary Income | $ 3,858 | $ 9,003 |
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48), was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets, results of operations and financial statement disclosures.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
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. Upon settlement date, 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.
3. Purchases and Sales of Investments.
Purchases and sales of securities other than short-term securities, aggregated $872,315 and $943,066, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management 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 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. In addition, the management fee is subject to a performance adjustment (up to a maximum of ± .20% of the Fund's average net assets over a 36 month performance period). The upward or downward adjustment to the management fee is based on the Fund's relative investment performance as compared to an appropriate benchmark index. For the period, the total annual management fee rate, including the performance adjustment, was .61% 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 rate of .21% of average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Investments in Fidelity Central Funds. The Fund may invest in Fidelity Central Funds. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request. In addition, the financial statements of the Fidelity Central Funds, 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 Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
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 $11 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 shareholder 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, which amounts to $2 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
6. Security Lending - continued
disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Net income from lending portfolio securities during the period amounted to $115.
7. 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 $105 for the period. In addition, through arrangements with the Fund's 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 transfer agent expenses by $6.
8. 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.
The United States Securities and Exchange Commission ("SEC") is conducting an investigation of FMR (covering the years 2002 to 2004) arising from gifts, gratuities and business entertainment provided by certain brokers to certain individuals who were employed on FMR's domestic equity trading desk during that period. FMR is in discussions with the SEC staff regarding the possible resolution of the matter, but as of period-end no final resolution has been reached.
In December 2006, the Independent Trustees completed their own investigation of the matter with the assistance of independent counsel. The Independent Trustees and FMR agree that, despite the absence of proof that the Fidelity mutual funds experienced diminished execution quality as a result of the improper receipt of gifts and business entertainment, the conduct at issue was serious and is worthy of redress. Accordingly, the Independent Trustees have requested and FMR has agreed to pay $42 million to Fidelity mutual funds, plus interest to be determined at the time that payment is made. A method of allocating this payment among the funds has not yet been determined. In addition, FMR has agreed to reimburse related legal expenses. The total payment to the Fund is not anticipated to have a material impact on the Fund's net assets.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Capital Trust and Shareholders of Fidelity Stock Selector:
We have audited the accompanying statement of assets and liabilities of Fidelity Stock Selector (the Fund), a fund of Fidelity Capital Trust, including the schedule of investments, as of October 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 October 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 Stock Selector as of October 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 348 funds advised by FMR or an affiliate. Mr. McCoy oversees 350 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1978 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Stock Selector (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as Vice Chairman (2006-present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. | |
Marie L. Knowles (60) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach is Chairman of the Independent Trustees (2006-present). Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Sony Corporation (2006-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (73) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
James H. Keyes (66) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Capital Trust. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Capital Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. | |
Philip L. Bullen (47) | |
Year of Election or Appointment: 2006 Vice President of Stock Selector. Mr. Bullen also serves as Vice President of certain Equity Funds (2006-present). Mr. Bullen is Senior Vice President of FMR (2001-present) and FMR Co., Inc. (2001-present). Previously, Mr. Bullen served as President and a Director of Fidelity Research & Analysis Company (2001-2005), President and a Director of Fidelity Management & Research (U.K.) Inc. (2002-2006), and a Director of Strategic Advisers, Inc. (2002-2005). | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Stock Selector. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
James F. Catudal (45) | |
Year of Election or Appointment: 2001 Vice President of Stock Selector. Mr. Catudal also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Catudal worked as a research analyst and manager. Mr. Catudal also serves as Vice President of FMR and FMR Co., Inc. (2002). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Stock Selector. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (47) | |
Year of Election or Appointment: 2003 Assistant Secretary of Stock Selector. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (48) | |
Year of Election or Appointment: 2004 President and Treasurer of Stock Selector. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Stock Selector. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Stock Selector. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Stock Selector. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Stock Selector. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Stock Selector. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (37) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Stock Selector. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Stock Selector. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (60) | |
Year of Election or Appointment: 1990 Assistant Treasurer of Stock Selector. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Stock Selector. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Stock Selector. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (48) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Stock Selector. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Appointment: 2005 Assistant Treasurer of Stock Selector. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The Board of Trustees of Fidelity Stock Selector voted to pay on December 4, 2006, to shareholders of record at the opening of business on December 1, 2006, a distribution of $.03 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.13 per share from net investment income.
The fund designates $1,614,553 of distributions paid during the period November 1, 2005 to October 31, 2006 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund designates 100% of the dividends distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.
The fund designates 100% of the dividends distributed in December during the fiscal year as amounts which may be taken into account as a dividend for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on September 20, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 18,984,087,768.24 | 96.277 |
Withheld | 734,128,039.90 | 3.723 |
TOTAL | 19,718,215,808.14 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 18,972,066,364.22 | 96.216 |
Withheld | 746,149,443.92 | 3.784 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert M. Gates | ||
Affirmative | 18,939,072,824.91 | 96.049 |
Withheld | 779,142,983.23 | 3.951 |
TOTAL | 19,718,215,808.14 | 100.000 |
George H. Heilmeier | ||
Affirmative | 18,924,535,963.81 | 95.975 |
Withheld | 793,679,844.33 | 4.025 |
TOTAL | 19,718,215,808.14 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 18,871,094,149.22 | 95.704 |
Withheld | 847,121,658.92 | 4.296 |
TOTAL | 19,718,215,808.14 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 18,962,549,074.38 | 96.168 |
Withheld | 755,666,733.76 | 3.832 |
TOTAL | 19,718,215,808.14 | 100.000 |
James H. KeyesB | ||
Affirmative | 18,951,323,897.48 | 96.111 |
Withheld | 766,891,910.66 | 3.889 |
TOTAL | 19,718,215,808.14 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 18,948,733,631.68 | 96.098 |
Withheld | 769,482,176.46 | 3.902 |
TOTAL | 19,718,215,808.14 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 18,955,192,662.21 | 96.130 |
Withheld | 763,023,145.93 | 3.870 |
TOTAL | 19,718,215,808.14 | 100.000 |
William O. McCoy | ||
Affirmative | 18,901,077,394.54 | 95.856 |
Withheld | 817,138,413.60 | 4.144 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 18,956,972,615.07 | 96.139 |
Withheld | 761,243,193.07 | 3.861 |
TOTAL | 19,718,215,808.14 | 100.000 |
Cornelia M. Small | ||
Affirmative | 18,967,158,466.26 | 96.191 |
Withheld | 751,057,341.88 | 3.809 |
TOTAL | 19,718,215,808.14 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 18,918,672,661.66 | 95.945 |
Withheld | 799,543,146.48 | 4.055 |
TOTAL | 19,718,215,808.14 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 18,959,278,859.57 | 96.151 |
Withheld | 758,936,948.57 | 3.849 |
TOTAL | 19,718,215,808.14 | 100.000 |
A Denotes trust-wide proposal and voting results. B Effective on or about January 1, 2007. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Stock Selector
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance, as well as the fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the fund.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Stock Selector
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the second quartile for all the periods shown. The Board also stated that the relative investment performance of the fund compared favorably to its benchmark for all the periods shown. The Board also reviewed the fund's relative investment performance against a peer group defined by Morningstar.
The Board also considered that the fund's management fee is subject to upward or downward adjustment depending upon whether, and to what extent, the fund's investment performance for the performance period exceeds, or is exceeded by, the record (over the same period) of a Board-approved performance adjustment index. The Board realizes that the performance adjustment provides FMR with a strong economic incentive to seek to achieve superior performance for the fund's shareholders and helps to more closely align the interests of FMR and the fund's shareholders.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Annual Report
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps, and without giving effect to the fund's performance adjustment. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 9% means that 91% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked and the impact of the fund's performance adjustment, is also included in the chart and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Stock Selector
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. The Board also noted the effect of the fund's positive performance adjustment on the fund's management fee ranking. The Board noted that the performance adjustment for each year represents calculations for rolling 36-month periods that differ from the periods shown in the performance charts above.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of the fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses, as well as the fund's positive performance adjustment. As part of its review, the Board also considered current and historical total expenses of the fund compared to competitive fund median expenses. The fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the fund's total expenses ranked below its competitive median for 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Based on its review, the Board concluded that the fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered 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. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
(phone_graphic)
Fidelity Automated
Service Telephone (FAST®)
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
* 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.
Annual Report
To Write Fidelity
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
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
(letter_graphic)
For Retirement
Accounts
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
Annual Report
To Visit Fidelity
For directions and hours,
please call 1-800-544-9797.
Arizona
7001 West Ray Road
Chandler, AZ
15445 N. Scottsdale Road
Scottsdale, AZ
California
815 East Birch Street
Brea, CA
1411 Chapin Avenue
Burlingame, CA
851 East Hamilton Avenue
Campbell, CA
19200 Von Karman Avenue
Irvine, CA
601 Larkspur Landing Circle
Larkspur, CA
10100 Santa Monica Blvd.
Los Angeles, CA
27101 Puerta Real
Mission Viejo, CA
73-575 El Paseo
Palm Desert, CA
251 University Avenue
Palo Alto, CA
123 South Lake Avenue
Pasadena, CA
16995 Bernardo Ctr. Drive
Rancho Bernardo, CA
1220 Roseville Parkway
Roseville, CA
1740 Arden Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
11943 El Camino Real
San Diego, CA
8 Montgomery Street
San Francisco, CA
3793 State Street
Santa Barbara, CA
1200 Wilshire Boulevard
Santa Monica, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
Colorado
1625 Broadway
Denver, CO
9185 Westview Road
Lone Tree, CO
Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
Delaware
400 Delaware Avenue
Wilmington, DE
Florida
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
4671 Town Center Parkway
Jacksonville, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
3501 PGA Boulevard
Palm Beach Gardens, FL
3550 Tamiami Trail, South
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
2465 State Road 7
Wellington, FL
Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
Illinois
One North LaSalle Street
Chicago, IL
875 North Michigan Ave.
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1572 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
Indiana
4729 East 82nd Street
Indianapolis, IN
Kansas
5400 College Boulevard
Overland Park, KS
Maine
Three Canal Plaza
Portland, ME
Maryland
7315 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
238 Main Street
Cambridge, MA
405 Cochituate Road
Framingham, MA
416 Belmont Street
Worcester, MA
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
Michigan
500 E. Eisenhower Pkwy.
Ann Arbor, MI
280 Old N. Woodward Ave.
Birmingham, MI
43420 Grand River Avenue
Novi, MI
29155 Northwestern Hwy.
Southfield, MI
Minnesota
7600 France Avenue South
Edina, MN
Missouri
1524 South Lindbergh Blvd.
St. Louis, MO
Nevada
2225 Village Walk Drive
Henderson, NV
New Jersey
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
396 Route 17, North
Paramus, NJ
3518 Route 1 North
Princeton, NJ
530 Broad Street
Shrewsbury, NJ
New York
1055 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
980 Madison Avenue
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
200 Fifth Avenue
New York, NY
733 Third Avenue
New York, NY
11 Penn Plaza
New York, NY
2070 Broadway
New York, NY
1075 Northern Blvd.
Roslyn, NY
799 Central Park Avenue
Scarsdale, NY
North Carolina
4611 Sharon Road
Charlotte, NC
7011 Fayetteville Road
Durham, NC
Ohio
3805 Edwards Road
Cincinnati, OH
1324 Polaris Parkway
Columbus, OH
28699 Chagrin Boulevard
Woodmere Village, OH
Oregon
7493 SW Bridgeport Road
Tigard, OR
Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
Wexford, PA
Rhode Island
47 Providence Place
Providence, RI
Tennessee
6150 Poplar Avenue
Memphis, TN
Texas
10000 Research Boulevard
Austin, TX
4001 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
6560 Fannin Street
Houston, TX
6500 N. MacArthur Blvd.
Irving, TX
6005 West Park Boulevard
Plano, TX
14100 San Pedro
San Antonio, TX
1576 East Southlake Blvd.
Southlake, TX
19740 IH 45 North
Spring, TX
Utah
279 West South Temple
Salt Lake City, UT
Virginia
1861 International Drive
McLean, VA
Washington
411 108th Avenue, N.E.
Bellevue, WA
1518 6th Avenue
Seattle, WA
Washington, DC
1900 K Street, N.W.
Washington, DC
Wisconsin
595 North Barker Road
Brookfield, WI
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment
Advisors
Fidelity International Investment
Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
Brown Brothers Harriman & Co.
Boston, MA
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 graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
FSS-UANN-1206
1.784780.103
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Fidelity®
Small Cap Independence
Fund
Annual Report
October 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The managers' review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results | ||
Board Approval of 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.
Annual Report
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.
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.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity® Small Cap Independence Fund | 14.08% | 10.63% | 9.01% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Small Cap Independence Fund on October 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Russell 2000® Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Richard Thompson, Portfolio Manager of Fidelity® Small Cap Independence Fund
U.S. equity investors had much to feel good about during the 12-month period ending October 31, 2006. On October 3, the Dow Jones Industrial AverageSM closed above its all-time high set back in January 2000. On October 19 - the 19th anniversary of the 1987 stock market crash - the Dow made history again, recording its first close above 12,000. The Dow finished the 12-month period with a gain of 18.47%. The Standard & Poor's 500SM Index and the NASDAQ Composite® Index also did well, returning 16.34% and 12.49%, respectively. There were a number of reasons for the equity market's impressive results, particularly the consistently strong quarterly earnings reported by U.S. corporations. The Federal Reserve Board also played a significant role. Though its inflation fighting efforts caused investors anguish at times, the Board seemed to successfully accomplish its mission of engineering a "soft landing" - where inflation doesn't get too hot and economic growth doesn't get too cold - leading to what Wall Street calls a "Goldilocks economy."
The fund rose 14.08% during the past year, versus 19.98% for the Russell 2000® Index. The biggest drag on performance versus the index was the portfolio's growth bias during a year in which value stocks did better overall. Specifically, the fund's large underweighting in the strong performing real estate industry, disappointing stock selection among diversified financials and weak industry positioning within technology all had a meaningful negative impact. In contrast, an underweighting in bank stocks added to results, while strong security selection in energy helped contribute to the fund's performance. Also, given my investment in foreign stocks, favorable currency movements were a net positive. Two of the fund's biggest detractors were out-of-benchmark positions in NETeller and Optimal Group. Both specialize in electronic money transfers for Internet gaming companies, which were dealt a severe blow in October after Congress voted to ban online gambling. Other detractors included energy holding Carbo Ceramics, retailer Pier 1 Imports and fiber-optic component maker Bookham. Many of our best performers were companies that agreed to be acquired for premium valuations during the period, including RSA Security, which provides digital identification products for computer network users, and Maverick Tube, a maker of tubular products used for oil and natural gas drilling. Neither was in the portfolio at period end. Also performing well was specialty materials manufacturer Allegheny Technologies.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual 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 (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the accompanying table 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.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table 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 shareholder 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.
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.
Beginning | Ending | Expenses Paid | |
Actual | $ 1,000.00 | $ 961.10 | $ 4.40 |
Hypothetical (5% return per year before expenses) | $ 1,000.00 | $ 1,020.72 | $ 4.53 |
* Expenses are equal to the Fund's annualized expense ratio of .89%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Annual Report
Investment Changes
Top Ten Stocks as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Medicis Pharmaceutical Corp. Class A | 2.4 | 1.8 |
Huron Consulting Group, Inc. | 2.2 | 1.2 |
Allegheny Technologies, Inc. | 2.1 | 1.5 |
Fourlis Holdings SA | 1.8 | 1.5 |
New River Pharmaceuticals, Inc. | 1.8 | 1.1 |
ValueClick, Inc. | 1.6 | 0.8 |
FLIR Systems, Inc. | 1.4 | 0.2 |
Carpenter Technology Corp. | 1.3 | 1.2 |
Kanbay International, Inc. | 1.3 | 0.0 |
Conceptus, Inc. | 1.3 | 0.3 |
17.2 | ||
Top Five Market Sectors as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Consumer Discretionary | 23.1 | 19.8 |
Information Technology | 19.5 | 22.9 |
Industrials | 15.9 | 13.6 |
Health Care | 12.3 | 11.5 |
Energy | 11.5 | 14.4 |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2006 * | As of April 30, 2006 ** | ||||||
Stocks 99.4% | Stocks 99.3% | ||||||
Short-Term | Short-Term | ||||||
* Foreign investments | 18.3% | ** Foreign investments | 24.6% |
Annual Report
Investments October 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.4% | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - 23.1% | |||
Auto Components - 0.7% | |||
Gentex Corp. | 879,900 | $ 13,999 | |
Hawk Corp. Class A (a) | 326,500 | 4,800 | |
18,799 | |||
Distributors - 1.0% | |||
Keystone Automotive Industries, Inc. (a) | 656,100 | 25,234 | |
Diversified Consumer Services - 0.0% | |||
New Oriental Education & Technology Group, Inc. Sponsored ADR | 1,300 | 31 | |
Hotels, Restaurants & Leisure - 4.8% | |||
BJ's Restaurants, Inc. (a) | 411,200 | 8,853 | |
Gaming Partners International Corp. | 153,205 | 3,112 | |
Isle of Capri Casinos, Inc. (a)(d) | 849,800 | 21,330 | |
McCormick & Schmick's Seafood Restaurants (a) | 420,918 | 11,066 | |
Multimedia Games, Inc. (a)(d) | 488,500 | 4,587 | |
P.F. Chang's China Bistro, Inc. (a)(d) | 529,500 | 22,144 | |
St. Marc Holdings Co. Ltd. | 159,600 | 10,671 | |
The Restaurant Group PLC | 4,140,822 | 19,450 | |
Vail Resorts, Inc. (a) | 664,100 | 25,667 | |
126,880 | |||
Household Durables - 2.8% | |||
Fourlis Holdings SA | 2,475,330 | 48,025 | |
Ryland Group, Inc. | 192,300 | 8,832 | |
Standard Pacific Corp. | 381,300 | 9,239 | |
Universal Electronics, Inc. (a) | 287,607 | 6,221 | |
72,317 | |||
Internet & Catalog Retail - 0.8% | |||
Gaiam, Inc. Class A (a) | 350,000 | 5,079 | |
NutriSystem, Inc. (a)(d) | 270,800 | 16,703 | |
21,782 | |||
Leisure Equipment & Products - 1.0% | |||
MarineMax, Inc. (a) | 321,800 | 9,175 | |
Pool Corp. | 84,400 | 3,459 | |
RC2 Corp. (a) | 279,000 | 12,605 | |
25,239 | |||
Media - 5.5% | |||
Carmike Cinemas, Inc. (d)(e) | 1,197,400 | 23,888 | |
CTC Media, Inc. | 947,000 | 22,984 | |
DreamWorks Animation SKG, Inc. Class A (a) | 705,200 | 18,653 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - continued | |||
Media - continued | |||
Focus Media Holding Ltd. ADR (a) | 23,902 | $ 1,264 | |
Modern Times Group AB (MTG) (B Shares) | 314,600 | 18,121 | |
R.H. Donnelley Corp. | 422,000 | 25,413 | |
Regal Entertainment Group Class A (d) | 1,584,700 | 32,851 | |
143,174 | |||
Multiline Retail - 0.1% | |||
Conn's, Inc. (a)(d) | 137,000 | 3,291 | |
Specialty Retail - 4.0% | |||
Casual Male Retail Group, Inc. (a)(d) | 1,268,100 | 18,781 | |
Charlotte Russe Holding, Inc. (a) | 348,600 | 9,639 | |
New York & Co., Inc. (a) | 281,700 | 3,662 | |
Pier 1 Imports, Inc. (d) | 3,225,500 | 21,095 | |
The Men's Wearhouse, Inc. | 293,150 | 11,682 | |
Wet Seal, Inc. Class A (a) | 2,206,700 | 13,770 | |
Williams-Sonoma, Inc. (d) | 796,800 | 27,099 | |
105,728 | |||
Textiles, Apparel & Luxury Goods - 2.4% | |||
Crocs, Inc. (d) | 434,700 | 17,223 | |
Timberland Co. Class A (a) | 447,200 | 12,902 | |
True Religion Apparel, Inc. (a)(d) | 1,097,851 | 23,801 | |
Volcom, Inc. (a)(d) | 252,700 | 8,278 | |
62,204 | |||
TOTAL CONSUMER DISCRETIONARY | 604,679 | ||
CONSUMER STAPLES - 1.3% | |||
Food & Staples Retailing - 0.3% | |||
Itochushokuhin Co. Ltd. | 245,200 | 8,176 | |
Food Products - 1.0% | |||
Corn Products International, Inc. | 553,700 | 20,038 | |
Imperial Sugar Co. (d) | 198,100 | 5,256 | |
25,294 | |||
TOTAL CONSUMER STAPLES | 33,470 | ||
ENERGY - 11.5% | |||
Energy Equipment & Services - 5.5% | |||
Carbo Ceramics, Inc. (d) | 291,400 | 9,820 | |
Compagnie Generale de Geophysique SA sponsored ADR (d) | 325,000 | 11,063 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
ENERGY - continued | |||
Energy Equipment & Services - continued | |||
Core Laboratories NV (a) | 292,700 | $ 21,335 | |
Dawson Geophysical Co. (a) | 137,000 | 4,115 | |
Hydril Co. (a) | 214,500 | 12,881 | |
Oil States International, Inc. (a) | 789,900 | 22,939 | |
Petroleum Geo-Services ASA sponsored ADR (a) | 310,700 | 18,117 | |
Superior Energy Services, Inc. (a) | 763,500 | 23,898 | |
TGS Nopec Geophysical Co. ASA (a) | 1,202,000 | 21,423 | |
145,591 | |||
Oil, Gas & Consumable Fuels - 6.0% | |||
Aurora Oil & Gas Corp. (a) | 1,098,908 | 3,407 | |
Cabot Oil & Gas Corp. | 386,500 | 20,450 | |
Comstock Resources, Inc. (a) | 461,700 | 12,881 | |
Encore Acquisition Co. (a) | 388,550 | 9,729 | |
Forest Oil Corp. (a) | 231,700 | 7,563 | |
Goodrich Petroleum Corp. (d) | 791,400 | 27,074 | |
Houston Exploration Co. (a) | 189,000 | 10,236 | |
Mariner Energy, Inc. (a) | 1,118,314 | 22,165 | |
Plains Exploration & Production Co. (a) | 500,100 | 21,149 | |
Range Resources Corp. | 62,400 | 1,694 | |
Tesoro Corp. | 313,300 | 20,032 | |
156,380 | |||
TOTAL ENERGY | 301,971 | ||
FINANCIALS - 9.2% | |||
Commercial Banks - 2.1% | |||
Boston Private Financial Holdings, Inc. | 595,100 | 16,449 | |
East West Bancorp, Inc. | 424,500 | 15,498 | |
Signature Bank, New York (a) | 50,203 | 1,523 | |
UCBH Holdings, Inc. | 1,212,900 | 20,789 | |
54,259 | |||
Consumer Finance - 0.2% | |||
Cash Systems, Inc. (a)(d)(e) | 1,043,700 | 6,210 | |
Diversified Financial Services - 1.0% | |||
African Bank Investments Ltd. | 5,064,498 | 18,900 | |
NETeller PLC (a) | 2,504,500 | 6,867 | |
25,767 | |||
Insurance - 3.3% | |||
Aspen Insurance Holdings Ltd. | 987,900 | 24,520 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
FINANCIALS - continued | |||
Insurance - continued | |||
IPC Holdings Ltd. | 449,700 | $ 13,509 | |
Montpelier Re Holdings Ltd. | 1,060,924 | 18,831 | |
Navigators Group, Inc. (a) | 434,300 | 20,443 | |
Philadelphia Consolidated Holdings Corp. (a) | 122,115 | 4,777 | |
Scottish Re Group Ltd. | 332,350 | 3,799 | |
85,879 | |||
Real Estate Investment Trusts - 2.3% | |||
Corporate Office Properties Trust (SBI) | 274,100 | 13,099 | |
Extra Space Storage, Inc. | 367,000 | 6,767 | |
Home Properties of New York, Inc. | 216,000 | 13,645 | |
Tanger Factory Outlet Centers, Inc. | 372,400 | 13,891 | |
U-Store-It Trust | 603,500 | 13,253 | |
60,655 | |||
Real Estate Management & Development - 0.3% | |||
Unite Group PLC | 976,587 | 9,263 | |
TOTAL FINANCIALS | 242,033 | ||
HEALTH CARE - 12.3% | |||
Biotechnology - 0.0% | |||
Alnylam Pharmaceuticals, Inc. (a) | 39,000 | 769 | |
Health Care Equipment & Supplies - 2.8% | |||
Conceptus, Inc. (a)(e) | 1,681,283 | 33,323 | |
Cyberonics, Inc. (a) | 270,400 | 4,875 | |
Cynosure, Inc. Class A (e) | 500,000 | 9,200 | |
Home Diagnostics, Inc. | 220,500 | 2,809 | |
Somanetics Corp. (a) | 174,809 | 3,718 | |
Stereotaxis, Inc. (a) | 1,572,292 | 18,836 | |
72,761 | |||
Health Care Providers & Services - 3.9% | |||
Brookdale Senior Living, Inc. | 458,400 | 22,058 | |
Capital Senior Living Corp. (a)(e) | 1,467,000 | 14,010 | |
Emeritus Corp. (a) | 701,300 | 16,831 | |
Healthways, Inc. (a) | 653,500 | 27,676 | |
Sun Healthcare Group, Inc. (a) | 1,548,600 | 20,256 | |
100,831 | |||
Health Care Technology - 0.4% | |||
Vital Images, Inc. (a) | 360,900 | 11,202 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
HEALTH CARE - continued | |||
Life Sciences Tools & Services - 0.2% | |||
Covance, Inc. (a) | 105,600 | $ 6,178 | |
Pharmaceuticals - 5.0% | |||
Allergan, Inc. | 172,100 | 19,878 | |
Medicis Pharmaceutical Corp. Class A (d) | 1,830,300 | 64,128 | |
New River Pharmaceuticals, Inc. (a)(d) | 939,526 | 47,784 | |
131,790 | |||
TOTAL HEALTH CARE | 323,531 | ||
INDUSTRIALS - 15.9% | |||
Aerospace & Defense - 1.9% | |||
Alliant Techsystems, Inc. (a) | 345,930 | 26,709 | |
Hexcel Corp. (a) | 617,400 | 9,996 | |
United Industrial Corp. (d) | 312,300 | 14,057 | |
50,762 | |||
Air Freight & Logistics - 0.8% | |||
Business Post Group PLC | 918,200 | 7,339 | |
EGL, Inc. (a) | 371,600 | 12,631 | |
19,970 | |||
Airlines - 0.4% | |||
ACE Aviation Holdings, Inc. Class A (a) | 279,400 | 9,706 | |
Building Products - 1.0% | |||
Jacuzzi Brands, Inc. (a) | 1,282,257 | 15,887 | |
PGT, Inc. | 707,002 | 10,471 | |
26,358 | |||
Commercial Services & Supplies - 4.8% | |||
Clean Harbors, Inc. (a) | 84,147 | 3,601 | |
Corrections Corp. of America (a) | 673,678 | 30,780 | |
Huron Consulting Group, Inc. (a)(e) | 1,422,555 | 56,845 | |
Innerworkings, Inc. | 245,700 | 3,673 | |
ITE Group PLC | 4,096,900 | 11,117 | |
Tele Atlas NV (Netherlands) (a) | 1,056,500 | 19,810 | |
125,826 | |||
Construction & Engineering - 1.1% | |||
Infrasource Services, Inc. (a) | 757,500 | 14,824 | |
Quanta Services, Inc. (a) | 778,100 | 14,239 | |
29,063 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INDUSTRIALS - continued | |||
Electrical Equipment - 1.9% | |||
GrafTech International Ltd. (a) | 1,024,200 | $ 6,196 | |
Q-Cells AG (d) | 326,900 | 12,935 | |
SolarWorld AG (d) | 257,900 | 13,872 | |
Suntech Power Holdings Co. Ltd. sponsored ADR | 138,000 | 3,588 | |
Vestas Wind Systems AS (a) | 446,200 | 12,569 | |
49,160 | |||
Machinery - 1.2% | |||
Valmont Industries, Inc. | 557,300 | 31,097 | |
Road & Rail - 0.5% | |||
Con-way, Inc. | 168,700 | 7,958 | |
Old Dominion Freight Lines, Inc. (a) | 237,100 | 6,558 | |
14,516 | |||
Trading Companies & Distributors - 2.3% | |||
Beacon Roofing Supply, Inc. (a)(d) | 853,750 | 16,904 | |
Bergman & Beving AB (B Shares) | 927,000 | 20,793 | |
Watsco, Inc. | 470,000 | 23,406 | |
61,103 | |||
TOTAL INDUSTRIALS | 417,561 | ||
INFORMATION TECHNOLOGY - 19.5% | |||
Communications Equipment - 0.7% | |||
Bookham, Inc. (a)(d)(e) | 3,533,716 | 11,061 | |
TANDBERG ASA | 606,870 | 7,010 | |
18,071 | |||
Computers & Peripherals - 2.7% | |||
Hypercom Corp. (a) | 1,713,300 | 11,119 | |
NCR Corp. (a) | 651,700 | 27,059 | |
QLogic Corp. (a) | 858,500 | 17,668 | |
Rackable Systems, Inc. (a)(d) | 393,400 | 12,199 | |
SimpleTech, Inc. (a) | 340,263 | 2,947 | |
70,992 | |||
Electronic Equipment & Instruments - 3.0% | |||
FARO Technologies, Inc. (a)(d)(e) | 1,260,721 | 24,004 | |
FLIR Systems, Inc. (a)(d) | 1,136,649 | 36,305 | |
Optimal Group, Inc. Class A (a)(d)(e) | 2,015,400 | 19,428 | |
79,737 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INFORMATION TECHNOLOGY - continued | |||
Internet Software & Services - 5.2% | |||
Aladdin Knowledge Systems Ltd. (a)(e) | 1,273,200 | $ 22,739 | |
aQuantive, Inc. (a)(d) | 694,500 | 18,877 | |
Bankrate, Inc. (a)(d) | 615,808 | 19,675 | |
CyberSource Corp. (a) | 298,948 | 3,064 | |
Digitas, Inc. (a) | 3,016,700 | 31,856 | |
ValueClick, Inc. (a)(d) | 2,167,600 | 40,751 | |
136,962 | |||
IT Services - 2.0% | |||
Kanbay International, Inc. (a)(d) | 1,188,600 | 33,756 | |
MoneyGram International, Inc. | 567,053 | 19,399 | |
53,155 | |||
Semiconductors & Semiconductor Equipment - 4.7% | |||
Actel Corp. (a) | 90,300 | 1,480 | |
Broadcom Corp. Class A (a) | 523,950 | 15,860 | |
Cypress Semiconductor Corp. (a) | 881,000 | 14,792 | |
DSP Group, Inc. (a) | 814,200 | 17,684 | |
Integrated Device Technology, Inc. (a) | 890,200 | 14,110 | |
Intersil Corp. Class A | 702,000 | 16,462 | |
O2Micro International Ltd. sponsored ADR (a) | 700,400 | 4,525 | |
Saifun Semiconductors Ltd. | 87,400 | 1,731 | |
Silicon Laboratories, Inc. (a) | 277,500 | 9,055 | |
Silicon On Insulator Technologies SA (SOITEC) (a) | 400,000 | 11,850 | |
SiRF Technology Holdings, Inc. (a) | 517,948 | 14,565 | |
122,114 | |||
Software - 1.2% | |||
Fair, Isaac & Co., Inc. | 148,200 | 5,429 | |
NAVTEQ Corp. (a) | 115,864 | 3,847 | |
Quality Systems, Inc. | 188,200 | 7,987 | |
Sonic Solutions, Inc. (a) | 860,500 | 13,888 | |
31,151 | |||
TOTAL INFORMATION TECHNOLOGY | 512,182 | ||
MATERIALS - 4.8% | |||
Metals & Mining - 4.8% | |||
Allegheny Technologies, Inc. | 707,800 | 55,725 | |
Carpenter Technology Corp. | 330,000 | 35,307 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
MATERIALS - continued | |||
Metals & Mining - continued | |||
Oregon Steel Mills, Inc. (a) | 340,425 | $ 18,519 | |
Shore Gold, Inc. (a) | 3,671,300 | 17,496 | |
127,047 | |||
TELECOMMUNICATION SERVICES - 1.4% | |||
Diversified Telecommunication Services - 1.4% | |||
Level 3 Communications, Inc. (a) | 2,643,300 | 13,983 | |
NeuStar, Inc. Class A (a) | 744,700 | 21,760 | |
35,743 | |||
UTILITIES - 0.4% | |||
Independent Power Producers & Energy Traders - 0.4% | |||
AES Tiete SA (PN) (non-vtg.) | 366,000,000 | 9,289 | |
TOTAL COMMON STOCKS (Cost $2,483,010) | 2,607,506 | ||
Money Market Funds - 11.5% | |||
Fidelity Cash Central Fund, 5.34% (b) | 32,731,247 | 32,731 | |
Fidelity Securities Lending Cash Central Fund, 5.35% (b)(c) | 269,952,146 | 269,952 | |
TOTAL MONEY MARKET FUNDS (Cost $302,683) | 302,683 | ||
TOTAL INVESTMENT PORTFOLIO - 110.9% (Cost $2,785,693) | 2,910,189 | ||
NET OTHER ASSETS - (10.9)% | (286,751) | ||
NET ASSETS - 100% | $ 2,623,438 |
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) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Affiliated company |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 4,158 |
Fidelity Securities Lending Cash Central Fund | 4,725 |
Total | $ 8,883 |
Other Affiliated Issuers |
An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Fiscal year to date transactions with companies which are or were affiliates are as follows: |
Affiliate | Value, beginning of period | Purchases | Sales Proceeds | Dividend Income | Value, end of period |
Aladdin Knowledge Systems Ltd. | $ - | $ 26,140 | $ - | $ - | $ 22,739 |
Allied Healthcare International, Inc. | 14,067 | - | 15,153 | - | - |
Anika Therapeutics, Inc. | - | 9,263 | 8,251 | - | - |
Bookham, Inc. | - | 28,810 | - | - | 11,061 |
Capital Senior Living Corp. | - | 14,161 | - | - | 14,010 |
Carmike Cinemas, Inc. | - | 27,335 | - | 736 | 23,888 |
CAS Medical Systems, Inc. | - | 11,288 | 6,521 | - | - |
Cash Systems, Inc. | - | 7,522 | - | - | 6,210 |
Conceptus, Inc. | - | 24,603 | - | - | 33,323 |
Cynosure, Inc. Class A | - | 10,865 | - | - | 9,200 |
FARO Technologies, Inc. | - | 27,637 | 3,035 | - | 24,004 |
Annual Report
See accompanying notes which are an integral part of the financial statements.
Investments - continued
Other Affiliated Issuers - continued
Affiliate | Value, beginning of period | Purchases | Sales Proceeds | Dividend Income | Value, end of period |
Huron Consulting Group, Inc. | $ - | $ 47,163 | $ - | $ - | $ 56,845 |
New Frontier Media, Inc. | 6,560 | - | 7,248 | - | - |
Optimal Group, Inc. Class A | - | 32,423 | - | - | 19,428 |
Packaging Dynamics Corp. | 7,425 | - | 7,259 | - | - |
SOURCECORP, Inc. | 18,054 | - | 19,763 | - | - |
Stereotaxis, Inc. | - | 22,225 | 134 | - | - |
The Geo Group, Inc. | 16,299 | - | 17,300 | - | - |
The Restaurant Group PLC | - | 29,679 | 27,401 | 3,174 | - |
Whitehall Jewellers, Inc. | 790 | - | 728 | - | - |
Total | $ 63,195 | $ 319,114 | $ 112,793 | $ 3,910 | $ 220,708 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 81.7% |
Bermuda | 2.1% |
United Kingdom | 2.0% |
Greece | 1.8% |
Canada | 1.8% |
Norway | 1.8% |
Netherlands | 1.6% |
Sweden | 1.5% |
Germany | 1.0% |
Israel | 1.0% |
Others (individually less than 1%) | 3.7% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | October 31, 2006 | |
Assets | ||
Investment in securities, at value (including securities loaned of $263,997) - See accompanying schedule: Unaffiliated issuers (cost $2,240,254) | $ 2,386,798 | |
Fidelity Central Funds (cost $302,683) | 302,683 | |
Other affiliated issuers (cost $242,756) | 220,708 | |
Total Investments (cost $2,785,693) | $ 2,910,189 | |
Foreign currency held at value (cost $17) | 17 | |
Receivable for investments sold | 22,543 | |
Receivable for fund shares sold | 2,254 | |
Dividends receivable | 897 | |
Interest receivable | 373 | |
Other receivables | 768 | |
Total assets | 2,937,041 | |
Liabilities | ||
Payable for investments purchased | $ 38,799 | |
Payable for fund shares redeemed | 2,763 | |
Accrued management fee | 1,229 | |
Other affiliated payables | 601 | |
Other payables and accrued expenses | 259 | |
Collateral on securities loaned, at value | 269,952 | |
Total liabilities | 313,603 | |
Net Assets | $ 2,623,438 | |
Net Assets consist of: | ||
Paid in capital | $ 2,181,687 | |
Undistributed net investment income | 6,996 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 310,261 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 124,494 | |
Net Assets, for 117,990 shares outstanding | $ 2,623,438 | |
Net Asset Value, offering price and redemption price per share ($2,623,438 ÷ 117,990 shares) | $ 22.23 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended October 31, 2006 | |
Investment Income | ||
Dividends (including $3,910 received from other affiliated issuers) | $ 14,673 | |
Special dividends | 2,245 | |
Interest | 86 | |
Income from Fidelity Central Funds (including $4,725 from security lending) | 8,883 | |
Total income | 25,887 | |
Expenses | ||
Management fee | $ 14,068 | |
Performance adjustment | (1,527) | |
Transfer agent fees | 5,762 | |
Accounting and security lending fees | 696 | |
Custodian fees and expenses | 263 | |
Independent trustees' compensation | 9 | |
Registration fees | 127 | |
Audit | 56 | |
Legal | 33 | |
Interest | 2 | |
Miscellaneous | 126 | |
Total expenses before reductions | 19,615 | |
Expense reductions | (1,035) | 18,580 |
Net investment income (loss) | 7,307 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 312,016 | |
Other affiliated issuers | (2,611) | |
Foreign currency transactions | 86 | |
Futures contracts | 3,165 | |
Total net realized gain (loss) | 312,656 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (68,037) | |
Assets and liabilities in foreign currencies | (2) | |
Total change in net unrealized appreciation (depreciation) | (68,039) | |
Net gain (loss) | 244,617 | |
Net increase (decrease) in net assets resulting from operations | $ 251,924 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 7,307 | $ 5,929 |
Net realized gain (loss) | 312,656 | 119,721 |
Change in net unrealized appreciation (depreciation) | (68,039) | 54,939 |
Net increase (decrease) in net assets resulting from operations | 251,924 | 180,589 |
Distributions to shareholders from net investment income | (5,739) | - |
Distributions to shareholders from net realized gain | (109,861) | (46,445) |
Total distributions | (115,600) | (46,445) |
Share transactions | 1,250,445 | 715,075 |
Reinvestment of distributions | 113,855 | 45,487 |
Cost of shares redeemed | (486,761) | (230,542) |
Net increase (decrease) in net assets resulting from share transactions | 877,539 | 530,020 |
Redemption fees | 92 | 198 |
Total increase (decrease) in net assets | 1,013,955 | 664,362 |
Net Assets | ||
Beginning of period | 1,609,483 | 945,121 |
End of period (including undistributed net investment income of $6,996 and undistributed net investment income of $5,927, respectively) | $ 2,623,438 | $ 1,609,483 |
Other Information Shares | ||
Sold | 58,064 | 34,937 |
Issued in reinvestment of distributions | 5,524 | 2,370 |
Redeemed | (22,914) | (11,624) |
Net increase (decrease) | 40,674 | 25,683 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended October 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 20.82 | $ 18.30 | $ 16.87 | $ 13.56 | $ 15.40 |
Income from Investment Operations | |||||
Net investment income (loss) B | .07 E | .10 F | (.09) | (.08) | (.08) |
Net realized and unrealized gain (loss) | 2.75 | 3.31 | 1.52 | 3.38 | (1.33) |
Total from investment operations | 2.82 | 3.41 | 1.43 | 3.30 | (1.41) |
Distributions from net investment income | (.07) | - | - | - | - |
Distributions from net realized gain | (1.34) | (.89) | - | - | (.44) |
Total distributions | (1.41) | (.89) | - | - | (.44) |
Redemption fees added to paid in capital B | - H | - H | - H | .01 | .01 |
Net asset value, end of period | $ 22.23 | $ 20.82 | $ 18.30 | $ 16.87 | $ 13.56 |
Total Return A | 14.08% | 19.05% | 8.48% | 24.41% | (9.58)% |
Ratios to Average Net Assets C, G | |||||
Expenses before | .86% | .78% | .95% | 1.06% | 1.12% |
Expenses net of fee waivers, if any | .86% | .78% | .95% | 1.06% | 1.12% |
Expenses net of all | .81% | .75% | .91% | .93% | .91% |
Net investment income (loss) | .32% E | .49% F | (.49)% | (.59)% | (.52)% |
Supplemental Data | |||||
Net assets, end of period | $ 2,623 | $ 1,609 | $ 945 | $ 933 | $ 892 |
Portfolio turnover rate D | 126% | 61% | 95% | 220% | 290% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expense of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Investment income per share reflects a special dividend which amounted to $.02 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .22%.
F Investment income per share reflects special dividends which amounted to $.12 per share. Excluding these special dividends, the ratio of net investment income (loss) to average net assets would have been (.10)%.
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. 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.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2006
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Small Cap Independence Fund (the Fund) is a fund of Fidelity Capital Trust (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 Fidelity 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 Fidelity 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. Investments in open-end mutual funds, including the Fidelity 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 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.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
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 Fidelity Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. 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 distributions or capital gain distributions. Large, non-recurring dividends recognized by the Fund are presented separately on the Statement of Operations as "Special Dividends" and the impact of these dividends is presented in the Financial Highlights. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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.
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
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 distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim 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 futures transactions, foreign currency transactions, deferred trustees compensation, and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 339,319 | |
Unrealized depreciation | (218,684) | |
Net unrealized appreciation (depreciation) | 120,635 | |
Undistributed ordinary income | 95,889 | |
Undistributed long-term capital gain | 185,266 | |
Cost for federal income tax purposes | $ 2,789,554 |
The tax character of distributions paid was as follows:
October 31, 2006 | October 31, 2005 | |
Ordinary Income | $ 45,092 | $ 1,044 |
Long-term Capital Gains | 70,508 | 45,401 |
Total | $ 115,600 | $ 46,445 |
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 90 days are subject to a redemption fee equal to 1.50% 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.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48), was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets, results of operations and financial statement disclosures.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
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. Upon settlement date, 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.
Futures Contracts. The Fund may use futures contracts to manage its exposure to the stock market and to fluctuations in currency values. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized
Annual Report
2. Operating Policies - continued
Futures Contracts - continued
gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $3,560,843 and $2,793,481, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .35% of the Fund's average net assets and a group fee rate that averaged ..27% during the 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. In addition, the management fee is subject to a performance adjustment (up to a maximum of ± .20% of the Fund's average net assets over a 36 month performance period). The upward or downward adjustment to the management fee is based on the Fund's relative investment performance as compared to an appropriate benchmark index. For the period, the total annual management fee rate, including the performance adjustment, was .55% 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 rate of .25% of average net assets.
Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
4. Fees and Other Transactions with Affiliates - continued
Investments in Fidelity Central Funds. The Fund may invest in Fidelity Central Funds. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request. In addition, the financial statements of the Fidelity Central Funds, 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 Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
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 $32 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from, or lend money to, other participating affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily | Weighted Average | Interest Expense |
Borrower | $ 3,166 | 4.90% | $ 2 |
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 shareholder 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, which amounts to $6 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to
Annual Report
6. Security Lending - continued
return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds.
7. 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 $899 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 $9 and $127, respectively.
8. 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.
The United States Securities and Exchange Commission ("SEC") is conducting an investigation of FMR (covering the years 2002 to 2004) arising from gifts, gratuities and business entertainment provided by certain brokers to certain individuals who were employed on FMR's domestic equity trading desk during that period. FMR is in discussions with the SEC staff regarding the possible resolution of the matter, but as of period-end no final resolution has been reached.
In December 2006, the Independent Trustees completed their own investigation of the matter with the assistance of independent counsel. The Independent Trustees and FMR agree that, despite the absence of proof that the Fidelity mutual funds experienced diminished execution quality as a result of the improper receipt of gifts and business entertainment, the conduct at issue was serious and is worthy of redress. Accordingly, the Independent Trustees have requested and FMR has agreed to pay $42 million to Fidelity mutual funds, plus interest to be determined at the time that payment is made. A method of allocating this payment among the funds has not yet been determined. In addition, FMR has agreed to reimburse related legal expenses. The total payment to the Fund is not anticipated to have a material impact on the Fund's net assets.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Capital Trust and Shareholders of Fidelity Small Cap Independence Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Small Cap Independence Fund (the Fund), a fund of Fidelity Capital Trust, including the schedule of investments as of October 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 October 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 Small Cap Independence Fund as of October 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 349 funds advised by FMR or an affiliate. Mr. McCoy oversees 350 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1978 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Small Cap Independence (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as Vice Chairman (2006-present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. | |
Marie L. Knowles (60) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach is Chairman of the Independent Trustees (2006-present). Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Sony Corporation (2006-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (73) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
James H. Keyes (66) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Capital Trust. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Capital Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Small Cap Independence. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
Bruce T. Herring (41) | |
Year of Election or Appointment: 2006 Vice President of Small Cap Independence. Mr. Herring also serves as Vice President of certain Equity Funds (2006-present). Mr. Herring is Senior Vice President of FMR (2006-present) and Vice President of FMR Co., Inc. (2001-present). Previously, Mr. Herring served as a portfolio manager for Fidelity U.S. Equity Funds (2001-2005). | |
Rich Thompson (37) | |
Year of Election or Appointment: 2005 Vice President of Small Cap Independence. Prior to his current responsibilities, Mr. Thompson worked as a research analyst and portfolio manager. Mr. Thompson also serves as a Vice President of FMR and FMR Co., Inc. (2006). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Small Cap Independence. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (47) | |
Year of Election or Appointment: 2003 Assistant Secretary of Small Cap Independence. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (48) | |
Year of Election or Appointment: 2004 President and Treasurer of Small Cap Independence. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Small Cap Independence. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Small Cap Independence. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Small Cap Independence. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Small Cap Independence. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Small Cap Independence. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (37) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Small Cap Independence. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Small Cap Independence. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (60) | |
Year of Election or Appointment: 1993 Assistant Treasurer of Small Cap Independence. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Small Cap Independence. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Small Cap Independence. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (48) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Small Cap Independence. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Small Cap Independence. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The Board of Trustees of Fidelity Small Cap Independence Fund voted to pay on December 4, 2006, to shareholders of record at the opening of business on December 1, 2006, a distribution of $2.34 per share derived from capital gains realized from sales of portfolio securities and a dividend of $0.05 per share from net investment income.
The fund designates 25% of the dividends distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.
The fund designates 31% of the dividends distributed in December 2005 during the fiscal year as amounts which may be taken into account as a dividend for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
The fund hereby designates as a capital gain dividend with respect to the taxable year ended October 31, 2006, $185,362,000 or, if subsequently determined to be different, the net capital gain of such year.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on September 20, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 18,984,087,768.24 | 96.277 |
Withheld | 734,128,039.90 | 3.723 |
TOTAL | 19,718,215,808.14 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 18,972,066,364.22 | 96.216 |
Withheld | 746,149,443.92 | 3.784 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert M. Gates | ||
Affirmative | 18,939,072,824.91 | 96.049 |
Withheld | 779,142,983.23 | 3.951 |
TOTAL | 19,718,215,808.14 | 100.000 |
George H. Heilmeier | ||
Affirmative | 18,924,535,963.81 | 95.975 |
Withheld | 793,679,844.33 | 4.025 |
TOTAL | 19,718,215,808.14 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 18,871,094,149.22 | 95.704 |
Withheld | 847,121,658.92 | 4.296 |
TOTAL | 19,718,215,808.14 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 18,962,549,074.38 | 96.168 |
Withheld | 755,666,733.76 | 3.832 |
TOTAL | 19,718,215,808.14 | 100.000 |
James H. KeyesB | ||
Affirmative | 18,951,323,897.48 | 96.111 |
Withheld | 766,891,910.66 | 3.889 |
TOTAL | 19,718,215,808.14 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 18,948,733,631.68 | 96.098 |
Withheld | 769,482,176.46 | 3.902 |
TOTAL | 19,718,215,808.14 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 18,955,192,662.21 | 96.130 |
Withheld | 763,023,145.93 | 3.870 |
TOTAL | 19,718,215,808.14 | 100.000 |
William O. McCoy | ||
Affirmative | 18,901,077,394.54 | 95.856 |
Withheld | 817,138,413.60 | 4.144 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 18,956,972,615.07 | 96.139 |
Withheld | 761,243,193.07 | 3.861 |
TOTAL | 19,718,215,808.14 | 100.000 |
Cornelia M. Small | ||
Affirmative | 18,967,158,466.26 | 96.191 |
Withheld | 751,057,341.88 | 3.809 |
TOTAL | 19,718,215,808.14 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 18,918,672,661.66 | 95.945 |
Withheld | 799,543,146.48 | 4.055 |
TOTAL | 19,718,215,808.14 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 18,959,278,859.57 | 96.151 |
Withheld | 758,936,948.57 | 3.849 |
TOTAL | 19,718,215,808.14 | 100.000 |
A Denotes trust-wide proposal and voting results. B Effective on or about January 1, 2007. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Small Cap Independence Fund
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance, as well as the fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the fund.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Small Cap Independence Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the first quartile for the one-year period, the third quartile for the three-year period, and the second quartile for the five-year period. The Board also stated that the relative investment performance of the fund was lower than its benchmark for the three- and five-year periods, although the fund's one-year cumulative total return compared favorably to its benchmark. The Board also reviewed the fund's relative investment performance against a peer group defined by Morningstar.
The Board also considered that the fund's management fee is subject to upward or downward adjustment depending upon whether, and to what extent, the fund's investment performance for the performance period exceeds, or is exceeded by, the record (over the same period) of a Board-approved performance adjustment index. The Board realizes that the performance adjustment provides FMR with a strong economic incentive to seek to achieve superior performance for the fund's shareholders and helps to more closely align the interests of FMR and the fund's shareholders.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Annual Report
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps, and without giving effect to the fund's performance adjustment. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 6% means that 94% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked and the impact of the fund's performance adjustment, is also included in the chart and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Small Cap Independence Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. The Board also noted the effect of the fund's negative performance adjustment on the fund's management fee ranking. The Board noted that the performance adjustment for each year represents calculations for rolling 36-month periods that differ from the periods shown in the performance charts above.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of the fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses, as well as the fund's negative performance adjustment. As part of its review, the Board also considered current and historical total expenses of the fund compared to competitive fund median expenses. The fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the fund's total expenses ranked below its competitive median for 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Based on its review, the Board concluded that the fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered 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. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
(phone_graphic)
Fidelity Automated
Service Telephone (FAST®)
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
* 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.
Annual Report
To Write Fidelity
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
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
(letter_graphic)
For Retirement
Accounts
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
Annual Report
To Visit Fidelity
For directions and hours,
please call 1-800-544-9797.
Arizona
7001 West Ray Road
Chandler, AZ
15445 N. Scottsdale Road
Scottsdale, AZ
California
815 East Birch Street
Brea, CA
1411 Chapin Avenue
Burlingame, CA
851 East Hamilton Avenue
Campbell, CA
19200 Von Karman Avenue
Irvine, CA
601 Larkspur Landing Circle
Larkspur, CA
10100 Santa Monica Blvd.
Los Angeles, CA
27101 Puerta Real
Mission Viejo, CA
73-575 El Paseo
Palm Desert, CA
251 University Avenue
Palo Alto, CA
123 South Lake Avenue
Pasadena, CA
16995 Bernardo Ctr. Drive
Rancho Bernardo, CA
1220 Roseville Parkway
Roseville, CA
1740 Arden Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
11943 El Camino Real
San Diego, CA
8 Montgomery Street
San Francisco, CA
3793 State Street
Santa Barbara, CA
1200 Wilshire Boulevard
Santa Monica, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
Colorado
1625 Broadway
Denver, CO
9185 Westview Road
Lone Tree, CO
Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
Delaware
400 Delaware Avenue
Wilmington, DE
Florida
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
4671 Town Center Parkway
Jacksonville, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
3501 PGA Boulevard
Palm Beach Gardens, FL
3550 Tamiami Trail, South
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
2465 State Road 7
Wellington, FL
Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
Illinois
One North LaSalle Street
Chicago, IL
875 North Michigan Ave.
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1572 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
Indiana
4729 East 82nd Street
Indianapolis, IN
Kansas
5400 College Boulevard
Overland Park, KS
Maine
Three Canal Plaza
Portland, ME
Maryland
7315 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
238 Main Street
Cambridge, MA
405 Cochituate Road
Framingham, MA
416 Belmont Street
Worcester, MA
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
Michigan
500 E. Eisenhower Pkwy.
Ann Arbor, MI
280 Old N. Woodward Ave.
Birmingham, MI
43420 Grand River Avenue
Novi, MI
29155 Northwestern Hwy.
Southfield, MI
Minnesota
7600 France Avenue South
Edina, MN
Missouri
1524 South Lindbergh Blvd.
St. Louis, MO
Nevada
2225 Village Walk Drive
Henderson, NV
New Jersey
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
396 Route 17, North
Paramus, NJ
3518 Route 1 North
Princeton, NJ
530 Broad Street
Shrewsbury, NJ
New York
1055 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
980 Madison Avenue
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
200 Fifth Avenue
New York, NY
733 Third Avenue
New York, NY
11 Penn Plaza
New York, NY
2070 Broadway
New York, NY
1075 Northern Blvd.
Roslyn, NY
799 Central Park Avenue
Scarsdale, NY
North Carolina
4611 Sharon Road
Charlotte, NC
7011 Fayetteville Road
Durham, NC
Ohio
3805 Edwards Road
Cincinnati, OH
1324 Polaris Parkway
Columbus, OH
28699 Chagrin Boulevard
Woodmere Village, OH
Oregon
7493 SW Bridgeport Road
Tigard, OR
Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
Wexford, PA
Rhode Island
47 Providence Place
Providence, RI
Tennessee
6150 Poplar Avenue
Memphis, TN
Texas
10000 Research Boulevard
Austin, TX
4001 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
6560 Fannin Street
Houston, TX
6500 N. MacArthur Blvd.
Irving, TX
6005 West Park Boulevard
Plano, TX
14100 San Pedro
San Antonio, TX
1576 East Southlake Blvd.
Southlake, TX
19740 IH 45 North
Spring, TX
Utah
279 West South Temple
Salt Lake City, UT
Virginia
1861 International Drive
McLean, VA
Washington
411 108th Avenue, N.E.
Bellevue, WA
1518 6th Avenue
Seattle, WA
Washington, DC
1900 K Street, N.W.
Washington, DC
Wisconsin
595 North Barker Road
Brookfield, WI
Annual Report
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 Advisors
Fidelity International Investment
Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
Brown Brothers Harriman & Co.
Boston, MA
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 graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
SCS-UANN-1206
1.784779.103
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Fidelity®
Value
Fund
Annual Report
October 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results | ||
Board Approval of 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.
Annual Report
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.
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.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity® Value Fund | 19.01% | 15.80% | 12.14% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Value Fund on October 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Russell Midcap® Value Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Richard Fentin, Portfolio Manager of Fidelity® Value Fund
U.S. equity investors had much to feel good about during the 12-month period ending October 31, 2006. On October 3, the Dow Jones Industrial AverageSM closed above its all-time high set back in January 2000. On October 19 - the 19th anniversary of the 1987 stock market crash - the Dow made history again, recording its first close above 12,000. The Dow finished the 12-month period with a gain of 18.47%. The Standard & Poor's 500SM Index and the NASDAQ Composite® Index also did well, returning 16.34% and 12.49%, respectively. There were a number of reasons for the equity market's impressive results, particularly the consistently strong quarterly earnings reported by U.S. corporations. The Federal Reserve Board also played a significant role. Though its inflation fighting efforts caused investors anguish at times, the Board seemed to successfully accomplish its mission of engineering a "soft landing" - where inflation doesn't get too hot and economic growth doesn't get too cold - leading to what Wall Street calls a "Goldilocks economy."
For the 12 months that ended October 31, 2006, the fund returned 19.01% while the Russell Midcap® Value Index gained 20.51%. The fund lagged the index partly due to its underexposure to strong performing real estate investment trusts (REITs). Weak stock selection in the materials sector also hurt performance, including overweighting glass container maker Owens-Illinois, and having only a small position in steelmaker Nucor and not owning paper products giant Georgia-Pacific. Not investing in other strong performing index components Archer-Daniels-Midland, Kerr-McGee and Qwest Communications detracted as well. Some overweighted holdings in health care disappointed. Specifically, Community Health Systems fell on weak business fundamentals, while corporate issues at video game producer Take-Two Interactive hampered returns. The fund's modest cash position also hurt. On the other hand, the portfolio benefited from several out-of-index technology holdings, including disk-drive manufacturers Western Digital and Maxtor, which was acquired by Seagate Technology during the period. An overweighting in Symbol Technologies boosted relative performance when Motorola announced it would acquire the company. Out-of-index engineering and construction leader Fluor worked well, as did overweighted investments in several turnaround stories in retailing, including Ann Taylor, OfficeMax and Big Lots. Lastly, security selection in energy and an underweighting in interest-rate-sensitive utilities stocks provided additional gains relative to the index.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, 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 (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the accompanying table 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.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table 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 shareholder 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.
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.
Beginning | Ending | Expenses Paid | |
Actual | $ 1,000.00 | $ 1,026.10 | $ 3.42 |
Hypothetical (5% return per year before expenses) | $ 1,000.00 | $ 1,021.83 | $ 3.41 |
* Expenses are equal to the Fund's annualized expense ratio of .67%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Annual Report
Investment Changes
Top Ten Stocks as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Baxter International, Inc. | 2.0 | 1.7 |
Xerox Corp. | 1.5 | 1.3 |
Tyco International Ltd. | 1.3 | 1.2 |
Safeway, Inc. | 1.2 | 1.3 |
Symbol Technologies, Inc. | 1.2 | 0.8 |
Avon Products, Inc. | 1.0 | 1.0 |
Agilent Technologies, Inc. | 1.0 | 0.9 |
Flextronics International Ltd. | 1.0 | 0.9 |
Ceridian Corp. | 1.0 | 1.0 |
Fannie Mae | 0.9 | 0.8 |
12.1 | ||
Top Five Market Sectors as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Information Technology | 19.5 | 18.7 |
Consumer Discretionary | 18.6 | 16.1 |
Financials | 14.1 | 12.8 |
Health Care | 12.5 | 12.5 |
Industrials | 8.1 | 9.2 |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2006 * | As of April 30, 2006 ** | ||||||
Stocks 96.7% | Stocks 95.2% | ||||||
Bonds 0.1% | Bonds 0.1% | ||||||
Convertible | Convertible | ||||||
Short-Term | Short-Term | ||||||
* Foreign investments | 9.9% | ** Foreign investments | 10.0% |
Annual Report
Investments October 31, 2006
Showing Percentage of Net Assets
Common Stocks - 96.6% | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - 18.6% | |||
Auto Components - 0.0% | |||
Gentex Corp. | 510,600 | $ 8,124 | |
Automobiles - 0.7% | |||
Harley-Davidson, Inc. (d) | 163,400 | 11,214 | |
Monaco Coach Corp. | 706,800 | 8,439 | |
Nissan Motor Co. Ltd. | 2,913,684 | 34,901 | |
Renault SA | 602,700 | 70,505 | |
125,059 | |||
Diversified Consumer Services - 0.1% | |||
Service Corp. International (SCI) | 1,361,500 | 12,417 | |
Hotels, Restaurants & Leisure - 4.1% | |||
Applebee's International, Inc. | 718,600 | 16,398 | |
Aristocrat Leisure Ltd. | 1,531,500 | 16,516 | |
Boyd Gaming Corp. | 1,020,600 | 40,283 | |
Brinker International, Inc. | 2,306,600 | 107,095 | |
Carnival Corp. unit | 2,910,000 | 142,066 | |
Domino's Pizza, Inc. | 1,233,000 | 33,513 | |
Gaylord Entertainment Co. (a) | 876,032 | 40,771 | |
Harrah's Entertainment, Inc. | 211,735 | 15,738 | |
OSI Restaurant Partners, Inc. (d) | 2,167,920 | 72,127 | |
Rare Hospitality International, Inc. (a) | 759,900 | 23,944 | |
Royal Caribbean Cruises Ltd. | 3,330,520 | 134,886 | |
WMS Industries, Inc. (a) | 1,491,100 | 52,681 | |
696,018 | |||
Household Durables - 3.0% | |||
Ethan Allen Interiors, Inc. | 632,600 | 22,533 | |
Jarden Corp. (a)(d) | 1,595,300 | 57,399 | |
La-Z-Boy, Inc. (d) | 1,618,200 | 19,823 | |
Leggett & Platt, Inc. | 4,626,650 | 108,032 | |
Matsushita Electric Industrial Co. Ltd. | 1,119,000 | 23,275 | |
Newell Rubbermaid, Inc. | 2,220,200 | 63,897 | |
Samson Holding Ltd. | 1,540,000 | 752 | |
Sealy Corp., Inc. | 2,983,300 | 41,975 | |
Sony Corp. sponsored ADR | 371,600 | 15,228 | |
The Stanley Works | 2,476,000 | 117,981 | |
Whirlpool Corp. | 612,000 | 53,201 | |
524,096 | |||
Leisure Equipment & Products - 1.3% | |||
Brunswick Corp. (d) | 2,573,000 | 81,050 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - continued | |||
Leisure Equipment & Products - continued | |||
Eastman Kodak Co. (d) | 5,190,900 | $ 126,658 | |
Polaris Industries, Inc. (d) | 367,800 | 15,749 | |
223,457 | |||
Media - 4.0% | |||
CBS Corp. Class B | 557,987 | 16,148 | |
Clear Channel Communications, Inc. | 2,795,800 | 97,434 | |
E.W. Scripps Co. Class A | 1,216,500 | 60,168 | |
Gannett Co., Inc. | 2,136,000 | 126,323 | |
Lamar Advertising Co. Class A (a) | 591,900 | 34,141 | |
Live Nation, Inc. (a) | 850,962 | 18,091 | |
Omnicom Group, Inc. | 688,400 | 69,838 | |
R.H. Donnelley Corp. | 581,300 | 35,006 | |
The New York Times Co. Class A (d) | 2,499,200 | 60,406 | |
The Reader's Digest Association, Inc. (non-vtg.) | 3,535,971 | 50,847 | |
Tribune Co. (d) | 1,969,600 | 65,647 | |
Viacom, Inc. Class B (non-vtg.) (a) | 1,204,687 | 46,886 | |
680,935 | |||
Multiline Retail - 1.4% | |||
Big Lots, Inc. (a) | 4,374,360 | 92,212 | |
Dollar General Corp. | 1,409,100 | 19,770 | |
Family Dollar Stores, Inc. | 3,952,500 | 116,401 | |
Sears Holdings Corp. (a) | 102,100 | 17,813 | |
246,196 | |||
Specialty Retail - 3.1% | |||
AnnTaylor Stores Corp. (a) | 458,400 | 20,179 | |
AutoNation, Inc. (a) | 837,722 | 16,796 | |
AutoZone, Inc. (a) | 234,000 | 26,208 | |
Best Buy Co., Inc. | 438,700 | 24,238 | |
Gap, Inc. (d) | 5,600,500 | 117,723 | |
Hot Topic, Inc. (a) | 1,658,900 | 16,771 | |
OfficeMax, Inc. | 2,775,400 | 132,054 | |
PETsMART, Inc. | 2,205,000 | 63,460 | |
RadioShack Corp. | 995,400 | 17,758 | |
Tiffany & Co., Inc. | 2,634,800 | 94,115 | |
529,302 | |||
Textiles, Apparel & Luxury Goods - 0.9% | |||
Brown Shoe Co., Inc. | 326,500 | 12,720 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
CONSUMER DISCRETIONARY - continued | |||
Textiles, Apparel & Luxury Goods - continued | |||
Liz Claiborne, Inc. | 2,995,500 | $ 126,320 | |
Warnaco Group, Inc. (a) | 559,780 | 11,890 | |
150,930 | |||
TOTAL CONSUMER DISCRETIONARY | 3,196,534 | ||
CONSUMER STAPLES - 5.5% | |||
Beverages - 0.5% | |||
Coca-Cola Enterprises, Inc. | 937,244 | 18,773 | |
Cott Corp. (a) | 1,977,900 | 28,929 | |
SABMiller PLC | 2,268,500 | 43,877 | |
91,579 | |||
Food & Staples Retailing - 2.1% | |||
Kroger Co. | 2,338,300 | 52,588 | |
Rite Aid Corp. | 2,961,318 | 13,859 | |
Safeway, Inc. | 6,926,556 | 203,364 | |
Sysco Corp. | 2,368,300 | 82,843 | |
352,654 | |||
Food Products - 0.6% | |||
Corn Products International, Inc. | 1,365,000 | 49,399 | |
McCormick & Co., Inc. (non-vtg.) | 240,100 | 8,980 | |
TreeHouse Foods, Inc. (a) | 592,179 | 15,018 | |
Tyson Foods, Inc. Class A | 1,940,400 | 28,039 | |
101,436 | |||
Household Products - 0.6% | |||
Colgate-Palmolive Co. | 1,633,400 | 104,489 | |
Personal Products - 1.1% | |||
Avon Products, Inc. | 5,864,000 | 178,324 | |
Herbalife Ltd. (a) | 265,200 | 9,706 | |
Playtex Products, Inc. (a) | 435,700 | 6,074 | |
194,104 | |||
Tobacco - 0.6% | |||
Altria Group, Inc. | 1,190,600 | 96,831 | |
TOTAL CONSUMER STAPLES | 941,093 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
ENERGY - 7.0% | |||
Energy Equipment & Services - 5.3% | |||
Baker Hughes, Inc. | 927,060 | $ 64,013 | |
Cameron International Corp. (a) | 1,780,800 | 89,218 | |
ENSCO International, Inc. | 1,015,000 | 49,705 | |
FMC Technologies, Inc. (a) | 1,806,100 | 109,179 | |
GlobalSantaFe Corp. | 927,820 | 48,154 | |
Halliburton Co. | 2,512,600 | 81,283 | |
National Oilwell Varco, Inc. (a) | 2,498,970 | 150,938 | |
Noble Corp. | 709,800 | 49,757 | |
Pride International, Inc. (a) | 790,600 | 21,828 | |
Smith International, Inc. | 3,053,700 | 120,560 | |
Transocean, Inc. (a) | 820,900 | 59,548 | |
Weatherford International Ltd. (a) | 1,462,548 | 60,081 | |
904,264 | |||
Oil, Gas & Consumable Fuels - 1.7% | |||
Alpha Natural Resources, Inc. (a) | 306,000 | 4,868 | |
Arch Coal, Inc. | 1,245,900 | 43,146 | |
Cabot Oil & Gas Corp. | 715,500 | 37,857 | |
El Paso Corp. | 2,663,200 | 36,486 | |
EOG Resources, Inc. | 655,000 | 43,577 | |
EXCO Resources, Inc. | 1,201,700 | 17,401 | |
Foundation Coal Holdings, Inc. | 1,368,500 | 50,238 | |
Noble Energy, Inc. | 531,000 | 25,823 | |
Ultra Petroleum Corp. (a) | 612,655 | 32,697 | |
292,093 | |||
TOTAL ENERGY | 1,196,357 | ||
FINANCIALS - 14.0% | |||
Capital Markets - 1.4% | |||
Ameriprise Financial, Inc. | 225,700 | 11,624 | |
Janus Capital Group, Inc. (d) | 1,577,100 | 31,668 | |
Merrill Lynch & Co., Inc. | 1,322,100 | 115,578 | |
State Street Corp. | 617,900 | 39,688 | |
TD Ameritrade Holding Corp. | 1,998,750 | 32,919 | |
231,477 | |||
Commercial Banks - 1.3% | |||
Boston Private Financial Holdings, Inc. | 816,289 | 22,562 | |
National Australia Bank Ltd. | 554,140 | 16,314 | |
Popular, Inc. | 491,500 | 8,940 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
FINANCIALS - continued | |||
Commercial Banks - continued | |||
UCBH Holdings, Inc. | 1,647,400 | $ 28,236 | |
UnionBanCal Corp. | 205,328 | 11,823 | |
Wachovia Corp. | 1,918,867 | 106,497 | |
Zions Bancorp | 275,500 | 22,150 | |
216,522 | |||
Consumer Finance - 0.5% | |||
Capital One Financial Corp. | 1,112,000 | 88,215 | |
Diversified Financial Services - 0.6% | |||
Bank of America Corp. | 905,460 | 48,777 | |
FirstRand Ltd. | 3,076,200 | 8,047 | |
JPMorgan Chase & Co. | 1,089,500 | 51,686 | |
108,510 | |||
Insurance - 3.9% | |||
AFLAC, Inc. | 2,008,620 | 90,227 | |
AMBAC Financial Group, Inc. | 1,221,500 | 101,983 | |
Genworth Financial, Inc. Class A (non-vtg.) | 804,400 | 26,899 | |
Marsh & McLennan Companies, Inc. | 2,070,900 | 60,967 | |
MBIA, Inc. | 1,755,400 | 108,870 | |
MetLife, Inc. | 655,390 | 37,442 | |
Montpelier Re Holdings Ltd. | 435,400 | 7,728 | |
Prudential Financial, Inc. | 708,400 | 54,497 | |
Reinsurance Group of America, Inc. | 356,400 | 20,101 | |
Scottish Re Group Ltd. | 1,138,760 | 13,016 | |
The St. Paul Travelers Companies, Inc. | 1,710,820 | 87,474 | |
Willis Group Holdings Ltd. | 1,577,500 | 59,992 | |
669,196 | |||
Real Estate Investment Trusts - 4.2% | |||
Alexandria Real Estate Equities, Inc. | 425,800 | 42,452 | |
American Financial Realty Trust (SBI) | 1,946,500 | 22,716 | |
Annaly Capital Management, Inc. | 1,006,500 | 13,205 | |
Brandywine Realty Trust (SBI) | 702,800 | 23,445 | |
Developers Diversified Realty Corp. | 948,700 | 57,776 | |
Digital Realty Trust, Inc. | 397,400 | 13,269 | |
Duke Realty Corp. | 951,300 | 38,109 | |
Education Realty Trust, Inc. | 1,052,400 | 16,281 | |
Equity Office Properties Trust | 1,081,100 | 45,947 | |
Equity Residential (SBI) | 1,237,900 | 67,602 | |
General Growth Properties, Inc. | 1,644,450 | 85,347 | |
GMH Communities Trust | 980,700 | 13,700 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
FINANCIALS - continued | |||
Real Estate Investment Trusts - continued | |||
Kimco Realty Corp. | 1,371,600 | $ 60,940 | |
Pennsylvania (REIT) (SBI) | 1,000,600 | 43,126 | |
Public Storage, Inc. | 520,734 | 46,715 | |
United Dominion Realty Trust, Inc. (SBI) | 1,953,200 | 63,225 | |
Vornado Realty Trust | 529,100 | 63,095 | |
716,950 | |||
Thrifts & Mortgage Finance - 2.1% | |||
Countrywide Financial Corp. | 1,791,849 | 68,305 | |
Fannie Mae | 2,730,900 | 161,833 | |
Freddie Mac | 1,558,800 | 107,542 | |
Hudson City Bancorp, Inc. | 1,842,300 | 25,295 | |
362,975 | |||
TOTAL FINANCIALS | 2,393,845 | ||
HEALTH CARE - 12.4% | |||
Biotechnology - 0.7% | |||
Cephalon, Inc. (a)(d) | 1,031,900 | 72,419 | |
MedImmune, Inc. (a) | 741,600 | 23,761 | |
Myogen, Inc. (a) | 308,600 | 16,140 | |
112,320 | |||
Health Care Equipment & Supplies - 3.1% | |||
Baxter International, Inc. | 7,423,482 | 341,261 | |
Becton, Dickinson & Co. | 1,262,560 | 88,417 | |
Boston Scientific Corp. (a) | 484,600 | 7,710 | |
CONMED Corp. (a) | 1,259,867 | 27,956 | |
Dade Behring Holdings, Inc. | 604,168 | 22,010 | |
Wright Medical Group, Inc. (a) | 1,505,200 | 37,193 | |
524,547 | |||
Health Care Providers & Services - 5.9% | |||
AmerisourceBergen Corp. | 964,180 | 45,509 | |
Brookdale Senior Living, Inc. | 734,500 | 35,344 | |
Chemed Corp. | 878,050 | 31,162 | |
Community Health Systems, Inc. (a) | 3,218,000 | 104,424 | |
HCA, Inc. | 1,872,940 | 94,621 | |
Health Net, Inc. (a) | 1,680,900 | 69,774 | |
Laboratory Corp. of America Holdings (a) | 530,300 | 36,320 | |
McKesson Corp. | 2,342,300 | 117,326 | |
Medco Health Solutions, Inc. (a) | 1,365,400 | 73,049 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
HEALTH CARE - continued | |||
Health Care Providers & Services - continued | |||
Omnicare, Inc. | 1,362,900 | $ 51,627 | |
Quest Diagnostics, Inc. | 2,596,820 | 129,166 | |
Triad Hospitals, Inc. (a) | 1,086,750 | 40,242 | |
United Surgical Partners International, Inc. (a) | 2,225,223 | 55,230 | |
UnitedHealth Group, Inc. | 255,000 | 12,439 | |
Universal Health Services, Inc. Class B | 2,306,880 | 122,149 | |
1,018,382 | |||
Life Sciences Tools & Services - 1.4% | |||
Charles River Laboratories International, Inc. (a) | 2,145,900 | 92,102 | |
Fisher Scientific International, Inc. (a) | 749,832 | 64,201 | |
Varian, Inc. (a) | 1,045,315 | 49,015 | |
Waters Corp. (a) | 871,700 | 43,411 | |
248,729 | |||
Pharmaceuticals - 1.3% | |||
Schering-Plough Corp. | 6,610,250 | 146,351 | |
Teva Pharmaceutical Industries Ltd. sponsored ADR | 2,153,000 | 70,984 | |
217,335 | |||
TOTAL HEALTH CARE | 2,121,313 | ||
INDUSTRIALS - 8.1% | |||
Aerospace & Defense - 0.3% | |||
Honeywell International, Inc. | 1,064,100 | 44,820 | |
Airlines - 0.7% | |||
Ryanair Holdings PLC sponsored ADR (a)(d) | 902,400 | 60,298 | |
Southwest Airlines Co. | 1,814,000 | 27,264 | |
TAM SA (PN) sponsored ADR (ltd. vtg.) | 1,050,600 | 32,096 | |
119,658 | |||
Building Products - 1.1% | |||
American Standard Companies, Inc. | 839,800 | 37,195 | |
Goodman Global, Inc. | 815,900 | 13,112 | |
Masco Corp. | 4,987,500 | 137,904 | |
188,211 | |||
Commercial Services & Supplies - 1.1% | |||
Allied Waste Industries, Inc. | 2,241,408 | 27,233 | |
Clean Harbors, Inc. (a) | 336,500 | 14,399 | |
Navigant Consulting, Inc. (a) | 1,681,400 | 29,946 | |
Pike Electric Corp. (a) | 885,300 | 16,334 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INDUSTRIALS - continued | |||
Commercial Services & Supplies - continued | |||
Steelcase, Inc. Class A | 574,900 | $ 9,526 | |
The Brink's Co. | 1,784,400 | 93,663 | |
191,101 | |||
Construction & Engineering - 0.5% | |||
Fluor Corp. | 1,221,262 | 95,784 | |
Industrial Conglomerates - 1.3% | |||
Tyco International Ltd. | 7,441,070 | 218,991 | |
Machinery - 1.5% | |||
Albany International Corp. Class A | 538,339 | 18,094 | |
Briggs & Stratton Corp. | 2,183,600 | 55,660 | |
Deere & Co. | 1,156,900 | 98,487 | |
Mueller Water Products, Inc. Class A (d) | 642,100 | 10,254 | |
SPX Corp. | 920,430 | 52,943 | |
Wabash National Corp. | 1,355,987 | 19,024 | |
254,462 | |||
Road & Rail - 1.4% | |||
Canadian National Railway Co. | 912,100 | 43,466 | |
Con-way, Inc. | 1,492,600 | 70,406 | |
CSX Corp. | 224,500 | 8,008 | |
Laidlaw International, Inc. (e) | 4,311,300 | 125,071 | |
246,951 | |||
Transportation Infrastructure - 0.2% | |||
Macquarie Infrastructure Co. Trust | 1,076,795 | 32,121 | |
TOTAL INDUSTRIALS | 1,392,099 | ||
INFORMATION TECHNOLOGY - 19.5% | |||
Communications Equipment - 1.3% | |||
Alcatel SA sponsored ADR (d) | 3,104,400 | 39,426 | |
Dycom Industries, Inc. (a)(e) | 3,906,100 | 91,051 | |
Lucent Technologies, Inc. (a) | 6,282,100 | 15,266 | |
Motorola, Inc. | 1,963,600 | 45,281 | |
Nortel Networks Corp. (a) | 12,230,100 | 27,273 | |
218,297 | |||
Computers & Peripherals - 3.5% | |||
Brocade Communications Systems, Inc. (a) | 919,200 | 7,455 | |
Diebold, Inc. | 1,684,300 | 73,570 | |
EMC Corp. (a) | 2,450,800 | 30,022 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INFORMATION TECHNOLOGY - continued | |||
Computers & Peripherals - continued | |||
Imation Corp. | 831,526 | $ 38,059 | |
Intermec, Inc. (a) | 1,912,300 | 43,218 | |
Komag, Inc. (a) | 408,100 | 15,610 | |
NCR Corp. (a) | 3,056,700 | 126,914 | |
Seagate Technology | 6,365,531 | 143,734 | |
Sun Microsystems, Inc. (a) | 5,007,400 | 27,190 | |
Western Digital Corp. (a) | 5,112,380 | 93,454 | |
599,226 | |||
Electronic Equipment & Instruments - 5.9% | |||
Agilent Technologies, Inc. (a) | 4,945,300 | 176,053 | |
Arrow Electronics, Inc. (a) | 2,982,200 | 89,019 | |
Avnet, Inc. (a) | 4,350,935 | 103,030 | |
CDW Corp. | 981,300 | 64,442 | |
Celestica, Inc. (sub. vtg.) (a)(e) | 10,562,500 | 103,682 | |
Flextronics International Ltd. (a) | 14,365,600 | 166,641 | |
Ingram Micro, Inc. Class A (a) | 2,418,300 | 49,841 | |
Mettler-Toledo International, Inc. (a) | 391,075 | 26,847 | |
Solectron Corp. (a) | 8,456,600 | 28,245 | |
Symbol Technologies, Inc. (e) | 13,318,100 | 198,839 | |
1,006,639 | |||
Internet Software & Services - 0.3% | |||
Open Text Corp. (a) | 489,900 | 8,906 | |
Yahoo!, Inc. (a) | 1,989,900 | 52,414 | |
61,320 | |||
IT Services - 1.8% | |||
Ceridian Corp. (a)(e) | 7,021,960 | 165,508 | |
Hewitt Associates, Inc. Class A (a)(e) | 3,722,000 | 93,162 | |
Satyam Computer Services Ltd. sponsored ADR | 2,220,000 | 49,084 | |
307,754 | |||
Office Electronics - 1.5% | |||
Xerox Corp. (a) | 15,141,910 | 257,412 | |
Semiconductors & Semiconductor Equipment - 3.7% | |||
AMIS Holdings, Inc. (a) | 2,325,108 | 22,298 | |
Amkor Technology, Inc. (a) | 1,209,000 | 8,354 | |
Applied Materials, Inc. | 5,182,300 | 90,120 | |
ASML Holding NV (NY Shares) (a) | 4,597,500 | 105,007 | |
DSP Group, Inc. (a) | 484,431 | 10,522 | |
Fairchild Semiconductor International, Inc. (a)(e) | 6,205,010 | 99,963 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
INFORMATION TECHNOLOGY - continued | |||
Semiconductors & Semiconductor Equipment - continued | |||
Integrated Device Technology, Inc. (a) | 1,634,000 | $ 25,899 | |
Intersil Corp. Class A | 1,593,200 | 37,361 | |
Maxim Integrated Products, Inc. | 1,624,200 | 48,742 | |
MKS Instruments, Inc. (a) | 1,698,970 | 36,783 | |
National Semiconductor Corp. | 5,073,900 | 123,245 | |
Spansion, Inc. Class A | 1,413,300 | 20,154 | |
628,448 | |||
Software - 1.5% | |||
Fair, Isaac & Co., Inc. | 1,193,821 | 43,730 | |
Hyperion Solutions Corp. (a) | 1,103,322 | 41,264 | |
Parametric Technology Corp. (a) | 918,000 | 17,938 | |
Quest Software, Inc. (a) | 816,700 | 12,030 | |
Symantec Corp. (a) | 4,268,655 | 84,690 | |
Take-Two Interactive Software, Inc. (a) | 1,900,375 | 26,586 | |
THQ, Inc. (a) | 1,221,280 | 36,724 | |
262,962 | |||
TOTAL INFORMATION TECHNOLOGY | 3,342,058 | ||
MATERIALS - 3.7% | |||
Chemicals - 1.7% | |||
Arkema sponsored ADR (a) | 203,900 | 9,869 | |
Ashland, Inc. | 731,720 | 43,245 | |
Celanese Corp. Class A | 2,471,495 | 50,938 | |
Chemtura Corp. | 8,503,931 | 72,964 | |
Cytec Industries, Inc. | 1,776,900 | 98,422 | |
Georgia Gulf Corp. | 421,700 | 9,020 | |
OMNOVA Solutions, Inc. (a) | 747,170 | 3,273 | |
287,731 | |||
Containers & Packaging - 0.8% | |||
Owens-Illinois, Inc. (e) | 8,790,000 | 145,914 | |
Metals & Mining - 1.2% | |||
Alcan, Inc. | 1,409,960 | 66,149 | |
Alcoa, Inc. | 2,410,240 | 69,680 | |
Newmont Mining Corp. | 681,300 | 30,842 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
MATERIALS - continued | |||
Metals & Mining - continued | |||
Oregon Steel Mills, Inc. (a) | 418,143 | $ 22,747 | |
Titanium Metals Corp. (a) | 550,700 | 16,235 | |
205,653 | |||
TOTAL MATERIALS | 639,298 | ||
TELECOMMUNICATION SERVICES - 3.4% | |||
Diversified Telecommunication Services - 2.3% | |||
Alaska Communication Systems Group, Inc. (e) | 2,170,546 | 31,234 | |
AT&T, Inc. | 2,737,000 | 93,742 | |
BellSouth Corp. | 2,219,200 | 100,086 | |
Citizens Communications Co. | 3,278,300 | 48,060 | |
Iowa Telecommunication Services, Inc. | 779,076 | 15,535 | |
NTELOS Holding Corp. | 1,335,300 | 18,734 | |
Verizon Communications, Inc. | 2,086,200 | 77,189 | |
Windstream Corp. | 1,393,526 | 19,119 | |
403,699 | |||
Wireless Telecommunication Services - 1.1% | |||
ALLTEL Corp. | 1,347,800 | 71,851 | |
Dobson Communications Corp. Class A | 4,553,100 | 35,332 | |
MTN Group Ltd. | 568,500 | 5,171 | |
Philippine Long Distance Telephone Co. sponsored ADR (d) | 253,200 | 12,055 | |
Sprint Nextel Corp. | 3,171,300 | 59,272 | |
183,681 | |||
TOTAL TELECOMMUNICATION SERVICES | 587,380 | ||
UTILITIES - 4.4% | |||
Electric Utilities - 2.4% | |||
Allegheny Energy, Inc. (a) | 1,356,500 | 58,370 | |
Edison International | 2,055,280 | 91,337 | |
Entergy Corp. | 848,060 | 72,789 | |
Exelon Corp. | 952,100 | 59,011 | |
FPL Group, Inc. | 1,261,600 | 64,342 | |
PPL Corp. | 2,016,000 | 69,592 | |
415,441 | |||
Gas Utilities - 0.1% | |||
Equitable Resources, Inc. | 346,799 | 14,052 | |
Common Stocks - continued | |||
Shares | Value (Note 1) (000s) | ||
UTILITIES - continued | |||
Independent Power Producers & Energy Traders - 1.3% | |||
AES Corp. (a) | 2,502,500 | $ 55,030 | |
Constellation Energy Group, Inc. | 460,100 | 28,710 | |
NRG Energy, Inc. | 1,369,700 | 65,951 | |
TXU Corp. | 1,175,800 | 74,228 | |
223,919 | |||
Multi-Utilities - 0.6% | |||
CMS Energy Corp. (a) | 2,119,700 | 31,562 | |
Dominion Resources, Inc. | 367,101 | 29,732 | |
Public Service Enterprise Group, Inc. | 634,900 | 38,761 | |
100,055 | |||
TOTAL UTILITIES | 753,467 | ||
TOTAL COMMON STOCKS (Cost $13,831,005) | 16,563,444 | ||
Preferred Stocks - 0.2% | |||
Convertible Preferred Stocks - 0.1% | |||
MATERIALS - 0.1% | |||
Containers & Packaging - 0.1% | |||
Owens-Illinois, Inc. 4.75% | 681,200 | 23,917 | |
Nonconvertible Preferred Stocks - 0.1% | |||
FINANCIALS - 0.1% | |||
Thrifts & Mortgage Finance - 0.1% | |||
Fannie Mae 7.00% | 209,400 | 11,203 | |
TOTAL PREFERRED STOCKS (Cost $42,039) | 35,120 |
Nonconvertible Bonds - 0.1% | ||||
Principal Amount (000s) | ||||
CONSUMER DISCRETIONARY - 0.0% | ||||
Leisure Equipment & Products - 0.0% | ||||
K2, Inc. 7.375% 7/1/14 | $ 80 | 79 | ||
Nonconvertible Bonds - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
HEALTH CARE - 0.1% | ||||
Health Care Providers & Services - 0.1% | ||||
Tenet Healthcare Corp. 6.375% 12/1/11 | $ 15,515 | $ 13,925 | ||
INFORMATION TECHNOLOGY - 0.0% | ||||
Electronic Equipment & Instruments - 0.0% | ||||
Celestica, Inc. 7.875% 7/1/11 | 10,040 | 10,115 | ||
TOTAL NONCONVERTIBLE BONDS (Cost $24,147) | 24,119 |
Money Market Funds - 4.0% | |||
Shares | |||
Fidelity Cash Central Fund, 5.34% (b) | 490,345,660 | 490,346 | |
Fidelity Securities Lending Cash Central Fund, 5.35% (b)(c) | 199,536,500 | 199,537 | |
TOTAL MONEY MARKET FUNDS (Cost $689,883) | 689,883 | ||
TOTAL INVESTMENT PORTFOLIO - 100.9% (Cost $14,587,074) | 17,312,566 | ||
NET OTHER ASSETS - (0.9)% | (159,660) | ||
NET ASSETS - 100% | $ 17,152,906 |
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) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Affiliated company |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 34,286 |
Fidelity Securities Lending Cash Central Fund | 946 |
Total | $ 35,232 |
Other Affiliated Issuers |
An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Fiscal year to date transactions with companies which are or were affiliates are as follows: |
Affiliate | Value, beginning of period | Purchases | Sales Proceeds | Dividend Income | Value, end of period |
Alaska Communication Systems Group, Inc. | $ 7,897 | $ 27,825 | $ 16,823 | $ 997 | $ 31,234 |
Albany International Corp. Class A | 61,599 | - | 40,695 | 305 | - |
Celestica, Inc. (sub. vtg.) | 79,190 | 21,819 | - | - | 103,682 |
Ceridian Corp. | 153,851 | - | - | - | 165,508 |
Dycom Industries, Inc. | 77,183 | 665 | - | - | 91,051 |
Fairchild Semiconductor International, Inc. | 43,813 | 55,507 | - | - | 99,963 |
Hewitt Associates, Inc. Class A | 15,064 | 83,686 | - | - | 93,162 |
Iowa Telecommunication Services, Inc. | 35,230 | - | 26,737 | 3,224 | - |
Laidlaw International, Inc. | 59,158 | 38,257 | - | 2,372 | 125,071 |
NTELOS Holding Corp. | - | 16,919 | - | - | - |
OMNOVA Solutions, Inc. | 10,916 | - | 10,116 | - | - |
Owens-Illinois, Inc. | 81,316 | 79,482 | - | - | 145,914 |
Pier 1 Imports, Inc. | 49,754 | 2,963 | 34,748 | 1,193 | - |
Spartech Corp. | 33,522 | - | 41,527 | 301 | - |
Sports Authority, Inc. | 44,332 | - | 59,317 | - | - |
Symbol Technologies, Inc. | 67,325 | 66,802 | 13,788 | 115 | 198,839 |
THQ, Inc. | 97,923 | - | 77,421 | - | - |
Varian, Inc. | 74,827 | 4,558 | 50,595 | - | - |
Total | $ 992,900 | $ 398,483 | $ 371,767 | $ 8,507 | $ 1,054,424 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | October 31, 2006 | |
Assets | ||
Investment in securities, at value (including securities loaned of $197,182) - See accompanying schedule: Unaffiliated issuers (cost $12,924,906) | $ 15,568,259 | |
Fidelity Central Funds (cost $689,883) | 689,883 | |
Other affiliated issuers (cost $972,285) | 1,054,424 | |
Total Investments (cost $14,587,074) | $ 17,312,566 | |
Receivable for investments sold | 89,628 | |
Receivable for fund shares sold | 25,565 | |
Dividends receivable | 9,705 | |
Interest receivable | 2,765 | |
Other receivables | 363 | |
Total assets | 17,440,592 | |
Liabilities | ||
Payable for investments purchased | $ 64,107 | |
Payable for fund shares redeemed | 13,704 | |
Accrued management fee | 6,470 | |
Other affiliated payables | 3,020 | |
Other payables and accrued expenses | 848 | |
Collateral on securities loaned, at value | 199,537 | |
Total liabilities | 287,686 | |
Net Assets | $ 17,152,906 | |
Net Assets consist of: | ||
Paid in capital | $ 12,901,571 | |
Undistributed net investment income | 106,637 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 1,419,208 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 2,725,490 | |
Net Assets, for 204,646 shares outstanding | $ 17,152,906 | |
Net Asset Value, offering price and redemption price per share ($17,152,906 ÷ 204,646 shares) | $ 83.82 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended October 31, 2006 | |
Investment Income | ||
Dividends (including $8,507 received from other affiliated issuers) | $ 185,258 | |
Interest | 2,076 | |
Income from Fidelity Central Funds | 35,232 | |
Total income | 222,566 | |
Expenses | ||
Management fee | $ 88,123 | |
Performance adjustment | (16,055) | |
Transfer agent fees | 29,705 | |
Accounting and security lending fees | 1,485 | |
Custodian fees and expenses | 294 | |
Independent trustees' compensation | 60 | |
Appreciation in deferred trustee compensation account | 10 | |
Registration fees | 448 | |
Audit | 137 | |
Legal | 217 | |
Miscellaneous | 626 | |
Total expenses before reductions | 105,050 | |
Expense reductions | (1,532) | 103,518 |
Net investment income (loss) | 119,048 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 1,410,755 | |
Other affiliated issuers | 11,898 | |
Foreign currency transactions | (171) | |
Total net realized gain (loss) | 1,422,482 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 1,015,864 | |
Assets and liabilities in foreign currencies | 13 | |
Total change in net unrealized appreciation (depreciation) | 1,015,877 | |
Net gain (loss) | 2,438,359 | |
Net increase (decrease) in net assets resulting from operations | $ 2,557,407 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 119,048 | $ 66,115 |
Net realized gain (loss) | 1,422,482 | 985,829 |
Change in net unrealized appreciation (depreciation) | 1,015,877 | 467,396 |
Net increase (decrease) in net assets resulting | 2,557,407 | 1,519,340 |
Distributions to shareholders from net investment income | (74,656) | (21,476) |
Distributions to shareholders from net realized gain | (892,814) | (497,964) |
Total distributions | (967,470) | (519,440) |
Share transactions | 4,909,502 | 4,888,658 |
Reinvestment of distributions | 938,674 | 502,873 |
Cost of shares redeemed | (3,325,363) | (2,253,711) |
Net increase (decrease) in net assets resulting from share transactions | 2,522,813 | 3,137,820 |
Total increase (decrease) in net assets | 4,112,750 | 4,137,720 |
Net Assets | ||
Beginning of period | 13,040,156 | 8,902,436 |
End of period (including undistributed net investment income of $106,637 and undistributed net investment income of $63,523, respectively) | $ 17,152,906 | $ 13,040,156 |
Other Information Shares | ||
Sold | 61,904 | 66,494 |
Issued in reinvestment of distributions | 12,395 | 7,187 |
Redeemed | (42,118) | (30,784) |
Net increase (decrease) | 32,181 | 42,897 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended October 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 75.61 | $ 68.71 | $ 57.91 | $ 44.71 | $ 46.64 |
Income from Investment Operations | |||||
Net investment income (loss) B | .61 | .43 | .24 | .33 | .52 |
Net realized and unrealized gain (loss) | 13.17 | 10.34 | 10.84 | 13.23 | (1.94) |
Total from investment | 13.78 | 10.77 | 11.08 | 13.56 | (1.42) |
Distributions from net investment income | (.43) | (.16) | (.23) | (.36) | (.51) |
Distributions from net realized gain | (5.14) | (3.71) | (.05) | - | - |
Total distributions | (5.57) | (3.87) | (.28) | (.36) | (.51) |
Net asset value, end of period | $ 83.82 | $ 75.61 | $ 68.71 | $ 57.91 | $ 44.71 |
Total Return A | 19.01% | 16.13% | 19.21% | 30.52% | (3.18)% |
Ratios to Average Net Assets C, E | |||||
Expenses before | .67% | .73% | .95% | 1.00% | .97% |
Expenses net of fee | .67% | .73% | .95% | 1.00% | .97% |
Expenses net of all | .66% | .72% | .93% | .98% | .95% |
Net investment | .76% | .58% | .37% | .66% | 1.02% |
Supplemental Data | |||||
Net assets, end of period (in millions) | $ 17,153 | $ 13,040 | $ 8,902 | $ 6,328 | $ 4,984 |
Portfolio turnover rate D | 36% | 29% | 40% | 40% | 42% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expense of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E 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. 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.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2006
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Value Fund (the Fund) is a fund of Fidelity Capital Trust (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 Fidelity 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 Fidelity 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 the Fidelity 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 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.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
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 Fidelity Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. 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 distributions or capital gain distributions. Interest income distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
1. Significant Accounting Policies - continued
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), Independent Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.
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 distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim 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 short-term capital gains, foreign currency transactions, market discount, deferred trustees compensation, and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 3,267,618 |
Unrealized depreciation | (539,412) |
Net unrealized appreciation (depreciation) | 2,728,206 |
Undistributed ordinary income | 92,123 |
Undistributed long-term capital gain | 1,259,247 |
Cost for federal income tax purposes | $ 14,584,360 |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
October 31, 2006 | October 31, 2005 | |
Ordinary Income | $ 118,081 | $ 89,930 |
Long-term Capital Gains | 849,389 | 429,510 |
Total | $ 967,470 | $ 519,440 |
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48), was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets, results of operations and financial statement disclosures.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
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. Upon settlement date, 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.
Annual Report
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $7,196,072 and $5,407,329, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management 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 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. In addition, the management fee is subject to a performance adjustment (up to a maximum of ± .20% of the Fund's average net assets over a 36 month performance period). The upward or downward adjustment to the management fee is based on the Fund's relative investment performance as compared to an appropriate benchmark index. For the period, the total annual management fee rate, including the performance adjustment, was .46% 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 rate of .19% of average net assets.
Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Investments in Fidelity Central Funds. The Fund may invest in Fidelity Central Funds. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request. In addition, the financial statements of the Fidelity Central Funds, 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.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
4. Fees and Other Transactions with Affiliates - continued
Investments in Fidelity Central Funds - continued
The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
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 $52 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 shareholder 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, which amounts to $42 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Net income from lending portfolio securities during the period amounted to $946.
Annual Report
7. 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 $969 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 $33 and $530, respectively.
8. 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.
The United States Securities and Exchange Commission ("SEC") is conducting an investigation of FMR (covering the years 2002 to 2004) arising from gifts, gratuities and business entertainment provided by certain brokers to certain individuals who were employed on FMR's domestic equity trading desk during that period. FMR is in discussions with the SEC staff regarding the possible resolution of the matter, but as of period-end no final resolution has been reached.
In December 2006, the Independent Trustees completed their own investigation of the matter with the assistance of independent counsel. The Independent Trustees and FMR agree that, despite the absence of proof that the Fidelity mutual funds experienced diminished execution quality as a result of the improper receipt of gifts and business entertainment, the conduct at issue was serious and is worthy of redress. Accordingly, the Independent Trustees have requested and FMR has agreed to pay $42 million to Fidelity mutual funds, plus interest to be determined at the time that payment is made. A method of allocating this payment among the funds has not yet been determined. In addition, FMR has agreed to reimburse related legal expenses. The total payment to the Fund is not anticipated to have a material impact on the Fund's net assets.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Capital Trust and the Shareholders of Fidelity Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Value Fund (a fund of Fidelity Capital Trust) at October 31, 2006, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Value Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 21, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 348 funds advised by FMR or an affiliate. Mr. McCoy oversees 350 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1978 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Value Fund (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as Vice Chairman (2006-present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. | |
Marie L. Knowles (60) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach is Chairman of the Independent Trustees (2006-present). Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Sony Corporation (2006-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (73) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
James H. Keyes (66) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Capital Trust. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Capital Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Value Fund. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
Bruce T. Herring (41) | |
Year of Election or Appointment: 2006 Vice President of Value Fund. Mr. Herring also serves as Vice President of certain Equity Funds (2006-present). Mr. Herring is Senior Vice President of FMR (2006-present) and Vice President of FMR Co., Inc. (2001-present). Previously, Mr. Herring served as a portfolio manager for Fidelity U.S. Equity Funds (2001-2005). | |
Richard B. Fentin (51) | |
Year of Election or Appointment: 1996 Vice President of Value Fund. Mr. Fentin serves as Vice President of other funds advised by FMR. Prior to his current responsibilities, Mr. Fentin worked as a research analyst, portfolio assistant and manager. Mr. Fentin also serves as Senior Vice President of FMR and FMR Co., Inc. (2001). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Value Fund. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (47) | |
Year of Election or Appointment: 2003 Assistant Secretary of Value Fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (48) | |
Year of Election or Appointment: 2004 President and Treasurer of Value Fund. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Value Fund. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Value Fund. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Value Fund. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Value Fund. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Value Fund. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (37) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Value Fund. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Value Fund. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (60) | |
Year of Election or Appointment: 1986 Assistant Treasurer of Value Fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Value Fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Value Fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (48) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Value Fund. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Value Fund. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The Board of Trustees of Fidelity Value Fund voted to pay on December 4, 2006, to shareholders of record at the opening of business on December 01, 2006, a distribution of $6.09 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.56 per share from net investment income.
The fund hereby designates as a capital gain dividend with respect to the taxable year ended October 31, 2006 $1,283,829,757, or, if subsequently determined to be different, the net capital gain of such year.
The fund designates 29% of the dividends distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.
The fund designates 98% of the dividends distributed during the fiscal year as an amount which may be taken into account as a dividend for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on September 20, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
Dennis J. Dirks | ||
Affirmative | 18,984,087,768.24 | 96.277 |
Withheld | 734,128,039.90 | 3.723 |
TOTAL | 19,718,215,808.14 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 18,972,066,364.22 | 96.216 |
Withheld | 746,149,443.92 | 3.784 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert M. Gates | ||
Affirmative | 18,939,072,824.91 | 96.049 |
Withheld | 779,142,983.23 | 3.951 |
TOTAL | 19,718,215,808.14 | 100.000 |
George H. Heilmeier | ||
Affirmative | 18,924,535,963.81 | 95.975 |
Withheld | 793,679,844.33 | 4.025 |
TOTAL | 19,718,215,808.14 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 18,871,094,149.22 | 95.704 |
Withheld | 847,121,658.92 | 4.296 |
TOTAL | 19,718,215,808.14 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 18,962,549,074.38 | 96.168 |
Withheld | 755,666,733.76 | 3.832 |
TOTAL | 19,718,215,808.14 | 100.000 |
James H. KeyesB | ||
Affirmative | 18,951,323,897.48 | 96.111 |
Withheld | 766,891,910.66 | 3.889 |
TOTAL | 19,718,215,808.14 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 18,948,733,631.68 | 96.098 |
Withheld | 769,482,176.46 | 3.902 |
TOTAL | 19,718,215,808.14 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 18,955,192,662.21 | 96.130 |
Withheld | 763,023,145.93 | 3.870 |
TOTAL | 19,718,215,808.14 | 100.000 |
William O. McCoy | ||
Affirmative | 18,901,077,394.54 | 95.856 |
Withheld | 817,138,413.60 | 4.144 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 18,956,972,615.07 | 96.139 |
Withheld | 761,243,193.07 | 3.861 |
TOTAL | 19,718,215,808.14 | 100.000 |
Cornelia M. Small | ||
Affirmative | 18,967,158,466.26 | 96.191 |
Withheld | 751,057,341.88 | 3.809 |
TOTAL | 19,718,215,808.14 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 18,918,672,661.66 | 95.945 |
Withheld | 799,543,146.48 | 4.055 |
TOTAL | 19,718,215,808.14 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 18,959,278,859.57 | 96.151 |
Withheld | 758,936,948.57 | 3.849 |
TOTAL | 19,718,215,808.14 | 100.000 |
A Denotes trust-wide proposal and voting results. B Effective on or about January 1, 2007. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Value Fund
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance, as well as the fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the fund.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Value Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the first quartile for all the periods shown. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the peer group includes funds with different investment mandates (some broader, some narrower) than the fund. For example, the peer group includes funds that are not limited to a particular investment style, funds that focus on growth-oriented stocks, and funds that (like the fund) focus their investments on value-oriented securities. The Board also stated that the relative investment performance of the fund compared favorably to its benchmark for the one- and five-year periods, although the fund's three-year cumulative total return was lower than its benchmark. The Board also reviewed the fund's relative investment performance against a peer group defined by Morningstar.
The Board also considered that the fund's management fee is subject to upward or downward adjustment depending upon whether, and to what extent, the fund's investment performance for the performance period exceeds, or is exceeded by, the record (over the same period) of a Board-approved performance adjustment index. The Board realizes that the performance adjustment provides FMR with a strong economic incentive to seek to achieve superior performance for the fund's shareholders and helps to more closely align the interests of FMR and the fund's shareholders.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Annual Report
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps, and without giving effect to the fund's performance adjustment. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 9% means that 91% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked and the impact of the fund's performance adjustment, is also included in the chart and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Value Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. The Board also noted the effect of the fund's negative performance adjustment on the fund's management fee ranking. The Board noted that the performance adjustment for each year represents calculations for rolling 36-month periods that differ from the periods shown in the performance charts above.
Furthermore, the Board considered that shareholders approved a prospective change in the index used to calculate the fund's performance adjustment, beginning December 1, 2002. The Board also considered that, because the performance adjustment is based on a rolling 36-month measurement period, during a transition period the fund's performance is compared to a blended index return that reflects the performance of the former index for the portion of the measurement period prior to December 1, 2002 and the performance of the current index for the remainder of the measurement period. The Board noted that the fund's performance adjustments for 2002 through 2005 shown in the chart above reflect the effect of using the blended index return to calculate the fund's performance adjustment.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of the fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses, as well as the fund's negative performance adjustment. As part of its review, the Board also considered current and historical total expenses of the fund compared to competitive fund median expenses. The fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
Annual Report
The Board noted that the fund's total expenses ranked below its competitive median for 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Based on its review, the Board concluded that the fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered 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. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
Mellon Bank, N.A.
Pittsburgh, PA
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 graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
VAL-UANN-1206
1.784783.103
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Fidelity®
Focused Stock
Fund
Annual Report
October 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results | ||
Board Approval of 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.
Annual Report
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.
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.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2006 | Past 1 | Past 5 | Life of |
Fidelity® Focused Stock Fund | 8.72% | 3.35% | 5.23% |
A From November 12, 1996.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Focused Stock Fund on November 12, 1996, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the Standard & Poor's 500SM Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Robert Haber, Portfolio Manager of Fidelity® Focused Stock Fund
U.S. equity investors had much to feel good about during the 12-month period ending October 31, 2006. On October 3, the Dow Jones Industrial AverageSM closed above its all-time high set back in January 2000. On October 19 - the 19th anniversary of the 1987 stock market crash - the Dow made history again, recording its first close above 12,000. The Dow finished the 12-month period with a gain of 18.47%. The Standard & Poor's 500SM Index and the NASDAQ Composite® Index also did well, returning 16.34% and 12.49%, respectively. There were a number of reasons for the equity market's impressive results, particularly the consistently strong quarterly earnings reported by U.S. corporations. The Federal Reserve Board also played a significant role. Though its inflation fighting efforts caused investors anguish at times, the Board seemed to successfully accomplish its mission of engineering a "soft landing" - where inflation doesn't get too hot and economic growth doesn't get too cold - leading to what Wall Street calls a "Goldilocks economy."
Fidelity Focused Stock Fund was up 8.72% for the 12-month period ending October 31, 2006, significantly behind the return for the S&P 500®. The fund's strategy of holding smaller-cap stocks helped performance during the first half of the period, but hurt it in the second half when the market began favoring larger-cap stocks. Poor stock selection - notably in antivirus software and services company McAfee and Endo Pharmaceuticals - also tempered performance. The fund was further hurt by staying with some previously strong performing companies for too long, specifically health care holdings Aetna and UnitedHealth Group. Another drag on performance came from oil refiner Valero in the energy sector, along with weak results in the banking group and a lack of exposure to brokerage stocks, which fared well. Poor stock selection in the consumer staples sector also detracted. Conversely, good stock picking in capital goods, retailing and materials benefited the fund. In terms of individual contributors, technology hardware and equipment company Hewlett-Packard, construction equipment maker Terex, retailer JCPenney and telecommunications company Qwest Communications all did well. The fund did not hold some of the stocks mentioned above at period end.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual 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 (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the accompanying table 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.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table 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 shareholder 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.
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.
Beginning | Ending | Expenses Paid | |
Actual | $ 1,000.00 | $ 988.80 | $ 5.01 |
Hypothetical (5% return per year before expenses) | $ 1,000.00 | $ 1,020.16 | $ 5.09 |
* Expenses are equal to the Fund's annualized expense ratio of 1.00%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Annual Report
Investment Changes
Top Ten Stocks as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Hewlett-Packard Co. | 4.9 | 4.9 |
ACE Ltd. | 4.3 | 0.8 |
McKesson Corp. | 4.2 | 0.0 |
W.R. Berkley Corp. | 4.2 | 2.9 |
TXU Corp. | 4.2 | 3.7 |
Tesoro Corp. | 4.1 | 3.9 |
Terex Corp. | 3.9 | 0.0 |
Loews Corp. - Carolina Group | 3.9 | 0.0 |
Archer-Daniels-Midland Co. | 3.8 | 0.0 |
Radian Group, Inc. | 3.7 | 4.1 |
41.2 | ||
Top Five Market Sectors as of October 31, 2006 | ||
% of fund's | % of fund's net assets | |
Financials | 22.0 | 21.1 |
Health Care | 14.8 | 8.6 |
Information Technology | 10.9 | 18.6 |
Industrials | 10.6 | 10.9 |
Consumer Staples | 10.3 | 9.2 |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2006 * | As of April 30, 2006 ** | ||||||
Stocks 95.0% | Stocks 98.6% | ||||||
Short-Term | Short-Term | ||||||
* Foreign investments | 4.3% | ** Foreign investments | 1.7% |
Annual Report
Investments October 31, 2006
Showing Percentage of Net Assets
Common Stocks - 95.0% | |||
Shares | Value (Note 1) | ||
CONSUMER DISCRETIONARY - 7.4% | |||
Multiline Retail - 0.6% | |||
Family Dollar Stores, Inc. | 18,800 | $ 553,660 | |
Specialty Retail - 5.3% | |||
OfficeMax, Inc. | 59,300 | 2,821,494 | |
The Men's Wearhouse, Inc. | 48,100 | 1,916,785 | |
4,738,279 | |||
Textiles, Apparel & Luxury Goods - 1.5% | |||
Brown Shoe Co., Inc. | 9,400 | 366,224 | |
Skechers U.S.A., Inc. Class A (sub. vtg.) (a) | 5,100 | 152,439 | |
Wolverine World Wide, Inc. | 28,100 | 796,916 | |
1,315,579 | |||
TOTAL CONSUMER DISCRETIONARY | 6,607,518 | ||
CONSUMER STAPLES - 10.3% | |||
Food & Staples Retailing - 2.6% | |||
Kroger Co. | 102,200 | 2,298,478 | |
Food Products - 3.8% | |||
Archer-Daniels-Midland Co. | 88,400 | 3,403,400 | |
Tobacco - 3.9% | |||
Loews Corp. - Carolina Group | 60,400 | 3,492,328 | |
TOTAL CONSUMER STAPLES | 9,194,206 | ||
ENERGY - 9.7% | |||
Oil, Gas & Consumable Fuels - 9.7% | |||
Exxon Mobil Corp. | 17,900 | 1,278,418 | |
Frontier Oil Corp. | 103,900 | 3,054,660 | |
Holly Corp. | 12,500 | 594,500 | |
Tesoro Corp. | 57,090 | 3,650,335 | |
8,577,913 | |||
FINANCIALS - 22.0% | |||
Capital Markets - 0.5% | |||
Morgan Stanley | 6,000 | 458,580 | |
Diversified Financial Services - 2.7% | |||
JPMorgan Chase & Co. | 51,500 | 2,443,160 | |
Insurance - 14.0% | |||
ACE Ltd. | 66,500 | 3,807,125 | |
AMBAC Financial Group, Inc. | 6,900 | 576,081 | |
Assurant, Inc. | 6,300 | 331,758 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
FINANCIALS - continued | |||
Insurance - continued | |||
Delphi Financial Group, Inc. Class A | 35,200 | $ 1,381,600 | |
Reinsurance Group of America, Inc. | 10,900 | 614,760 | |
The Chubb Corp. | 27,600 | 1,466,940 | |
Tower Group, Inc. | 15,300 | 540,855 | |
W.R. Berkley Corp. | 100,100 | 3,689,686 | |
12,408,805 | |||
Real Estate Management & Development - 1.1% | |||
Jones Lang LaSalle, Inc. | 10,700 | 984,400 | |
Thrifts & Mortgage Finance - 3.7% | |||
Radian Group, Inc. | 61,100 | 3,256,630 | |
TOTAL FINANCIALS | 19,551,575 | ||
HEALTH CARE - 14.8% | |||
Biotechnology - 2.5% | |||
Gilead Sciences, Inc. (a) | 32,200 | 2,218,580 | |
Health Care Equipment & Supplies - 2.2% | |||
Immucor, Inc. (a) | 55,600 | 1,530,668 | |
Mentor Corp. | 10,100 | 472,680 | |
2,003,348 | |||
Health Care Providers & Services - 6.5% | |||
Humana, Inc. (a) | 34,400 | 2,064,000 | |
McKesson Corp. | 73,700 | 3,691,633 | |
5,755,633 | |||
Pharmaceuticals - 3.6% | |||
Endo Pharmaceuticals Holdings, Inc. (a) | 112,400 | 3,207,896 | |
TOTAL HEALTH CARE | 13,185,457 | ||
INDUSTRIALS - 10.6% | |||
Aerospace & Defense - 3.4% | |||
Orbital Sciences Corp. (a) | 12,900 | 234,264 | |
Raytheon Co. | 54,700 | 2,732,265 | |
2,966,529 | |||
Industrial Conglomerates - 1.1% | |||
General Electric Co. | 27,500 | 965,525 | |
Machinery - 6.1% | |||
AGCO Corp. (a) | 47,800 | 1,278,650 | |
Deere & Co. | 4,900 | 417,137 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
INDUSTRIALS - continued | |||
Machinery - continued | |||
Terex Corp. (a) | 67,800 | $ 3,509,328 | |
Valmont Industries, Inc. | 4,300 | 239,940 | |
5,445,055 | |||
TOTAL INDUSTRIALS | 9,377,109 | ||
INFORMATION TECHNOLOGY - 10.9% | |||
Communications Equipment - 1.7% | |||
Arris Group, Inc. (a) | 33,200 | 444,880 | |
Motorola, Inc. | 31,100 | 717,166 | |
Polycom, Inc. (a) | 14,100 | 386,340 | |
1,548,386 | |||
Computers & Peripherals - 4.9% | |||
Hewlett-Packard Co. | 112,400 | 4,354,376 | |
Internet Software & Services - 2.1% | |||
Digital River, Inc. (a) | 4,300 | 248,755 | |
RealNetworks, Inc. (a) | 149,400 | 1,640,412 | |
1,889,167 | |||
Semiconductors & Semiconductor Equipment - 2.2% | |||
Atmel Corp. (a) | 333,400 | 1,917,050 | |
TOTAL INFORMATION TECHNOLOGY | 9,708,979 | ||
MATERIALS - 2.4% | |||
Chemicals - 0.4% | |||
Monsanto Co. | 8,800 | 389,136 | |
Metals & Mining - 2.0% | |||
Chaparral Steel Co. | 42,900 | 1,784,211 | |
TOTAL MATERIALS | 2,173,347 | ||
TELECOMMUNICATION SERVICES - 2.6% | |||
Diversified Telecommunication Services - 2.6% | |||
Qwest Communications International, Inc. (a) | 264,014 | 2,278,441 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
UTILITIES - 4.3% | |||
Independent Power Producers & Energy Traders - 4.3% | |||
AES Corp. (a) | 4,400 | $ 96,756 | |
TXU Corp. | 58,440 | 3,689,317 | |
3,786,073 | |||
TOTAL COMMON STOCKS (Cost $76,236,834) | 84,440,618 | ||
Money Market Funds - 3.5% | |||
Fidelity Cash Central Fund, 5.34% (b) | 3,154,262 | 3,154,262 | |
TOTAL INVESTMENT PORTFOLIO - 98.5% (Cost $79,391,096) | 87,594,880 | ||
NET OTHER ASSETS - 1.5% | 1,313,039 | ||
NET ASSETS - 100% | $ 88,907,919 |
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. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 178,533 |
Fidelity Securities Lending Cash Central Fund | 4,926 |
Total | $ 183,459 |
Income Tax Information |
At October 31, 2006, the fund had a capital loss carryforward of approximately $2,805,868 all of which will expire on October 31, 2011. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2006 | ||
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $76,236,834) | $ 84,440,618 | |
Fidelity Central Funds (cost $3,154,262) | 3,154,262 | |
Total Investments (cost $79,391,096) | $ 87,594,880 | |
Receivable for investments sold | 3,431,282 | |
Receivable for fund shares sold | 55,598 | |
Dividends receivable | 15,104 | |
Interest receivable | 24,639 | |
Receivable from investment adviser for expense reductions | 19,050 | |
Other receivables | 489 | |
Total assets | 91,141,042 | |
Liabilities | ||
Payable for investments purchased | $ 1,552,341 | |
Payable for fund shares redeemed | 557,228 | |
Accrued management fee | 55,447 | |
Other affiliated payables | 25,836 | |
Other payables and accrued expenses | 42,271 | |
Total liabilities | 2,233,123 | |
Net Assets | $ 88,907,919 | |
Net Assets consist of: | ||
Paid in capital | $ 83,523,072 | |
Accumulated undistributed net realized gain (loss) on investments | (2,818,937) | |
Net unrealized appreciation (depreciation) on investments | 8,203,784 | |
Net Assets, for 7,214,768 shares outstanding | $ 88,907,919 | |
Net Asset Value, offering price and redemption price per share ($88,907,919 ÷ 7,214,768 shares) | $ 12.32 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Year ended October 31, 2006 | ||
Investment Income | ||
Dividends | $ 917,301 | |
Special dividends | 123,413 | |
Interest | 6,383 | |
Income from Fidelity Central Funds | 183,459 | |
Total income | 1,230,556 | |
Expenses | ||
Management fee | $ 637,635 | |
Performance adjustment | 124,244 | |
Transfer agent fees | 312,433 | |
Accounting and security lending fees | 42,884 | |
Custodian fees and expenses | 9,972 | |
Independent trustees' compensation | 443 | |
Registration fees | 31,109 | |
Audit | 45,084 | |
Legal | 2,606 | |
Miscellaneous | 8,088 | |
Total expenses before reductions | 1,214,498 | |
Expense reductions | (113,055) | 1,101,443 |
Net investment income (loss) | 129,113 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 9,189,826 | |
Futures contracts | 164,834 | |
Total net realized gain (loss) | 9,354,660 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 77,296 | |
Futures contracts | (35,815) | |
Total change in net unrealized appreciation (depreciation) | 41,481 | |
Net gain (loss) | 9,396,141 | |
Net increase (decrease) in net assets resulting from operations | $ 9,525,254 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 129,113 | $ 288,186 |
Net realized gain (loss) | 9,354,660 | 6,995,947 |
Change in net unrealized appreciation (depreciation) | 41,481 | 5,083,659 |
Net increase (decrease) in net assets resulting | 9,525,254 | 12,367,792 |
Distributions to shareholders from net investment income | (442,449) | (128,489) |
Share transactions | 73,306,748 | 97,160,584 |
Reinvestment of distributions | 418,321 | 122,574 |
Cost of shares redeemed | (104,162,373) | (38,158,401) |
Net increase (decrease) in net assets resulting from share transactions | (30,437,304) | 59,124,757 |
Redemption fees | 7,379 | 17,708 |
Total increase (decrease) in net assets | (21,347,120) | 71,381,768 |
Net Assets | ||
Beginning of period | 110,255,039 | 38,873,271 |
End of period (including undistributed net investment income of $0, and undistributed net investment income of $159,778, respectively) | $ 88,907,919 | $ 110,255,039 |
Other Information Shares | ||
Sold | 6,079,658 | 8,970,777 |
Issued in reinvestment of distributions | 35,006 | 12,482 |
Redeemed | (8,598,018) | (3,538,668) |
Net increase (decrease) | (2,483,354) | 5,444,591 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended October 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, | $ 11.37 | $ 9.14 | $ 8.29 | $ 7.26 | $ 10.54 |
Income from Investment Operations | |||||
Net investment income (loss) B | .01 E | .04 F | - H | .02 | (.07) |
Net realized and unrealized gain (loss) | .98 | 2.22 | .87 | 1.01 | (3.21) |
Total from investment operations | .99 | 2.26 | .87 | 1.03 | (3.28) |
Distributions from net investment income | (.04) | (.03) | (.02) | - | - |
Redemption fees added to paid in capital B, H | - | - | - | - | - |
Net asset value, end of period | $ 12.32 | $ 11.37 | $ 9.14 | $ 8.29 | $ 7.26 |
Total Return A | 8.72% | 24.78% | 10.51% | 14.19% | (31.12)% |
Ratios to Average Net Assets C, G | |||||
Expenses before reductions | 1.08% | 1.01% | 1.07% | 1.08% | 1.33% |
Expenses net of fee waivers, | 1.00% | 1.01% | 1.07% | 1.08% | 1.33% |
Expenses net of all reductions | .98% | .98% | 1.02% | 1.03% | 1.20% |
Net investment income (loss) | .12% E | .40% F | .01% | .20% | (.71)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 88,908 | $ 110,255 | $ 38,873 | $ 33,581 | $ 33,214 |
Portfolio turnover rate D | 202% | 158% | 201% | 199% | 256% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expense of any underlying Fidelity Central Funds.
D Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
E Investment income per share reflects a special dividend which amounted to $.01 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .01%.
F Investment income per share reflects an in-kind dividend received in a corporate reorganization which amounted to $.02 per share. Excluding this dividend, the ratio of net investment income to average net assets would have been .24%.
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. 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.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2006
1. Significant Accounting Policies.
Fidelity Focused Stock Fund (the Fund) is a fund of Fidelity Capital Trust (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 Fidelity 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 Fidelity 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. Investments in open-end mutual funds, including the Fidelity 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 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.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions, including the Fund's investment activity in the Fidelity Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. 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. Large, non-recurring dividends recognized by the Fund are presented separately on the Statement of Operations as "Special Dividends" and the impact of these dividends is presented in the Financial Highlights. Interest income distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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.
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.
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 futures transactions, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 9,197,218 | |
Unrealized depreciation | (1,006,504) | |
Net unrealized appreciation (depreciation) | 8,190,714 | |
Capital loss carryforward | (2,805,868) | |
Cost for federal income tax purposes | $ 79,404,166 |
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
October 31, 2006 | October 31, 2005 | |
Ordinary Income | $ 442,449 | $ 128,489 |
Short-Term Trading (Redemption) Fees. During the period, shares held in the Fund less than 30 days were 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. On July 20, 2006, the Board of Trustees approved the removal of the redemption fee beginning July 24, 2006 for shares redeemed from accounts held directly with Fidelity, and on or before September 1, 2006 for shares redeemed through intermediaries.
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48), was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets, results of operations and financial statement disclosures.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
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. Upon settlement date, 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
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Repurchase Agreements - continued
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.
Futures Contracts. The Fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $217,905,744 and $246,284,893, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management 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 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. In addition, the management fee is subject to a performance adjustment (up to a maximum of ± .20% of the Fund's average net assets over a 36 month performance period). The upward or downward adjustment to the management fee is based on the Fund's relative investment performance as compared to an appropriate benchmark index. For the period, the total annual management fee rate, including the performance adjustment, was .68% of the Fund's average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the Fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .28% of average net assets.
Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Investments in Fidelity Central Funds. The Fund may invest in Fidelity Central Funds. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request. In addition, the financial statements of the Fidelity Central Funds, 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 Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
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 $11,375 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 shareholder 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, which amounts to $319 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. At period end, there were no security loans outstanding. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Net income from lending portfolio securities during the period amounted to $4,926.
7. Expense Reductions.
FMR voluntarily agreed to reimburse the Fund to the extent annual operating expenses exceeded 1.00% of average net assets. Some expenses, for example interest expense, including commitment fees, are excluded from this reimbursement. During the period, this reimbursement reduced the Fund's expenses by $91,497.
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 $20,307 for the period. In addition, through arrangements with the Fund's 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 transfer agent expenses by $1,251.
8. 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.
Annual Report
8. Other - continued
The United States Securities and Exchange Commission ("SEC") is conducting an investigation of FMR (covering the years 2002 to 2004) arising from gifts, gratuities and business entertainment provided by certain brokers to certain individuals who were employed on FMR's domestic equity trading desk during that period. FMR is in discussions with the SEC staff regarding the possible resolution of the matter, but as of period-end no final resolution has been reached.
In December 2006, the Independent Trustees completed their own investigation of the matter with the assistance of independent counsel. The Independent Trustees and FMR agree that, despite the absence of proof that the Fidelity mutual funds experienced diminished execution quality as a result of the improper receipt of gifts and business entertainment, the conduct at issue was serious and is worthy of redress. Accordingly, the Independent Trustees have requested and FMR has agreed to pay $42 million to Fidelity mutual funds, plus interest to be determined at the time that payment is made. A method of allocating this payment among the funds has not yet been determined. In addition, FMR has agreed to reimburse related legal expenses. The total payment to the Fund is not anticipated to have a material impact on the Fund's net assets.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Capital Trust and the Shareholders of Fidelity Focused Stock Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Focused Stock Fund (a fund of Fidelity Capital Trust) at October 31, 2006, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Focused Stock Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 21, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 348 funds advised by FMR or an affiliate. Mr. McCoy oversees 350 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1978 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Focused Stock (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005- present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as Vice Chairman (2006-present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. | |
Marie L. Knowles (60) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach is Chairman of the Independent Trustees (2006-present). Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Sony Corporation (2006-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (73) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
James H. Keyes (66) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Capital Trust. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Capital Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Focused Stock. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
Robert J. Haber (48) | |
Year of Election or Appointment: 2004 Mr. Haber is Vice President of Focused Stock. Prior to assuming his current responsibilities, Mr. Haber worked as a research analyst, manager, Senior Vice President, and Chief Investment Officer of Fidelity Investments Canada. Mr. Haber also serves as Vice President of FMR and FMR Co., Inc. (2006). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Focused Stock. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (47) | |
Year of Election or Appointment: 2003 Assistant Secretary of Focused Stock. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (48) | |
Year of Election or Appointment: 2004 President and Treasurer of Focused Stock. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Focused Stock. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Focused Stock. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Focused Stock. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Focused Stock. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Focused Stock. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (37) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Focused Stock. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Focused Stock. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (60) | |
Year of Election or Appointment: 1996 Assistant Treasurer of Focused Stock. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Focused Stock. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Focused Stock. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (48) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Focused Stock. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Focused Stock. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The fund designates 100% of the dividend distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.
The fund designates 100% of the dividends distributed in December during the fiscal year as amounts which may be taken into account as a dividend for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on September 20, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 18,984,087,768.24 | 96.277 |
Withheld | 734,128,039.90 | 3.723 |
TOTAL | 19,718,215,808.14 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 18,972,066,364.22 | 96.216 |
Withheld | 746,149,443.92 | 3.784 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert M. Gates | ||
Affirmative | 18,939,072,824.91 | 96.049 |
Withheld | 779,142,983.23 | 3.951 |
TOTAL | 19,718,215,808.14 | 100.000 |
George H. Heilmeier | ||
Affirmative | 18,924,535,963.81 | 95.975 |
Withheld | 793,679,844.33 | 4.025 |
TOTAL | 19,718,215,808.14 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 18,871,094,149.22 | 95.704 |
Withheld | 847,121,658.92 | 4.296 |
TOTAL | 19,718,215,808.14 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 18,962,549,074.38 | 96.168 |
Withheld | 755,666,733.76 | 3.832 |
TOTAL | 19,718,215,808.14 | 100.000 |
James H. KeyesB | ||
Affirmative | 18,951,323,897.48 | 96.111 |
Withheld | 766,891,910.66 | 3.889 |
TOTAL | 19,718,215,808.14 | 100.000 |
Marie L. Knowles | ||
Affirmative | 18,948,733,631.68 | 96.098 |
Withheld | 769,482,176.46 | 3.902 |
TOTAL | 19,718,215,808.14 | 100.000 |
# of | % of | |
Ned C. Lautenbach | ||
Affirmative | 18,955,192,662.21 | 96.130 |
Withheld | 763,023,145.93 | 3.870 |
TOTAL | 19,718,215,808.14 | 100.000 |
William O. McCoy | ||
Affirmative | 18,901,077,394.54 | 95.856 |
Withheld | 817,138,413.60 | 4.144 |
TOTAL | 19,718,215,808.14 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 18,956,972,615.07 | 96.139 |
Withheld | 761,243,193.07 | 3.861 |
TOTAL | 19,718,215,808.14 | 100.000 |
Cornelia M. Small | ||
Affirmative | 18,967,158,466.26 | 96.191 |
Withheld | 751,057,341.88 | 3.809 |
TOTAL | 19,718,215,808.14 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 18,918,672,661.66 | 95.945 |
Withheld | 799,543,146.48 | 4.055 |
TOTAL | 19,718,215,808.14 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 18,959,278,859.57 | 96.151 |
Withheld | 758,936,948.57 | 3.849 |
TOTAL | 19,718,215,808.14 | 100.000 |
A Denotes trust-wide proposal and voting results. B Effective on or about January 1, 2007. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Focused Stock Fund
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance, as well as the fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the fund.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Focused Stock Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the first quartile for the one- and three-year periods and the third quartile for the five-year period. The Board also stated that the relative investment performance of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board also reviewed the fund's relative investment performance against a customized peer group based on a combination of categories defined by Morningstar.
The Board also considered that the fund's management fee is subject to upward or downward adjustment depending upon whether, and to what extent, the fund's investment performance for the performance period exceeds, or is exceeded by, the record (over the same period) of a Board-approved performance adjustment index. The Board realizes that the performance adjustment provides FMR with a strong economic incentive to seek to achieve superior performance for the fund's shareholders and helps to more closely align the interests of FMR and the fund's shareholders.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Annual Report
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps, and without giving effect to the fund's performance adjustment. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 9% means that 91% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked and the impact of the fund's performance adjustment, is also included in the chart and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Focused Stock Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. The Board noted that the performance adjustment for each year represents calculations for rolling 36-month periods that differ from the periods shown in the performance charts above.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of the fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses, as well as the fund's performance adjustment. As part of its review, the Board also considered current and historical total expenses of the fund compared to competitive fund median expenses. The fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the fund's total expenses ranked below its competitive median for 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Based on its review, the Board concluded that the fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered 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. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
(phone_graphic)
Fidelity Automated
Service Telephone (FAST®)
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
* 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.
Annual Report
To Write Fidelity
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
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
(letter_graphic)
For Retirement
Accounts
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
Annual Report
Investment Adviser
Fidelity Management &
Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company (formerly Fidelity Management & Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
JPMorgan Chase Bank
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 graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
TQG-UANN-1206
1.784778.103
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Item 2. Code of Ethics
As of the end of the period, October 31, 2006, Fidelity Capital Trust (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the trust has determined that Marie L. Knowles is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Ms. Knowles is independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees.
For the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Audit Fees billed by PricewaterhouseCoopers LLP (PwC) for professional services rendered for the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, for Fidelity Capital Appreciation Fund, Fidelity Disciplined Equity Fund, Fidelity Focused Stock Fund and Fidelity Value Fund (the funds) and for all funds in the Fidelity Group of Funds are shown in the table below.
Fund | 2006A | 2005A |
Fidelity Capital Appreciation Fund | $82,000 | $75,000 |
Fidelity Disciplined Equity Fund | $71,000 | $65,000 |
Fidelity Focused Stock Fund | $39,000 | $35,000 |
Fidelity Value Fund | $101,000 | $86,000 |
All funds in the Fidelity Group of Funds audited by PwC | $13,400,000 | $11,900,000 |
A | Aggregate amounts may reflect rounding. |
For the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Audit Fees billed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte Entities") for professional services rendered for the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, for Fidelity Small Cap Independence Fund and Fidelity Stock Selector (the funds) and for all funds in the Fidelity Group of Funds are shown in the table below.
Fund | 2006A | 2005A |
Fidelity Small Cap Independence Fund | $39,000 | $34,000 |
Fidelity Stock Selector | $44,000 | $39,000 |
All funds in the Fidelity Group of Funds audited by Deloitte Entities | $6,500,000 | $5,400,000 |
A | Aggregate amounts may reflect rounding. |
(b) Audit-Related Fees.
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Audit-Related Fees billed by PwC for services rendered for assurance and related services to each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Fund | 2006A | 2005 A |
Fidelity Capital Appreciation Fund | $0 | $0 |
Fidelity Disciplined Equity Fund | $0 | $0 |
Fidelity Focused Stock Fund | $0 | $0 |
Fidelity Value Fund | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Audit-Related Fees billed by Deloitte Entities for services rendered for assurance and related services to each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Fund | 2006A | 2005 A |
Fidelity Small Cap Independence Fund | $0 | $0 |
Fidelity Stock Selector | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Audit-Related Fees that were billed by PwC and Deloitte Entities that were required to be approved by the Audit Committee for services rendered on behalf of Fidelity Management & Research Company (FMR) and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the funds ("Fund Service Providers") for assurance and related services that relate directly to the operations and financial reporting of each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Billed By | 2006 A | 2005A |
PwC | $0 | $0 |
Deloitte Entities | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
Fees included in the audit-related category comprise assurance and related services (e.g., due diligence services) that are traditionally performed by the independent registered public accounting firm. These audit-related services include due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
(c) Tax Fees.
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Tax Fees billed by PwC for professional services rendered for tax compliance, tax advice, and tax planning for each fund is shown in the table below.
Fund | 2006A | 2005A |
Fidelity Capital Appreciation Fund | $3,600 | $3,400 |
Fidelity Disciplined Equity Fund | $2,700 | $2,500 |
Fidelity Focused Stock Fund | $2,700 | $2,500 |
Fidelity Value Fund | $3,600 | $3,400 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Tax Fees billed by Deloitte Entities for professional services rendered for tax compliance, tax advice, and tax planning for each fund is shown in the table below.
Fund | 2006A | 2005A |
Fidelity Small Cap Independence Fund | $4,000 | $3,900 |
Fidelity Stock Selector | $4,000 | $3,800 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Tax Fees billed by PwC and Deloitte Entities that were required to be approved by the Audit Committee for professional services rendered on behalf of the Fund Service Providers for tax compliance, tax advice, and tax planning that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2006A | 2005A |
PwC | $0 | $0 |
Deloitte Entities | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
Fees included in the Tax Fees category comprise all services performed by professional staff in the independent registered public accounting firm's tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
(d) All Other Fees.
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Other Fees billed by PwC for all other non-audit services rendered to the funds is shown in the table below.
Fund | 2006A | 2005A |
Fidelity Capital Appreciation Fund | $6,700 | $7,100 |
Fidelity Disciplined Equity Fund | $5,900 | $5,900 |
Fidelity Focused Stock Fund | $1,300 | $1,400 |
Fidelity Value Fund | $12,300 | $11,100 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Other Fees billed by Deloitte Entities for all other non-audit services rendered to the funds is shown in the table below.
Fund | 2006A | 2005A |
Fidelity Small Cap Independence Fund | $0 | $0 |
Fidelity Stock Selector | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate Other Fees billed by PwC and Deloitte Entities that were required to be approved by the Audit Committee for all other non-audit services rendered on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2006A | 2005A |
PwC | $20,000 | $420,000 |
Deloitte Entities | $255,000 | $210,000 |
A | Aggregate amounts may reflect rounding. |
Fees included in the All Other Fees category include services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the fund.
(e) (1) | Audit Committee Pre-Approval Policies and Procedures: |
The trust's Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust's Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity Fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund (Covered Service) are subject to approval by the Audit Committee before such service is provided. Non-audit services provided by a fund audit firm for a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund (Non-Covered Service) but that are expected to exceed $50,000 are also subject to pre-approval by the Audit Committee.
All Covered Services, as well as Non-Covered Services that are expected to exceed $50,000, must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair's absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee. Neither pre-approval nor advance notice of Non-Covered Service engagements for which fees are not expected to exceed $50,000 is required; such engagements are to be reported to the Audit Committee monthly.
(e) (2) | Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: |
Audit-Related Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended October 31, 2006 and October 31, 2005 on behalf of each fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended October 31, 2006 and October 31, 2005 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
Tax Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended October 31, 2006 and October 31, 2005 on behalf of each fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended October 31, 2006 and October 31, 2005 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended October 31, 2006 and October 31, 2005 on behalf of each fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended October 31, 2006 and October 31, 2005 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
(f) Not applicable.
(g) For the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate fees billed by PwC of $760,000A and $1,650,000A,B for non-audit services rendered on behalf of the funds, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and Fund Service Providers relating to Covered Services and Non-Covered Services are shown in the table below.
2006A | 2005A | |
Covered Services | $60,000 | $450,000 |
Non-Covered Services | $700,000 | $1,200,000B |
A | Aggregate amounts may reflect rounding. |
B | Reflects current period presentation. |
For the fiscal years ended October 31, 2006 and October 31, 2005, the aggregate fees billed by Deloitte Entities of $795,000A and $560,000A,B for non-audit services rendered on behalf of the fund, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and Fund Service Providers relating to Covered Services and Non-Covered Services are shown in the table below.
2006A | 2005A | |
Covered Services | $265,000 | $250,000 |
Non-Covered Services | $530,000 | $310,000 B |
A | Aggregate amounts may reflect rounding. |
B | Reflects current period presentation. |
(h) The trust's Audit Committee has considered Non-Covered Services that were not pre-approved that were provided by PwC and Deloitte Entities to Fund Service Providers to be compatible with maintaining the independence of PwC and Deloitte Entities in their audit of the funds, taking into account representations from PwC and Deloitte Entities, in accordance with Independence Standards Board Standard No.1, regarding their independence from the funds and their related entities.
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 trust's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust's 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 trust 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 trust'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 trust's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(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 Capital Trust
By: | /s/Christine Reynolds |
Christine Reynolds | |
President and Treasurer | |
Date: | December 22, 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: | December 22, 2006 |
By: | /s/Joseph B. Hollis |
Joseph B. Hollis | |
Chief Financial Officer | |
Date: | December 22, 2006 |