(2_FIDELITY_LOGOS)FIDELITY
MARKET INDEX
FUND
ANNUAL REPORT
APRIL 30, 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 29 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 33 Notes to the financial statements.
REPORT OF INDEPENDENT 37 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 38
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in 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 of 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 a fund's 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), and the
effect of the fund's $10 index account fee.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Market Index 29.78% 97.22% 128.84%
S&P 500(registered trademark) 30.21% 100.72% 131.94%
S&P 500 Index Objective Funds Average 29.55% 96.00% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on March 6, 1990. 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 common proxy for the U.S. stock market. To
measure how the fund's performance stacked up against its peers, you can
compare it to the S&P 500 index objective funds average, which reflects the
performance of 43 funds with similar objectives tracked by Lipper
Analytical Services over the past 12 months. Both benchmarks include
reinvested dividends and capital gains, if any, and exclude the effects of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Market Index 29.78% 14.55% 14.39%
S&P 500 30.21% 14.95% 14.64%
S&P 500 Index Objective Funds Average 29.55% 14.40% n/a
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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960430 19960521 122358 S00000000000001
Market Index Fund SP Standard & Poor 500
00317 SP001
1990/03/06 10000.00 10000.00
1990/03/31 10080.00 10077.26
1990/04/30 9832.00 9825.33
1990/05/31 10828.00 10783.30
1990/06/30 10759.05 10709.97
1990/07/31 10726.82 10675.70
1990/08/31 9755.68 9710.62
1990/09/30 9278.83 9237.71
1990/10/31 9246.32 9197.99
1990/11/30 9843.77 9792.18
1990/12/31 10104.76 10065.38
1991/01/31 10552.31 10504.23
1991/02/28 11307.81 11255.28
1991/03/31 11576.40 11527.66
1991/04/30 11605.36 11555.33
1991/05/31 12101.66 12054.52
1991/06/30 11541.33 11502.42
1991/07/31 12083.37 12038.43
1991/08/31 12362.73 12323.74
1991/09/30 12158.48 12117.94
1991/10/31 12318.02 12280.32
1991/11/30 11818.41 11785.42
1991/12/31 13169.28 13133.67
1992/01/31 12923.44 12889.39
1992/02/29 13084.50 13056.95
1992/03/31 12824.48 12802.34
1992/04/30 13199.92 13178.73
1992/05/31 13259.64 13243.30
1992/06/30 13062.40 13045.98
1992/07/31 13590.56 13579.56
1992/08/31 13311.45 13301.18
1992/09/30 13465.08 13458.13
1992/10/31 13503.97 13505.23
1992/11/30 13957.71 13965.76
1992/12/31 14131.46 14137.54
1993/01/31 14240.20 14256.30
1993/02/28 14431.57 14450.18
1993/03/31 14731.95 14755.08
1993/04/30 14368.79 14398.01
1993/05/31 14749.45 14783.88
1993/06/30 14784.85 14826.75
1993/07/31 14718.47 14767.44
1993/08/31 15267.21 15327.13
1993/09/30 15147.31 15209.11
1993/10/31 15458.89 15523.94
1993/11/30 15307.55 15376.46
1993/12/31 15490.51 15562.52
1994/01/31 16009.85 16091.64
1994/02/28 15571.10 15655.56
1994/03/31 14886.68 14972.97
1994/04/30 15080.31 15164.63
1994/05/31 15323.46 15413.33
1994/06/30 14942.26 15035.70
1994/07/31 15431.43 15528.87
1994/08/31 16056.48 16165.56
1994/09/30 15661.49 15769.50
1994/10/31 16007.70 16124.31
1994/11/30 15420.05 15537.07
1994/12/31 15649.20 15767.48
1995/01/31 16052.46 16176.33
1995/02/28 16671.10 16806.72
1995/03/31 17154.37 17302.69
1995/04/30 17656.61 17812.26
1995/05/31 18352.37 18524.21
1995/06/30 18766.45 18954.53
1995/07/31 19389.52 19583.06
1995/08/31 19436.02 19632.21
1995/09/30 20247.40 20460.69
1995/10/31 20172.60 20387.65
1995/11/30 21046.82 21282.67
1995/12/31 21439.08 21692.57
1996/01/31 22172.32 22430.99
1996/02/29 22371.00 22638.92
1996/03/31 22600.27 22856.93
1996/04/30 22923.54 23193.85
IMATRL PRASUN SHR__CHT 19960430 19960521 122401 R00000000000077
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Market Index Fund on March 6, 1990, when the fund started and paid the
fund's $10 annual index account fee. As the chart shows, by April 30, 1996,
the value of your investment would have grown to $22,884 - a 128.84%
increase on your 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 $23,194 - a 131.94% 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
An interview with Jennifer Farrelly, Portfolio Manager of Fidelity Market
Index Fund
Q. HOW DID THE FUND PERFORM, JEN?
A. For the 12 months ended April 30, 1996, the fund had a total return of
29.78%. Additionally, for the past six months, the fund returned 13.62%.
These returns compare with the 30.21% return of the Standard & Poor's 500
Index for the past year and the 13.76% return of the index for the
six-month period. Of course, the fund's total return is slightly lower than
the index due to management expenses. Additionally, the S&P 500 Index
objective funds average, as tracked by Lipper Analytical Services, was
29.55% for one year and 13.40% for six months.
Q. THE STOCK MARKET CONTINUES TO APPRECIATE, YET IT SEEMS QUITE DIFFERENT
THAN IT DID SIX MONTHS AGO . . .
A. Well, there have been several developments in 1996 that have changed the
stock market. The large blue-chip and multinational companies that drove
the market in 1995 and the early part of 1996 relinquished their status as
market leaders. One contributor to this move was a strong dollar. With a
strong currency, multinational firms make less of a profit on overseas
sales when translated into dollar terms. Additionally, surging mutual fund
cash in-flows moved more toward funds that invest in more aggressive growth
companies. Lastly, the higher valuations in larger stocks as a result of
such strong performance has highlighted the relative cheapness of other
stocks.
Q. HOW DID RISING INTEREST RATES PLAY A ROLE IN THE PERFORMANCE OF THE
STOCK MARKET?
A. Although the Federal Reserve Board once again eased its target for the
federal funds rate at the end of January 1996, earlier signs of a stronger
economy than expected spooked the bond market. Additionally,
stronger-than-expected employment reports in March and April confirmed the
bond market's fears, and the yield of the 30-year Treasury bond rose (and
its price fell) to over 7% - a level not seen in over a year. Why was this
significant for stocks? While stocks usually perform well in a strong
economy, many investors feared that rising interest rates would raise the
cost of corporate borrowing.
Q. WHAT WERE SOME S&P 500 COMPANIES THAT LED THE MARKET?
A. Many companies included in the S&P 500 have led the market, such as
Microsoft, Cisco Systems and Sun Microsystems.
Q. ALL THOSE COMPANIES YOU JUST MENTIONED ARE TECHNOLOGY-RELATED COMPANIES.
WASN'T THERE A BIG SELL-OFF IN TECHNOLOGY STOCKS IN THE PAST SIX MONTHS?
A. It depends on what type of technology you are speaking of. The stocks of
some computer chip makers went down when it became clear that an over
supply of semiconductors was depressing prices of these components
worldwide. Additionally, falling semiconductor prices were part of an
overall shift in many industries from hardware to an emphasis on software,
on-line services and networking - all areas that play to the strengths of
companies such as Microsoft, Cisco and Sun Microsystems. Separately, Cisco
recently announced it agreed to acquire Stratacom Inc. in a stock swap
worth approximately $4 billion. Should the merger occur, it would give
Cisco a much more diverse product line.
Q. HAVE RISING COMMODITY PRICES MADE AN IMPACT ON THE S&P 500?
A. Rising commodity prices and higher interest rates over the past few
months are mostly why investors favored cyclical stocks over the consumer
non-durable stocks that were popular last year. Many investors look for
cyclical stocks when the economy appears to be expanding, which was to the
benefit of the aluminum, chemical, oil, oil service and basic sectors.
Q. WHAT DID THE PASSAGE OF THE NEW TELECOMMUNICATIONS LAW IN FEBRUARY 1996
MEAN FOR MANY S&P 500 COMPANIES?
A. The long-term effects are innumerable. The telecommunications law gave
the long-distance phone service, local phone service, broadcast and cable
sectors the regulatory freedom necessary to blur the traditional lines of
their respective businesses through mergers and acquisitions. Highlighting
the impact of the telecom law also have been several announcements of major
merger agreements. These include: SBC Communications and Pacific Telesis,
U.S. West and Continental Cablevision, and Bell Atlantic and NYNEX.
Q. HAVE FINANCIAL STOCKS - INCLUDING BANKS, INSURANCE AND BROKERAGE - BEEN
HURT BY THE RECENT INTEREST RATE INCREASES?
A. Although financial stocks are often hurt by rising interest rates,
stock market volume continues to be high. In other words, a large amount of
stock market activity could be a sign of a continued strong demand for
financial services.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. Rising interest rates and the uncertainty of deregulation hurt many
utility companies during the period. Additionally - as I stated previously
- - consumer companies were hurt in part by investors' preference for
commodity-cyclical companies, including Reynolds Aluminum and Schlumberger.
Q. WHAT'S YOUR OUTLOOK?
A. The increased volatility in the stock market is a concern. Certainly,
pieces of economic data and analysts' corporate earnings estimates have
created wider daily trading ranges than we have seen in some time. However,
as always, investors should keep their long-term goals in mind and not be
influenced by short-term price movements.
FUND FACTS
GOAL: to provide returns that
correspond to those of the
S&P 500 Index
START DATE: March 6, 1990
SIZE: as of April 30,1996,
more than $1 billion
MANAGER: Jennifer Farrelly,
since 1994; manager,
Fidelity U.S. Equity Index
Portfolio and VIP II: Index
500 Portfolio, since 1994;
joined Fidelity in 1988
(checkmark)
JENNIFER FARRELLY ON CHANGES
TO THE S&P 500:
"The S&P 500 is an index of
500 stocks chosen to be
representative of the broader
market. Periodically, companies
will be added or deleted from
the index. Usually, this is
based on events such as
acquisitions, spin-offs or shifts
in asset size."
Here are some of the changes
to the index in the past year
involving some well-known
companies:
(solid bullet) May 26, 1995: Fruit of the
Loom is added in place of
children's clothing maker
Oshkosh B'Gosh
(solid bullet) June 30: Harrah's
Entertainment is added to the
index's hotel/motel categoy
(solid bullet) September 21: Railroad
Santa Fe Pacific Corp. is
deleted due to its merger with
Burlington Northern Inc.
(solid bullet) November 24: CBS Inc. is
removed after its acquisition
by Westinghouse Electric
Corp.
(solid bullet) February 12, 1996: Capital
Cities/ABC is deleted
following its acquisition by
Walt Disney
(solid bullet) March 12: Green Tree
Financial is added to the
financial (miscellaneous)
category
(solid bullet) March 29: After Chemical
Banking Corp.'s merger with
Chase Manhattan, Chemical
is removed because the new
company will be known as
Chase Manhattan
(solid bullet) April 22: Loral is removed
following its acquisition by
defense manufacturer
Lockheed Martin.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 2.6 2.4
Exxon Corp. 2.1 2.1
Coca-Cola Company (The) 2.0 2.0
AT&T Corp. 1.9 2.2
Royal Dutch Petroleum Co. 1.5 1.5
Philip Morris Companies, Inc. 1.5 1.6
Merck & Co., Inc. 1.5 1.6
Microsoft Corp. 1.3 1.3
Johnson & Johnson 1.2 1.2
International Business Machines 1.2 1.2
Corp.
TOP TEN MARKET SECTORS AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Finance 13.2 11.9
Utilities 11.7 12.4
Technology 11.7 11.5
Nondurables 10.8 11.2
Health 10.0 9.7
Energy 8.8 8.3
Basic Industries 6.8 6.5
Industrial Machinery & Equipment 5.4 4.8
Retail & Wholesale 4.7 4.3
Media & Leisure 4.3 4.5
ASSET ALLOCATION
TO MATCH THE STANDARD & POOR'S 500 INDEX, FIDELITY MARKET INDEX FUND SEEKS
100.0% INVESTMENT EXPOSURE TO STOCKS AT ALL TIMES.
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 97.4%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.7%
AEROSPACE & DEFENSE - 1.4%
Boeing Co. 68,380 $ 5,616
Lockheed Martin Corp. 39,568 3,190
McDonnell Douglas Corp. 22,350 2,157
Northrop Grumman Corp. 9,800 606
Rockwell International Corp. 43,300 2,533
14,102
DEFENSE ELECTRONICS - 0.2%
Raytheon Co. 48,340 2,447
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 12,600 795
TOTAL AEROSPACE & DEFENSE 17,344
BASIC INDUSTRIES - 6.7%
CHEMICALS & PLASTICS - 3.8%
Air Products & Chemicals, Inc. 22,320 1,275
Avery Dennison Corp. 10,500 598
Dow Chemical Co. 52,170 4,637
du Pont (E.I.) de Nemours & Co. 110,630 8,892
Eastman Chemical Co. 16,042 1,079
Engelhard Corp. 28,737 722
FMC Corp. (a) 7,400 513
Goodrich (B.F.) Co. 10,420 414
Grace (W.R.) & Co. 19,300 1,496
Great Lakes Chemical Corp. 12,800 874
Hercules, Inc. 21,820 1,320
Minnesota Mining & Manufacturing Co. 83,620 5,498
Monsanto Co. 23,220 3,518
Morton International, Inc. 29,200 1,033
Nalco Chemical Co. 13,480 411
PPG Industries, Inc. 38,500 1,949
Praxair, Inc. 30,100 1,163
Raychem Corp. 8,200 639
Rohm & Haas Co. 13,300 883
Union Carbide Corp. 25,300 1,151
38,065
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - 0.2%
Armco, Inc. (a) 21,200 $ 119
Bethlehem Steel Corp. (a) 22,500 307
Inland Steel Industries, Inc. 9,800 241
Nucor Corp. 17,500 984
USX-U.S. Steel Group 16,560 546
Worthington Industries, Inc. 18,125 369
2,566
METALS & MINING - 0.8%
Alcan Aluminium Ltd. 45,003 1,431
Aluminum Co. of America 35,320 2,203
ASARCO, Inc. 8,500 282
Cyprus Amax Minerals Co. 18,550 503
Freeport-McMoRan Copper & Gold, Inc. Class B 40,300 1,325
Inco Ltd. 18,058 610
Phelps Dodge Corp. 13,740 1,010
Reynolds Metals Co. 12,740 685
8,049
PACKAGING & CONTAINERS - 0.3%
Ball Corp. 6,077 189
Bemis Co., Inc. 10,600 343
Corning, Inc. 45,540 1,583
Crown Cork & Seal Co., Inc. 24,780 1,168
3,283
PAPER & FOREST PRODUCTS - 1.6%
Boise Cascade Corp. 9,500 442
Champion International Corp. 19,300 931
Georgia-Pacific Corp. 18,200 1,415
International Paper Co. 58,800 2,345
James River Corp. of Virginia 16,800 449
Kimberly-Clark Corp. 55,565 4,035
Louisiana-Pacific Corp. 21,560 542
Mead Corp. 10,800 601
Potlatch Corp. 5,740 245
Stone Container Corp. 19,814 337
Temple-Inland, Inc. 11,100 538
Union Camp Corp. 13,900 756
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Westvaco Corp. 19,950 $ 618
Weyerhaeuser Co. 40,200 1,990
Willamette Industries, Inc. 11,100 683
15,927
TOTAL BASIC INDUSTRIES 67,890
CONGLOMERATES - 1.1%
Allied-Signal, Inc. 56,200 3,267
Crane Co. 6,100 253
Dial Corp. (The) 18,800 529
Harris Corp. 7,700 475
ITT Industries, Inc. 23,770 654
Teledyne, Inc. 11,198 416
Textron, Inc. 16,800 1,441
Tyco International Ltd. 28,280 1,092
United Technologies Corp. 24,370 2,693
Whitman Corp. 21,000 530
11,350
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.3%
Armstrong World Industries, Inc. 7,410 422
Masco Corp. 31,900 869
Owens-Corning (a) 10,300 415
Sherwin-Williams Co. 16,840 787
2,493
CONSTRUCTION - 0.0%
Centex Corp. 5,560 150
Kaufman & Broad Home Corp. 6,500 92
Pulte Corp. 5,300 140
382
ENGINEERING - 0.2%
EG & G, Inc. 9,520 209
Fluor Corp. 16,530 1,093
Foster Wheeler Corp. 7,900 365
1,667
TOTAL CONSTRUCTION & REAL ESTATE 4,542
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 3.8%
AUTOS, TIRES, & ACCESSORIES - 3.0%
Chrysler Corp. 75,400 $ 4,731
Cooper Tire & Rubber Co. 16,700 409
Cummins Engine Co., Inc. 7,900 369
Dana Corp. 20,100 668
Eaton Corp. 15,380 930
Echlin, Inc. 12,100 416
Ford Motor Co. 232,600 8,345
General Motors Corp. 149,256 8,097
Genuine Parts Co. 24,525 1,085
Goodyear Tire & Rubber Co. 30,400 1,585
Johnson Controls, Inc. 8,100 579
NACCO Industries, Inc. Class A 1,700 107
Navistar International Corp. (a) 14,760 177
PACCAR, Inc. 7,638 378
Pep Boys-Manny, Moe & Jack 12,400 414
Snap-on Tools Corp. 8,100 389
TRW, Inc. 12,960 1,217
29,896
CONSUMER ELECTRONICS - 0.3%
Black & Decker Corp. 17,200 692
Maytag Co. 21,400 460
Newell Co. 31,600 901
Whirlpool Corp. 14,800 890
2,943
TEXTILES & APPAREL - 0.5%
Fruit of the Loom, Inc. Class A (a) 15,200 401
Liz Claiborne, Inc. 14,800 538
NIKE, Inc. Class B 28,560 2,499
Reebok International Ltd. 15,100 438
Russell Corp. 7,800 203
Springs Industries, Inc. Class A 4,100 189
Stride Rite Corp. 9,900 95
VF Corp. 12,600 718
5,081
TOTAL DURABLES 37,920
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 8.9%
ENERGY SERVICES - 0.9%
Baker Hughes, Inc. 26,200 $ 832
Dresser Industries, Inc. 36,240 1,155
Halliburton Co. 22,680 1,301
Helmerich & Payne, Inc. 5,000 184
McDermott International, Inc. 10,000 210
Rowan Companies, Inc. (a) 16,800 248
Schlumberger Ltd. 48,080 4,243
Western Atlas, Inc. (a) 9,440 566
8,739
OIL & GAS - 8.0%
Amerada Hess Corp. 17,140 971
Amoco Corp. 98,810 7,213
Ashland, Inc. 12,630 519
Atlantic Richfield Co. 31,920 3,759
Burlington Resources, Inc. 25,100 935
Chevron Corp. 129,780 7,527
Coastal Corp. (The) 21,000 832
Exxon Corp. 247,260 21,017
Kerr-McGee Corp. 10,360 662
Louisiana Land & Exploration Co. 5,140 278
Mobil Corp. 78,450 9,022
Occidental Petroleum Corp. $1.00 63,300 1,630
Oryx Energy Co. (a) 20,860 334
Pennzoil Co. 9,130 404
Phillips Petroleum Co. 52,100 2,162
Royal Dutch Petroleum Co. 106,620 15,273
Santa Fe Energy Resources, Inc. (a) 18,066 217
Sun Co., Inc. 14,880 461
Texaco, Inc. 52,640 4,501
USX-Marathon Group 57,300 1,261
Unocal Corp. 49,282 1,583
80,561
TOTAL ENERGY 89,300
FINANCE - 13.2%
BANKS - 6.6%
Banc One Corp. 90,314 3,138
Bank of Boston Corp. 22,419 1,085
Bank of New York Co., Inc. 39,900 1,935
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
BankAmerica Corp. 73,564 $ 5,572
Bankers Trust New York Corp. 15,750 1,093
Barnett Banks, Inc. 18,800 1,191
Boatmen's Bancshares, Inc. 31,400 1,217
Chase Manhattan Corp. 86,748 5,975
Citicorp 96,869 7,628
Comerica, Inc. 23,600 1,027
CoreStates Financial Corp. 44,300 1,728
Fifth Third Bancorp 19,900 1,099
First Bank System, Inc. 29,000 1,747
First Union Corp. 56,805 3,494
Fleet Financial Group, Inc. 49,180 2,115
KeyCorp. 47,055 1,817
Mellon Bank Corp. 26,613 1,430
Morgan (J.P.) & Co., Inc. 37,419 3,148
National City Corp. 29,051 1,071
NationsBank Corp. 58,850 4,693
Norwest Corp. 70,200 2,536
PNC Financial Corp. 67,860 2,053
Republic New York Corp. 11,100 659
SunTrust Banks, Inc. 22,600 1,593
U.S. Bancorp 30,050 973
Wachovia Corp. 34,000 1,496
Wells Fargo & Co. 19,474 4,725
66,238
CREDIT & OTHER FINANCE - 1.4%
American Express Co. 89,472 4,339
Beneficial Corp. 10,500 580
Dean Witter Discover & Co. 34,018 1,854
First Chicago NBD Corp. 63,760 2,630
Green Tree Financial Corp. 27,400 925
Household International, Inc. 19,529 1,350
MBNA Corp. 44,400 1,260
Transamerica Corp. 13,522 1,028
13,966
FEDERAL SPONSORED CREDIT - 1.0%
Federal Home Loan Mortgage Corp. 35,900 2,993
Federal National Mortgage Association 217,280 6,654
9,647
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - 3.6%
Aetna Life & Casualty Co. 22,930 $ 1,634
Alexander & Alexander Services, Inc. 8,900 168
Allstate Corp. 89,183 3,467
American General Corp. 40,820 1,434
American International Group, Inc. 94,462 8,631
Aon Corp. 19,800 1,062
CIGNA Corp. 15,020 1,703
Chubb Corp. (The) 17,280 1,635
General Re Corp. 16,240 2,320
ITT Hartford Group, Inc. 22,070 1,079
Jefferson Pilot Corp. 14,222 750
Lincoln National Corp. 20,760 1,002
Loews Corp. 23,400 1,784
Marsh & McLennan Companies, Inc. 14,660 1,378
Providian Corp. 19,020 877
SAFECO Corp. 25,020 826
St. Paul Companies, Inc. (The) 16,900 898
Torchmark Corp. 14,320 616
Travelers, Inc. (The) 63,021 3,876
UNUM Corp. 14,400 857
USF&G Corp. 22,300 354
USLIFE Corp. 6,770 190
36,541
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 23,300 553
Golden West Financial Corp. 11,600 610
Great Western Financial Corp. 27,138 624
1,787
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 34,900 2,107
Morgan Stanley Group, Inc. 31,000 1,558
Salomon, Inc. 21,100 857
4,522
TOTAL FINANCE 132,701
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 10.0%
DRUGS & PHARMACEUTICALS - 6.0%
Allergan, Inc. 12,900 $ 456
ALZA Corp. Class A (a) 16,500 470
American Home Products Corp. 62,160 6,558
Amgen, Inc. (a) 53,000 3,047
Bristol-Myers Squibb Co. 100,490 8,265
Lilly (Eli) & Co. 109,708 6,473
Merck & Co., Inc. 245,190 14,834
Pharmacia & Upjohn, Inc. 100,342 3,838
Pfizer, Inc. 126,580 8,718
Schering-Plough Corp. 72,440 4,156
Sigma Aldrich Corp. 10,000 540
Warner-Lambert Co. 27,040 3,022
60,377
MEDICAL EQUIPMENT & SUPPLIES - 2.9%
Abbott Laboratories 157,420 6,395
Bard (C.R.), Inc. 11,400 416
Bausch & Lomb, Inc. 11,440 456
Baxter International, Inc. 54,100 2,394
Becton, Dickinson & Co. 12,800 1,032
Biomet, Inc. (a) 22,900 338
Boston Scientific Corp. (a) 34,500 1,488
Johnson & Johnson 132,720 12,277
Mallinckrodt Group, Inc. 14,830 584
Medtronic, Inc. 46,300 2,460
Millipore Corp. 8,800 369
Pall Corp. 22,866 640
St. Jude Medical, Inc. (a) 13,850 506
U.S. Surgical Corp. 11,300 418
29,773
MEDICAL FACILITIES MANAGEMENT - 1.1%
Beverly Enterprises, Inc. (a) 19,500 236
Columbia/HCA Healthcare Corp. 88,520 4,703
Community Psychiatric Centers 8,700 80
Humana, Inc. 32,300 795
Manor Care, Inc. 12,350 496
Tenet Healthcare Corp. (a) 41,700 855
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - CONTINUED
United HealthCare Corp. 34,700 $ 2,030
U.S. Healthcare, Inc. 30,500 1,590
10,785
TOTAL HEALTH 100,935
HOLDING COMPANIES - 0.3%
CINergy Corp. 31,217 905
Norfolk Southern Corp. 25,740 2,162
3,067
INDUSTRIAL MACHINERY & EQUIPMENT - 5.4%
ELECTRICAL EQUIPMENT - 3.4%
Emerson Electric Co. 44,670 3,736
General Electric Co. 332,400 25,761
General Signal Corp. 9,360 356
Grainger (W.W.), Inc. 10,200 704
Honeywell, Inc. 25,180 1,325
Loral Space & Communications Ltd. 34,600 497
Scientific-Atlanta, Inc. 15,300 283
Westinghouse Electric Corp. 82,730 1,562
34,224
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
Briggs & Stratton Corp. 5,700 259
Case Corp. 14,300 722
Caterpillar, Inc. 39,260 2,513
Cincinnati Milacron, Inc. 6,900 182
Cooper Industries, Inc. 21,379 909
Deere & Co. 52,170 2,028
Dover Corp. 22,520 1,160
Giddings & Lewis, Inc. 6,900 128
Harnischfeger Industries, Inc. 8,800 356
Illinois Tool Works, Inc. 23,460 1,578
Ingersoll-Rand Co. 21,740 842
Parker-Hannifin Corp. 14,850 627
Stanley Works 8,900 558
Tenneco, Inc. 34,655 1,902
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
Timken Co. 6,149 $ 244
TRINOVA Corp. 5,700 201
Varity Corp. (a) 8,090 345
14,554
POLLUTION CONTROL - 0.6%
Browning-Ferris Industries, Inc. 42,260 1,363
Laidlaw, Inc. Class B 58,600 615
Ogden Corp. 9,800 198
Safety Kleen Corp. 11,425 171
WMX Technologies, Inc. 96,760 3,362
5,709
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 54,487
MEDIA & LEISURE - 4.3%
BROADCASTING - 0.9%
Comcast Corp. Class A special 47,850 837
TCI Group Class A 130,000 2,486
Time Warner, Inc. 77,045 3,149
Viacom, Inc. Class B (non-vtg.) (a) 73,300 3,005
9,477
ENTERTAINMENT - 0.9%
Disney (Walt) Co. 134,930 8,366
King World Productions, Inc. (a) 7,400 322
8,688
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 19,000 418
Fleetwood Enterprises, Inc. 8,500 223
Hasbro, Inc. 17,550 645
Mattel, Inc. 54,895 1,427
Outboard Marine Corp. 4,100 81
2,794
LODGING & GAMING - 0.4%
Bally Entertainment Corp. (a) 9,300 194
Harrah's Entertainment, Inc. 20,350 702
Hilton Hotels Corp. 9,540 1,006
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
ITT Corp. 22,070 $ 1,344
Marriott International, Inc. 25,000 1,219
4,465
PUBLISHING - 1.0%
American Greetings Corp. Class A 14,760 408
Dow Jones & Co., Inc. 19,400 725
Dun & Bradstreet Corp. 33,620 2,047
Gannett Co., Inc. 27,850 1,904
Harcourt General, Inc. 14,576 641
Knight-Ridder, Inc. 9,580 693
McGraw-Hill, Inc. 20,100 887
Meredith Corp. 5,400 245
New York Times Co. (The) Class A 19,100 621
Times Mirror Co. Class A 21,700 925
Tribune Co. 12,590 878
9,974
RESTAURANTS - 0.8%
Darden Restaurants, Inc. 31,620 435
Luby's Cafeterias, Inc. 4,550 109
McDonald's Corp. 138,700 6,640
Ryan's Family Steak Houses, Inc. (a) 10,700 103
Shoney's, Inc. (a) 8,200 91
Wendy's International, Inc. 23,700 453
7,831
TOTAL MEDIA & LEISURE 43,229
NONDURABLES - 10.8%
AGRICULTURE - 0.1%
Pioneer Hi-Bred International, Inc. 16,700 931
BEVERAGES - 3.7%
Anheuser-Busch Companies, Inc. 50,570 3,395
Brown-Forman Corp. Class B 13,780 544
Coca-Cola Company (The) 249,640 20,346
Coors (Adolph) Co. Class B 7,600 144
PepsiCo, Inc. 156,760 9,954
Seagram Co. Ltd. 74,320 2,502
36,885
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - 2.5%
Archer-Daniels-Midland Co. 103,668 $ 1,957
CPC International, Inc. 28,920 1,999
Campbell Soup Co. 49,680 3,105
ConAgra, Inc. 49,150 1,898
General Mills, Inc. 31,720 1,760
Heinz (H.J.) Co. 73,500 2,490
Hershey Foods Corp. 15,460 1,173
Kellogg Co. 43,340 3,093
Quaker Oats Co. 26,800 921
Ralston Purina Co. 21,180 1,236
Sara Lee Corp. 96,400 2,988
Sysco Corp. 36,440 1,171
Wrigley (Wm.) Jr. Co. 23,180 1,220
25,011
HOUSEHOLD PRODUCTS - 2.7%
Alberto Culver Co. Class B 5,600 212
Avon Products, Inc. 13,410 1,192
Clorox Co. 10,260 848
Colgate-Palmolive Co. 29,060 2,227
Gillette Co. 88,260 4,766
International Flavors & Fragrances, Inc. 22,150 1,088
Premark International, Inc. 12,100 622
Procter & Gamble Co. 136,560 11,539
Rubbermaid, Inc. 31,280 884
Unilever NV ADR 31,770 4,337
27,715
TOBACCO - 1.8%
American Brands, Inc. 36,060 1,501
Philip Morris Companies, Inc. 166,260 14,984
UST, Inc. 38,400 1,229
17,714
TOTAL NONDURABLES 108,256
PRECIOUS METALS - 0.6%
Barrick Gold Corp. 70,400 2,158
Echo Bay Mines Ltd. 25,200 331
Homestake Mining Co. 29,100 586
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
PRECIOUS METALS - CONTINUED
Newmont Mining Corp. 18,638 $ 1,079
Placer Dome, Inc. 47,500 1,322
Santa Fe Pacific Gold Corp. 26,245 390
5,866
RETAIL & WHOLESALE - 4.7%
APPAREL STORES - 0.4%
Brown Group, Inc. 3,500 56
Charming Shoppes, Inc. 20,600 133
Gap, Inc. 57,360 1,728
Limited, Inc. (The) 58,271 1,209
Melville Corp. 20,960 815
TJX Companies, Inc. 11,000 325
4,266
DRUG STORES - 0.2%
Long Drug Stores, Inc. 3,870 175
Rite Aid Corp. 16,600 492
Walgreen Co. 48,940 1,566
2,233
GENERAL MERCHANDISE STORES - 2.7%
Dayton Hudson Corp. 14,250 1,361
Dillard Department Stores, Inc. Class A 22,560 905
Federated Department Stores, Inc. (a) 40,400 1,348
K mart Corp. 91,500 926
May Department Stores Co. (The) 49,480 2,523
Mercantile Stores Co., Inc. 7,410 462
Nordstrom, Inc. 16,100 819
Penney (J.C.) Co., Inc. 44,620 2,209
Price/Costco, Inc. (a) 38,795 737
Sears, Roebuck & Co. 77,510 3,866
Wal-Mart Stores, Inc. 456,660 10,903
Woolworth Corp. (a) 26,540 508
26,567
GROCERY STORES - 0.6%
Albertson's, Inc. 50,380 1,940
American Stores Co. 29,080 971
Fleming Companies, Inc. 7,565 104
Giant Food, Inc. Class A 11,900 379
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Great Atlantic & Pacific Tea Co., Inc. 7,650 $ 267
Kroger Co. (The) (a) 24,700 1,016
Supervalu, Inc. 13,400 429
Winn-Dixie Stores, Inc. 30,440 1,005
6,111
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Circuit City Stores, Inc. 19,300 613
Home Depot, Inc. (The) 94,982 4,500
Lowe's Companies, Inc. 32,060 1,038
Tandy Corp. 12,566 652
Toys "R" Us, Inc. (a) 54,425 1,517
8,320
TOTAL RETAIL & WHOLESALE 47,497
SERVICES - 0.8%
ADVERTISING - 0.1%
Interpublic Group of Companies, Inc. 15,500 725
LEASING & RENTAL - 0.0%
Ryder Systems, Inc. 15,700 457
PRINTING - 0.4%
Alco Standard Corp. 25,500 1,476
Deluxe Corp. 16,500 577
Donnelley (R.R.) & Sons Co. 30,520 1,099
Harland (John H.) Co. 6,000 158
Moore Corporation Ltd. 19,937 364
3,674
SERVICES - 0.3%
Block (H&R), Inc. 20,780 730
Ecolab, Inc. 12,800 416
Jostens, Inc. 7,600 171
National Service Industries, Inc. 9,700 359
Service Corp. International 23,250 1,235
2,991
TOTAL SERVICES 7,767
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 11.7%
COMMUNICATIONS EQUIPMENT - 1.4%
Andrew Corp. (a) 11,575 $ 556
Cabletron Systems, Inc. (a) 14,300 1,078
Cisco Systems, Inc. (a) 109,900 5,701
DSC Communications Corp. (a) 23,000 725
General Instrument Corp. (a) 24,500 802
Northern Telecom Ltd. 50,600 2,604
Tellabs, Inc. (a) 17,700 978
3Com Corp. (a) 32,800 1,513
13,957
COMPUTER SERVICES & SOFTWARE - 3.1%
Autodesk, Inc. 9,140 372
Automatic Data Processing, Inc. 57,820 2,248
CUC International, Inc. (a) 36,350 1,195
Ceridian Corp. (a) 13,100 626
Computer Associates International, Inc. 48,250 3,540
Computer Sciences Corp. (a) 11,050 818
First Data Corp. 44,300 3,367
Microsoft Corp. (a) 118,300 13,397
Novell, Inc. (a) 73,300 1,063
Oracle Systems Corp. (a) 129,900 4,384
Shared Medical Systems Corp. 4,700 322
31,332
COMPUTERS & OFFICE EQUIPMENT - 3.8%
Amdahl Corp. (a) 23,800 303
Apple Computer, Inc. 24,550 598
Bay Networks, Inc. (a) 36,800 1,159
Compaq Computer Corp. (a) 52,980 2,470
Data General Corp. (a) 7,700 118
Digital Equipment Corp. (a) 30,420 1,818
EMC Corp. (a) 45,100 925
Hewlett-Packard Co. 101,560 10,753
Intergraph Corp. (a) 9,300 118
International Business Machines Corp. 113,270 12,177
Pitney Bowes, Inc. 30,240 1,474
Silicon Graphics, Inc. (a) 32,300 957
Sun Microsystems, Inc. (a) 36,400 1,975
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Tandem Computers, Inc. (a) 23,400 $ 298
Unisys Corp. (a) 34,200 205
Xerox Corp. 21,550 3,157
38,505
ELECTRONIC INSTRUMENTS - 0.2%
Applied Materials, Inc. (a) 35,600 1,424
Perkin-Elmer Corp. 8,500 466
Tektronix, Inc. 6,600 262
2,152
ELECTRONICS - 2.6%
Advanced Micro Devices, Inc. 26,100 489
AMP, Inc. 43,364 1,941
Intel Corp. 163,560 11,081
LSI Logic Corp. (a) 25,600 922
Micron Technology, Inc. 41,300 1,502
Motorola, Inc. 117,700 7,209
National Semiconductor Corp. (a) 26,900 424
Texas Instruments, Inc. 37,660 2,128
Thomas & Betts Corp. 8,020 316
26,012
PHOTOGRAPHIC EQUIPMENT - 0.6%
Eastman Kodak Co. 68,170 5,215
Polaroid Corp. 8,340 375
5,590
TOTAL TECHNOLOGY 117,548
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.3%
AMR Corp. (a) 15,270 1,363
Delta Air Lines, Inc. 10,280 826
Southwest Airlines Co. 28,700 854
USAir Group, Inc. (a) 12,500 222
3,265
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
RAILROADS - 0.8%
Burlington Northern Santa Fe Corp. 28,143 $ 2,463
CSX Corp. 26,472 1,357
Conrail, Inc. 15,640 1,091
Union Pacific Corp. 40,840 2,782
7,693
TRUCKING & FREIGHT - 0.1%
Caliber System, Inc. 7,700 309
Consolidated Freightways, Inc. 8,600 225
Federal Express Corp. (a) 11,190 904
Yellow Corp. 5,500 67
1,505
TOTAL TRANSPORTATION 12,463
UTILITIES - 11.7%
CELLULAR - 0.3%
AirTouch Communications, Inc. (a) 98,530 3,079
ELECTRIC UTILITY - 3.0%
American Electric Power Co., Inc. 37,000 1,503
Baltimore Gas & Electric Co. 29,450 777
Carolina Power & Light Co. 30,700 1,105
Central & South West Corp. 41,180 1,122
Consolidated Edison Co. of New York, Inc. 46,700 1,372
DTE Energy Co. 28,800 893
Dominion Resources, Inc. 35,010 1,348
Duke Power Co. 40,860 1,920
Edison International 88,700 1,419
Entergy Corp. 45,400 1,203
FPL Group, Inc. 36,900 1,591
General Public Utilities Corp. 23,800 756
Houston Industries, Inc. 52,200 1,116
Niagara Mohawk Power Corp. 28,800 216
Northern States Power Co. 13,460 629
Ohio Edison Co. 30,300 633
PP&L Resources, Inc. 31,600 715
Pacific Gas & Electric Co. 83,500 1,900
PacifiCorp. 58,200 1,164
Peco Energy Co. 44,100 1,097
Public Service Enterprise Group, Inc. 48,800 1,275
Southern Co. 132,700 2,919
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Texas Utilities Co. 44,886 $ 1,807
Unicom Corp. 42,700 1,174
Union Electric Co. 20,400 788
30,442
GAS - 0.8%
Columbia Gas System, Inc. (The) 10,720 521
Consolidated Natural Gas Co. 18,490 864
Eastern Enterprises Co. 4,100 147
Enron Corp. 50,140 2,018
ENSERCH Corp. 13,700 295
NICOR, Inc. 9,940 277
Noram Energy Corp. 24,700 272
ONEOK, Inc. 5,300 136
Pacific Enterprises 16,780 432
Panenergy Corp. 29,800 972
Peoples Energy Corp. 7,000 221
Sonat, Inc. 17,060 744
Williams Companies, Inc. 20,300 1,038
7,937
TELEPHONE SERVICES - 7.6%
AT&T Corp. 318,162 19,487
ALLTEL Corp. 37,600 1,236
Ameritech Corp. 110,300 6,439
Bell Atlantic Corp. 87,050 5,658
BellSouth Corp. 197,940 7,918
GTE Corp. 192,880 8,366
MCI Communications Corp. 135,660 3,993
NYNEX Corp. 85,520 4,201
Pacific Telesis Group 85,330 2,923
SBC Communications, Inc. 121,320 6,066
Sprint Corp. 86,190 3,631
U.S. West, Inc. 93,640 3,067
US West, Inc. (Media Group) 93,740 1,828
WorldCom, Inc. (a) 38,500 1,810
76,623
TOTAL UTILITIES 118,081
TOTAL COMMON STOCKS
(Cost $772,116) 980,243
U.S. TREASURY OBLIGATIONS - 0.4%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
United States Treasury Bill, yield at date of purchase
4.85% to 4.94%, 7/18/96 (b)
(Cost $4,037) $ 4,080 $ 4,038
REPURCHASE AGREEMENTS - 2.2%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 21,932 21,929
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $798,082) $ 1,006,210
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
(000S)
PURCHASED
93 S&P 500 Index Contracts June 1996 $ 30,451 $ 382
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.0%
LEGEND
1. Non-income producing
2. 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 $1,769,000.
INCOME TAX INFORMATION
At April 30,1996, the aggregate cost of investment securities for income
tax purposes was $798,197,000. Net unrealized appreciation aggregated
$208,013,000 of which $222,034,000 related to appreciated investment
securities and $14,021,000 related to depreciated investment securities.
The fund hereby designates approximately $736,000 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 AMOUNTS) APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 1,006,210
agreements of $21,929) (cost $798,082) -
See accompanying schedule
Cash 5,206
Receivable for fund shares sold 3,825
Dividends receivable 1,202
Redemption fees receivable 2
Other receivables 6
TOTAL ASSETS 1,016,451
LIABILITIES
Payable for investments purchased $ 714
Payable for fund shares redeemed 4,415
Accrued management fee 367
Payable for daily variation on futures contracts 14
TOTAL LIABILITIES 5,510
NET ASSETS $ 1,010,941
Net Assets consist of:
Paid in capital $ 784,232
Undistributed net investment income 388
Accumulated undistributed net realized gain (loss) on 17,810
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 208,511
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 20,966 shares outstanding $ 1,010,941
NET ASSET VALUE, offering price and redemption price $48.22
per share ($1,010,941 (divided by) 20,966 shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 13,844
Dividends
Interest 2,432
TOTAL INCOME 16,276
EXPENSES
Management fee $ 2,872
Non-interested trustees' compensation 1
Total expenses before reductions 2,873
Expense reductions (35) 2,838
NET INVESTMENT INCOME 13,438
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 14,935
Futures contracts 6,775 21,710
Change in net unrealized appreciation (depreciation) on:
Investment securities 118,344
Futures contracts 117 118,461
NET GAIN (LOSS) 140,171
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 153,609
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 13,438 $ 7,802
Net investment income
Net realized gain (loss) 21,710 2,849
Change in net unrealized appreciation (depreciation) 118,461 41,344
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 153,609 51,995
FROM OPERATIONS
Distributions to shareholders (13,997) (7,124)
From net investment income
From net realized gain (4,833) -
TOTAL DISTRIBUTIONS (18,830) (7,124)
Share transactions 601,874 104,977
Net proceeds from sales of shares
Reinvestment of distributions 17,854 6,645
Cost of shares redeemed (134,662) (48,508)
Redemption fees 363 46
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 485,429 63,160
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 620,208 108,031
NET ASSETS
Beginning of period 390,733 282,702
End of period (including undistributed net investment $ 1,010,941 $ 390,733
income of $388 and $940, respectively)
OTHER INFORMATION
Shares
Sold 13,365 2,956
Issued in reinvestment of distributions 408 191
Redeemed (3,004) (1,392)
Net increase (decrease) 10,769 1,755
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30,
1996 1995 1994 B 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 38.32 $ 33.49 $ 32.84 $ 30.94 $ 28.06
of period
Income from Investment
Operations
Net investment income .92 .85 .81 .81 .82
Net realized and unrealized 10.32 4.77 .81 1.89 2.94
gain (loss)
Total from investment 11.24 5.62 1.62 2.70 3.76
operations
Less Distributions (.99) (.80) (.80) (.81) (.83)
From net investment income
From net realized gain (.37) - (.17) - (.07)
In excess of net realized - - (.01) - -
gain
Total distributions (1.36) (.80) (.98) (.81) (.90)
Redemption fees added to .02 .01 .01 .01 .02
paid in capital
Net asset value, end of period $ 48.22 $ 38.32 $ 33.49 $ 32.84 $ 30.94
TOTAL RETURN A 29.83% 17.08% 4.95% 8.85% 13.74%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,011 $ 391 $ 283 $ 305 $ 230
(in millions)
Ratio of expenses to average .45% .45% .45% .44% .35%
net assets C C
Ratio of net investment income 2.11% 2.49% 2.38% 2.54% 2.84%
to average net assets
Portfolio turnover rate 5% 2% 3% 0% 1%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE INDEX ACCOUNT FEE. THE TOTAL RETURNS
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
B 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.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Market Index Fund (the fund) is a fund of Fidelity Commonwealth
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 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 maturing within sixty days of their purchase date are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing rates of exchange at period end. Purchases and sales of
securities, income receipts, and expense payments are translated into U.S.
dollars at the prevailing exchange rate on the respective dates of the
transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
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 is accrued as
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
earned. Investment income is recorded net of foreign taxes withheld where
recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned 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 futures
and options transactions and losses deferred due to wash sales, and futures
and options. 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 and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). 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.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to .50% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
daily and maintained at a value at least equal to the repurchase price.
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.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Buying futures, writing
puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Futures contracts involve, to varying degrees, risk
of loss in excess of the futures variation margin reflected in the
Statement of Assets and Liabilities. The underlying face amount at value of
any open futures contracts at the 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, if there
is an illiquid secondary market for the contracts, 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. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $506,206,000 and $32,122,000, respectively, of which U.S.
government and government agency obligations aggregated $0 and $500,000,
respectively.
The market value of futures contracts opened and closed during the period
amounted to $516,698,000 and $511,742,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.45% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$165,000 for the period.
4. FEES AND OTHER TRANSACTIONS - CONTINUED
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $1,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce fund expenses. During the period, the fund's
expenses were reduced by $35,000 under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Commonwealth Trust and the Shareholders of
Fidelity Market Index Fund:
We have audited the accompanying statement of assets and liabilities of ,
Fidelity Commonwealth Trust: Fidelity Market Index Fund including the
schedule of portfolio investments, as of April 30, 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 April 30, 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 Commonwealth Trust: Fidelity Market Index Fund as of April 30,
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.
/s/COOPERS & LYBRAND L.L.P
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 5, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Market Index Fund voted to pay on June
10, 1996, to shareholders of record at the opening of business on June 7,
1996, a distribution of $.81 per share derived from capital gains realized
from sales of portfolio securities and a dividend of $.23 per share from
net investment income.
A total of .72% 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 83% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Robert H. Morrison, Manager,
Security Transactions
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 *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan(registered trademark) Fund
Real Estate Portfolio
Utilities Income Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
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)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
INTERMEDIATE BOND
FUND
ANNUAL REPORT
APRIL 30, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 23 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 27 Notes to the financial statements.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS
The Board of Trustees of Fidelity Intermediate Bond Fund voted to pay on
June 10, 1996, to shareholders of record at the opening of business on June
7, 1996, a distribution of $.03 per share derived from capital gains
realized from sales of portfolio securities.
A total of 55.11% 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.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in 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.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond 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.
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 a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain fund
expenses, the past five years and past 10 years total return figures would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Intermediate Bond 6.85% 43.60% 106.18%
Lehman Brothers Intermediate 7.85% 44.13% 116.11%
Government/Corporate Bond Index
Intermediate Investment 7.67% 44.26% n/a
Grade Debt Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you 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 Lehman Brothers Intermediate
Government/Corporate Bond Index, which is comprised of government and
corporate fixed-rate debt issues. Issues included in the Index have
maturities of one to 10 years. To measure how the fund's performance
stacked up against its peers, you can compare it to the intermediate
investment grade debt funds average, which reflects the performance of 166
funds with similar objectives tracked by Lipper Analytical Services over
the past 12 months. These benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Intermediate Bond 6.85% 7.51% 7.50%
Lehman Brothers Intermediate 7.85% 7.58% 8.01%
Government/Corporate Bond Index
Intermediate Investment 7.67% 7.59% n/a
Grade Debt Funds Average
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 19960430 19960523 131253 S00000000000001
Intermediate Bond LB Govt./Corp. Int.
00032 LB007
1986/04/30 10000.00 10000.00
1986/05/31 9823.44 9883.42
1986/06/30 10083.84 10113.13
1986/07/31 10155.68 10215.64
1986/08/31 10362.20 10445.34
1986/09/30 10272.41 10360.07
1986/10/31 10416.08 10494.44
1986/11/30 10514.85 10594.65
1986/12/31 10569.76 10630.26
1987/01/31 10689.70 10738.22
1987/02/28 10757.18 10792.78
1987/03/31 10718.01 10770.38
1987/04/30 10435.96 10573.69
1987/05/31 10387.33 10549.29
1987/06/30 10533.22 10676.77
1987/07/31 10542.95 10701.18
1987/08/31 10504.04 10673.33
1987/09/30 10328.01 10534.93
1987/10/31 10568.71 10835.85
1987/11/30 10693.03 10904.76
1987/12/31 10781.62 11019.32
1988/01/31 11098.36 11301.29
1988/02/29 11241.59 11427.05
1988/03/31 11156.99 11383.12
1988/04/30 11115.42 11364.17
1988/05/31 11053.66 11313.92
1988/06/30 11245.81 11494.24
1988/07/31 11238.19 11469.84
1988/08/31 11264.12 11487.06
1988/09/30 11447.81 11686.34
1988/10/31 11599.36 11845.12
1988/11/30 11532.04 11744.05
1988/12/31 11559.60 11754.39
1989/01/31 11681.97 11877.85
1989/02/28 11660.13 11828.75
1989/03/31 11714.66 11879.86
1989/04/30 11890.58 12117.32
1989/05/31 12119.19 12357.94
1989/06/30 12395.45 12669.48
1989/07/31 12637.01 12929.62
1989/08/31 12468.84 12762.51
1989/09/30 12536.01 12822.81
1989/10/31 12797.60 13093.86
1989/11/30 12896.88 13219.05
1989/12/31 12925.71 13255.23
1990/01/31 12796.26 13170.24
1990/02/28 12831.17 13218.19
1990/03/31 12834.37 13235.42
1990/04/30 12750.96 13189.48
1990/05/31 13039.09 13020.07
1990/06/30 13208.38 13659.80
1990/07/31 13380.68 13849.31
1990/08/31 13271.54 13792.46
1990/09/30 13376.16 13898.99
1990/10/31 13496.21 14060.36
1990/11/30 13724.63 13780.11
1990/12/31 13900.76 14468.95
1991/01/31 14036.11 14615.67
1991/02/28 14136.62 14732.54
1991/03/31 14213.12 14832.74
1991/04/30 14358.56 14994.40
1991/05/31 14421.68 15086.57
1991/06/30 14412.33 15097.19
1991/07/31 14578.92 15265.45
1991/08/31 14861.68 15556.90
1991/09/30 15143.60 15824.50
1991/10/31 15282.70 16005.11
1991/11/30 15404.12 16188.88
1991/12/31 15916.05 16584.26
1992/01/31 15680.79 16434.09
1992/02/29 15757.02 16498.98
1992/03/31 15687.77 16434.09
1992/04/30 15767.99 16578.52
1992/05/31 16035.91 16835.50
1992/06/30 16255.17 17084.73
1992/07/31 16650.79 17424.41
1992/08/31 16783.36 17598.70
1992/09/30 16896.16 17837.60
1992/10/31 16710.08 17606.17
1992/11/30 16624.27 17539.27
1992/12/31 16883.64 17774.14
1993/01/31 17275.15 18119.85
1993/02/28 17624.47 18405.55
1993/03/31 17707.33 18478.77
1993/04/30 17801.66 18627.50
1993/05/31 17810.66 18586.15
1993/06/30 18183.07 18877.88
1993/07/31 18355.97 18924.11
1993/08/31 18750.51 19224.17
1993/09/30 18819.12 19303.99
1993/10/31 18935.17 19355.67
1993/11/30 18821.84 19247.71
1993/12/31 18902.93 19335.86
1994/01/31 19124.17 19550.64
1994/02/28 18741.43 19261.49
1994/03/31 18404.68 18943.64
1994/04/30 18322.57 18814.71
1994/05/31 18293.00 18827.35
1994/06/30 18314.41 18829.93
1994/07/31 18501.54 19100.98
1994/08/31 18524.33 19160.71
1994/09/30 18434.86 18984.41
1994/10/31 18440.55 18981.82
1994/11/30 18461.87 18895.68
1994/12/31 18523.21 18962.59
1995/01/31 18735.95 19282.17
1995/02/28 18998.50 19682.14
1995/03/31 19120.52 19794.70
1995/04/30 19297.28 20039.05
1995/05/31 19785.19 20644.90
1995/06/30 19904.57 20783.30
1995/07/31 19890.94 20786.17
1995/08/31 20073.01 20975.39
1995/09/30 20199.65 21127.29
1995/10/31 20430.50 21362.74
1995/11/30 20680.20 21643.55
1995/12/31 20895.67 21870.39
1996/01/31 21052.17 22059.03
1996/02/29 20815.78 21800.04
1996/03/31 20689.44 21687.77
1996/04/30 20610.86 21611.11
IMATRL PRASUN SHR__CHT 19960430 19960523 131257 R00000000000104
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Intermediate Bond
Fund on April 30, 1986. As the chart shows, by April 30, 1996, the value of
your investment would have grown to $20,618 - a 106.18% increase on your
initial investment. For comparison, look at how the Lehman Brothers
Intermediate Government/Corporate Bond Index did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$21,611 - a 116.11% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds 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)
TOTAL RETURN COMPONENTS
YEARS ENDED APRIL 30,
1996 1995 1994 1993 1992
Dividend return 6.65% 6.40% A 6.49% 8.08% 7.83%
Capital appreciation return 0.20% -1.08% -3.56% 4.82% 1.99%
Total return 6.85% 5.32% 2.93% 12.90% 9.82%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.52(cents) 33.75(cents) 66.03(cents)
Annualized dividend rate 6.66% 6.58% 6.44%
30-day annualized yield 5.69% n/a n/a
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average share price of $10.08 over the past month, $10.29 over
the past six months, and $10.25 over the past year, you can compare the
fund's income over these three periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis.
A DIVIDENDS PAID ARE BASED ON THE FUND'S INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
OF APPROXIMATELY 1.9(CENTS) PER SHARE PAID DURING 1995 WERE A NON-TAXABLE
RETURN OF CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Signs of strength in the economy
cooled off a hot 1995 bond
market and served to lower
returns for the 12 months ended
April 30, 1996. For the period, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of U.S. taxable bonds - posted a
total return of 8.64%. Even
though in late January the
Federal Reserve Board lowered
its target for the fed funds rate -
the rate banks charge each
other on overnight loans - from
5.50% to 5.25%, the move largely
was discounted by the bond
market. Stronger-than-expected
economic signals - including
surprisingly robust employment
reports in February and March -
rattled the bond market and
caused the yield on the 30-year
bond to rise to over 7% - a level
not seen in over a year. Although
mortgage-backed securities were
held back by the overall downturn
in bond prices, they have
performed well thus far in 1996
relative to other investment-grade
securities as prepayment fears
eased in the face of a rising
mortgage rate environment. To
illustrate, the Salomon Brothers
Mortgage Index returned 8.54%
during the period, almost
matching the return posted by the
more aggressive Aggregate
Bond Index.
An interview with Christine Thompson, Portfolio Manager, Fidelity
Intermediate Bond Fund
Q. CHRISTINE, HOW DID THE FUND PERFORM?
A. For the twelve months ended April 30, 1996, the fund had a total return
of 6.85%. That compares to a return of 7.67% over the same period for the
intermediate investment grade debt funds average, as tracked by Lipper
Analytical Services. The Lehman Brothers Intermediate Government/Corporate
Bond Index was up 7.85% for the period. While the fund underperformed the
Index and the Lipper average for the annual period, during the past six
months its return has closely tracked that of the Index and, in fact, has
outperformed the Lipper average.
Q. THE FUND HAS GENERALLY HAD A SOMEWHAT SHORTER DURATION COMPARED TO ITS
PEERS. HOW DID THAT AFFECT PERFORMANCE OVER THE COURSE OF THE PERIOD?
A. First, I think it's important to remember why the fund was structured as
it was during the period. I was managing the fund to match the overall
interest rate sensitivity of the market, as represented by the Index. This
allowed me to focus on finding areas of relative value within the bond
market, while providing some consistency in terms of how volatile the
fund's performance was in relation to the Index. In contrast, the majority
of the funds in our Lipper peer group tended to have a longer duration.
Those funds tended to have more volatility compared to the Index during the
past twelve months, outperforming it in the first part of the period and
underperforming in the second part.
Q. HOW DID YOU CONTINUE TO RE-STRUCTURE THE PORTFOLIO SINCE TAKING OVER IN
OCTOBER?
A. When I began working with the fund, it had what is known as a barbell
structure, which refers to overweighted holdings of both short- and
long-duration assets, rather than assets of intermediate duration. I
repositioned the fund toward a laddered structure that has holdings all
along the curve, within which I focused on emphasizing certain maturities
that I felt offered relative value compared to neighboring ones.
Q. YOU ALSO INCREASED THE FUND'S EXPOSURE TO THE CORPORATE SECTOR. DID THAT
REFLECT YOUR FEELING THAT THE ECONOMY WAS CONTINUING TO IMPROVE?
A. Corporate bond holdings played a central role in my overall strategy in
managing the fund. The composition of the fund's corporate holdings, as
well as the total percentage exposure, reflected my view of the health of
the economy, the credit quality of individual issuers and, most
importantly, the valuation of corporate securities relative to alternative
investments. My view on the economy was that growth was likely to slow from
its recent level, but would continue at a moderate pace into the second
half of the year. Within the corporate sector, our research identified a
number of issuers with stable or improving credit profiles. Unfortunately,
the valuation levels of corporate securities already reflected this
favorable backdrop. Quality yield spread relationships in the corporate
market were approaching historically narrow levels during the period. This
led me to have a defensive orientation within the corporate market and to
concentrate recent increases in the fund's corporate holdings in issues
maturing in less than five years.
Q. WAS IT DIFFICULT TO RE-POSITION THE PORTFOLIO IN THIS MARKET?
A. I would say that it was a bit frustrating not to be able to move as
quickly as I would have liked. There wasn't much available supply in the
marketplace within the areas that I wanted to focus the fund's investments.
Of course, that's also because I only wanted to pay what I considered to be
reasonable valuation levels for the paper I was interested in buying. There
was very strong demand in the corporate market, and only modest issuance,
so to move the fund any faster would have meant paying prices that I viewed
as unfavorable to the long-term interests of the fund's shareholders.
Q. CHRISTINE, WE UNDERSTAND THAT THERE WILL BE SOME CHANGES IN THE FUND'S
INVESTMENT POLICIES . . .
A. Yes, there will. As of June 21, the fund will use two additional
agencies - Duff & Phelps Credit Rating Co. and Fitch Investor's Service,
L.P., as well as the Moody's Investors Service and Standard & Poor's
agencies the fund already uses - to determine the credit quality of the
fund's bonds. In addition, as of June 21, the fund will reserve the right
to invest up to 5% in non-investment grade securities. The fund does not
intend to seek out the lower quality bonds. Instead, this change gives the
fund additional flexibility under unusual circumstances.
Q. LOOKING FORWARD, WHAT CAN WE EXPECT IN THE MONTHS AHEAD?
A. My current intention is to continue in the direction we've been
discussing. I will use the fund's benchmark, the Lehman Brothers
Intermediate Government/Corporate Bond Index, as a target for structuring
the overall interest rate volatility of the fund, while drawing on
Fidelity's vast resources to identify securities which I feel have the
strongest performance potential in the U.S. dollar-denominated investment
grade marketplace.
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: high current income
by investing mainly in
investment-grade debt
securities while normally
maintaining an average
maturity of three to 10 years.
START DATE: May 23, 1975
SIZE: as of April 30, 1996,
more than $2.8 billion
MANAGER: Christine
Thompson, since October 1,
1995; manager, Fidelity U.S.
Bond Index Fund, since
1990; manager, Fidelity
Target Timeline 1999, 2001,
2003, since February 1996;
joined Fidelity in 1985
(checkmark)
CHRISTINE THOMPSON ON
RELATIVE VALUE IN FIXED-INCOME
MARKET SECTORS:
"I feel that a value approach is
best suited for pursuing solid
returns while minimizing
portfolio volatility. The key for
me is leveraging Fidelity's
internal resources to identify
areas of fundamental value
and to negotiate price levels
that leave room for future
improvement. With this fund, I
don't want to be
second-guessing interest rate
moves. Instead, I feel
shareholders will generally be
better served if I actively
manage the portfolio to take
advantage of valuation
changes within the investment
grade bond market. For
instance, I was fairly active in
entering and exiting the
mortgage sector over the past
six months. Mortgage
valuations tend to change
quickly in response to the
bond market's overall volatility,
primarily due to the sensitivity
of the sector to the
prepayment of the underlying
mortgage loans. The
movements of interest rates
caused some sharp variations
in how the mortgage sector was
valued compared to alternative
sectors. Fidelity has invested
in the development of
proprietary analytic tools that
allow us to create models for
the sector and judge its
performance potential amid
changing market conditions.
Identifying these types of
variations can create
opportunities for tactical
investments that may help
generate strong performance
for the fund."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF APRIL 30, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Aaa 64.8 75.8
Aa 4.6 4.7
A 14.1 11.2
Baa 12.7 6.5
Ba 0.6 0.4
B - -
Not rated 1.8 1.0
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" OR BELOW BY
MOODY'S WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION
BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1996
6 MONTHS AGO
Years 4.9 5.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF APRIL 30, 1996
6 MONTHS AGO
Years 3.3 3.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION, IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF APRIL 30, 1996 * AS OF OCTOBER 31, 1995 **
Row: 1, Col: 1, Value: 2.4
Row: 1, Col: 2, Value: 3.0
Row: 1, Col: 3, Value: 3.2
Row: 1, Col: 4, Value: 54.0
Row: 1, Col: 5, Value: 37.4
Row: 1, Col: 1, Value: 1.5
Row: 1, Col: 2, Value: 3.0
Row: 1, Col: 3, Value: 3.8
Row: 1, Col: 4, Value: 72.8
Row: 1, Col: 5, Value: 18.9
Corporate bonds 37.9%
U.S. government
and agency
obligations 55.0%
Foreign
government
obligations 2.9%
Other 2.8%
Short-term
investments 1.4%
Corporate bonds 19.9%
U.S. government
and agency
obligations 73.2%
Foreign
government
obligations 3.6%
Other 2.8%
Short-term
investments 0.5%
* FOREIGN
INVESTMENTS 9.8%
** FOREIGN
INVESTMENTS 9.8%
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 37.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
BASIC INDUSTRIES - 1.0%
CHEMICALS & PLASTICS - 1.0%
Methanex Corp. 8 7/8%, 11/15/01 $ 25,560 $ 27,595
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.3%
General Motors Corp. 9 5/8%, 12/1/00 6,870 7,594
CONSUMER ELECTRONICS - 0.1%
Black & Decker Corp. 7 1/2%, 4/1/03 3,000 3,025
TOTAL DURABLES 10,619
ENERGY - 3.6%
ENERGY SERVICES - 0.6%
Petroliam Nasional BHD yankee (a):
6 7/8%, 7/1/03 6,350 6,215
7 1/8%, 8/15/05 11,500 11,386
17,601
OIL & GAS - 3.0%
Coastal Corp.:
9 3/4%, 8/1/03 1,760 1,990
10 3/8%, 10/1/00 6,000 6,747
Elf Aquitaine SA yankee 7 3/4%, 5/1/99 15,000 15,428
Occidental Petroleum Corp.:
6.46%, 9/8/97 3,600 3,609
6.04%, 9/15/97 7,500 7,477
5.84%, 11/9/98 2,000 1,963
5.85%, 11/9/98 6,200 6,088
5.93%, 11/9/98 5,000 4,919
5.95%, 11/9/98 1,800 1,772
5.96%, 11/9/98 3,900 3,839
6.93%, 10/15/99 4,500 4,520
6.09%, 11/29/99 2,250 2,200
10.72%, 4/6/00 2,000 2,264
10.69%, 7/27/00 5,000 5,692
6.35%, 11/9/00 5,000 4,894
6.24%, 11/24/00 6,550 6,381
9 1/2%, 8/1/01 4,000 4,434
84,217
TOTAL ENERGY 101,818
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FINANCE - 27.0%
ASSET-BACKED SECURITIES - 10.4%
Boatmens Auto Trust 6.35%, 10/15/01 $ 2,820 $ 2,804
Case Equipment Loan Trust:
6.45%, 9/15/02 6,140 6,015
5.85%, 2/15/03 4,370 4,251
Chase Manhattan Grantor Trust 5.90%, 11/15/01 25,098 25,019
Chevy Chase Auto Receivables Trust 5.80%, 6/15/02 30,577 30,415
Discover Card Trust:
7 7/8%, 4/16/98 1,860 1,856
6 1/8%, 5/15/98 2,550 2,545
7 1/2%, 6/16/00 8,150 8,285
Ford Credit Auto Loan Master Trust 7 3/8%, 4/15/99 12,000 12,146
Ford Credit Grantor Trust 5.90%, 10/15/00 30,417 30,283
Green Tree Financial Corp.:
5 1/2%, 1/31/00 2,776 2,729
6.10%, 4/15/27 19,690 19,555
6.45%, 5/15/27 8,780 8,759
6.70%, 5/15/27 9,220 9,171
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 1,918 1,912
Premier Auto Trust 6.35%, 7/6/00 10,800 10,695
Prime Credit Card Master Trust:
7.05%, 2/15/01 14,210 14,392
7.45%, 11/15/02 8,410 8,622
Railcar Trust 7 3/4%, 6/1/04 12,994 13,501
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 1,951 1,955
Standard Credit Card Master Trust I 7.65%, 2/15/00 2,800 2,858
Toyota Auto Receivables Grantor Trust 6.15%, 1/15/99 3,537 3,524
Union Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 1,119 1,119
7.275%, 10/10/00 1,140 1,149
WFS Financial Grantor Trust:
6.05%, 6/1/00 18,920 18,920
5 7/8%, 3/1/02 37,128 36,848
Western Financial Grantor Trust:
6.05%, 11/1/00 9,890 9,910
6.20%, 2/1/02 8,225 8,236
297,474
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FINANCE - CONTINUED
BANKS - 10.8%
Banponce Corp.:
5 3/4%, 3/1/99 $ 5,420 $ 5,277
6.378%, 4/8/99 6,000 5,927
6 3/4%, 12/15/05 5,000 4,691
Capital One Bank:
6.48%, 8/15/97 5,000 5,004
8 1/8%, 2/27/98 22,400 22,966
Central Fidelity Banks, Inc. 8.15%, 11/15/02 11,500 12,057
Chase Manhattan Corp. 7 3/4%, 11/1/99 8,260 8,484
Citicorp 8.80%, 2/1/00 5,820 5,935
Corporacion Andina De Fomento yankee:
7 1/4%, 4/30/98 (a) 6,100 6,150
7.10%, 2/1/03 5,000 4,839
Crestar Financial Corp. 8 3/4%, 11/15/04 7,100 7,704
Export-Import Bank of Korea 6 3/8%, 2/15/06 12,690 11,792
First Fidelity Bancorporation 9 5/8%, 8/15/99 2,700 2,926
First Hawaiian, Inc. 6 1/4%, 8/15/00 11,255 10,948
First Interstate Bancorp 8 5/8%, 4/1/99 10,000 10,513
First Maryland Bancorp 10 3/8%, 8/1/99 2,895 3,190
First Tennessee National Corp. 6 3/4%, 11/15/05 3,750 3,551
First USA Bank 5 3/4%, 1/15/99 12,000 11,699
Fleet Financial Group, Inc. 7 5/8%, 12/1/99 6,570 6,705
Florida National Banks, Inc. 9 7/8%, 5/15/99 5,000 5,435
Hartford National Corp. 9.85%, 6/1/99 2,155 2,329
Integra Financial Corp. 6 1/2%, 4/15/00 3,000 2,953
Kansallis-Osake-Pankki:
yankee 9 3/4%, 12/15/98 6,715 7,207
6 3/8%, 8/15/00 235 230
10%, 5/1/02 3,840 4,348
Korea Development Bank:
9 1/4%, 6/15/98 5,300 5,571
yankee 5 7/8%, 12/1/98 1,000 981
7%, 7/15/99 3,300 3,322
6 1/4%, 5/1/00 1,000 974
9 1/2%, 3/15/01 3,000 3,300
9.48%, 4/2/01 7,000 7,697
9.40%, 8/1/01 5,000 5,501
Merita Bank Ltd. yankee 6 1/2%, 1/15/06 12,000 11,167
Midland American Capital Corp. 12 3/4%, 11/15/03 1,930 2,194
Midlantic Corp. 9 1/4%, 9/1/99 5,000 5,350
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Provident Bank:
6 1/8%, 12/15/00 $ 22,405 $ 21,623
7 1/8%, 3/15/03 2,000 1,952
6 3/8%, 1/15/04 1,250 1,172
Shawmut Corp. 8 1/8%, 2/1/97 3,000 3,047
Shawmut National Corp.:
8 5/8%, 12/15/99 3,670 3,871
7.20%, 4/15/03 7,610 7,540
Signet Banking Corp.:
5 3/8%, 5/15/97 (b) 750 747
5.75%, 4/15/98 (b) 3,201 3,172
9 5/8%, 6/1/99 2,000 2,135
Sovran Financial Corp. 9 3/4%, 6/15/99 7,430 8,004
Summit Bancorp. 8 5/8%, 12/10/02 10,000 10,751
Union Planters Corp. 6 3/4%, 11/1/05 9,000 8,548
Wachovia Bank 7 3/4%, 4/15/02 11,000 11,239
Zions Bancorporation 8 5/8%, 10/15/02 3,900 4,182
306,900
CREDIT & OTHER FINANCE - 5.0%
Aristar, Inc.:
7 3/8%, 2/15/97 10,000 10,100
8 7/8%, 8/15/98 390 406
Associates Corp. of North America:
6 7/8%, 1/15/97 1,000 1,006
8.80%, 8/1/98 90 94
Deere (John) Capital Corp. 9 5/8%, 11/1/98 6,000 6,401
Finova Capital Corp.:
5.98%, 10/31/97 10,070 10,035
6.30%, 11/1/99 1,500 1,482
Ford Capital BV:
yankee 9 3/8%, 1/1/98 3,310 3,466
9%, 8/15/98 13,850 14,563
General Motors Acceptance Corp.:
7 7/8%, 2/23/98 16,000 16,421
5 3/8%, 3/9/98 4,000 3,935
7 1/2%, 5/18/98 10,000 10,207
6.40%, 6/8/98 12,500 12,497
Greyhound Financial Corp. 8 1/2%, 5/1/98 3,980 4,118
Heller Financial, Inc. 9 3/8%, 3/15/98 750 787
Household Finance Corp. 7 5/8%, 12/15/96 2,000 2,019
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
MCN Investment Corp.:
5.84%, 2/1/99 $ 8,730 $ 8,547
6.03%, 2/1/01 11,600 11,155
Secured Finance, Inc. secured 9.05%, 12/15/04 4,000 4,427
Southwestern Bell Capital Corp. 6.86%, 7/26/99 4,380 4,416
Tenneco Credit Corp.:
10 1/8%, 12/1/97 11,315 11,928
10.05%, 8/17/98 1,940 2,080
Union Acceptance Corp. 7.075%, 7/10/02 2,827 2,830
142,920
INSURANCE - 0.4%
Metropolitan Life Insurance Co. (a):
6.30%, 11/1/03 4,500 4,241
7%, 11/1/05 5,000 4,838
Protective Life Corp. 7.95%, 7/1/04 1,000 1,027
St. Paul Companies, Inc. 9 3/8%, 6/15/97 440 454
10,560
SAVINGS & LOANS - 0.4%
Ahmanson (H.F.) & Co.:
9 7/8%, 11/15/99 9,500 10,362
7 7/8%, 9/1/04 1,250 1,268
11,630
TOTAL FINANCE 769,484
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
Tenneco, Inc. 10%, 8/1/98 15,410 16,481
MEDIA & LEISURE - 0.1%
PUBLISHING - 0.1%
News America Holdings, Inc.:
12%, 12/15/01 1,835 2,007
8 5/8%, 2/1/03 3,240 3,448
TOTAL MEDIA & LEISURE 5,455
NONDURABLES - 0.8%
BEVERAGES - 0.1%
Coors Adolph Co. 9.05%, 6/15/98 3,500 3,669
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NONDURABLES - CONTINUED
FOODS - 0.7%
Dart and Kraft Finance 7 3/4%, 11/30/98 $ 5,847 $ 5,993
Quaker Oats Co.:
6.91%, 5/15/03 3,000 2,955
9 1/8%, 7/15/04 250 279
9 1/8%, 12/15/04 1,000 1,116
7 1/2%, 5/2/05 3,000 3,033
7.51%, 5/2/05 3,000 3,035
Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 2,910 3,019
19,430
TOBACCO - 0.0%
Philip Morris Companies, Inc. 8 7/8%, 7/1/96 450 452
TOTAL NONDURABLES 23,551
TECHNOLOGY - 0.8%
COMPUTERS & OFFICE EQUIPMENT - 0.8%
Comdisco, Inc.:
7 3/4%, 1/29/97 3,000 3,035
7.82%, 2/5/97 1,500 1,518
6.11%, 10/27/97 2,500 2,488
7 1/4%, 4/15/98 9,500 9,634
7 3/4%, 9/1/99 100 103
5 3/4%, 2/15/01 7,700 7,327
TOTAL TECHNOLOGY 24,105
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.3%
AMR Corp. 7 3/4%, 12/1/97 1,420 1,446
Delta Air Lines, Inc. 9 7/8%, 1/1/98 7,990 8,400
TOTAL TRANSPORTATION 9,846
UTILITIES - 3.3%
CELLULAR - 0.5%
360 Degrees Communications Co. 7 1/8%, 3/1/03 14,060 13,461
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - 1.2%
British Columbia Hydro & Power Authority yankee:
15 1/2%, 11/15/11 $ 12,500 $ 13,947
12 1/2%, 1/15/14 4,670 5,497
Hydro-Quebec 8.40%, 1/15/22 12,500 13,162
Texas Utilities Electric Co. 5 1/2%, 10/1/98 2,000 1,952
34,558
GAS - 1.6%
Columbia Gas System, Inc.:
6.39%, 11/28/00 5,478 5,367
6.61%, 11/28/02 5,328 5,186
Enron Corp:
10%, 6/1/98 3,000 3,187
8 1/2%, 2/1/00 2,920 2,974
InterNorth Inc. 9 5/8%, 3/15/06 9,610 11,102
Kern River Funding Corp. 6.42%, 3/31/01 (a) 14,138 13,852
Southwest Gas Corp., Series F, 9 3/4%, 6/15/02 3,840 4,269
45,937
TOTAL UTILITIES 93,956
TOTAL NONCONVERTIBLE BONDS
(Cost $1,095,311) 1,082,910
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 49.3%
U.S. TREASURY OBLIGATIONS - 36.1%
8 3/4%, 10/15/97 45,250 47,025
7 3/8%, 11/15/97 217,383 221,798
9%, 5/15/98 134,550 141,992
9 1/4%, 8/15/98 250,373 266,843
7 3/4%, 12/31/99 210,899 220,455
12 3/4%, 11/15/10 71,075 100,293
9%, 11/15/18 17,800 21,591
12%, 8/15/23 7,950 11,238
TOTAL U.S. TREASURY OBLIGATIONS 1,031,235
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 13.2%
Farm Credit System Financial Assistance Corp. Series A,
9 3/8%, 7/21/03 $ 6,990 $ 7,970
Federal Farm Credit Bank:
6.09%, 4/3/00 5,730 5,648
9 1/2%, 5/9/00 5,000 5,508
6.32%, 9/9/02 4,640 4,539
6.20%, 9/23/02 7,180 6,986
6.40%, 10/3/02 2,270 2,226
6.44%, 4/9/03 12,320 12,072
Federal Home Loan Bank:
9.05%, 5/23/00 5,000 5,444
8.85%, 6/21/00 2,960 3,201
6 3/4%, 4/5/04 3,060 3,013
6.89%, 4/6/04 4,465 4,476
7.36%, 7/1/04 19,335 19,764
7.38%, 8/5/04 5,890 6,029
7.46%, 9/9/04 5,000 5,159
7.59%, 3/10/05 3,010 3,135
Federal Home Loan Mortgage Corporation:
6.55%, 1/4/00 3,585 3,593
6.395%, 5/16/00 13,290 13,217
7.93%, 1/20/05 12,195 12,946
8%, 1/26/05 3,300 3,522
8.115%, 1/31/05 25,475 27,354
8 1/2%, 6/15/13 130 134
Federal National Mortgage Association:
8.67%, 6/15/97 (b) 20 19
8.35%, 11/10/99 8,340 8,831
8.90%, 6/12/00 5,000 5,418
5.73%, 1/6/03 5,000 4,718
5.45%, 10/10/03 6,100 5,609
7.40%, 7/1/04 12,340 12,679
7.49%, 3/2/05 1,815 1,877
7.65%, 3/10/05 10,620 11,083
7.35%, 3/28/05 14,635 15,001
7 3/8%, 3/28/05 3,300 3,383
7.16%, 5/11/05 24,385 24,655
Government Trust Certificates (assets of Trust guaranteed
by U.S. Government through Defense Security Assistance
Agency) Class 1-C, 9 1/4%, 11/15/01 990 1,063
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Government Trust Certificates (assets of Trust guaranteed
by U.S. Government through Export-Import Bank) Series:
1993-C 5.20%, 10/15/04 $ 6,247 $ 5,894
1993-D 5.23%, 5/15/05 4,464 4,208
1994-A 7.39%, 6/26/06 1,138 1,163
1994-B 7 1/2%, 1/26/06 3,215 3,312
1994-C 6.61%, 9/15/99 1,409 1,416
1994-F 8.187%, 12/15/04 3,274 3,429
1995-B 6.13%, 6/15/04 1,840 1,810
1996-A 6.55%, 6/15/04 8,750 8,691
Overseas Private Investment Corp. (U.S. Government
guaranteed participation certificate) Series 1994-1995,
6.08%, 8/15/04 9,680 9,227
Private Export Funding Corp.:
8 3/4%, 6/30/03 2,860 3,147
Series II, 8.40%, 7/31/01 6,520 6,987
Series LL, 7.90%, 3/31/00 1,610 1,682
Series SS, 5.80%, 2/1/04 8,400 8,049
Series VV, 6.24%, 5/15/02 3,195 3,117
State of Israel (guaranteed by U.S. Government through
Agency for International Development):
7 1/8%, 8/15/99 2,627 2,677
5 3/4%, 3/15/00 6,314 6,150
8%, 11/15/01 5,590 5,921
6 1/4%, 8/15/02 26,860 26,197
6 1/8%, 3/15/03 2,421 2,332
6 5/8%, 2/15/04 840 827
7 5/8%, 8/15/04 4,710 4,894
5.89%, 8/15/05 16,328 15,139
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 376,541
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $1,435,116) 1,407,776
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 5.7%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.6%
6%, 2/15/11 to 4/15/16 80,721 76,446
6 1/2%, 9/15/25 to 4/15/26 87,826 82,719
12 1/2%, 9/15/11 to 8/15/15 341 395
159,560
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.1%
7 1/2%, 9/15/25 $ 1,269 $ 1,255
8%, 5/15/22 26 26
9 1/2%, 9/15/09 to 10/15/15 165 180
10%, 12/15/13 to 8/15/17 501 551
2,012
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES (Cost $164,272) 161,572
COMMERCIAL MORTGAGE SECURITIES - 1.9%
CS First Boston Mortgage Securities Corp. commercial Series
1995-WF1 Class A-2, 6.648%, 12/21/27 15,000 14,400
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 103 103
Oregon pass thru certificates commercial
Series 1995 Class A1, 7.15%, 6/25/26 (a) 7,246 7,208
Resolution Trust Corp. commercial Series:
1994-N2 Class 2, 7 1/2%, 12/15/04 (a)(c) 204 203
1995-C1 Class A2A, 6 1/4%, 2/25/27 1,664 1,661
1995-C1 Class A4A, 6 1/4%, 2/25/27 4,461 4,430
1995-C2 Class A-1B, 6 1/4%, 5/25/27 7,850 7,614
1995-C2 Class D, 7%, 5/25/27 3,164 2,974
Structured Asset Securities Corp. commercial Series:
1993-C1 Class A-1, 6.60%, 10/25/24 1,069 1,063
1995-C4 Class A1A, 6.90%, 6/25/26 7,361 7,308
1996 Class A-1A, 5.711%, 2/25/28 4,314 4,267
1996 Class A-1B, 5.751%, 2/25/28 2,470 2,414
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $54,967) 53,645
FOREIGN GOVERNMENT OBLIGATIONS - 2.9%
Danish Government euro 7 3/4%, 12/15/96 1,350 1,367
Ireland Republic yankee 8 5/8%, 4/15/01 10,500 11,243
Manitoba Province yankee 6 7/8%, 9/15/02 17,500 17,346
FOREIGN GOVERNMENT OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
Ontario Province Canada yankee:
7 3/4%, 6/4/02 $ 11,000 $ 11,433
7 3/8%, 1/27/03 7,500 7,659
15 1/8%, 5/1/11 7,080 7,491
17%, 11/5/11 12,145 13,584
15 1/4%, 8/31/12 5,085 5,922
11 1/2%, 3/10/13 6,270 7,058
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $88,848) 83,103
SUPRANATIONAL OBLIGATIONS - 0.9%
African Development Bank:
10%, 11/1/97 4,000 4,222
8.70%, 5/1/01 5,000 5,406
7 3/4%, 12/15/01 8,000 8,266
European Investment Bank 11 5/8%, 2/1/99 2,500 3,075
Inter-American Development Bank 9.45%, 9/15/98 2,000 2,132
International Bank for Reconstruction & Development
euro 11 1/8%, 1/13/98 2,000 2,147
TOTAL SUPRANATIONAL OBLIGATIONS
(Cost $24,949) 25,248
REPURCHASE AGREEMENTS - 1.4%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 39,434 39,428
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,902,891) $ 2,853,682
LEGEND
1. 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 $54,093,000 or 1.9% of net
assets.
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.5% AAA, AA, A 79.7%
Baa 12.7% BBB 16.0%
Ba 0.6% BB 0.9%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.0%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 90.2%
Canada 4.5
Korea 1.4
Supranational 1.3
Others (individually less than 1%) 2.6
TOTAL 100.0%
INCOME TAX INFORMATION
At April 30, 1996, the aggregate cost of investment securities for income
tax purposes was $2,905,203,000. Net unrealized depreciation aggregated
$51,521,000, of which $9,793,000 related to appreciated investment
securities and $61,314,000 related to depreciated investment securities.
The fund hereby designates approximately $2,207,000 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) APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 2,853,682
agreements of $39,428) (cost $2,902,891) -
See accompanying schedule
Cash 95
Receivable for investments sold 26,495
Interest receivable 58,631
TOTAL ASSETS 2,938,903
LIABILITIES
Payable for investments purchased $ 43,810
Payable for fund shares redeemed 11,338
Distributions payable 687
Accrued management fee 1,059
Other payables and accrued expenses 1,224
TOTAL LIABILITIES 58,118
NET ASSETS $ 2,880,785
Net Assets consist of:
Paid in capital $ 2,930,914
Distributions in excess of net investment income (8,370)
Accumulated undistributed net realized gain (loss) on 7,467
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (49,226)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 286,691 shares outstanding $ 2,880,785
NET ASSET VALUE, offering price and redemption price $10.05
per share ($2,880,785 (divided by) 286,691 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 195,547
Interest (including income on securities loaned of $25)
EXPENSES
Management fee $ 12,219
Transfer agent fees 6,440
Accounting and security lending fees 650
Non-interested trustees' compensation 12
Custodian fees and expenses 118
Registration fees 230
Audit 67
Legal 22
Miscellaneous 18
Total expenses before reductions 19,776
Expense reductions (466) 19,310
NET INVESTMENT INCOME 176,237
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 53,279
Futures contracts (14,192) 39,087
Change in net unrealized appreciation (depreciation) on:
Investment securities (44,655)
Futures contracts 2,562 (42,093)
NET GAIN (LOSS) (3,006)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 173,231
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 176,237 $ 131,888
Net investment income
Net realized gain (loss) 39,087 (16,585)
Change in net unrealized appreciation (depreciation) (42,093) 2,612
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 173,231 117,915
FROM OPERATIONS
Distributions to shareholders (175,620) (125,751)
From net investment income
In excess of net realized gain - (18,082)
Return of capital (Note 1) - (3,993)
TOTAL DISTRIBUTIONS (175,620) (147,826)
Share transactions 1,657,878 1,248,267
Net proceeds from sales of shares
Reinvestment of distributions 167,400 139,860
Cost of shares redeemed (1,404,741) (677,390)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 420,537 710,737
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 418,148 680,826
NET ASSETS
Beginning of period 2,462,637 1,781,811
End of period (including distributions in excess $ 2,880,785 $ 2,462,637
of net investment income of $8,370 and
$12,959, respectively)
OTHER INFORMATION
Shares
Sold 161,750 125,125
Issued in reinvestment of distributions 16,326 14,003
Redeemed (136,971) (67,751)
Net increase (decrease) 41,105 71,377
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED APRIL 30,
1996 1995 1994 B 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.030 $ 10.230 $ 10.700 $ 10.270 $ 10.070
of period
Income from Investment .684 .591 .705 .784 .764
Operations
Net investment income
Net realized and (.004) (.074) (.381) .496 .197
unrealized gain (loss)
Total from investment .680 .517 .324 1.280 .961
operations
Less Distributions (.660) (.598) (.704) (.790) (.761)
From net investment income
From net realized gain - - - (.060) -
In excess of net realized gain - (.100) (.090) - -
Return of capital - (.019) - - -
Total distributions (.660) (.717) (.794) (.850) (.761)
Net asset value, end of period $ 10.050 $ 10.030 $ 10.230 $ 10.700 $ 10.270
TOTAL RETURN A 6.85% 5.32% 2.93% 12.90% 9.82%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 2,881 $ 2,463 $ 1,782 $ 1,639 $ 1,235
period (in millions)
Ratio of expenses to average .73% .68% .64% .61% .63%
net assets C C
Ratio of expenses to average net .71% .68% .64% .61% .63%
assets after expense reductions D
Ratio of net investment 6.48% 6.31% 6.88% 7.44% 7.45%
income to average net assets
Portfolio turnover rate 169% 75% 81% 51% 80%
</TABLE>
D THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
E EFFECTIVE MAY 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 VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G 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).
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Intermediate Bond Fund (the fund) is a fund of Fidelity
Commonwealth 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 are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted securities) for
which quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
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. Interest income, which includes accretion of original
issue discount, is accrued as earned.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, 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 paydown
gains/losses on certain securities, futures transactions, market discount
and losses deferred due to wash sales and excise tax regulations. The fund
also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
For the period ended April 30, 1995, the fund's distributions exceeded the
aggregate amount of taxable income and net realized gains resulting in a
return of capital. This was due to certain foreign currency losses which
decreased taxable income available for distribution after certain
distributions had been made.
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.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. 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 forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, 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, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates and currency values. Buying futures, writing puts, and
buying calls tend to increase the fund's exposure to the underlying
instrument. Selling futures, buying puts, and writing calls tend to
decrease the fund's exposure to the underlying instrument, or hedge other
fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $5,152,268,000 and $4,212,231,000, respectively, of which U.S.
government and government agency obligations aggregated $4,180,258,000 and
$3,848,105,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $158,139,000 and $345,377,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
assets of all the mutual funds advised by FMR. The rates ranged from .1100%
to .3700% 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%. For the period, the management
fee was equivalent to an annual rate of .45% of average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made to third parties under
the Plan during the period.
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 .24%
of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the month
plus out-of-pocket expenses.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, there were no
loans outstanding.
6. EXPENSE REDUCTIONS.
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 $26,000 and $440,000,
respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Commonwealth Trust and the Shareholders of
Fidelity Intermediate Bond Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Commonwealth Trust: Fidelity Intermediate Bond Fund, including the
schedule of portfolio investments, as of April 30,1996 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 April 30, 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 Commonwealth Trust: Fidelity Intermediate Bond Fund as of April
30, 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.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 5, 1996
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
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
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 *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
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)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
LARGE CAP STOCK
FUND
ANNUAL REPORT
APRIL 30, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The managers' 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 19 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 23 Notes to the financial statements.
REPORT OF INDEPENDENT 27 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 28
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in 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 a fund's 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
PERIOD ENDED APRIL 30, 1996 LIFE OF
FUND
Large Cap Stock 17.52%
S&P 500 (registered trademark) 22.61%
Growth Funds Average 19.54%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case since the fund started on June 22, 1995.
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 common proxy of the U.S. stock market. To measure how the fund's
performance stacked up against its peers, you can compare it to the
performance of the growth funds average, which reflects the performance of
611 growth funds with similar objectives tracked by Lipper Analytical
Services over the period. Both benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
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. In the fund's next report we'll report these
numbers for the fund and the benchmarks.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960430 19960521 083906 S00000000000001
Large Cap Stock SP Standard & Poor 500
00338 SP001
1995/06/22 10000.00 10000.00
1995/06/30 9870.00 10019.95
1995/07/31 10260.00 10352.21
1995/08/31 10330.00 10378.20
1995/09/30 10720.00 10816.16
1995/10/31 10590.00 10777.54
1995/11/30 10990.00 11250.68
1995/12/31 11079.92 11467.37
1996/01/31 11420.84 11857.71
1996/02/29 11621.38 11967.64
1996/03/31 11661.49 12082.88
1996/04/30 11751.73 12260.99
IMATRL PRASUN SHR__CHT 19960430 19960521 083907 R00000000000014
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Large Cap Stock Fund on June 22, 1995, when the fund started. As the chart
shows, by April 30, 1996, the value of your investment would have grown to
$11,752 - a 17.52% increase on your initial investment. For comparison,
look at how the S&P 500 Index did over the same period. With dividends
reinvested, the same $10,000 investment in the S&P 500 Index would have
grown to $12,261 - a 22.61% 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
Although rising interest rates
added to an already clouded
corporate earnings outlook in the
first quarter of 1996, stocks
managed to post solid returns for the
12 months ended April 30, 1996.
The Standard & Poor's 500 Index
finished the period with a return of
30.21% (including reinvested
dividends) - well above its
long-term historical annual average
of about 12%. During the period, the
market appeared to lose its appetite
for the blue-chip, multinational
firms that drove the market in
1995. This development was due
in part to a stronger dollar, surging
cash flows into mutual funds and
the higher valuations of
large-capitalization stocks relative
to small-capitalization stocks.
Additionally, technology
companies no longer had the
broad-based share price increases
they did in 1995. Falling
semiconductor prices worldwide
punished computer chip makers'
stocks, and the market put more of
an emphasis on software and
networking companies. Rising
interest rates - while fanning fears
of lower corporate earnings - and
higher commodity prices caused
another major shift in the stock
market. Investors, sensing a
renewed economic expansion,
moved from less economically
sensitive stocks like consumer
non-durables to more cyclical
sectors, such as aluminum,
chemical, oil, oil service and basic
industries. Financial stocks
performed well throughout the
period as high stock market
volume and the demand for
financial services created a positive
backdrop for the industry.
NOTE TO SHAREHOLDERS: On March 26, 1996, Tom Sprague (right photo) became
Portfolio Manager of Fidelity Large Cap Stock Fund. The following is an
interview with John McDowell (left photo) - who managed the fund during
most of the period covered by this report - with some additional comments
from Tom Sprague on his outlook and strategy.
Q. HOW DID THE FUND PERFORM, JOHN?
J.M. This fund was introduced on June 22, 1995. Fidelity generally looks at
performance for six- or 12- month periods. For this report, we will look at
performance since inception. For the period ended April 30, 1996, the fund
returned 17.52%, while its benchmark, the Standard & Poor's 500 Index,
returned 22.61%. According to Lipper Analytical Services, from June 22,
1995, to April 30, 1996, the growth funds average returned 19.54%.
Q. WHAT WAS BEHIND THE LARGE CAP SECTOR'S UNDERPERFORMANCE DURING THE PAST
SIX MONTHS?
A. I'd say there were three reasons. The first, of course, was the reversal
of some of the large-cap companies in the technology sector; earnings
momentum turned against many of the stocks - such as Intel and IBM - that
had driven the fund's performance since it began. The second was that,
realizing early this year that the economy was performing better than
expected, investors rotated away from several of the high-quality segments
of the large-cap sector, such as the pharmaceutical and household products
companies. At the same time, the fund wasn't heavily exposed to the
cyclicals, basic commodity goods and other smaller-cap areas of the market
that have performed well so far this year.
Q. AND THE THIRD REASON?
A. Well, the bond market's negative reaction to stronger-than-expected
economic news early in the year drove interest rates up, and both financial
and telephone-related companies - including Fannie Mae, Citicorp, Merrill
Lynch, Nynex and Ameritech - fared poorly along with other rate-sensitive
stocks. And it's fair to say that uncertainty over the telecom bill hurt
the Regional Bell companies, too.
Q. WAS THE FUND ABLE TO TAKE ADVANTAGE OF THE RUN-UP IN ENERGY STOCKS?
A. Absolutely. In fact, in retrospect, I would have liked to have had more
of the fund invested in the energy area, particularly some of the energy
services companies. But it's difficult to find good, solid earnings growth
stories in the energy sector overall, so I just couldn't justify investing
much more there.
Q. TURNING TO YOU, TOM, WHAT REALIGNMENTS HAVE YOU MADE IN THE PORTFOLIO?
T.S. Actually, very few. Both John and I have similar investment
philosophies, so I'll continue to try to find companies with good short-
and long-term earnings growth prospects selling at reasonable prices. For
example, I've continued to focus on investments in the health care area.
Q. WHY IS THAT?
T.S. For many pharmaceutical companies in particular, I see strong
short-term momentum, coupled with an even better long-term outlook. That's
because many of these companies continued to develop new drugs during the
debate on health care reform. So when no dramatic changes occurred, they
were poised to bring products to the market quickly, and the FDA has been
approving them more quickly as well. Also, providers are realizing that
drugs are in many cases a cost-efficient way to manage health care. After
all, it makes sense that spending on, say, prescriptions for blood pressure
medication today is cheaper than treating a heart attack five years from
now. And finally, because the average number of prescriptions per person
increases with age, the aging Baby Boomer wave should be a powerful
demographic positive.
Q. ANY SIGNIFICANT DIFFERENCES IN THE TOP 10 STOCKS?
T.S. Well, Fannie Mae dropped out because I felt the stock was expensive on
a price-to-earnings basis, although at the end of the reporting period it
was still a big position in the fund. Also, at the end of the period,
American Express and Bank of New York had joined the top 10 on the basis of
steady earnings growth and strong valuation. Owens-Illinois was also a
newcomer to the top 10 and somewhat of a special case. It makes glass
containers, which most people don't see as a growing business because of
the overall movement toward cans. But in less-developed countries, glass
consumption is growing, and Owens is a dominant glass producer outside the
U.S.
Q. WHAT'S YOUR OUTLOOK OVER THE NEXT SEVERAL MONTHS, TOM?
T.S. First let me say that my overall philosophy is to remain close to
fully invested rather than setting any top-down sector strategy or trying
to time the market. The fund's current weighting toward growth companies
instead of cyclicals means that the fund would benefit most from a stable,
low-growth economy, with steady or declining interest rates.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to seek long-term
growth of capital by investing
in companies with market
capitalizations greater than
$1 billion at the time of
investment
START DATE: June 22, 1995
SIZE: As of April 30, 1996,
more than $88 million
MANAGER: Tom Sprague,
since March 26, 1996;
manager, Fidelity Advisor
Large Cap Fund since March
1996; joined Fidelity in 1989
(checkmark)
TOM SPRAGUE ON HIS
INVESTMENT DISCIPLINE:
"I base my investment
decisions primarily on three
characteristics: long-term
earnings growth, short-term
earnings momentum and
good overall stock valuation.
As for long-term earnings
growth, I look for companies
that can grow their earnings
above the 8% a year of the
fund's benchmark, the
Standard & Poor's 500 Index.
I'm interested in companies
with earnings growth of at
least 10% a year over a
three-year period. The
second step is to take those
companies and determine
which will have good earnings
surprises in the short-term
compared to what the market
expects. That's where
Fidelity's analysts are
invaluable - I think they give
me a big advantage in
uncovering those kinds of
stocks. The third step is
ensuring that the stock price
is attractive to me. To do this
I'll analyze a stock's price per
unit of earnings growth, using
a measure called `p-e to
growth.' For example, right
now the market is selling at a
price-to-earnings ratio of
about 16 times earnings, and
earnings are growing at 8% a
year, so the market's p-e to
growth measure is 16 divided
by 8, or 2. I'm looking for
stocks with a p-e to growth of
closer to one, which means I
can get a unit of earnings
growth priced at half that of
the market - in other words,
a bargain. With this strategy, I
can stay fully focused on the
stocks that have true earnings
growth and are selling at
reasonable valuations
because, over time, the
market tends to reward that."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
International Business Machines 3.1 2.1
Corp.
General Electric Co. 2.4 2.7
Philip Morris Companies, Inc. 1.9 3.0
AT&T Corp. 1.8 2.3
American Express Co. 1.7 1.6
Owens-Illinois, Inc. 1.6 0.5
Bank of New York Co., Inc. 1.5 0.8
Ameritech Corp. 1.4 1.8
Cisco Systems, Inc. 1.4 1.5
British Petroleum PLC ADR 1.4 1.1
TOP FIVE MARKET SECTORS AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Technology 18.5 27.2
Health 15.3 13.8
Finance 11.4 9.8
Retail & Wholesale 9.5 3.5
Nondurables 8.1 10.6
ASSET ALLOCATION
AS OF APRIL 30, 1996 * AS OF OCTOBER 31, 1995 **
Row: 1, Col: 1, Value: 48.0
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 1, Value: 44.8
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 5.2
Stocks 98.9%
Short-term
investments 1.1%
FOREIGN
INVESTMENTS 3.1%
Stocks 94.8%
Short-term
investments 5.2%
FOREIGN
INVESTMENTS 3.7%
*
**
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 98.9%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.6%
Lockheed Martin Corp. 6,680 $ 538,575
BASIC INDUSTRIES - 4.0%
CHEMICALS & PLASTICS - 2.4%
du Pont (E.I.) de Nemours & Co. 9,700 779,638
Monsanto Co. 2,500 378,750
Praxair, Inc. 13,200 509,850
Rohm & Haas Co. 4,800 318,600
1,986,838
PACKAGING & CONTAINERS - 1.6%
Owens-Illinois, Inc. (a) 86,470 1,372,711
TOTAL BASIC INDUSTRIES 3,359,549
CONGLOMERATES - 1.5%
Allied-Signal, Inc. 7,000 406,875
Tyco International Ltd. 21,960 848,205
1,255,080
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.5%
Sherwin-Williams Co. 9,500 444,125
DURABLES - 4.2%
AUTOS, TIRES, & ACCESSORIES - 1.8%
Autozone, Inc. (a) 12,700 463,550
Echlin, Inc. 17,300 594,688
Snap-on Tools Corp. 9,600 460,800
1,519,038
CONSUMER ELECTRONICS - 0.6%
Black & Decker Corp. 11,600 466,900
Newell Co. 900 25,650
492,550
HOME FURNISHINGS - 0.4%
Heilig-Meyers Co. 11,800 243,375
Leggett & Platt, Inc. 2,600 66,950
310,325
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 1.4%
Jones Apparel Group, Inc. (a) 6,700 $ 344,213
Nine West Group, Inc. (a) 9,340 400,453
Warnaco Group, Inc. Class A 17,500 459,375
1,204,041
TOTAL DURABLES 3,525,954
ENERGY - 6.1%
ENERGY SERVICES - 1.3%
Halliburton Co. 7,000 401,625
Schlumberger Ltd. 7,640 674,230
1,075,855
OIL & GAS - 4.8%
Amerada Hess Corp. 4,260 241,223
Amoco Corp. 3,100 226,300
Anadarko Petroleum Corp. 4,000 233,000
Atlantic Richfield Co. 3,620 426,255
British Petroleum PLC ADR 10,423 1,138,713
Burlington Resources, Inc. 6,300 234,675
Phillips Petroleum Co. 7,310 303,365
Royal Dutch Petroleum Co. 6,200 888,150
Unocal Corp. 8,820 283,343
3,975,024
TOTAL ENERGY 5,050,879
FINANCE - 11.4%
BANKS - 3.0%
Bank of New York Co., Inc. 25,890 1,255,665
Citicorp 5,300 417,375
NationsBank Corp. 10,800 861,300
2,534,340
CREDIT & OTHER FINANCE - 2.3%
American Express Co. 28,610 1,387,585
Household International, Inc. 8,000 553,000
1,940,585
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 2.4%
Federal Home Loan Mortgage Corp. 9,500 $ 792,063
Federal National Mortgage Association 26,800 820,750
Student Loan Marketing Association 5,300 388,225
2,001,038
INSURANCE - 3.3%
Aetna Life & Casualty Co. 6,200 441,750
Allstate Corp. 22,571 877,448
American International Group, Inc. 5,800 529,975
General Re Corp. 1,720 245,745
MBIA, Inc. 3,300 235,538
UNUM Corp. 7,100 422,450
2,752,906
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 5,100 307,913
TOTAL FINANCE 9,536,782
HEALTH - 15.3%
DRUGS & PHARMACEUTICALS - 6.0%
Allergan, Inc. 12,100 428,038
American Home Products Corp. 6,660 702,630
Bristol-Myers Squibb Co. 8,200 674,450
Merck & Co., Inc. 18,070 1,093,235
Pharmacia & Upjohn, Inc. 14,200 543,150
Pfizer, Inc. 9,450 650,869
Schering-Plough Corp. 12,490 716,614
Warner-Lambert Co. 1,700 189,975
4,998,961
MEDICAL EQUIPMENT & SUPPLIES - 5.5%
Baxter International, Inc. 15,680 693,840
Becton, Dickinson & Co. 10,520 848,175
Bergen Brunswig Corp. Class A 20,800 566,800
Cardinal Health, Inc. 6,400 401,600
Johnson & Johnson 7,800 721,500
McKesson Corp. 7,100 338,138
Medtronic, Inc. 4,400 233,750
Millipore Corp. 8,260 345,888
St. Jude Medical, Inc. (a) 12,620 460,630
4,610,321
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 3.8%
Columbia/HCA Healthcare Corp. 19,350 $ 1,027,969
Health Management Associates, Inc. Class A (a) 6,620 211,840
Health Care & Retirement Corp. (a) 9,200 339,250
Tenet Healthcare Corp. (a) 7,600 155,800
United HealthCare Corp. 12,870 752,895
U.S. Healthcare, Inc. 4,500 234,563
Vencor, Inc. (a) 13,400 452,250
3,174,567
TOTAL HEALTH 12,783,849
INDUSTRIAL MACHINERY & EQUIPMENT - 5.4%
ELECTRICAL EQUIPMENT - 3.1%
Emerson Electric Co. 4,500 376,313
General Electric Co. 26,190 2,029,725
Honeywell, Inc. 3,700 194,713
2,600,751
INDUSTRIAL MACHINERY & EQUIPMENT - 2.3%
Caterpillar, Inc. 15,070 964,480
Ingersoll-Rand Co. 7,200 279,000
Stanley Works 10,400 652,600
1,896,080
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 4,496,831
MEDIA & LEISURE - 4.0%
ENTERTAINMENT - 0.5%
Carnival Cruise Lines, Inc. Class A 6,600 191,400
Disney (Walt) Co. 3,455 214,210
405,610
LODGING & GAMING - 1.9%
HFS, Inc. (a) 11,480 589,785
Hilton Hotels Corp. 2,000 211,000
Marriott International, Inc. 16,740 816,075
1,616,860
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 1.2%
American Greetings Corp. Class A 7,200 $ 198,900
Scholastic Corp. (a) 3,900 255,450
Times Mirror Co. Class A 12,900 549,863
1,004,213
RESTAURANTS - 0.4%
Brinker International, Inc. (a) 1,500 26,250
Darden Restaurants, Inc. 20,800 286,000
312,250
TOTAL MEDIA & LEISURE 3,338,933
NONDURABLES - 8.1%
AGRICULTURE - 0.4%
Pioneer Hi-Bred International, Inc. 6,000 334,500
BEVERAGES - 1.0%
Coca-Cola Company (The) 3,630 295,845
PepsiCo, Inc. 8,870 563,245
859,090
FOODS - 1.8%
CPC International, Inc. 2,800 193,550
ConAgra, Inc. 6,200 239,475
General Mills, Inc. 6,700 371,850
Ralston Purina Co. 6,670 389,361
Tyson Foods, Inc. 10,530 261,934
1,456,170
HOUSEHOLD PRODUCTS - 2.0%
Clorox Co. 1,400 115,675
First Brands Corp. 18,200 482,300
Gillette Co. 4,200 226,800
Procter & Gamble Co. 9,690 818,805
1,643,580
TOBACCO - 2.9%
Philip Morris Companies, Inc. 17,480 1,575,385
RJR Nabisco Holdings Corp. 28,996 866,256
2,441,641
TOTAL NONDURABLES 6,734,981
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 9.5%
APPAREL STORES - 1.1%
Gymboree Corp. (a) 34,520 $ 893,205
DRUG STORES - 1.9%
Eckerd Corp. (a) 13,100 625,525
General Nutrition Companies, Inc. (a) 16,200 315,900
Rite Aid Corp. 21,500 636,938
1,578,363
GENERAL MERCHANDISE STORES - 2.4%
Dillard Department Stores, Inc. Class A 3,300 132,413
Dollar General Corp. 20,375 537,391
Sears, Roebuck & Co. 18,380 916,703
Wal-Mart Stores, Inc. 17,330 413,754
2,000,261
GROCERY STORES - 0.6%
Stop & Shop Companies, Inc. (a) 16,700 549,013
RETAIL & WHOLESALE, MISCELLANEOUS - 3.5%
Circuit City Stores, Inc. 28,300 898,525
Lowe's Companies, Inc. 30,110 974,811
PETsMART, Inc. 12,700 563,563
Toys "R" Us, Inc. (a) 18,300 510,113
2,947,012
TOTAL RETAIL & WHOLESALE 7,967,854
SERVICES - 1.5%
ADVERTISING - 0.6%
Omnicom Group, Inc. 11,000 477,125
SERVICES - 0.9%
Block (H&R), Inc. 8,600 302,075
Service Corp. International 9,080 482,375
784,450
TOTAL SERVICES 1,261,575
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 18.5%
COMMUNICATIONS EQUIPMENT - 2.7%
Cisco Systems, Inc. (a) 22,160 $ 1,149,550
Network General Corp. (a) 17,400 767,775
3Com Corp. (a) 7,980 368,078
2,285,403
COMPUTER SERVICES & SOFTWARE - 5.6%
America Online, Inc. (a) 8,700 556,800
Automatic Data Processing, Inc. 17,760 690,420
Broderbund Software, Inc. (a) 5,890 259,160
CUC International, Inc. (a) 11,505 378,227
Ceridian Corp. (a) 8,950 427,363
Computer Sciences Corp. (a) 5,360 396,640
Equifax, Inc. 12,100 296,450
General Motors Corp. Class E 5,740 323,593
Microsoft Corp. (a) 2,120 240,090
Sierra On-Line, Inc. (a) 15,800 620,150
Stratacom, Inc. (a) 8,980 466,960
4,655,853
COMPUTERS & OFFICE EQUIPMENT - 7.5%
Adaptec, Inc. (a) 18,420 1,059,150
Bay Networks, Inc. (a) 15,295 481,793
Compaq Computer Corp. (a) 12,620 588,408
Digital Equipment Corp. (a) 5,100 304,725
International Business Machines Corp. 24,220 2,603,650
Pitney Bowes, Inc. 14,910 726,863
Xerox Corp. 3,480 509,820
6,274,409
ELECTRONICS - 1.8%
Intel Corp. 3,300 223,575
Linear Technology Corp. 23,340 802,313
Maxim Integrated Products, Inc. (a) 13,200 452,100
1,477,988
PHOTOGRAPHIC EQUIPMENT - 0.9%
Eastman Kodak Co. 6,770 517,905
Polaroid Corp. 5,400 243,000
760,905
TOTAL TECHNOLOGY 15,454,558
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 0.4%
RAILROADS - 0.4%
CSX Corp. 7,016 $ 359,570
UTILITIES - 7.9%
CELLULAR - 1.3%
AirTouch Communications, Inc. (a) 6,500 203,125
360 Degrees Communications Co. (a) 12,100 284,350
Vodafone Group PLC sponsored ADR 13,500 541,688
1,029,163
TELEPHONE SERVICES - 6.6%
AT&T Corp. 24,440 1,496,932
Ameritech Corp. 20,550 1,199,606
Frontier Corp. 25,590 809,284
NYNEX Corp. 15,900 781,088
SBC Communications, Inc. 18,380 919,000
WorldCom, Inc. (a) 7,000 329,000
5,534,910
TOTAL UTILITIES 6,564,073
TOTAL COMMON STOCKS
(Cost $78,191,636) 82,673,168
REPURCHASE AGREEMENTS - 1.1%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 941,139 941,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $79,132,636) $ 83,614,168
LEGEND
7.Non-income producing
INCOME TAX INFORMATION
At April 30, 1996, the aggregate cost of investment securities for income
tax purposes was $79,475,668. Net unrealized appreciation aggregated
$4,138,500, of which $6,020,555 related to appreciated investment
securities and $1,882,055 related to depreciated investment securities.
The fund hereby designates approximately $604,000 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 APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 83,614,168
agreements of $941,000) (cost $79,132,636) -
See accompanying schedule
Cash 295
Receivable for investments sold 12,612,530
Receivable for fund shares sold 450,638
Dividends receivable 122,985
TOTAL ASSETS 96,800,616
LIABILITIES
Payable for investments purchased $ 637,923
Payable for fund shares redeemed 7,859,368
Accrued management fee 49,311
Other payables and accrued expenses 87,977
TOTAL LIABILITIES 8,634,579
NET ASSETS $ 88,166,037
Net Assets consist of:
Paid in capital $ 79,312,985
Undistributed net investment income 144,441
Accumulated undistributed net realized gain (loss) 4,227,079
on investments
Net unrealized appreciation (depreciation) on 4,481,532
investments
NET ASSETS, for 7,520,598 shares outstanding $ 88,166,037
NET ASSET VALUE, offering price and redemption price per $11.72
share ($88,166,037 (divided by) 7,520,598 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 22, 1995 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1996
INVESTMENT INCOME $ 857,821
Dividends
Interest 226,869
TOTAL INCOME 1,084,690
EXPENSES
Management fee $ 334,620
Transfer agent fees 163,263
Accounting fees and expenses 44,023
Non-interested trustees' compensation 175
Custodian fees and expenses 43,567
Registration fees 104,393
Audit 22,173
Legal 152
Interest 864
Miscellaneous 179
Total expenses before reductions 713,409
Expense reductions (7,348) 706,061
NET INVESTMENT INCOME 378,629
REALIZED AND UNREALIZED GAIN (LOSS) 4,227,079
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 4,481,532
investment securities
NET GAIN (LOSS) 8,708,611
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 9,087,240
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
JUNE 22, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
APRIL 30, 1996
INCREASE (DECREASE) IN NET ASSETS
Operations $ 378,629
Net investment income
Net realized gain (loss) 4,227,079
Change in net unrealized appreciation (depreciation) 4,481,532
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 9,087,240
FROM OPERATIONS
Distributions to shareholders from net investment income (234,188)
Share transactions 175,308,389
Net proceeds from sales of shares
Reinvestment of distributions 232,753
Cost of shares redeemed (96,228,157)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE 79,312,985
TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 88,166,037
NET ASSETS
Beginning of period -
End of period (including undistributed net investment income of $144,441) $ 88,166,037
OTHER INFORMATION
Shares
Sold 16,103,293
Issued in reinvestment of distributions 21,007
Redeemed (8,603,702)
Net increase (decrease) 7,520,598
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C>
JUNE 22, 1995
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.00
Income from Investment Operations
Net investment income .05
Net realized and unrealized gain (loss) 1.70
Total from investment operations 1.75
Less Distributions (.03)
From net investment income
Net asset value, end of period $ 11.72
TOTAL RETURN B, C 17.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 88,166
Ratio of expenses to average net assets 1.31% A
Ratio of expenses to average net assets after expense reductions 1.30% A,
D
Ratio of net investment income to average net assets .70% A
Portfolio turnover rate 155% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURN FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
8. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Large Cap Stock Fund (the fund) is a fund of Fidelity Commonwealth
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 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 maturing within sixty days of their purchase date are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
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. The fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. By so qualifying, the fund
will not be 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 is accrued as
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
earned. Investment income is recorded net of foreign taxes withheld where
recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned 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 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
dividend paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments 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.
9. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. 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 forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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, and are collateralized by U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
10. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $151,782,386 and $77,817,829, respectively.
11. 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%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. The fund's
performance adjustment will not take effect until June, 1996. For the
period, the management fee was equivalent to an annualized rate of .62% of
average net assets.
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 annualized rate of
.30% 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED.
BROKERAGE COMMISSIONS - CONTINUED
affiliates of FMR. The commissions paid to these affiliated firms were
$44,036 for the period.
12. 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 balances during the period for
which the loan was outstanding amounted to $5,029,000. The weighted average
interest rate was 6.1875%.
13. 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
$7,154 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 $24 and $170,
respectively, under these arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Commonwealth Trust and the Shareholders of
Fidelity Large Cap Stock Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Commonwealth Trust: Fidelity Large Cap Stock Fund, including the
schedule of portfolio investments, as of April 30, 1996, and the related
statement of operations, the statement of changes in net assets and the
financial highlights for the period June 22, 1995 (commencement of
operations) to April 30, 1996. 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 audit.
We conducted our audit 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 April 30, 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 audit provides 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 Commonwealth Trust: Fidelity Large Cap Stock Fund as of April
30, 1996, the results of its operations, the changes in its net assets and
the financial highlights for the period June 22, 1995 (commencement of
operations) to April 30, 1996, in conformity with generally accepted
accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 5, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Large Cap Stock Fund voted to pay on June
10, 1996, to shareholders of record at the opening of business on June 7,
1996, a distribution of $.62 per share derived from capital gains realized
from sales of portfolio securities and a dividend of $.02 per share from
net investment income.
A total of 100% 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 the applicable
percentage for use in preparing 1996 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
Fidelity Management & Research
(U.K.) Inc., London, England
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, 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 *
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 Fund
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
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
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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)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
SMALL CAP STOCK
FUND
ANNUAL REPORT
APRIL 30, 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.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first four
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in 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 a fund's 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 APRIL 30, 1996 PAST 1 LIFE OF
YEAR FUND
Small Cap Stock 35.72% 49.34%
Small Cap Stock (incl. 3% sales charge) 31.65% 44.86%
Russell 2000 (registered trademark) 32.99% 58.36%
Small Company Growth Funds Average 39.38% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year or since the fund started on
June 28, 1993. 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 Russell 2000
Index - a broad measure of small company stocks. To measure how the fund's
performance stacked up against its peers, you can compare it to the small
company growth funds average, which reflects the performance of 328 small
company growth funds with similar objectives tracked by Lipper Analytical
Services over the past 12 months. Both benchmarks include reinvested
dividends and capital gains, if any, and exclude the effects of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1996 PAST 1 LIFE OF
YEAR FUND
Small Cap Stock 35.72% 15.14%
Small Cap Stock (incl. 3% sales charge) 31.65% 13.92%
Russell 2000 32.99% 17.54%
Small Company Growth Funds 39.38% n/a
Average
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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960430 19960521 141202 S00000000000001
Small Cap Stock RS Russell 2000
00336 RS002
1993/06/28 9700.00 10000.00
1993/06/30 9700.00 10166.14
1993/07/31 9767.90 10306.50
1993/08/31 10126.80 10751.75
1993/09/30 10340.20 11055.17
1993/10/31 10417.80 11339.71
1993/11/30 10126.80 10966.49
1993/12/31 10555.20 11341.44
1994/01/31 10818.60 11697.03
1994/02/28 10906.39 11654.72
1994/03/31 10184.50 11039.38
1994/04/30 10350.34 11105.00
1994/05/31 10077.19 10980.30
1994/06/30 9579.68 10607.45
1994/07/31 9657.72 10781.73
1994/08/31 10340.59 11382.51
1994/09/30 10282.06 11344.40
1994/10/31 10477.16 11299.63
1994/11/30 9979.64 10843.27
1994/12/31 10204.29 11134.60
1995/01/31 9823.46 10994.12
1995/02/28 10165.23 11451.46
1995/03/31 10438.65 11648.68
1995/04/30 10673.01 11907.69
1995/05/31 10878.07 12112.44
1995/06/30 12085.13 12740.78
1995/07/31 13331.93 13474.67
1995/08/31 13518.46 13753.42
1995/09/30 13862.06 13999.04
1995/10/31 13145.40 13372.97
1995/11/30 13322.11 13934.83
1995/12/31 12921.50 14302.49
1996/01/31 12702.49 14287.16
1996/02/29 13004.93 14732.41
1996/03/31 13244.79 15032.31
1996/04/30 14485.84 15836.11
IMATRL PRASUN SHR__CHT 19960430 19960521 141203 R00000000000038
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Small Cap Stock Fund on June 28, 1993, when the fund started, and paid a 3%
sales charge. As the chart shows, by April 30, 1996, the value of your
investment would have grown to $14,486 - a 44.86% increase on your initial
investment. For comparison, look at how the Russell 2000 Index did over the
same period. With dividends reinvested, the same $10,000 investment would
have grown to $15,836 - a 58.36% 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
Although rising interest rates
added to an already clouded
corporate earnings outlook in the
first quarter of 1996, stocks
managed to post solid returns for the
12 months ended April 30, 1996.
The Standard & Poor's 500 Index
finished the period with a return of
30.21% (including reinvested
dividends) - well above its
long-term historical annual average
of about 12%. During the period, the
market appeared to lose its appetite
for the blue-chip, multinational
firms that drove the market in
1995. This development was due
in part to a stronger dollar, surging
cash flows into mutual funds and
the higher valuations of
large-capitalization stocks relative
to small-capitalization stocks.
Additionally, technology
companies no longer had the
broad-based share price increases
they did in 1995. Falling
semiconductor prices worldwide
punished computer chip makers'
stocks, and the market put more of
an emphasis on software and
networking companies. Rising
interest rates - while fanning fears
of lower corporate earnings - and
higher commodity prices caused
another major shift in the stock
market. Investors, sensing a
renewed economic expansion,
moved from less economically
sensitive stocks like consumer
non-durables to more cyclical
sectors, such as aluminum, chemical,
oil, oil service and basic industries.
Financial stocks performed well
throughout the period as high
stock market volume and the
demand for financial services
created a positive backdrop for the
industry.
An interview with Brad Lewis, Portfolio Manager of Small Cap Stock Fund
Q. HOW DID THE FUND PERFORM, BRAD?
A. For the 12-months ended April 30, 1996, the fund returned 35.72%. The
small company growth funds average was 39.38% for the same time period,
according to Lipper Analytical Services. Most of the shortfall occurred in
December and January.
Q. WHY DID THE FUND TRAIL ITS PEERS?
A. The fund was hurt by a variation of an investment strategy I have used
for several years known as the "January Effect." Historical data indicates
that stocks that have underperformed year-to-date through mid-December -
but have business prospects that have begun to stabilize - beat the market
during the four weeks between mid-December and mid-January. It was a tough
market in which some stocks - especially technology - did not perform as I
had anticipated. The fund's returns were definitely hurt by the lack of a
January Effect in early 1996. Small Cap Stock Fund lost 4.65% in December
and January compared to a gain of 2.53% for the Russell 2000, a well-known
benchmark for small cap stocks.
Q. HOW DID THE FUND'S OVERALL INVESTMENT STRATEGY WORK?
A. Despite the failure of the January Effect strategy, the underlying stock
selection models that the fund normally uses - the real bread and butter of
this fund - worked very well. As technology improves, more data become
available for analysis and better systems are developed to process that
data. With better information available, it's likely that I can discover
more complex relationships among factors and use them to better manage the
fund.
Q. WHAT HAPPENED IN THE SMALL-CAP MARKET DURING THE PERIOD?
A. The small-cap market began to improve slightly from recent levels during
the second half of the period. The strengthening of the U.S. dollar has
been beneficial for small-cap stocks. In general, a weak dollar hurts
small-cap stocks, while it can be very helpful to larger companies that are
able to increase exports. Since the dollar has appreciated in recent
months, the market environment began to improve for small-cap stocks.
Q. DURING THE PAST SIX MONTHS, THE FUND'S HOLDINGS IN TECHNOLOGY AND
FINANCIAL STOCKS INCREASED. WHAT WAS YOUR STRATEGY?
A. In general, the industry allocation is similar to that of the Russell
2000. That said, I thought that some small technology companies looked
attractive during the period. The fund had fairly large positions in
Western Digital and Credence Systems,
two relatively inexpensive stocks with good revenues and solid earnings
growth at the end of the period. The models that the fund uses indicated
that financial companies - especially insurance companies - were attractive
during the period.
Q. RECENTLY, THE FUND EXPANDED ITS DEFINITION OF SMALL-CAP STOCKS TO
INCLUDE THOSE WITH A MARKET CAPITALIZATION OF UP TO $1 BILLION. THE FUND
ALSO IMPOSED A REDEMPTION FEE. WHAT IMPACT HAVE THESE CHANGES HAD ON THE
FUND?
A. Increasing the fund's definition of a small-cap stock simply has added
about 200 stocks to the fund's universe. At the end of the period, the
weighted average market capitalization was approximately $540 million. In
other words, the discipline hasn't changed at all - the universe was just
enlarged. As for the redemption fee, I think it's been a positive for the
fund because it has reduced the short-term fluctuations of assets into and
out of the fund in recent months.
Q. HAVE YOU MADE ANY CHANGES TO THE FUND'S QUANTITATIVE STOCK SELECTION
MODELS DURING THE PAST SIX MONTHS?
A. I'm always fine-tuning the fund's models. During the past six months,
I've been improving the models that help me forecast revenues and earnings
more accurately. I'm working on developing more powerful variables that I
think could be a much better predictor of stock price or other factors. The
revenue growth forecaster is in place, and I've begun testing the earnings
variable. Stay tuned.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I expect to see below-average returns for the market during the next six
months. At the end of April, it was trading at a price-to-earnings multiple
of 19, which is expensive, and had trended upward during the past two
months. I also think that the uncertainty of the election year could have a
disquieting impact on the small-cap market.
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: capital appreciation by
investing mainly in equity
securities of companies with
small market capitalizations,
chosen in part by using
computer-aided quantitative
analysis.
START DATE: June 28, 1993
SIZE: as of April 30, 1996,
more than $554 million
MANAGER: Bradford Lewis,
since 1993; manager,
Fidelity Disciplined Equity,
since 1988, and Fidelity
Stock
Selector, since 1990; joined
Fidelity in 1985
(checkmark)
BRAD LEWIS ON "MARKET
BREADTH"
"It's no secret that over the
long run there is a high
correlation between stock
returns and earnings growth.
Companies implementing
strategies that garner
above-average earnings
growth usually are rewarded
with handsome stock returns.
So what are the
characteristics of firms that
generate excellent earnings
growth? There are many
factors that have predictive
capabilities, but one of the
most important ones is firm
size. Smaller companies often
have a much greater potential
for increasing their earnings
over three or four years than
many huge S&P 500
companies. Of course, they
also have the potential to
underperform the market as
well.
"I intentionally skew this
fund's holdings toward
smaller stocks with above
average earnings growth
prospects. Over the long
term, this strategy has worked
quite well."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Medic Computer Systems, Inc. 3.6 2.2
Western Digital Corp. 3.0 0.0
Credence Systems Corp. 2.8 2.2
Nautica Enterprises, Inc. 2.5 1.9
Aames Financial Corp. 2.1 0.4
St. John Knits 1.7 1.7
Sanmina Corp. 1.6 0.0
Ross Stores, Inc. 1.6 0.0
American Travellers Corp. 1.4 0.0
United Waste Systems, Inc. 1.4 0.4
TOP FIVE MARKET SECTORS AS OF APRIL 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Technology 31.3 22.0
Finance 17.9 7.0
Industrial Machinery & Equipment 6.8 7.9
Durables 6.5 4.3
Health 4.9 7.1
ASSET ALLOCATION
AS OF APRIL 30, 1996 * AS OF OCTOBER 31, 1995 **
Row: 1, Col: 1, Value: 13.8
Row: 1, Col: 2, Value: 46.2
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 1, Value: 7.7
Row: 1, Col: 2, Value: 52.3
Row: 1, Col: 3, Value: 40.0
Stocks and
equity futures 86.2%
Short-term
investments 13.8%
FOREIGN
INVESTMENTS 1.3%
Stocks and
equity futures 92.3%
Short-term
investments 7.7%
FOREIGN
INVESTMENTS 1.6%
*
**
INVESTMENTS APRIL 30, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 86.2%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.2%
DEFENSE ELECTRONICS - 0.2%
Logicon, Inc. 42,000 $ 1,249,451
BASIC INDUSTRIES - 2.1%
CHEMICALS & PLASTICS - 0.6%
Arcadian Corp. 2,000 40,000
Cambrex Corp. 18,000 774,000
Cytec Industries, Inc. (a) 20,800 1,723,800
McWhorter Technologies, Inc. 10,000 180,000
Terra Industries, Inc. 11,900 156,188
Tredegar Industries, Inc. 150 4,163
Univar Corp. 16,000 186,000
3,064,151
IRON & STEEL - 0.1%
Chaparral Steel Company 22,000 332,750
Universal Stainless & Alloy Products, Inc. (a) 21,000 231,000
563,750
METALS & MINING - 0.3%
Belden, Inc. 1,300 38,675
Cable Design Technology Corp. (a) 32,000 1,056,000
Capral Aluminum Ltd. 150,000 439,286
Chase Brass Industries, Inc. (a) 13,000 217,750
1,751,711
PAPER & FOREST PRODUCTS - 1.1%
Fibreboard Corp. (a) 40,000 1,025,000
Mercer International, Inc. (SBI) (a) 215,000 4,864,375
5,889,375
TOTAL BASIC INDUSTRIES 11,268,987
CONGLOMERATES - 0.1%
Figgie International Holdings, Inc. Class A (a) 43,700 579,025
CONSTRUCTION & REAL ESTATE - 2.3%
BUILDING MATERIALS - 0.6%
Falcon Building Products, Inc. (a) 85,000 818,125
Green (A.P.) Industries, Inc. 9,000 167,063
Insilco Corp. (a) 33,000 1,146,750
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
BUILDING MATERIALS - CONTINUED
Shaw Group 30,000 $ 588,750
Watsco, Inc. Class A 9,000 255,375
2,976,063
CONSTRUCTION - 1.6%
Butler Manufacturing Co. 32,000 1,176,000
Continental Homes Holding Corp. 85,000 1,944,375
Crossman Communities, Inc. (a) 20,600 448,050
NCI Building Systems, Inc. (a) 57,400 2,080,750
Redman Industries, Inc. (a) 156,000 3,139,500
Southern Energy Homes, Inc. 5,000 88,125
Zaring Homes, Inc. 5,000 66,250
8,943,050
REAL ESTATE - 0.1%
Hovnanian Enterprises, Inc. Class A (a) 48,000 330,000
TOTAL CONSTRUCTION & REAL ESTATE 12,249,113
DURABLES - 6.5%
AUTOS, TIRES, & ACCESSORIES - 0.6%
Copart, Inc. (a) 69,000 1,880,250
Miller Industries, Inc. (a) 42,000 1,170,750
3,051,000
CONSUMER DURABLES - 0.9%
Department 56, Inc. (a) 200,000 4,975,000
HOME FURNISHINGS - 0.5%
Ethan Allen Interiors, Inc. (a) 87,000 2,262,000
Furniture Brands International, Inc. (a) 52,100 514,488
2,776,488
TEXTILES & APPAREL - 4.5%
Kellwood Co. 78,000 1,267,500
Nautica Enterprises, Inc. (a) 294,900 13,712,850
Quiksilver (a) 13,600 516,800
St. John Knits 151,400 8,989,375
24,486,525
TOTAL DURABLES 35,289,013
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 1.8%
COAL - 0.4%
Zeigler Coal Holding Co. 146,000 $ 2,153,500
ENERGY SERVICES - 0.8%
Carbo Ceramics, Inc. 1,000 21,500
Maverick Tube Corp. (a) 14,000 170,625
Seacor Holdings, Inc. (a) 45,000 1,856,250
Serv-Tech, Inc. (a) 58,000 391,500
Tuboscope Vetco Corp. (a) 140,300 1,823,900
4,263,775
OIL & GAS - 0.6%
Caltex Australia Ltd. 150,000 655,386
Digicon, Inc. par $0.01 (a) 38,000 584,250
Forcenergy Gas Exploration, Inc. (a) 102,000 1,428,000
Giant Industries, Inc. 33,000 499,125
McFarland Energy, Inc. (a) 500 4,500
Nuevo Energy Corp. (a) 3,000 84,750
3,256,011
TOTAL ENERGY 9,673,286
FINANCE - 17.9%
BANKS - 2.4%
City National Corp. 33,500 473,188
Community First Bankshares, Inc. 21,600 496,800
North Fork Bancorporation, Inc. 98,000 2,327,500
ONBANCorp, Inc. 70,000 2,310,000
Peoples Heritage Financial Group, Inc. 138,000 2,880,750
Riggs National Corp. 155,900 1,948,750
Silicon Valley Bancshares (a) 15,000 348,750
Sterling Bancshares, Inc. 18,000 279,000
UST Corp. 91,000 1,205,750
USBANCORP, Inc. 22,000 759,000
West Coast Bancorp. 5,000 93,125
13,122,613
CLOSED END INVESTMENT COMPANY - 1.9%
All Seasons Global Fund, Inc. 150,000 600,000
Alliance Global Environment Fund 60,000 750,000
Central European Equity Fund 51,284 910,291
Emerging Germany Fund, Inc. 100,000 737,500
Emerging Markets Infrastructure Fund, Inc. 68,300 717,150
GT Global Developing Markets Fund 225,000 2,362,500
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CLOSED END INVESTMENT COMPANY - CONTINUED
Global Health Sciences Fund (a) 15,000 $ 277,500
Growth Fund of Spain, Inc. 30,000 345,000
Morgan Stanley Asia-Pacific Fund, Inc. 50,000 600,000
Morgan Stanley Asia-Pacific Fund, Inc. (rights) (a) 27,001 18,563
Southern Africa Fund, Inc. 25,200 415,800
TCW/DW Emerging Markets Opportunities Trust (SBI) 200,000 2,175,000
Templeton Dragon Fund, Inc. 45,000 607,500
10,516,804
CREDIT & OTHER FINANCE - 5.8%
Aames Financial Corp. 259,700 11,459,263
AmeriCredit Corp. (a) 196,000 2,817,500
Consumer Portfolio Services, Inc. (a) 17,000 170,000
First Merchants Acceptance Corp. 102,500 2,485,625
MS Financial, Inc. (a) 150,000 1,087,500
Money Store, Inc. 223,500 5,643,375
Olympic Financial Ltd. 257,600 5,731,600
Triad Guaranty, Inc. (a) 21,000 687,750
WFS Financial, Inc. (a) 66,800 1,336,000
31,418,613
INSURANCE - 5.7%
Allied Group, Inc. 33,000 1,183,875
American Travellers Corp. (a) 391,500 7,634,250
CMAC Investments 58,800 3,292,800
Capital RE Corp. 12,000 450,000
Enhance Financial Services Group Corp. 46,000 1,247,750
Executive Risk, Inc. 5,000 155,000
Financial Security Assurance Holdings Ltd. 22,000 594,000
Intercargo Corp. 2,800 25,200
Life USA Holding, Inc. (a) 84,100 767,413
Life RE Corp. 73,000 2,180,875
MMI Companies, Inc. 14,000 390,250
Markel Corp. (a) 15,500 1,240,000
National Re Corp. 15,000 532,500
Navigators Group, Inc. (a) 20,000 390,000
Penn-America Group, Inc. 10,000 133,750
Penncorp. Financial Group, Inc. 137,000 4,195,625
Philadelphia Consolidated Holding Corp. (a) 12,000 261,000
RLI Corp. 6,000 136,500
Reliance Group Holdings, Inc. 265,000 2,120,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Selective Insurance Group, Inc. 2,800 $ 87,850
20th Century Industries (a) 32,400 506,250
Vesta Insurance Group Corp. 68,000 2,184,500
Washington National Corp. 106 2,928
Zurich Reinsurance Centre Holdings, Inc. 30,000 903,750
30,616,066
SAVINGS & LOANS - 2.1%
California Federal Bancorp., Inc. 385,400 6,889,025
California Federal Bank A Federal Savings Bank
(Los Angeles) contingent litigation recovery rights (a) 24,640 169,400
California Financial Holding Co. 10,000 215,000
CenFed Financial Corp. 35,200 809,600
D & N Financial Corp. (a) 23,000 293,250
Downey Financial Corp. 20,000 432,500
Farmers & Mechanics Bank (a) 18,000 360,000
First Financial Corp. of Wisconsin 2,000 47,000
Haven Bancorp., Inc. 58,000 1,392,000
Interwest Bancorp., Inc. 17,000 405,875
Metropolitan Bancorp (a) 16,000 232,000
11,245,650
SECURITIES INDUSTRY - 0.0%
Southwest Securities Group, Inc. 10,000 116,250
TOTAL FINANCE 97,035,996
HEALTH - 4.9%
DRUGS & PHARMACEUTICALS - 0.6%
Rexall Sundown, Inc. (a) 115,650 3,296,025
Serologicals Corp. (a) 1,500 38,625
3,334,650
MEDICAL EQUIPMENT & SUPPLIES - 1.6%
Advanced Technology Laboratories, Inc. (a) 63,000 2,047,500
Heartport, Inc. 1,000 35,750
Marquette Electronics, Inc. Class A (a) 30,000 540,000
Maxxim Medical, Inc. (a) 56,000 994,000
Sofamor/Danek Group, Inc. (a) 113,600 3,720,400
Vital Signs, Inc. 55,000 1,158,438
8,496,088
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 2.7%
Cohr, Inc. (a) 2,700 $ 60,075
Horizon Mental Health Management, Inc. (a) 13,000 273,000
Magellan Health Services, Inc. (a) 111,000 2,386,500
Maxicare Health Plans, Inc. (a) 198,500 4,069,250
Orthologic Corp. 100,000 3,487,500
Phymatrix Corp. (a) 300 5,700
Renal Treatment Centers, Inc. (a) 146,200 4,239,800
14,521,825
TOTAL HEALTH 26,352,563
INDUSTRIAL MACHINERY & EQUIPMENT - 6.8%
ELECTRICAL EQUIPMENT - 2.0%
BMC Industries, Inc. 151,000 4,039,250
Computer Products, Inc. (a) 196,000 3,172,750
Fusion Systems Corp. (a) 5,200 150,800
Hughes Supply, Inc. 26,000 897,000
Roper Industries, Inc. 54,000 2,511,000
10,770,800
INDUSTRIAL MACHINERY & EQUIPMENT - 2.4%
Applied Power, Inc. Class A 49,700 1,559,338
Gardner Denver Machinery, Inc. (a) 20,000 475,313
Gasonics International Corp. (a) 142,500 2,155,313
Global Industrial Technologies, Inc. (a) 78,000 1,433,250
Kaydon Corp. 43,000 1,709,250
Lindsay Manufacturing Co. 10,000 375,000
Mattson Technology, Inc. (a) 67,000 1,021,750
NN Ball & Roller, Inc. 33,400 818,300
PRI Automation, Inc. (a) 98,000 2,768,500
Veeco Instruments, Inc. (a) 63,000 1,102,500
13,418,514
POLLUTION CONTROL - 2.4%
Dames & Moore, Inc. 53,100 577,463
Sanifill, Inc. (a) 112,800 4,892,700
United Waste Systems, Inc. (a) 136,000 7,480,000
12,950,163
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 37,139,477
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 2.3%
BROADCASTING - 0.2%
Century Communications Corp. Class A (a) 93,600 $ 900,900
LEISURE DURABLES & TOYS - 1.4%
Champion Enterprises, Inc. (a) 154,300 5,863,400
Coastcast Corp. 30,000 701,250
Galoob (Lewis) Toys, Inc. (a) 50,000 1,062,500
Play-By-Play Toys & Novelties, Inc. (a) 30,000 382,500
8,009,650
LODGING & GAMING - 0.3%
Red Lion Hotels, Inc. (a) 80,000 1,760,000
PUBLISHING - 0.2%
Hollinger International, Inc. Class A 80,000 950,000
RESTAURANTS - 0.2%
Foodmaker, Inc. (a) 85,000 690,625
Quantum Restaurant Group, Inc. 20,000 302,500
993,125
TOTAL MEDIA & LEISURE 12,613,675
NONDURABLES - 1.5%
BEVERAGES - 0.5%
Mondavi Robert Corp. Class A (a) 100,000 2,750,000
FOODS - 0.4%
Chiquita Brands International, Inc. 68,200 997,425
J & J Snack Foods Corp. (a) 21,000 257,250
Morningstar Group, Inc. (a) 75,000 750,000
2,004,675
HOUSEHOLD PRODUCTS - 0.6%
Paragon Trade Brands, Inc. (a) 47,300 1,105,638
USA Detergents, Inc. (a) 50,000 2,050,000
3,155,638
TOTAL NONDURABLES 7,910,313
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 3.5%
APPAREL STORES - 1.7%
Baker (J.), Inc. 10,900 $ 104,913
Marisa Christina, Inc. 20,000 515,000
Ross Stores, Inc. 245,000 8,452,500
9,072,413
GROCERY STORES - 0.1%
Great Atlantic & Pacific Tea Co., Inc. 16,000 558,000
RETAIL & WHOLESALE, MISCELLANEOUS - 1.7%
Cameron Ashley, Inc. (a) 21,000 204,750
Cole National Corp. Class A 24,900 407,738
Global Directmail Corp. (a) 4,000 157,000
Tandycrafts, Inc. (a) 27,000 185,625
Tiffany & Co., Inc. 85,000 5,546,250
U.S. Office Products Co. (a) 73,000 2,628,000
9,129,363
TOTAL RETAIL & WHOLESALE 18,759,776
SERVICES - 3.4%
ADVERTISING - 0.2%
HA-LO Industries, Inc. (a) 25,000 850,000
Outdoor Systems, Inc. 2,000 46,000
896,000
LEASING & RENTAL - 0.2%
National Auto Credit, Inc. (a) 30,800 438,900
Team Rental Group, Inc. Class A (a) 42,400 466,400
905,300
PRINTING - 0.3%
CSS Industries, Inc. (a) 16,000 366,000
Devon Group, Inc. (a) 43,000 1,354,500
United Stationers, Inc. 7,000 164,500
1,885,000
SERVICES - 2.7%
CFI Proservices, Inc. (a) 11,200 296,800
Employee Solutions, Inc. (a) 100,000 3,875,000
Interim Services, Inc. (a) 49,500 2,147,063
Lawyers Title Corp. 73,400 1,321,200
PCA International, Inc. 1,000 13,875
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - CONTINUED
SERVICES - CONTINUED
Prime Medical Services, Inc. (a) 50,000 $ 781,250
Regis Corp. 33,500 1,235,313
Robert Half International, Inc. (a) 5,500 316,250
Sitel Corp. (a) 40,000 2,210,000
Veterinary Centers of America, Inc. (a) 80,000 2,440,000
14,636,751
TOTAL SERVICES 18,323,051
TECHNOLOGY - 31.3%
COMMUNICATIONS EQUIPMENT - 3.8%
Aspect Telecommunications Corp. (a) 63,600 3,657,000
Global Village Communication (a) 243,000 4,191,750
IPC Information Systems, Inc. (a) 36,000 873,000
ITI Technologies (a) 102,000 2,817,750
InterVoice, Inc. 100,000 2,800,000
Microtest, Inc. (a) 89,600 872,200
Microcom, Inc. (a) 4,400 107,250
Perceptron, Inc. (a) 125,700 4,179,525
Periphonics Corp. (a) 54,300 1,221,750
20,720,225
COMPUTER SERVICES & SOFTWARE - 7.1%
American Management Systems, Inc. (a) 197,100 5,247,788
Axent Technologies, Inc. 500 9,000
Boole & Babbage, Inc. 31,500 830,813
Comshare, Inc. 40,000 960,000
Dendrite International, Inc. (a) 300 7,125
Fair Issac & Company, Inc. 42,000 1,785,000
Geoworks 50,000 1,875,000
Henry (Jack) & Associates, Inc. 15,800 495,725
Ikos Systems, Inc. (a) 75,000 1,846,875
I2 Technologies, Inc. 200 8,150
Legato Systems, Inc. (a) 200 8,200
Medic Computer Systems, Inc. (a) 206,900 19,345,150
Meridian Data, Inc. (a) 92,000 1,598,500
Oak Technology, Inc. (a) 214,000 3,825,250
On Technology Corp. (a) 300 3,450
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
Policy Management Systems Corp. (a) 100 $ 4,700
Spyglass, Inc. (a) 1,000 29,125
Sykes Enterprises, Inc. 500 17,750
Ultradata Corp. (a) 6,000 56,250
Unison Software, Inc. (a) 20,000 497,500
Vitalcom, Inc. (a) 500 8,375
38,459,726
COMPUTERS & OFFICE EQUIPMENT - 4.8%
Cray Research, Inc. (a) 25,175 742,663
Stormedia, Inc. Class A 90,000 3,825,000
Trident Microsystems, Inc. (a) 297,000 5,197,500
Western Digital Corp. (a) 691,800 16,257,300
26,022,463
ELECTRONIC INSTRUMENTS - 9.1%
Cognex Corp. (a) 187,000 5,002,250
Credence Systems Corp. (a) 711,100 15,377,538
Electro Scientific Industries, Inc. (a) 287,600 6,902,400
Helix Technology Corp. 165,000 6,218,438
LTX Corp. (a) 689,400 6,635,475
Measurex Corp. 167,900 4,869,100
Novellus System, Inc. (a) 81,500 4,421,375
49,426,576
ELECTRONICS - 6.5%
Altron Inc. (a) 62,400 1,996,800
Chips & Technologies, Inc. (a) 75,000 839,063
DII Group, Inc. (a) 55,000 1,911,250
Electroglas, Inc. (a) 164,000 3,198,000
Kent Electronics Corp. (a) 86,000 3,622,750
Mylex Corp. (a) 236,000 5,752,500
NU Horizons Electronics Corp. (a) 52,000 851,500
Rexel, Inc. (a) 137,000 1,832,375
Sanmina Corp. (a) 239,600 8,505,800
Tencor Instruments (a) 125,400 3,103,650
Truevision, Inc. (a) 127,000 1,079,500
Videoserver, Inc. 80,000 2,680,000
35,373,188
TOTAL TECHNOLOGY 170,002,178
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 0.5%
SHIPPING - 0.3%
Nu-Kote Holdings, Inc. Class A (a) 98,600 $ 1,737,825
TRUCKING & FREIGHT - 0.2%
Pittston Co. Minerals Group 98,400 1,328,400
TOTAL TRANSPORTATION 3,066,225
UTILITIES - 1.1%
ELECTRIC UTILITY - 0.1%
TNP Enterprises, Inc. 25,000 593,750
GAS - 0.7%
Bay State Gas Co. 6,800 188,700
Eastern Enterprises Co. 59,000 2,116,625
Indiana Energy, Inc. 19,000 453,625
Washington Gas Light Co. 50,000 1,050,000
3,808,950
TELEPHONE SERVICES - 0.3%
ACC Corp. 50,000 1,675,000
WATER - 0.0%
Philadelphia Suburban Corp. 3,400 79,050
TOTAL UTILITIES 6,156,750
TOTAL COMMON STOCKS
(Cost $380,483,296) 467,668,879
U.S. TREASURY OBLIGATIONS - 0.4%
PRINCIPAL
AMOUNT
U.S. Treasury Bill, yield at date of purchase
4.90%, 7/18/96 (Cost $1,978,889) $ 2,000,000 1,979,157
REPURCHASE AGREEMENTS - 13.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.33%, dated
4/30/96 due 5/1/96 $ 72,819,780 $ 72,809,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $455,271,185) $ 542,457,036
1. Non-income producing
INCOME TAX INFORMATION
At April 30, 1996, the aggregate cost of investment securities for income
tax purposes was $455,936,466. Net unrealized appreciation aggregated
$86,520,570, of which $99,158,976 related to appreciated investment
securities and $12,638,406 related to depreciated investment securities.
The fund hereby designates approximately $26,468,000 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 APRIL 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 542,457,036
agreements of $72,809,000) (cost $455,271,185) -
See accompanying schedule
Cash 90,522
Receivable for investments sold 2,511,168
Receivable for fund shares sold 13,711,214
Dividends receivable 120,094
Redemption fee receivable 50
Other receivables 431,109
TOTAL ASSETS 559,321,193
LIABILITIES
Payable for investments purchased $ 1,534,952
Payable for fund shares redeemed 2,802,608
Accrued management fee 184,247
Other payables and accrued expenses 226,230
TOTAL LIABILITIES 4,748,037
NET ASSETS $ 554,573,156
Net Assets consist of:
Paid in capital $ 416,725,037
Undistributed net investment income 1,263,137
Accumulated undistributed net realized gain (loss) on 49,399,131
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 87,185,851
investments
NET ASSETS, for 39,935,259 shares outstanding $ 554,573,156
NET ASSET VALUE and redemption price per share $13.89
($554,573,156 (divided by) 39,935,259 shares)
Maximum offering price per share (100/97.00 of $13.89) $14.32
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME $ 1,789,829
Dividends
Interest 5,052,202
TOTAL INCOME 6,842,031
EXPENSES
Management fee $ 3,290,647
Basic fee
Performance adjustment (396,361)
Transfer agent fees 1,652,077
Accounting fees and expenses 290,735
Non-interested trustees' compensation 3,769
Custodian fees and expenses 39,490
Registration fees 101,295
Audit 29,196
Legal 5,136
Miscellaneous 5,697
Total expenses before reductions 5,021,681
Expense reductions (101,642) 4,920,039
NET INVESTMENT INCOME 1,921,992
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 93,753,424
Foreign currency transactions 1,673
Futures contracts 10,026,868 103,781,965
Change in net unrealized appreciation (depreciation) on 27,853,163
investment securities
NET GAIN (LOSS) 131,635,128
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 133,557,120
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 1,921,992 $ 2,588,505
Net investment income
Net realized gain (loss) 103,781,965 (8,047,912)
Change in net unrealized appreciation (depreciation) 27,853,163 21,292,238
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 133,557,120 15,832,831
FROM OPERATIONS
Distributions to shareholders (2,767,732) (622,825)
From net investment income
From net realized gain (29,041,972) -
TOTAL DISTRIBUTIONS (31,809,704) (622,825)
Share transactions 797,374,193 557,255,782
Net proceeds from sales of shares
Reinvestment of distributions 31,586,673 614,684
Cost of shares redeemed (938,938,514) (672,148,923)
Redemption fees 67,458 -
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (109,910,190) (114,278,457)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (8,162,774) (99,068,451)
NET ASSETS
Beginning of period 562,735,930 661,804,381
End of period (including undistributed net investment $ 554,573,156 $ 562,735,930
income of $1,263,137 and $1,909,062, respectively)
OTHER INFORMATION
Shares
Sold 60,870,576 53,720,710
Issued in reinvestment of distributions 2,512,301 60,500
Redeemed (74,948,283) (64,674,336)
Net increase (decrease) (11,565,406) (10,893,126)
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED APRIL 30, JUNE 28, 1993
(COMMENCEMEN
T OF OPERATIONS)
TO APRIL 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.93 $ 10.61 $ 10.00
Income from Investment Operations
Net investment income .07 .05 .02
Net realized and unrealized gain (loss) 3.74 .28 .65
Total from investment operations 3.81 .33 .67
Less Distributions (.08) (.01) -
From net investment income
In excess of net investment income - - (.02)
From net realized gain (.77) - -
In excess of net realized gain - - (.04)
Total distributions (.85) (.01) (.06)
Redemption fees added to paid in capital - - -
Net asset value, end of period $ 13.89 $ 10.93 $ 10.61
TOTAL RETURN B, C 35.72% 3.12% 6.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 554,573 $ 562,736 $ 661,804
Ratio of expenses to average net assets 1.01% .97% 1.20% A
Ratio of expenses to average net assets after .99% D .90% D 1.18% A,
expense reductions D
Ratio of net investment income to average net .39% .40% .03% A
assets
Portfolio turnover rate 192% 182% 210% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D 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 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Small Cap Stock Fund (the fund) is a fund of Fidelity Commonwealth
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 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 maturing within sixty days of their purchase date are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of
exchange at period end. Purchases and sales of securities, income receipts,
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
Interest income is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned 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 litigation
proceeds, futures and options transactions, foreign currency transactions,
passive foreign investment companies (PFIC), partnerships, capital loss
carryforwards 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 and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). 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.
REDEMPTION FEES. Effective for shares purchased after December 4, 1995,
shares held in the fund less than 90 days are subject to a redemption fee
equal to .75% of the proceeds of the redeemed shares. The fee, which is
retained by the fund, is accounted for as a direct addition to paid in
capital.
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.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. 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 forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the
2. OPERATING POLICIES- CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
date of offset; otherwise, gain (loss) is recognized on settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, 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, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. 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.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Buying futures, writing
puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $807,168,571 and $893,737,119, respectively, of which U.S.
government and government agency obligations aggregated $10,986,404 and
$10,000,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $621,683,481 and $631,710,349, 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 .35%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .20%) 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 .58% of average net
assets after the performance adjustment.
SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an
affiliate of FMR and the general distributor of the fund, received sales
charges of $846,604 on sales of shares of the fund.
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 .33% 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 $55,409 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$81,018 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 $758 and $19,866,
respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Commonwealth Trust and the Shareholders of
Fidelity Small Cap Stock Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Commonwealth Trust: Fidelity Small Cap Stock Fund, including the
schedule of portfolio investments, as of April 30, 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 two years in the period then ended and
for the period June 28, 1993 (commencement of operations) to April 30,
1994. 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 April 30, 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 Commonwealth Trust: Fidelity Small Cap Stock Fund as of April
30, 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 two years in the period
then ended and for the period June 28, 1993 (commencement of operations) to
April 30, 1994, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 5, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Small Cap Stock voted to pay on June 10,
1996, to shareholders of record at the opening of business on June 7, 1996,
a distribution of $.51 per share derived from capital gains realized from
sales of portfolio securities and a dividend of $.01 per share from net
investment income.
A total of 1.10% 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 7% of the dividends distributed during the fiscal year qualifies
for the dividends-received deductions 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
(Far East) Inc., Tokyo, Japan
Fidelity Management & Research
(U.K.) Inc., London, England
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Bradford Lewis, 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 *
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
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Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Stock Fund
Stock Selector
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THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
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)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE