(2_FIDELITY_LOGOS)FIDELITY
EXCHANGE
FUND
ANNUAL REPORT
DECEMBER 31, 1993
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 8 A summary of major shifts in the
fund's investments over the last six
months.
INVESTMENTS 9 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 15 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 19 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 21 The auditor's opinion.
ACCOUNTANTS
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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments, either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
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. Each
performance figure 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 stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Exchange 6.54% 88.93% 280.69%
S&P 500(Registered trademark) 10.08% 97.26% 302.35%
Average Growth Fund 10.61% 99.76% 234.70%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one, five, or 10 years. You can compare
these figures to the performance of the Standard & Poor's 500 Composite
Stock Price Index - a common proxy for the U.S. stock market. You can also
compare them to the average growth fund, which reflects the performance of
488 growth funds tracked by Lipper Analytical Services. Both benchmarks
include reinvested dividends and capital gains, if any, and exclude the
effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Exchange 6.54% 13.57% 14.30%
S&P 500(Registered trademark) 10.08% 14.55% 14.94%
Average Growth Fund 10.61% 14.51% 12.38%
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
Exchange (033) S&P 500
12/31/83 10000.00 10000.00
01/31/84 9784.53 9944.00
02/29/84 9388.67 9593.97
03/31/84 9642.48 9759.95
04/30/84 9779.87 9852.67
05/31/84 9251.29 9306.83
06/30/84 9507.43 9508.79
07/31/84 9341.76 9390.88
08/31/84 10339.19 10428.57
09/30/84 10156.76 10430.66
10/31/84 10258.64 10471.34
11/30/84 10135.44 10354.06
12/31/84 10404.29 10627.40
01/31/85 11232.78 11455.28
02/28/85 11365.24 11596.18
03/31/85 11403.77 11604.30
04/30/85 11345.97 11593.85
05/31/85 11976.97 12263.98
06/30/85 12160.01 12456.52
07/31/85 12110.88 12437.84
08/31/85 12025.30 12332.11
09/30/85 11678.08 11946.12
10/31/85 12123.10 12498.03
11/30/85 13057.15 13355.39
12/31/85 13648.88 14001.80
01/31/86 13771.14 14080.21
02/28/86 14928.25 15133.40
03/31/86 15796.41 15977.85
04/30/86 15778.69 15797.30
05/31/86 16667.10 16637.72
06/30/86 17120.16 16918.89
07/31/86 16145.70 15973.13
08/31/86 17052.27 17158.33
09/30/86 15432.64 15739.34
10/31/86 16314.21 16647.50
11/30/86 16770.37 17052.03
12/31/86 16477.26 16617.21
01/31/87 18725.35 18855.54
02/28/87 19753.51 19600.34
03/31/87 20090.46 20166.79
04/30/87 19652.61 19987.30
05/31/87 19848.70 20161.19
06/30/87 20909.77 21179.33
07/31/87 21933.23 22253.12
08/31/87 22627.41 23083.17
09/30/87 22100.94 22577.65
10/31/87 17514.67 17714.42
11/30/87 16111.65 16254.75
12/31/87 17312.19 17491.74
01/31/88 17947.30 18228.14
02/29/88 18905.69 19077.57
03/31/88 18301.60 18488.08
04/30/88 18349.15 18693.29
05/31/88 18340.76 18855.92
06/30/88 18982.68 19721.41
07/31/88 18792.91 19646.47
08/31/88 18455.85 18978.49
09/30/88 19158.29 19786.97
10/31/88 20002.34 20337.05
11/30/88 19829.56 20046.23
12/31/88 20149.35 20397.04
01/31/89 21334.95 21890.10
02/28/89 20933.98 21345.04
03/31/89 21434.55 21842.38
04/30/89 22587.56 22976.00
05/31/89 23421.46 23906.53
06/30/89 23318.53 23770.26
07/31/89 25450.03 25916.71
08/31/89 25602.28 26424.68
09/30/89 25431.76 26316.34
10/31/89 25032.86 25705.80
11/30/89 25690.58 26230.20
12/31/89 26100.70 26859.73
01/31/90 24382.78 25057.44
02/28/90 24591.01 25380.68
03/31/90 25248.25 26053.27
04/30/90 24740.68 25401.94
05/31/90 27486.75 27878.62
06/30/90 27539.53 27689.05
07/31/90 27355.12 27600.44
08/31/90 25063.18 25105.36
09/30/90 23897.45 23882.73
10/31/90 23709.74 23780.04
11/30/90 25208.07 25316.23
12/31/90 25972.93 26022.55
01/31/91 26827.75 27157.13
02/28/91 28804.10 29098.87
03/31/91 29580.28 29803.06
04/30/91 29481.12 29874.59
05/31/91 30766.77 31165.17
06/30/91 29266.35 29737.81
07/31/91 30760.62 31123.59
08/31/91 31417.82 31861.22
09/30/91 30819.42 31329.13
10/31/91 31410.91 31748.94
11/30/91 30428.56 30469.46
12/31/91 34132.82 33955.17
01/31/92 33386.99 33323.60
02/29/92 33971.75 33756.81
03/31/92 33320.46 33098.55
04/30/92 33943.73 34071.65
05/31/92 34150.32 34238.60
06/30/92 33289.24 33728.44
07/31/92 34842.93 35107.94
08/31/92 34379.30 34388.23
09/30/92 34520.87 34794.01
10/31/92 34832.31 34915.79
11/30/92 35894.06 36106.41
12/31/92 35731.78 36550.52
01/31/93 35453.64 36857.55
02/28/93 35562.01 37358.81
03/31/93 36378.37 38147.08
04/30/93 35666.76 37223.92
05/31/93 36573.42 38221.52
06/30/93 36597.19 38332.36
07/31/93 35917.91 38179.04
08/31/93 37229.00 39626.02
09/30/93 36918.57 39320.90
10/31/93 38025.14 40134.84
11/30/93 37499.25 39753.56
12/31/93 38068.78 40234.58
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Exchange
Fund on December 31, 1983. As the chart shows, by December 31, 1993, the
value of your investment would have grown to $38,069 - a 280.69% 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 $40,235 - a 302.35% 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
Low inflation, falling interest rates
and a gradually improving
economy boosted U.S. stocks
during the 12 months ended
December 31, 1993. The
Standard & Poor's 500 stock
index rose 10.08%, in line with
the market's long-term average
annual return. Some tobacco,
drug and brand-name consumer
products stocks began to pick up
by year end, but had weak
returns for the year, overall.
Those losses were offset by
impressive gains in other sectors,
including technology, although
semiconductors gave back part
of their gains in the fall. Other
market leaders were finance,
notably securities brokers;
economically-sensitive sectors
like autos and steel;
entertainment; heavy machinery;
and precious metals.
Communications stocks soared
as traditional telephone utilities,
cellular companies, and
entertainment firms scrambled to
form strategic alliances. The
NASDAQ Composite Index -
which tracks over-the-counter
stocks - rose 14.75% for the
year, but was outpaced by
the Dow Jones Industrial Average
- - an index of 30 blue-chip stocks
- - which rose 17.04%. In
mid-November, the Dow closed
above 3700 for the first time and
finished the year at 3754. Most
international markets easily
outpaced U.S. returns. The
Morgan Stanley EAFE (Europe,
Australia, Far East) index rose
32.56%, while the Morgan
Stanley Emerging Markets Index
was up 73.21% for the year.
A message from Sandy Cushman, Portfolio Manager of Fidelity Exchange Fund
Dear Exchange Fund Shareholder:
For the 12 months ended December 31, the fund had a total return of 6.54%.
That trailed the Standard & Poor's 500 index, which returned 10.08%
during the same period. The fund also lagged the average growth fund
tracked by Lipper Analytical Services, which gained 10.61%. These results
came despite a pick-up in the fund's performance over the last six months.
Uncertainty over President Clinton's reform plan hurt health-care stocks,
the fund's biggest sector investment at 16.6% on December 31. Fear that
drug companies would lose the power to raise their prices flattened stocks
like Eli Lilly, Merck and Pfizer early in the year. But I think
overreaction fueled much of the drug stock sell-off. The industry is
changing and companies are preparing themselves to do business under a new
set of rules. Some have new and successful products either on the market or
in production. I have a brighter outlook for some of these stocks in '94.
Many of the fund's bigger, blue-chip names spent most of the year in the
doldrums. A big chunk of the growth stocks the fund acquired in the 1970s
fall into the category of consumer non-durables. This sector made up 16.4%
of the fund's investments at the end of the year. These companies lost
pricing power in 1993 for two big reasons. Inflation remained very low,
which made it difficult for companies to raise the prices of their
products. And more importantly, consumers shunned familiar brand-name
products for cheaper generic or off-brand items. Stocks like Philip Morris,
which dropped 27.9% in 1993, Sara Lee (down 16.7%), and Johnson &
Johnson (down 16.2%) felt the effects.
Lately, we've seen some consumer non-durables rebound a bit. Many companies
cut costs through the year, and should be poised for better earnings now
that the economy is showing signs of strength. By late in the year,
investors had beaten down the prices of some of these stocks to a point at
which bargain hunters began to move in.
Technology stocks - 6.2% of the fund's investments - and finance - 5.2% of
the fund - turned in strong perform-ances before investors went in for some
profit taking late in the year. Falling interest rates and low inflation
helped the balance sheets of banks, and their stocks responded. On the
technology side, semiconductor manufacturer Motorola's stock was up 80.9%
for the year. Japanese firms stopped gaining market share and demand for
semiconductors rose due to increasing sales of cellular phones and personal
computers. Investors also speculated about the roles of several companies
in the building of the so-called information superhighway, which will join
the technologies of telephones, televisions and computers to bring us
interactive services in our homes.
As for the next six months, I, like most people, feel stock valuations are
high. But I'm optimistic for a couple of reasons. Many of the stocks in
this fund have been hit hard over the last couple years and I think most of
the selling has already taken place. Also, if there's a market correction,
I believe the stocks of smaller companies will fall faster than those of
larger companies. The big firms in this fund may lend it more stability
should the market drop. Also, I like the outlook for some of the consumer
non-durables. Price cuts on brand-name goods have shrunk the gap between
those and the generics, and consumer confidence is picking up. I think
people may be ready to go back to the better known brand-names. Many of
these companies have long, successful histories and have rebounded from
down times before.
Sincerely,
Sandy Cushman
DISTRIBUTIONS: The Board of
Trustees of Fidelity Exchange
Fund voted to pay on February 7,
1994, to shareholders of record
at the opening of business on
February 4, 1994, a distribution
of $.06 derived from capital gains
realized from sales of portfolio
securities.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF DECEMBER 31, 1993
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 2.9 3.1
McDonald's Corp. 2.7 2.4
Coca-Cola Company (The) 2.7 2.6
Disney (Walt) Co. 2.6 2.6
Abbott Laboratories 2.5 2.3
Schering-Plough Corp. 2.5 2.6
American Home Products Corp. 2.5 2.5
Hewlett Packard Co. 2.5 2.6
Johnson & Johnson 2.4 2.3
Gillette Company 2.1 2.0
TOP FIVE INDUSTRIES AS OF DECEMBER 31, 1993
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO
Health 16.6 17.6
Nondurables 16.4 16.8
Media & Leisure 13.9 12.5
Energy 9.2 9.7
Utilities 7.5 7.9
ASSET ALLOCATION
AS OF DECEMBER 31, 1993 AS OF JUNE 30, 1993
Row: 1, Col: 1, Value: 4.7
Row: 1, Col: 2, Value: 95.3
Row: 1, Col: 1, Value: 2.9
Row: 1, Col: 2, Value: 97.09999999999999
Stocks 95.3%
Short-term
investments 4.7%
Stocks 97.1%
Short-term
investments 2.9%
INVESTMENTS DECEMBER 31, 1993
Showing Percentage of Total Value of Investments
COMMON STOCKS - 95.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.4%
DEFENSE ELECTRONICS - 1.4%
Raytheon Co. 40,000 $ 2,640,000 75511110
BASIC INDUSTRIES - 2.9%
CHEMICALS & PLASTICS - 2.6%
Air Products & Chemicals, Inc. 47,634 2,107,800 00915810
Cabot Corp. 25,000 1,346,875 12705510
Minnesota Mining & Manufacturing Co. 15,000 1,631,250 60405910
5,085,925
METALS & MINING - 0.3%
Aluminum Co. of America 8,382 581,501 02224910
TOTAL BASIC INDUSTRIES 5,667,426
CONGLOMERATES - 0.6%
United Technologies Corp. 17,776 1,102,112 91301710
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 2.1%
Dana Corp. 40,335 2,415,058 23581110
General Motors Corp. 30,000 1,646,250 37044210
4,061,308
CONSUMER ELECTRONICS - 0.5%
Stanley Works 21,074 937,793 85461610
TOTAL DURABLES 4,999,101
ENERGY - 9.2%
ENERGY SERVICES - 2.1%
Dresser Industries, Inc. 40,000 830,000 26159710
Halliburton Co. 50,700 1,616,063 40621610
Schlumberger Ltd. 26,919 1,591,586 80685710
4,037,649
OIL & GAS - 7.1%
Amoco Corp. 40,000 2,115,000 03190510
Cabot Oil & Gas Corp. Class A 643 13,583 12709710
Chevron Corp. 30,000 2,613,750 16675110
Exxon Corp. 50,000 3,150,000 30229010
Kerr-McGee Corp. 13,600 613,700 49238610
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Mobil Corp. 40,000 $ 3,160,000 60705910
Royal Dutch Petroleum Co. 15,000 1,565,625 78025770
Texaco, Inc. 6,391 413,018 88169410
13,644,676
TOTAL ENERGY 17,682,325
FINANCE - 5.2%
BANKS - 1.4%
Bankers Trust New York Corp. 20,000 1,582,500 06636510
CoreStates Financial Corp. 43,800 1,144,275 21869510
2,726,775
CREDIT & OTHER FINANCE - 1.5%
American Express Co. 94,788 2,926,580 02581610
INSURANCE - 2.3%
General Re Corp. 23,360 2,499,520 37056310
Torchmark Corp. 41,616 1,872,720 89102710
4,372,240
TOTAL FINANCE 10,025,595
HEALTH - 16.6%
DRUGS & PHARMACEUTICALS - 10.9%
American Cyanamid Co. 31,500 1,582,875 02532110
American Home Products Corp. 73,767 4,776,413 02660910
Bristol-Myers Squibb Co. 60,584 3,521,445 11012210
Lilly (Eli) & Co. 26,252 1,558,713 53245710
Merck & Co., Inc. 33,619 1,155,653 58933110
Pfizer, Inc. 50,000 3,450,000 71708110
Schering-Plough Corp. 70,020 4,796,370 80660510
20,841,469
MEDICAL EQUIPMENT & SUPPLIES - 5.7%
Abbott Laboratories 165,916 4,894,522 00282410
Becton, Dickinson & Co. 40,000 1,435,000 07588710
Johnson & Johnson 103,670 4,639,233 47816010
10,968,755
TOTAL HEALTH 31,810,224
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 5.8%
ELECTRICAL EQUIPMENT - 3.6%
General Electric Co. 53,597 $ 5,620,985 36960410
General Signal Corp. 40,000 1,375,000 37083810
6,995,985
INDUSTRIAL MACHINERY & EQUIPMENT - 1.5%
Indresco, Inc. (a) 2,355 36,503 45590510
Parker-Hannifin Corp. 75,937 2,866,622 70109410
2,903,125
POLLUTION CONTROL - 0.7%
WMX Technologies, Inc. 50,000 1,318,750 92929Q10
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 11,217,860
MEDIA & LEISURE - 13.9%
BROADCASTING - 0.6%
Capital Cities/ABC, Inc. 2,000 1,239,000 13985910
ENTERTAINMENT - 4.0%
Disney (Walt) Co. 115,454 4,921,227 25468710
GC Cos., Inc. (a) 4,000 138,500 36155Q10
Paramount Communications, Inc. 34,029 2,632,994 69921610
7,692,721
PUBLISHING - 6.6%
Gannett Co., Inc. 55,214 3,161,002 36473010
Harcourt General, Inc. 40,000 1,450,000 41163G10
Knight-Ridder, Inc. 32,200 1,923,950 49904010
McGraw-Hill, Inc. 34,756 2,350,375 58064510
Media General, Inc. Class A 34,382 1,009,971 58440410
Times Mirror Co., Series A 82,781 2,762,816 88736010
12,658,114
RESTAURANTS - 2.7%
McDonald's Corp. 90,000 5,130,000 58013510
TOTAL MEDIA & LEISURE 26,719,835
NONDURABLES - 16.4%
BEVERAGES - 4.4%
Anheuser-Busch Companies, Inc. 68,317 3,356,073 03522910
Coca-Cola Company (The) 113,461 5,091,562 19121610
8,447,635
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
FOODS - 3.9%
General Mills, Inc. 50,000 $ 3,037,500 37033410
Ralston Continental Baking Group 7,059 59,119 75126210
Ralston Purina Co. 35,298 1,403,096 75127730
Sara Lee Corp. 120,000 3,000,000 80311110
7,499,715
HOUSEHOLD PRODUCTS - 6.8%
Colgate-Palmolive Co. 60,000 3,742,500 19416210
Gillette Company 68,572 4,088,606 37576610
International Flavors & Fragrances, Inc. 15,678 1,783,373 45950610
Procter & Gamble Co. 60,000 3,420,000 74271810
13,034,479
TOBACCO - 1.3%
Philip Morris Companies, Inc. 44,150 2,461,363 71815410
TOTAL NONDURABLES 31,443,192
RETAIL & WHOLESALE - 4.6%
APPAREL STORES - 0.6%
Edison Brothers Stores, Inc. 40,000 1,190,000 28087510
GENERAL MERCHANDISE STORES - 2.6%
K mart Corp. 80,678 1,714,408 48258410
May Department Stores Co. (The) 82,126 3,233,711 57777810
4,948,119
GROCERY STORES - 1.4%
Supervalue, Inc. 76,080 2,757,900 86853610
TOTAL RETAIL & WHOLESALE 8,896,019
SERVICES - 1.8%
PRINTING - 1.2%
Harland (John H.) Co. 100,000 2,162,500 41269310
SERVICES - 0.6%
Jostens, Inc. 61,207 1,208,838 48108810
TOTAL SERVICES 3,371,338
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 6.2%
COMPUTERS & OFFICE EQUIPMENT - 2.7%
Hewlett-Packard Co. 59,889 $ 4,731,231 42823610
International Business Machines Corp. 9,097 513,981 45920010
5,245,212
ELECTRONICS - 2.0%
Motorola, Inc. 41,248 3,810,284 62007610
PHOTOGRAPHIC EQUIPMENT - 1.5%
Eastman Kodak Co. 37,192 2,082,752 27746110
Polaroid Corp. 21,668 731,295 73109510
2,814,047
TOTAL TECHNOLOGY 11,869,543
TRANSPORTATION - 0.6%
RAILROADS - 0.6%
Union Pacific Corp. 19,090 1,195,511 90781810
UTILITIES - 7.5%
ELECTRIC UTILITY - 5.0%
Central Louisiana Electric Co., Inc. 60,000 1,485,000 15389760
Duke Power Co. 50,000 2,118,750 26439910
Hawaiian Electric Industries, Inc. 40,000 1,435,000 41987010
PacifiCorp. 55,400 1,066,450 69511410
Potomac Electric Power Co. 70,000 1,872,500 73767910
SCECorp. 80,000 1,600,000 78388210
9,577,700
GAS - 0.4%
Williams Companies, Inc. 30,680 747,825 96945710
TELEPHONE SERVICES - 2.1%
MCI Communications Corp. 80,000 2,260,000 55267310
Sprint Corporation 50,000 1,737,500 85206110
3,997,500
TOTAL UTILITIES 14,323,025
TOTAL COMMON STOCKS
(Cost $25,220,561) 182,963,106
REPURCHASE AGREEMENTS - 4.7%
MATURITY VALUE (NOTE 1)
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 3.23%
dated 12/31/93 due 1/3/94 $8,990,807 $ 8,990,000
TOTAL INVESTMENTS - 100%
(Cost $34,210,561) $ 191,953,106
LEGEND
(a) Non-income producing
INCOME TAX INFORMATION
At December 31, 1993, the aggregate cost of investment securities for
income tax purposes was $34,210,561. Gross and net unrealized appreciation
amounted to $157,742,545 related to appreciated investment securities.
The fund hereby designates $1,530,000 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>
DECEMBER 31, 1993
ASSETS
Investment in securities, at value (including repurchase $ 191,953,106
agreements of $8,990,000) (cost $34,210,561) (Notes
1 and 2) - See accompanying schedule
Cash 806
Dividends receivable 354,326
TOTAL ASSETS 192,308,238
LIABILITIES
Payable for fund shares redeemed $ 1,700
Dividends payable 2,835,554
Accrued management fee 85,782
Other payables and accrued expenses 27,367
TOTAL LIABILITIES 2,950,403
NET ASSETS $ 189,357,835
Net Assets consist of:
Paid in capital $ 31,771,730
Distributions in excess of net investment income (258,972)
Accumulated undistributed net realized gain (loss) on 102,532
investments
Net unrealized appreciation (depreciation) on investment 157,742,545
securities
NET ASSETS, for 1,852,887 shares outstanding $ 189,357,835
NET ASSET VALUE, offering price and redemption price per $102.20
share ($189,357,835 (divided by) 1,852,887 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
INVESTMENT INCOME $ 5,082,241
Dividends
Interest 201,522
TOTAL INCOME 5,283,763
EXPENSES
Management fee (Note 4) $ 1,015,757
Transfer agent fees (Note 4) 10,986
Accounting fees and expenses (Note 4) 878
Non-interested trustees' compensation 1,150
Custodian fees and expenses 17,440
Registration fees 250
Audit 26,734
Legal 1,380
Miscellaneous 2,807
TOTAL EXPENSES 1,077,382
NET INVESTMENT INCOME 4,206,381
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 5,630,947
(NOTES 1 AND 3)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 2,103,145
investment securities
NET GAIN (LOSS) 7,734,092
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 11,940,473
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
INCREASE (DECREASE) IN NET ASSETS
Operations $ 4,206,381 $ 4,133,340
Net investment income
Net realized gain (loss) on investments 5,630,947 7,019,105
Change in net unrealized appreciation (depreciation) 2,103,145 (2,532,182)
on
investments
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 11,940,473 8,620,263
FROM OPERATIONS
Distributions to shareholders (4,206,381) (4,230,046)
From net investment income
In excess of net investment income (159,460) -
From net realized gain (1,424,592) (1,619,152)
TOTAL DISTRIBUTIONS (5,790,433) (5,849,198)
Share transactions
Reinvestment of distributions from: 878,621 854,791
Net investment income
Net realized gain 437,190 501,873
Cost of shares redeemed (4,994,161) (5,117,153)
Net increase (decrease) in net assets resulting from (3,678,350) (3,760,489)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,471,690 (989,424)
NET ASSETS
Beginning of period 186,886,145 187,875,569
End of period (including under (over) distribution of net $ 189,357,835 $ 186,886,145
investment income of $(258,972) and $1,308,601,
respectively)
OTHER INFORMATION
Shares
Issued in reinvestment of distributions from: 8,743 8,772
Net investment income
Net realized gain 4,319 4,956
Redeemed (49,384) (51,890)
Net increase (decrease) (36,322) (38,162)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA
Net asset value, beginning $ 98.92 $ 97.48 $ 75.96 $ 80.22 $ 69.85
of period
Income from Investment
Operations
Net investment income 2.26 2.19 2.13 2.16 2.23
Net realized and 4.14 2.34 21.49 (2.52) 17.56
unrealized gain (loss)
on
investments
Total from investment 6.40 4.53 23.62 (.36) 19.79
operations
Less Distributions
From net investment (2.26) (2.23) (2.10) (2.20) (2.30)
income
In excess of net (.09) - - - -
investment
income
From net realized gain (.77) (.86) - (1.70) (7.12)
Total distributions (3.12) (3.09) (2.10) (3.90) (9.42)
Net asset value, end of $ 102.20 $ 98.92 $ 97.48 $ 75.96 $ 80.22
period
TOTAL RETURN 6.54% 4.68% 31.42% (.49)% 29.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 189,358 $ 186,886 $ 187,876 $ 150,050 $ 163,312
(000 omitted)
Ratio of expenses to .57% .58% .58% .56% .58%
average net assets
Ratio of net investment 2.24% 2.23% 2.42% 2.72% 2.78%
income to average net
assets
Portfolio turnover rate 0% 0% 0% 0% 6%
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1993
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Exchange Fund (the fund) 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 and is
authorized to issue 10 million shares. 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 are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
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 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 earned. Dividend and
interest income is recorded net of foreign taxes where recovery of such
taxes is not assured.
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 are primarily due to differing treatments for
redemptions in kind and will result in reclassifications 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.
CHANGE IN ACCOUNTING FOR
DISTRIBUTIONS TO SHAREHOLDERS. Effective January 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, the fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, amounts
as of December 31, 1992 have been
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
restated to reflect an increase in paid in capital of $28,398,108, a
decrease in undistributed net investment income of $1,408,113 and a
decrease in accumulated net realized gain on investments of $26,989,995.
2. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
3. PURCHASES AND SALES OF INVESTMENTS.
Sales of securitites, other than short-term securities, agreggrated
$6,242,517, which represents the current value of securities delivered in
redemption of fund shares. There were no purchases of securities during
the period.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee at a
rate of 1/20 of 1% per month (which is equivalent to an annual rate of 6/10
of 1%) of the fund's average net assets determined as of the close of
business on each business day throughout the month. In addition, under the
Management Contract, FMR provides portfolio accounting and bookkeeping
services to the fund and determines the net asset value per share of the
fund. The management fee is subject to a reduction to the extent that the
monthly average net assets of all mutual funds advised by FMR exceed $4
billion in any month. The management fee payable by the fund on its portion
of the excess is reduced by 10%. For the period, the management fee was
reduced by $110,387. For the period, the management fee was equivalent to
an annual rate of .54% of average net assets after the fee reduction.
TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the
fund's transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and the Shareholders of Fidelity Exchange Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Exchange Fund, including the schedule of portfolio investments, as
of December 31,1993, 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 December 31, 1993, 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 Exchange Fund as of December 31, 1993, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
February 4, 1994
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)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)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. FOR MORE
INFORMATION ON ANY
FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888
FOR A FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO WRITE FIDELITY
Please locate the address that is closest to you. We'll give your
correspondence immediate attention and send you written confirmation upon
completion of your request. Please send ALL correspondence about retirement
accounts to Dallas.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 2269
Boston, MA 02107-2269
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30280
Salt Lake City, UT 84130-0280
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
Additional Payments
P.O. Box 2656
Boston, MA 02293-0656
Fidelity Investments
Additional Payments
P.O. Box 620024
Dallas, TX 75262-0024
Fidelity Investments
Additional Payments
P.O. Box 31455
Salt Lake City, UT 84131-0455
OVERNIGHT EXPRESS
Fidelity Investments
Additional Payments
World Trade Center
164 Northern Avenue
Boston, MA 02210
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02103-0878
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02101-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 620024
Dallas, TX 75262-0024
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
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 GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Exchange Fund
Growth Company Fund
Low-Priced Stock Fund
Magellan(Registered trademark) Fund
New Millennium<UNDEF> 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
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)
<UNDEF>
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and the Shareholders of Fidelity Exchange Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Exchange Fund at December 31, 1993, the results of its operations
for the year then ended, the changes in its net assets and the financial
highlights for the periods indicated in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fidelity Exchange Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1993 by correspondence
with the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Boston, Massachusetts
February 4, 1994
