(2_FIDELITY_LOGOS)FIDELITY
VALUE
FUND
ANNUAL REPORT
OCTOBER 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to the financial statements.
REPORT OF INDEPENDENT 30 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 31
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first 10
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in both the stock and bond markets so far
this year. In 1995, both stock and bond markets posted strong results,
while the year before, stocks posted below-average returns and bonds had
one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term. You also can help to manage some of the risks of investing
through diversification. A stock fund is already diversified because it
invests in many issues. You can diversify even further by placing some of
your money in several different types of stock funds or in other investment
categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in share price, plus reinvestment of any dividends
(or income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Value 19.44% 127.43% 239.52%
S&P 500(registered trademark) 24.10% 106.02% 292.91%
Capital Appreciation Funds 17.31% 91.67% 227.86%
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one, five, or 10 years. For example, if
you invested $1,000 in a fund that had a 5% return over the past year, the
value of your investment would be $1,050. You can compare the fund's
returns to the performance of the Standard & Poor's 500 Index - a widely
recognized, unmanaged index of common stocks. To measure how the fund's
performance stacked up against its peers, you can compare it to the capital
appreciation funds average, which reflects the performance of 184 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past 12 months. Both benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Value 19.44% 17.86% 13.00%
S&P 500 24.10% 15.55% 14.63%
Capital Appreciation Funds Average 17.31% 13.36% 11.73%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961031 19961111 093559 S00000000000001
Value SP Standard & Poor 500
00039 SP001
1986/10/31 10000.00 10000.00
1986/11/30 9882.97 10243.00
1986/12/31 9424.88 9981.80
1987/01/31 10073.86 11326.35
1987/02/28 10487.34 11773.74
1987/03/31 10554.16 12114.00
1987/04/30 10382.93 12006.19
1987/05/31 10637.70 12110.64
1987/06/30 10992.70 12722.23
1987/07/31 11886.49 13367.25
1987/08/31 11669.31 13865.85
1987/09/30 11727.78 13562.18
1987/10/31 8774.95 10640.89
1987/11/30 8115.05 9764.08
1987/12/31 8616.24 10507.13
1988/01/31 8942.01 10949.48
1988/02/29 9768.97 11459.72
1988/03/31 9706.32 11105.62
1988/04/30 9681.26 11228.89
1988/05/31 9660.38 11326.58
1988/06/30 10069.68 11846.47
1988/07/31 10111.45 11801.45
1988/08/31 9998.68 11400.21
1988/09/30 10725.40 11885.85
1988/10/31 11351.89 12216.28
1988/11/30 10875.76 12041.59
1988/12/31 11119.00 12252.32
1989/01/31 11557.13 13149.19
1989/02/28 11293.40 12821.77
1989/03/31 11774.06 13120.52
1989/04/30 12420.61 13801.47
1989/05/31 12820.46 14360.43
1989/06/30 13190.52 14278.58
1989/07/31 14419.82 15567.93
1989/08/31 14475.12 15873.06
1989/09/30 14202.89 15807.99
1989/10/31 13254.33 15441.24
1989/11/30 13577.60 15756.24
1989/12/31 13670.26 16134.39
1990/01/31 12434.80 15051.77
1990/02/28 12505.53 15245.94
1990/03/31 12783.74 15649.96
1990/04/30 12675.29 15258.71
1990/05/31 13495.79 16746.43
1990/06/30 13085.54 16632.56
1990/07/31 12962.93 16579.33
1990/08/31 11826.50 15080.56
1990/09/30 11387.95 14346.14
1990/10/31 11133.32 14284.45
1990/11/30 11637.87 15207.23
1990/12/31 11917.47 15631.51
1991/01/31 12550.43 16313.04
1991/02/28 13307.01 17479.42
1991/03/31 13569.10 17902.43
1991/04/30 13747.12 17945.39
1991/05/31 14513.60 18720.63
1991/06/30 13841.07 17863.23
1991/07/31 14518.54 18695.65
1991/08/31 14869.64 19138.74
1991/09/30 14755.90 18819.12
1991/10/31 14928.98 19071.30
1991/11/30 14078.43 18302.73
1991/12/31 15039.32 20396.56
1992/01/31 15661.29 20017.18
1992/02/29 16273.06 20277.41
1992/03/31 16135.41 19882.00
1992/04/30 16589.14 20466.53
1992/05/31 16757.37 20566.81
1992/06/30 16538.16 20260.37
1992/07/31 17063.26 21089.02
1992/08/31 16665.61 20656.69
1992/09/30 16961.30 20900.44
1992/10/31 17032.67 20973.59
1992/11/30 17782.09 21688.79
1992/12/31 18220.20 21955.56
1993/01/31 18720.16 22139.99
1993/02/28 18818.09 22441.10
1993/03/31 19740.69 22914.60
1993/04/30 19848.93 22360.07
1993/05/31 20261.27 22959.32
1993/06/30 20261.27 23025.90
1993/07/31 20694.23 22933.80
1993/08/31 21415.82 23802.99
1993/09/30 21405.51 23619.71
1993/10/31 22049.79 24108.63
1993/11/30 21601.37 23879.60
1993/12/31 22399.38 24168.54
1994/01/31 23563.06 24990.27
1994/02/28 23351.48 24313.04
1994/03/31 22432.79 23252.99
1994/04/30 22950.60 23550.63
1994/05/31 23284.67 23936.86
1994/06/30 23262.40 23350.41
1994/07/31 23986.21 24116.30
1994/08/31 24838.09 25105.07
1994/09/30 24476.18 24489.99
1994/10/31 24893.77 25041.02
1994/11/30 23774.64 24129.02
1994/12/31 24108.17 24486.86
1995/01/31 23830.52 25121.80
1995/02/28 24545.32 26100.80
1995/03/31 25260.12 26871.03
1995/04/30 25833.14 27662.38
1995/05/31 26406.15 28768.05
1995/06/30 26713.34 29436.33
1995/07/31 27770.77 30412.44
1995/08/31 28083.86 30488.78
1995/09/30 29023.14 31775.40
1995/10/31 28426.49 31661.96
1995/11/30 29690.68 33051.92
1995/12/31 30649.17 33688.50
1996/01/31 31476.53 34835.26
1996/02/29 31581.49 35158.18
1996/03/31 32371.80 35496.76
1996/04/30 33223.85 36019.98
1996/05/31 33674.57 36948.93
1996/06/30 33384.38 37089.71
1996/07/31 31686.45 35451.09
1996/08/31 32847.22 36198.75
1996/09/30 33686.92 38236.02
1996/10/31 33946.24 39290.56
IMATRL PRASUN SHR__CHT 19961031 19961111 093602 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Value Fund on October 31, 1986. As the chart shows, by October
31, 1996, the value of the investment would have grown to $33,952 - a
239.52% increase on the initial investment. For comparison, look at how the
S&P 500 did over the same period. With dividends reinvested, the same
$10,000 investment would have grown to $39,291 - a 292.91% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Paced by the robust performance
of blue chip stocks, the U.S. stock
market posted strong gains for the
year that ended October 31, 1996.
The Standard & Poor's 500 Index
returned 24.10% during the period
- - well above its long-term
average of about 12%. The stock
market spent much of the past
year breaking price and trading
volume records. Solid corporate
earnings reports, large cash
inflows into mutual funds,
widespread optimism and a
generally favorable interest rate
environment propelled share prices
higher. Large capitalization stocks
thrived as investors sought their
lower volatility and higher degree of
liquidity over smaller cap stocks in
an environment where it was
sometimes difficult to discern the
health of the economy. The Dow
Jones Industrial Average closed
above 6000 for the first time in
October. While short-term
confusion over the direction of
interest rates created a volatile
backdrop in the summer months,
stocks rallied again when the
Federal Reserve Board left
short-term interest rates unchanged
and it appeared inflation would not
be an issue for the remainder of
1996. Smaller-company stocks
posted strong gains at the
beginning of 1996, but trended
downward in the spring and summer
because their earnings tend to be
more affected by the higher
borrowing costs brought on by
higher rates. When interest rate
fears subsided, these stocks
rebounded, only to fade toward the
end of the period due to earnings
concerns and a general flight to
quality.
An interview with Richard Fentin, Portfolio Manager of Fidelity
Value Fund
Q. RICH, HOW HAS THE FUND PERFORMED?
A. It has done well. For the 12 months ending October 31, 1996, the fund
had a total return of 19.44%, beating the 17.31% return of the capital
appreciation funds average tracked by Lipper Analytical Services.
Q. WHAT HELPED THE FUND BEAT THE AVERAGE?
A. The fund's performance was helped by two main factors. First, earlier in
the year, the fund held investments in some of the very
large-capitalization, blue chip stocks that have led the market not only
this year, but over the past few years. Second, energy and retail stocks
generally performed well during the past year, and the fund held
significant stakes in those two sectors.
Q. LET'S TALK ABOUT THE ENERGY SECTOR. WHAT HAS DRIVEN ITS POSITIVE
PERFORMANCE?
A. First of all, the sector was selling very cheaply about 18 months ago.
It was out of favor in the market, but its overall business prospects went
from bad to good. The fund's investments in Schlumberger, Baker Hughes and
BJ Services have benefited from an outsourcing trend in the sector, as well
as new-product-driven revenue growth and fixed-cost structures that really
helped the companies increase their earnings.
Q. AND RETAIL?
A. Retail has performed generally well, although these stocks struggled in
September and October over concerns about the upcoming holiday buying
season. The key in this sector - where the fund owns such stocks as
Wal-Mart and Dayton Hudson - has been a dramatic reduction in capacity, or
retail space. Previously, there were too many stores for too few customers.
In addition, companies have planned their inventories better this year, so
that they've been able to sustain better profit margins.
Q. THE FUND ALSO HAS A SOLID STAKE IN DURABLES, BASIC INDUSTRIES AND
INDUSTRIAL MACHINERY STOCKS, ALL OF WHICH FALL INTO THE BROAD CATEGORY OF
CYCLICAL STOCKS - THOSE THAT RISE AND FALL WITH THE ECONOMY. WHAT'S BEEN
YOUR STRATEGY THERE?
A. Cyclical stocks remained attractive to me given the current environment
of moderate economic growth. My strategy in the cyclical area turns on two
factors - the stocks have to be cheap, and there has to be good news
regarding a company's business prospects. I don't like to buy cyclical
company stocks when a company's business has already improved. As a result
of this strategy, when I buy stocks for the fund, they often don't see
price improvements over the short-term. Instead, it may take up to 18
months for the market to appreciate a stock's story. In the meantime, these
investments can experience some short-term difficulties. For example,
Browning-Ferris suffered over the period because of some internal problems
as well as economic factors, such as a drop in the price of recycled paper
fiber. Safety Kleen, Nalco Chemical and Betz Dearborn are other cyclical
stocks in the fund that have had a rough go of it. These are quality
companies selling at cheap stock valuations, whose business prospects I
believed would improve.
Q. WHAT'S YOUR OUTLOOK?
A. It's pretty positive. Economies around the world are experiencing
moderate growth, the pricing environment is benign for companies, unit
sales are growing, interest rates are low and inflation is under control.
Up to this point, there has been some uncertainty about the strength of the
economy, as well as about the 1996 elections in the U.S., Japan and Russia.
As a result, investors sought comfort in the very large-capitalization,
blue chip stocks that tend to post solid earnings growth regardless of the
economic backdrop. These are the stocks that have paced the market for most
of the past two to three years. On the other hand, companies perceived to
have some sort of problem have seen share price declines, leading to a real
divergence in the market. If we experience a period of certainty - moderate
economic growth, low inflation, steady or declining interest rates and
political stability - it's quite possible the market will start to look
beyond the limited number of stocks that have posted the lion's share of
price gains in the recent past. If the world's economies show some
acceleration, that would be even better for stocks outside of the limited
group that has led the market. Value Fund should benefit if the market
shows greater breadth, because I've chosen cheap stocks of companies that
appear to have attractive business prospects outside that limited sphere.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to increase the value
of the fund's shares by
investing in companies that
own valuable assets or are
undervalued in the
marketplace
FUND NUMBER: 039
TRADING SYMBOL: FDVLX
START DATE: December 1,
1978
SIZE: as of October 31, 1996,
more than $6.9 billion
MANAGER: Richard Fentin,
since March 1996; manager,
Fidelity Puritan Fund, 1987-
March 1996; Fidelity Value
Fund, April 1992-December
1992; Fidelity Growth
Company Fund, 1983-1987;
joined Fidelity in 1980
(checkmark)
RICH FENTIN ON LOOKING FOR
VALUE IN AN EXPENSIVE
MARKET:
"If you look at any one of a
number of measures, the U.S.
stock market is selling at
historically high valuations.
Pursuing my investment
approach - looking for
cheap stocks - can be
tougher when the market is
this expensive. As a result, I
don't judge a stock's value
relative to the market, but
instead relative to its own
history or historical
profitability. I have an idea of
what a stock's historical
valuation range is. In a cheap
market, I'd be willing to pay a
bit more for the stock,
because the stock might be
buoyed by an upward move in
the overall market. In an
expensive market, however,
I'll buy stocks selling lower in
their historical range and pay
much more attention to the
difference between a stock's
potential upside and its
possible downside."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF OCTOBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Wal-Mart Stores, Inc. 2.1 1.6
Burlington Resources, Inc. 1.7 1.1
Deluxe Corp. 1.7 1.3
American Standard Companies, 1.6 1.2
Inc.
Sunbeam-Oster, Inc. 1.6 0.9
AMP, Inc. 1.5 1.2
Unifi, Inc. 1.5 1.3
Baker Hughes, Inc. 1.5 1.2
Nalco Chemical Co. 1.4 0.9
Browning-Ferris Industries, Inc. 1.4 1.2
TOP FIVE MARKET SECTORS AS OF OCTOBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Durables 14.5 12.1
Energy 12.2 10.8
Basic Industries 11.8 12.1
Retail & Wholesale 11.6 10.5
Industrial Machinery & Equipment 9.1 8.6
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF OCTOBER 31, 1996 * AS OF APRIL 30, 1996 **
Stocks 95.2%
Bonds 0.0%
Short-term
investments 4.8%
FOREIGN
INVESTMENTS 10.2%
Stocks 91.6%
Bonds 0.0%
Short-term
investments 8.4%
FOREIGN
INVESTMENTS 9.5%
Row: 1, Col: 1, Value: 4.8
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 47.6
Row: 1, Col: 4, Value: 47.6
Row: 1, Col: 1, Value: 8.4
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 46.6
Row: 1, Col: 4, Value: 45.0
*
**
INVESTMENTS OCTOBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 94.7%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.1%
AEROSPACE & DEFENSE - 0.9%
Harsco Corp. 956,400 $ 61,090
Rockwell International Corp. 35,000 1,925
63,015
DEFENSE ELECTRONICS - 0.2%
Litton Industries, Inc. (a) 321,400 14,423
TOTAL AEROSPACE & DEFENSE 77,438
BASIC INDUSTRIES - 11.8%
CHEMICALS & PLASTICS - 7.9%
Betz Dearborn, Inc. 1,144,300 60,076
Cabot Corp. 224,600 5,418
du Pont (E.I.) de Nemours & Co. 450,000 41,737
Ferro Corp. 613,700 16,570
Geon Co. 77,600 1,523
Grace (WR) & Co. 179,900 9,535
Great Lakes Chemical Corp. 1,100,080 57,342
IMC Fertilizer Group, Inc. 766,000 28,725
Lawter International, Inc. 1,050,600 12,344
Monsanto Co. 1,254,000 49,690
Morton International, Inc. 10,000 394
Nalco Chemical Co. 2,764,900 100,573
Praxair, Inc. 1,327,000 58,720
Raychem Corp. 8,100 633
Schulman (A.), Inc. 1,482,400 31,316
Sekisui Chemical Co. Ltd. 821,000 9,144
Union Carbide Corp. 1,654,700 70,531
554,271
IRON & STEEL - 1.2%
Armco, Inc. (a) 1,830,400 6,864
Inland Steel Industries, Inc. 1,610,600 25,971
Nucor Corp. 196,500 9,309
TriMas Corp. 1,651,000 37,973
USX-U.S. Steel Group 90,000 2,453
82,570
METALS & MINING - 1.9%
Alcan Aluminium Ltd. 661,579 21,749
Aluminum Co. of America 1,128,800 66,176
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
METALS & MINING - CONTINUED
Pechiney SA Class A 988,697 $ 42,353
Ryerson Tull, Inc. Class A (a) (c) 316,700 4,038
134,316
PACKAGING & CONTAINERS - 0.4%
Caradon PLC 4,490,700 17,645
Crown Cork & Seal Co., Inc. 190,700 9,153
Tupperware Corp. 28,200 1,449
28,247
PAPER & FOREST PRODUCTS - 0.4%
Chesapeake Corp. 35,500 1,003
Fort Howard Corp. (a) 937,000 24,010
Glatfelter (P.H.) Co. 187,300 3,559
28,572
TOTAL BASIC INDUSTRIES 827,976
CONGLOMERATES - 1.8%
AlliedSignal, Inc. 400 26
American Standard Companies, Inc. (a) 3,011,700 113,315
GenCorp, Inc. 314,500 5,189
Whitman Corp. 401,600 9,739
128,269
CONSTRUCTION & REAL ESTATE - 2.5%
BUILDING MATERIALS - 1.3%
Lilly Industrial Coatings, Inc. Class A 238,500 4,293
Masco Corp. 2,699,800 84,706
88,999
CONSTRUCTION - 0.5%
Daiwa House Industry Co. Ltd. 1,323,000 18,333
McDermott (J. Ray) SA 627,800 17,029
35,362
ENGINEERING - 0.7%
EG & G, Inc. (c) 3,015,100 53,141
TOTAL CONSTRUCTION & REAL ESTATE 177,502
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 14.3%
AUTOS, TIRES, & ACCESSORIES - 4.4%
Arvin Industries, Inc. 108,400 $ 2,480
Bandag, Inc. 210,600 10,003
Borg-Warner Automotive, Inc. 158,900 6,098
Cummins Engine Co., Inc. 1,326,100 55,199
Danaher Corp. 3,400 139
Eaton Corp. 340,800 20,363
Federal Signal Co. 203,100 5,230
Genuine Parts Co. 108,300 4,738
Johnson Controls, Inc. 308,600 22,528
Michelin SA (Compagnie Generale des Etablissements) Class B 202,041 9,719
Navistar International Corp. (a) 20,000 185
PACCAR, Inc. 274,900 15,326
SPX Corp. 706,600 20,050
Scania AB:
Class A 761,100 20,405
Class B 948,500 25,429
Snap-on Tools Corp. 1,590,900 51,108
Volvo AB Class B 1,928,000 39,975
308,975
CONSUMER DURABLES - 0.4%
Minnesota Mining & Manufacturing Co. 308,500 23,639
CONSUMER ELECTRONICS - 3.8%
Black & Decker Corp. 731,400 27,336
Electrolux AB 400,000 22,238
Newell Co. 1,376,800 39,067
Sunbeam-Oster, Inc. (c) 4,567,700 112,480
Whirlpool Corp. 1,319,200 62,332
263,453
HOME FURNISHINGS - 0.7%
Heilig-Meyers Co. (c) 3,907,700 50,800
TEXTILES & APPAREL - 5.0%
Burlington Industries, Inc. (a) 1,150,600 13,088
Fruit of the Loom, Inc. Class A (a) 2,397,000 87,191
Intimate Brands, Inc. Class A (c) 2,695,100 48,849
Reebok International Ltd. 385,300 13,774
Russell Corp. 1,396,100 39,614
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - CONTINUED
Stride Rite Corp. 1,875,600 $ 15,474
Unifi, Inc. (c) 3,394,800 105,663
Westpoint Stevens, Inc. Class A (a) 1,136,300 30,254
353,907
TOTAL DURABLES 1,000,774
ENERGY - 12.2%
COAL - 0.2%
MAPCO, Inc. 340,000 10,583
ENERGY SERVICES - 4.9%
BJ Services Co. (a) 659,986 29,617
Baker Hughes, Inc. 2,865,200 102,073
Eni Spa 2,200,000 10,510
Helmerich & Payne, Inc. 10,000 541
McDermott International, Inc. 10,000 177
Schlumberger Ltd. 945,100 93,683
Varco International, Inc. (a) 172,000 3,397
Weatherford Enterra, Inc. (a) 1,454,847 42,191
Western Atlas, Inc. (a) 910,500 63,166
345,355
OIL & GAS - 7.1%
Amerada Hess Corp. 1,509,200 83,572
British Petroleum PLC ADR 670,040 86,184
Burlington Resources, Inc. 2,400,000 120,900
Coastal Corp. (The) 1,593,400 68,516
Occidental Petroleum Corp. 2,947,600 72,216
Parker & Parsley Petroleum Co. 9,500 273
Royal Dutch Petroleum Co. ADR 201,100 33,257
Total SA Class B 420,000 32,779
USX-Marathon Group 85,600 1,872
499,569
TOTAL ENERGY 855,507
FINANCE - 4.0%
CREDIT & OTHER FINANCE - 1.6%
American Express Co. 2,004,203 94,197
Associates First Capital Corp. 10,000 434
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Beneficial Corp. 12,350 $ 722
Mercury Finance Co. 1,187,100 13,652
109,005
INSURANCE - 2.2%
Aetna, Inc. 655,100 43,810
Allstate Corp. 303,300 17,023
Berkley (W.R.) Corp. 297,300 15,460
General Re Corp. 217,000 31,953
Loews Corp. 10,000 826
MBIA, Inc. 84,700 7,507
PMI Group, Inc. 429,500 24,535
Terra Nova (Bermuda) Holdings Ltd. 656,000 13,940
155,054
SECURITIES INDUSTRY - 0.2%
Lehman Brothers Holdings, Inc. 643,200 16,160
TOTAL FINANCE 280,219
HEALTH - 2.8%
DRUGS & PHARMACEUTICALS - 0.8%
Bristol-Myers Squibb Co. 33,000 3,490
Pharmacia & Upjohn, Inc. 370,000 13,320
Sigma Aldrich Corp. 84,300 4,952
Takeda Chemical Industries Ltd. 1,179,000 20,163
Yamanouchi Pharmaceutical Co. Ltd. 738,000 14,951
56,876
MEDICAL EQUIPMENT & SUPPLIES - 1.2%
Bausch & Lomb, Inc. 1,468,900 49,575
Hillenbrand Industries, Inc. 873,200 32,309
Pall Corp. 10,000 256
82,140
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 1,257,750 44,965
United HealthCare Corp. 300,000 11,362
56,327
TOTAL HEALTH 195,343
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 9.1%
ELECTRICAL EQUIPMENT - 3.6%
Alcatel Alsthom Compagnie Generale d'Electricite SA 429,903 $ 36,580
AMETEK, Inc. (c) 3,305,000 65,687
Mitsubishi Electric Co. Ord. 3,707,000 21,424
Scientific-Atlanta, Inc. 2,059,900 29,869
Sensormatic Electronics Corp. 3,173,000 51,958
Westinghouse Electric Corp. 2,840,000 48,635
254,153
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
BW/IP Holdings, Inc. Class A 331,200 4,471
Detroit Diesel Corp. (a) 172,000 3,182
Harnischfeger Industries, Inc. 785,100 31,404
Ingersoll-Rand Co. 687,400 28,613
Keystone International, Inc. 1,468,100 26,426
Stewart & Stevenson Services, Inc. 945,700 20,096
Tenneco, Inc. 46,500 2,302
Valmet OY (b) 300,000 4,566
121,060
POLLUTION CONTROL - 3.8%
Browning-Ferris Industries, Inc. 3,778,300 99,180
Safety Kleen Corp. (c) 5,295,700 82,745
WMX Technologies, Inc. 2,366,100 81,335
263,260
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 638,473
MEDIA & LEISURE - 4.2%
LEISURE DURABLES & TOYS - 0.0%
Outboard Marine Corp. 10,700 166
LODGING & GAMING - 1.6%
Circus Circus Enterprises, Inc. (a) 1,106,600 38,178
Host Marriott Corp. 474,800 7,300
ITT Corp. (a) 1,471,600 61,807
Mirage Resorts, Inc. (a) 216,600 4,765
112,050
PUBLISHING - 0.7%
Harcourt General, Inc. 137,000 6,816
Hollinger International, Inc. Class A 1,000,000 12,500
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
Knight-Ridder, Inc. 159,200 $ 5,950
Times Mirror Co. Class A 519,500 24,027
49,293
RESTAURANTS - 1.9%
Brinker International, Inc. (a) (c) 5,162,000 87,754
Darden Restaurants, Inc. 5,141,700 43,062
130,816
TOTAL MEDIA & LEISURE 292,325
NONDURABLES - 5.5%
BEVERAGES - 0.6%
Anheuser-Busch Companies, Inc. 558,400 21,499
Seagram Co. Ltd. 600,000 22,638
44,137
FOODS - 2.7%
Dean Foods Co. 1,067,000 30,943
Dole Food, Inc. 1,443,700 56,304
Flowers Industries, Inc. 490,800 11,473
Quaker Oats Co. 1,470,800 52,213
Sara Lee Corp. 10,000 355
Smucker (J.M.) Co. 100,100 1,652
Tyson Foods, Inc. 1,247,600 36,804
189,744
HOUSEHOLD PRODUCTS - 1.5%
Brady (W.H.) Co. Class A 250,000 5,906
First Brands Corp. 975,200 27,672
Rubbermaid, Inc. 2,504,700 58,234
Unilever NV ADR 98,400 15,043
106,855
TOBACCO - 0.7%
Dimon, Inc. 425,800 8,090
Philip Morris Companies, Inc. 137,400 12,727
RJR Nabisco Holdings Corp. 904,667 26,122
46,939
TOTAL NONDURABLES 387,675
PRECIOUS METALS - 0.2%
Agnico Eagle Mines Ltd. 1,184,800 16,598
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 11.5%
APPAREL STORES - 2.2%
Abercrombie & Fitch Co. 5,000 $ 110
Filene's Basement Corp. (a) (c) 1,927,310 8,191
Limited, Inc. (The) 3,776,921 69,401
Payless ShoeSource, Inc. (a) 486,048 16,465
TJX Companies, Inc. 1,570,600 62,824
156,991
DRUG STORES - 0.3%
Revco (D.S.), Inc. (a) 657,400 19,804
GENERAL MERCHANDISE STORES - 6.6%
Consolidated Stores Corp. (a) 20,000 773
Dayton Hudson Corp. 2,780,700 96,282
Dillard Department Stores, Inc. Class A 1,199,600 38,087
Family Dollar Stores, Inc. 1,968,100 33,458
Federated Department Stores, Inc. (a) 2,176,700 71,831
Ito-Yokado Co. Ltd. 586,000 29,191
May Department Stores Co. (The) 232,800 11,029
Nordstrom, Inc. 120,000 4,328
Price/Costco, Inc. (a) 249,800 4,965
Sears, Roebuck & Co. 422,200 20,424
Wal-Mart Stores, Inc. 5,622,400 149,696
Woolworth Corp. (a) 123,200 2,587
462,651
GROCERY STORES - 0.6%
Great Atlantic & Pacific Tea Co., Inc. 363,600 10,908
Supervalu, Inc. 1,000,000 29,750
40,658
RETAIL & WHOLESALE, MISCELLANEOUS - 1.8%
Duty Free International, Inc. (c) 1,711,400 27,382
Home Depot, Inc. (The) 336,900 18,445
Pier 1 Imports, Inc. (c) 3,456,800 48,395
Toys "R" Us, Inc. (a) 1,012,600 34,302
128,524
TOTAL RETAIL & WHOLESALE 808,628
SERVICES - 4.7%
PRINTING - 3.1%
Deluxe Corp. 3,560,100 116,148
Donnelley (R.R.) & Sons Co. 2,906,900 88,297
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - CONTINUED
PRINTING - CONTINUED
Harland (John H.) Co. 314,700 $ 9,795
Nashua Corp. (a) 278,200 3,825
218,065
SERVICES - 1.6%
ADT Ltd. (a) 2,029,100 40,075
Block (H & R), Inc. 80,300 1,987
CPI Corp. 694,100 13,188
Jostens, Inc. 1,179,900 25,368
Sotheby's Holdings, Inc. Class A (c) 1,981,100 33,679
114,297
TOTAL SERVICES 332,362
TECHNOLOGY - 5.6%
COMMUNICATIONS EQUIPMENT - 0.0%
Lucent Technologies, Inc. 10,040 472
COMPUTER SERVICES & SOFTWARE - 0.0%
Electronic Data Systems Corp. 10,000 450
Sabre Group Holdings, Inc. Class A (a) 20,000 610
1,060
COMPUTERS & OFFICE EQUIPMENT - 1.9%
Compaq Computer Corp. (a) 10,000 696
Cross (A.T.) Co. 552,600 6,286
Ingram Micro, Inc. Class A 19,000 342
International Business Machines Corp. 140,000 18,060
Quantum Corp. (a) 1,130,900 22,901
Scitex Ltd. Ord. 92,000 908
Silicon Graphics, Inc. (a) 2,755,200 50,971
Wang Laboratories, Inc. (a) 1,268,651 29,655
129,819
ELECTRONIC INSTRUMENTS - 0.3%
Measurex Corp. (c) 854,600 22,006
ELECTRONICS - 2.4%
AMP, Inc. 3,121,800 105,751
Avnet, Inc. 112,800 5,682
Minebea Co. Ltd. 88,000 740
National Semiconductor Corp. (a) 1,641,300 31,595
Thomas & Betts Corp. 398,000 16,865
VLSI Technology, Inc. (a) 585,800 10,105
170,738
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 1.0%
Fuji Photo Film Co. Ltd. 1,500,000 $ 43,017
Imation Corp. (a) 173,350 4,746
Polaroid Corp. 483,700 19,650
67,413
TOTAL TECHNOLOGY 391,508
TRANSPORTATION - 1.9%
RAILROADS - 0.5%
Burlington Northern Santa Fe Corp. 403,442 33,234
CSX Corp. 10,000 431
33,665
TRUCKING & FREIGHT - 1.4%
Airborne Freight Corp. (c) 1,896,200 37,687
Caliber System, Inc. 1,290,800 21,782
Consolidated Freightways, Inc. 1,300,000 31,200
Hunt (J.B.) Transport Services, Inc. 549,000 8,029
Roadway Express, Inc. 66,400 1,054
99,752
TOTAL TRANSPORTATION 133,417
UTILITIES - 1.5%
CELLULAR - 0.3%
AirTouch Communications, Inc. (a) 836,200 21,846
ELECTRIC UTILITY - 0.2%
Veba AG Ord. 200,000 10,672
TELEPHONE SERVICES - 1.0%
AT&T Corp. 10,000 349
BCE, Inc. 398,500 18,325
Comsat Corp., Series 1 671,100 15,771
WorldCom, Inc. (a) 1,430,500 34,868
69,313
TOTAL UTILITIES 101,831
TOTAL COMMON STOCKS
(Cost $6,058,225) 6,645,845
PREFERRED STOCKS - 0.5%
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - 0.3%
FINANCE - 0.2%
INSURANCE - 0.2%
Allstate Corp. exchangeable $2.30 252,400 $ 12,525
RETAIL & WHOLESALE - 0.1%
GENERAL MERCHANDISE STORES - 0.1%
K mart Financing I $3.875 75,000 3,562
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (b) 67,500 3,561
TOTAL CONVERTIBLE PREFERRED STOCKS 19,648
NONCONVERTIBLE PREFERRED STOCKS - 0.2%
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Volkswagen AG 40,000 12,227
TOTAL PREFERRED STOCKS
(Cost $27,719) 31,875
CONVERTIBLE BONDS - 0.0%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Ventritex, Inc. 5 3/4%, 8/15/01 - $ 2,000 2,960
SERVICES - 0.0%
ADT Operations, Inc. liquid yield option notes
0%, 7/6/10 Ba3 4,920 2,940
TOTAL CONVERTIBLE BONDS
(Cost $4,051) 5,900
CASH EQUIVALENTS - 4.8%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.54%, dated
10/31/96 due 11/1/96 $ 36,569 $ 36,563
SHARES (000S)
Taxable Central Cash Fund (d) 300,322 300,322
TOTAL CASH EQUIVALENTS 336,885
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $6,426,880) $ 7,020,505
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $8,127,000 or 0.1% of net
assets.
3. Affiliated company (see Note 7 of Notes to Financial Statements).
4. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.33%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
OTHER INFORMATION
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 89.8%
Japan 2.2
France 1.7
Sweden 1.5
United Kingdom 1.5
Canada 1.1
Others (individually less than 1%) 2.2
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31,1996, the aggregate cost of investment securities for income
tax purposes was $6,432,502,000. Net unrealized appreci- ation aggregated
$588,003,000, of which $917,777,000 related to appreciated invest- ment
securities and $329,774,000 related to depreciated investment securities.
The fund hereby designates approximately $169,154,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) OCTOBER 31, 1996
ASSETS
Investment in securities, at value (including repurchase $ 7,020,505
agreements of $36,563) (cost $6,426,880) -
See accompanying schedule
Receivable for investments sold 57,634
Receivable for fund shares sold 6,804
Dividends receivable 8,595
Interest receivable 22
Other receivables 266
TOTAL ASSETS 7,093,826
LIABILITIES
Payable for investments purchased $ 133,824
Payable for fund shares redeemed 21,199
Accrued management fee 2,870
Other payables and accrued expenses 1,749
TOTAL LIABILITIES 159,642
NET ASSETS $ 6,934,184
Net Assets consist of:
Paid in capital $ 5,374,365
Undistributed net investment income 64,954
Accumulated undistributed net realized gain (loss) on 901,257
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 593,608
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 126,102 shares outstanding $ 6,934,184
NET ASSET VALUE, offering price and redemption price $54.99
per share ($6,934,184 (divided by) 126,102 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED OCTOBER 31, 1996
INVESTMENT INCOME $ 111,690
Dividends (including $5,043 received from affiliated issuers)
Interest 28,984
TOTAL INCOME 140,674
EXPENSES
Management fee $ 38,525
Basic fee
Performance adjustment 2,736
Transfer agent fees 13,520
Accounting fees and expenses 808
Non-interested trustees' compensation 23
Custodian fees and expenses 232
Registration fees 567
Audit 62
Legal 40
Interest 4
Miscellaneous 45
Total expenses before reductions 56,562
Expense reductions (874) 55,688
NET INVESTMENT INCOME 84,986
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain of $3,453 906,798
on sales of investments in affiliated issuers)
Foreign currency transactions (64) 906,734
Change in net unrealized appreciation (depreciation) on:
Investment securities 49,121
Assets and liabilities in foreign currencies (20) 49,101
NET GAIN (LOSS) 955,835
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,040,821
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 84,986 $ 68,955
Net investment income
Net realized gain (loss) 906,734 180,143
Change in net unrealized appreciation (depreciation) 49,101 367,063
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,040,821 616,161
FROM OPERATIONS
Distributions to shareholders (50,880) (14,249)
From net investment income
From net realized gain (183,376) (191,161)
TOTAL DISTRIBUTIONS (234,256) (205,410)
Share transactions 3,538,040 2,817,479
Net proceeds from sales of shares
Reinvestment of distributions 229,199 201,637
Cost of shares redeemed (2,702,903) (2,081,548)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,064,336 937,568
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,870,901 1,348,319
NET ASSETS
Beginning of period 5,063,283 3,714,964
End of period (including undistributed net investment $ 6,934,184 $ 5,063,283
income of $64,954 and $33,515, respectively)
OTHER INFORMATION
Shares
Sold 68,260 64,443
Issued in reinvestment of distributions 4,685 5,019
Redeemed (52,066) (47,325)
Net increase (decrease) 20,879 22,137
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31,
1996 1995 1994 E 1993 1992 B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA C
Net asset value, beginning $ 48.12 $ 44.71 $ 42.78 $ 33.41 $ 30.19
of period
Income from Investment
Operations
Net investment income .70 .70 .54 .55 D .64
Net realized and unrealized 8.38 5.16 4.53 9.20 3.43
gain (loss)
Total from investment operations 9.08 5.86 5.07 9.75 4.07
Less Distributions
From net investment income (.48) (.17) (.34) (.23) (.85)
From net realized gain (1.73) (2.28) (2.80) (.15) -
Total distributions (2.21) (2.45) (3.14) (.38) (.85)
Net asset value, end of period $ 54.99 $ 48.12 $ 44.71 $ 42.78 $ 33.41
TOTAL RETURN A 19.44% 14.19% 12.90% 29.46% 14.09%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,934 $ 5,063 $ 3,715 $ 1,623 $ 331
(in millions)
Ratio of expenses to average .89% .97% 1.10% 1.12% 1.00%
net assets
Ratio of expenses to average net .88% .96% 1.08% 1.11% 1.00%
assets after expense reductions F F F F
Ratio of net investment income to 1.34% 1.58% 1.29% 1.43% 2.01%
average net assets
Portfolio turnover rate 112% 125% 112% 117% 81%
Average commission rate G $ .0358
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
B AS OF NOVEMBER 1, 1991 THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO
$.11 PER SHARE.
E EFFECTIVE NOVEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1996
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 financial statements have been prepared
in conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities with remaining maturities
of sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. The effects of changes in foreign currency exchange
rates on investments in securities are included with the net realized and
unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, non-taxable dividends and losses deferred due to
wash sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign securities. Losses may
arise from changes in the value of the foreign currency or if the
counterparties do not perform under the contracts' terms. The U.S. dollar
value of foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements that
mature in 60 days or less from the date of purchase for U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
2. OPERATING POLICIES - CONTINUED
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund)
managed by FMR. The Cash Fund is an open-end money market fund available
only to investment companies and other accounts managed by FMR and its
affiliates. The Cash Fund seeks preservation of capital, liquidity, and
current income by investing in U.S. Treasury securities and repurchase
agreements for these securities, and may be utilized by the fund as an
additional cash management option. Dividends from the Cash Fund are
declared daily and paid monthly from net interest income. Income
distributions received by the fund are recorded as interest income.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $7,758,138,000 and $6,646,516,000, respectively, of which U.S.
government and government agency obligations aggregated $152,086,000 and
$394,028,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net
assets of all the mutual funds advised by FMR. The rates ranged from .2500%
to .5200% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .30%. The basic fee is subject to a
performance adjustment (up to a maximum of (plus/minus) .20% of the fund's
average net assets over the performance period) based on the fund's
investment performance as compared to the appropriate index over a
specified period of time. For the period, the management fee was equivalent
to an annual rate of .65% of average net assets after the performance
adjustment.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .21%
of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $2,414,000 for the period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balance during the period for which
loans were outstanding amounted to $20,223,000 and $12,748,000,
respectively. The weighted average interest rate was 5.92%.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$774,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $6,000 and $94,000,
respectively, under these arrangements.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Airborne Freight Corp. $ 14,377 $ - $ 283 $ 37,687
AMETEK, Inc. - - 595 65,687
Brinker International, Inc. 3,389 - - 87,754
Duty Free International, Inc. 4,421 - 167 27,382
EG & G, Inc. . 11,623 - 388 53,141
Filene's Basement Corp. - - - 8,191
Heilig-Meyers Co. 12,558 - 480 50,800
Helmerich & Payne, Inc. - 11,144 165 -
Ideon Group, Inc. - 11,381 - -
Intimate Brands, Inc. Class A 9,744 - - 48,849
Measurex Corp. 1,376 - - 22,006
Pier 1 Imports, Inc. 7,480 - 260 48,395
Ryerson Tull, Inc. Class A 649 - - 4,038
SPX Corp. 1,171 317 138 -
Safety Kleen Corp. 8,313 - 1,344 82,745
Sotheby's Holdings, Inc. Class A. - - 317 33,679
Sunbeam-Oster, Inc. . 625 - 91 112,480
Unifi, Inc. - - 815 105,663
TOTALS $ 75,726 $ 22,842 $ 5,043 $ 788,497
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Capital Trust and the Shareholders of Fidelity
Value Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Capital Trust: Fidelity Value Fund, including the schedule of
portfolio investments, as of October 31, 1996, 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 generally accepted auditing
standards. 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. 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 Capital Trust: Fidelity Value Fund as of October 31, 1996, 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 generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 6, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Value Fund voted to pay on December 9,
1996, to shareholders of record at the opening of business on December 6,
1996, a distribution of $5.92 per share derived from capital gains realized
from sales of portfolio securities and a dividend of $.53 per share from
net investment income.
A total of 3.18% of the dividends distributed during the fiscal year was
derived from interest on U.S. government securities which is generally
exempt from state income tax.
A total of 47% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Richard B. Fentin, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export Fund
Fidelity Fifty
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Stock Fund
Stock Selector
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress 1-800-544-5555
SM
* INDEPENDENT TRUSTEES
AUTOMATED LINE FOR QUICKEST SERVICE
