(2_FIDELITY_LOGOS)FIDELITY
EXCHANGE
FUND
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on stock market
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 8 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 9 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 15 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 19 Notes to the financial statements.
REPORT OF INDEPENDENT 21 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 22
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE
SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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:
The unsettling period that began for investors when the Federal Reserve
Board raised short-term interest rates in February continued into the
fourth quarter of 1994. The Board raised the federal funds rate - the rate
banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. A sixth increase in November
lifted the rate to 5.50%. The Fed rate hikes were intended to forestall
inflation that could result from an improving U.S. economy, and they led to
below-average returns for many stocks and negative returns for many bond
investments.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
If you can leave your money invested over the long term, you can avoid much
of the volatility that generally accompanies the stock market in the short
term, as we have been witnessing this year. You also can help to manage
risk through diversification of investments. 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 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. As with any mutual fund, 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 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, as we have discussed here. 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. 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, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Exchange 4.66% 52.65% 282.94%
S&P 500(registered trademark) 1.32% 51.77% 283.58%
Average Growth and Income Fund -0.94% 49.80% 224.96%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one,
five, or 10 years. For example, if you had invested $1,000 in a fund that
had a 5% return over the past year, you would end up with $1,050. 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 and income fund, which
currently reflects the performance of 347 growth and income funds tracked
by Lipper Analytical Services. (Lipper recently changed the fund's peer
group from growth funds to growth and income funds. This change allows the
fund's performance to be compared with other funds that more closely mirror
its investment objectives.) 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, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Exchange 4.66% 8.83% 14.37%
S&P 500(registered trademark) 1.32% 8.70% 14.39%
Average Growth and Income Fund -0.94% 8.29% 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) Standard & Poor's 5
12/31/84 10000.00 10000.00
01/31/85 10796.27 10779.00
02/28/85 10923.59 10911.58
03/31/85 10960.63 10919.22
04/30/85 10905.07 10909.39
05/31/85 11511.55 11539.96
06/30/85 11687.48 11721.13
07/31/85 11640.24 11703.55
08/31/85 11557.99 11604.07
09/30/85 11224.27 11240.86
10/31/85 11651.99 11760.19
11/30/85 12549.75 12566.94
12/31/85 13118.48 13175.18
01/31/86 13235.99 13248.96
02/28/86 14348.12 14239.98
03/31/86 15182.54 15034.57
04/30/86 15165.51 14864.68
05/31/86 16019.40 15655.49
06/30/86 16454.85 15920.06
07/31/86 15518.26 15030.13
08/31/86 16389.60 16145.37
09/30/86 14832.91 14810.15
10/31/86 15680.22 15664.69
11/30/86 16118.66 16045.34
12/31/86 15836.96 15636.19
01/31/87 17997.69 17742.38
02/28/87 18985.96 18443.20
03/31/87 19309.88 18976.21
04/30/87 18889.03 18807.33
05/31/87 19077.51 18970.95
06/30/87 20097.35 19928.98
07/31/87 21081.05 20939.38
08/31/87 21748.26 21720.42
09/30/87 21242.24 21244.74
10/31/87 16834.16 16668.63
11/30/87 15485.66 15295.13
12/31/87 16639.54 16459.09
01/31/88 17249.97 17152.02
02/29/88 18171.15 17951.30
03/31/88 17590.53 17396.61
04/30/88 17636.23 17589.71
05/31/88 17628.17 17742.74
06/30/88 18245.19 18557.13
07/31/88 18062.79 18486.61
08/31/88 17738.83 17858.07
09/30/88 18413.98 18618.82
10/31/88 19225.24 19136.43
11/30/88 19059.17 18862.78
12/31/88 19366.54 19192.87
01/31/89 20506.08 20597.79
02/28/89 20120.69 20084.91
03/31/89 20601.79 20552.89
04/30/89 21710.01 21619.58
05/31/89 22511.51 22495.17
06/30/89 22412.59 22366.95
07/31/89 24461.28 24386.69
08/31/89 24607.61 24864.67
09/30/89 24443.71 24762.72
10/31/89 24060.32 24188.23
11/30/89 24692.48 24681.66
12/31/89 25086.64 25274.02
01/31/90 23435.46 23578.14
02/28/90 23635.60 23882.30
03/31/90 24267.30 24515.18
04/30/90 23779.46 23902.30
05/31/90 26418.84 26232.77
06/30/90 26469.56 26054.39
07/31/90 26292.32 25971.01
08/31/90 24089.42 23623.23
09/30/90 22968.99 22472.78
10/31/90 22788.58 22376.15
11/30/90 24228.69 23821.65
12/31/90 24963.80 24486.27
01/31/91 25785.41 25553.87
02/28/91 27684.97 27380.98
03/31/91 28430.99 28043.60
04/30/91 28335.69 28110.90
05/31/91 29571.39 29325.29
06/30/91 28129.19 27982.19
07/31/91 29565.40 29286.16
08/31/91 30197.07 29980.25
09/30/91 29621.92 29479.58
10/31/91 30190.42 29874.60
11/30/91 29246.24 28670.66
12/31/91 32806.60 31950.58
01/31/92 32089.76 31356.30
02/29/92 32651.79 31763.93
03/31/92 32025.81 31144.53
04/30/92 32624.87 32060.18
05/31/92 32823.43 32217.28
06/30/92 31995.83 31737.24
07/31/92 33489.15 33035.29
08/31/92 33043.53 32358.07
09/30/92 33179.60 32739.89
10/31/92 33478.94 32854.48
11/30/92 34499.43 33974.82
12/31/92 34343.44 34392.71
01/31/93 34076.11 34681.61
02/28/93 34180.26 35153.28
03/31/93 34964.90 35895.02
04/30/93 34280.95 35026.36
05/31/93 35152.38 35965.06
06/30/93 35175.21 36069.36
07/31/93 34522.33 35925.08
08/31/93 35782.47 37286.64
09/30/93 35484.11 36999.54
10/31/93 36547.68 37765.43
11/30/93 36042.22 37406.66
12/31/93 36589.64 37859.28
01/31/94 37180.38 39146.49
02/28/94 36310.29 38085.62
03/31/94 34823.64 36425.09
04/30/94 35411.13 36891.33
05/31/94 35998.63 37496.35
06/30/94 35088.00 36577.69
07/31/94 36196.27 37777.44
08/31/94 37757.27 39326.31
09/30/94 37395.09 38362.82
10/31/94 38380.21 39225.98
11/30/94 37699.32 37797.37
12/30/94 38293.71 38357.90
$10,000 OVER 10 YEARS: Let's
say you invested $10,000 in Fidelity Exchange Fund on December 31, 1984. As
the chart shows, by December 31, 1994, the value of your investment would
have grown to $38,294 - a 282.94% 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
$38,358 - a 283.58% 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
Pressures from rising interest
rates contributed to below-average
returns in the U.S. stock market
during the 12 months ended
December 31, 1994. The
Standard and Poor's Composite
Index of 500 stocks finished the
12-month period with a total
return of 1.32% - well below its
historical annual average. After
steady gains in January, stocks
stumbled from February through
June 1994. During that time, the
Federal Reserve Board raised
short-term interest rates four
times in an effort to curb
possible future inflation triggered
by a strengthening economy.
During the second half of 1994,
there was a tug-of-war in the
stock market, fueled by two
competing sentiments. On one
side there was concern that rising
interest rates would hurt
corporate earnings; the market
dropped in November when the
Fed raised rates again. On the
other hand, strengthening
corporate earnings and a flurry
of merger and acquisition
activity helped the market rally
from July through October and in
December as well. Returns in
overseas markets were mixed.
The Morgan Stanley EAFE
(Europe, Australia, Far East)
index returned 7.78% for the 12
months ended December 31. The
Morgan Stanley Emerging
Markets Free index was down
7.32% during the same period, on
the heels of Mexico's devaluation
of the peso and market corrections
in Asian emerging markets.
NOTE TO SHAREHOLDERS: After 26 years at Fidelity, Sandy Cushman has
retired. As of January 1, 1995, Jonathan F. (Jay) Weed has assumed
responsibility for Exchange Fund. Mr. Weed is chief investment officer of
Fidelity Personal Trust Services. Previously, he managed Fidelity's $2
billion equity index mutual funds for over five years. Mr. Weed joined
Fidelity in 1984.
A Message from Jay Weed, Portfolio Manager of Fidelity Exchange Fund
Dear Exchange Fund Shareholder:
The past year has been a trying time for even the most seasoned stock
market investor, but your fund fared better than most stock portfolios. The
fund had a total return of 4.66% for the 12 months ended December 31, 1994.
That beat the Standard & Poor's 500 stock index, which returned 1.32%
during the same period. The fund also performed better than the average
growth and income fund, which fell 0.94% during the same period, according
to Lipper Analytical Services.
While the fund's stocks were affected by variables particular to them,
certain trends also influenced performance. For example, over the past six
months growth stocks - those of companies with rapid earnings growth -
fared better than cyclical stocks - those whose prices usually rise and
fall in tandem with the economy. The fund benefited from the growth stock
trend through its investments in technology. This was one of the best
performing sectors in 1994, largely due to strong earnings. Hewlett Packard
showed positive earnings growth. Motorola was helped by high demand for
microchips and robust growth in cellular subscriptions.
Health care stocks rebounded well over the past six months, as it became
clearer that reform would not be part of the political agenda. Stock
performance in this sector also benefited from cost cutting and higher
sales volumes. Some of the fund's top performers were drug and medical
supply companies. Johnson & Johnson made strong gains in earnings.
Schering-Plough increased sales of newer drugs. And the fund was fortunate
to hold shares in American Cyanamid, which was bought by American Home
Products at a large premium.
Some of the fund's investments in the consumer non-durables sector also
were among its top performers. Strong sales in the U.S. and South America
helped Coca-Cola. Both Colgate-Palmolive and Gillette benefited from new
products and increased penetration into developing markets.
Cyclical stocks fell out of favor more recently because investors worried
about potential negative effects of higher interest rates on corporate
earnings. For example, even though earnings projections for the railroad
industry remained positive, there was concern an economic slowdown could
hurt profits there. The fund's railroad stock, Union Pacific, fell because
of worries that its value would be diluted by the company's attempted
takeover of the Santa Fe Railroad.
Retailing was another area that was particularly weak, as consumers tended
to focus their spending on big-ticket items such as appliances, instead of
apparel. Price wars and costs related to restructuring hurt the stock of
Supervalu, a supermarket chain.
MCI Communications and Sprint also have struggled due to stepped-up
competition from the market share leader, AT&T. Additionally, these stocks
have dropped because investors are skeptical about their ability to succeed
with a new generation of wireless technology, after spending millions on
previously untapped radio frequencies.
Looking ahead, market performance depends on interest rates and the
economy. The Fed's commitment to controlling inflation benefits the market,
but questions remain as to whether it will have to continue to raise
interest rates to do so. If 1994's interest rate increases begin to affect
corporate earnings negatively, stocks could suffer. In addition, higher
yields on fixed-income investments could make them more attractive relative
to stocks, putting pressure on the market. However, if interest rates
stabilize and earnings remain strong, stock performance could improve. In
any event, a long-term outlook will help you more easily weather periodic
market downturns.
Sincerely,
Jonathan F. Weed
INVESTMENT CHANGES
TOP TEN STOCKS AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Hewlett Packard Co. 3.1 2.5
Johnson & Johnson 3.0 2.5
Coca-Cola Company (The) 2.8 2.5
Disney (Walt) Co. 2.8 2.7
Schering-Plough Corp. 2.7 2.4
Abbott Laboratories 2.7 2.7
General Electric Co. 2.7 2.6
Gillette Co. 2.7 2.5
McDonald's Corp. 2.6 2.8
Motorola, Inc. 2.5 2.1
TOP FIVE INDUSTRIES AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO
Nondurables 17.3 16.6
Health 17.1 17.1
Media & Leisure 13.0 13.3
Energy 9.2 9.8
Technology 6.9 5.9
ASSET ALLOCATION
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Row: 1, Col: 1, Value: 7.6
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 42.3
Row: 1, Col: 4, Value: 50.0
Row: 1, Col: 1, Value: 5.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 44.8
Row: 1, Col: 4, Value: 50.0
Stocks 92.3%
Bonds 0.1%
Short-term
Investments 7.6%
Stocks 94.8%
Bonds -
Short-term
Investments 5.2%
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 92.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.3%
DEFENSE ELECTRONICS - 1.3%
Raytheon Co. 40,000 $ 2,555,000
BASIC INDUSTRIES - 2.7%
CHEMICALS & PLASTICS - 2.7%
Air Products & Chemicals, Inc. 47,634 2,125,661
Cabot Corp. 50,000 1,418,750
Minnesota Mining & Manufacturing Co. 30,000 1,601,250
5,145,661
CONGLOMERATES - 0.5%
United Technologies Corp. 13,686 860,507
DURABLES - 2.0%
AUTOS, TIRES, & ACCESSORIES - 1.7%
Dana Corp. 80,670 1,885,661
General Motors Corp. 30,000 1,267,500
3,153,161
CONSUMER ELECTRONICS - 0.3%
Stanley Works 15,874 567,496
TOTAL DURABLES 3,720,657
ENERGY - 9.2%
ENERGY SERVICES - 2.0%
Dresser Industries, Inc. 40,000 755,000
Halliburton Co. 50,700 1,679,438
Schlumberger Ltd. 26,919 1,356,045
3,790,483
OIL & GAS - 7.2%
Amoco Corp. 40,000 2,365,000
Chevron Corp. 60,000 2,677,500
Exxon Corp. 47,900 2,909,925
Kerr-McGee Corp. 13,480 620,080
Mobil Corp. 40,000 3,370,000
Royal Dutch Petroleum Co. 15,000 1,612,500
13,555,005
TOTAL ENERGY 17,345,488
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - 5.0%
BANKS - 1.1%
Bankers Trust New York Corp. 17,800 $ 985,675
CoreStates Financial Corp. 43,800 1,138,800
2,124,475
CREDIT & OTHER FINANCE - 1.5%
American Express Co. 94,788 2,796,246
INSURANCE - 2.3%
General Re Corp. 23,360 2,890,800
Torchmark Corp. 41,616 1,451,358
4,342,158
SECURITIES INDUSTRY - 0.1%
Lehman Brothers Holdings, Inc. 18,957 279,616
TOTAL FINANCE 9,542,495
HEALTH - 17.1%
DRUGS & PHARMACEUTICALS - 10.6%
American Home Products Corp. 73,767 4,628,879
Bristol-Myers Squibb Co. 60,584 3,506,299
Lilly (Eli) & Co. 26,252 1,722,788
Merck & Co., Inc. 33,619 1,281,724
Pfizer, Inc. 50,000 3,862,500
Schering-Plough Corp. 70,020 5,181,480
20,183,670
MEDICAL EQUIPMENT & SUPPLIES - 6.5%
Abbott Laboratories 154,916 5,054,135
Becton, Dickinson & Co. 32,000 1,536,000
Johnson & Johnson 103,370 5,659,508
12,249,643
TOTAL HEALTH 32,433,313
INDUSTRIAL MACHINERY & EQUIPMENT - 5.9%
ELECTRICAL EQUIPMENT - 3.4%
General Electric Co. 98,534 5,025,234
General Signal Corp. 40,000 1,275,000
6,300,234
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
Parker-Hannifin Corp. 75,937 $ 3,455,134
POLLUTION CONTROL - 0.7%
WMX Technologies, Inc. 50,000 1,312,500
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 11,067,868
MEDIA & LEISURE - 12.9%
BROADCASTING - 1.2%
Capital Cities/ABC, Inc. 20,000 1,705,000
Viacom, Inc.:
Class B (non-vtg.) 15,283 620,872
Class B (warrants) (a) 4,926 26,477
Rights (a) 15,283 46,804
2,399,153
ENTERTAINMENT - 2.8%
Disney (Walt) Co. 113,454 5,233,066
PUBLISHING - 6.3%
Gannett Co., Inc. 55,214 2,940,146
Harcourt General, Inc. 40,000 1,410,000
Knight-Ridder, Inc. 32,200 1,626,100
McGraw-Hill, Inc. 34,756 2,324,308
Media General, Inc. Class A 34,382 975,589
Times Mirror Co., Series A 82,781 2,597,254
11,873,397
RESTAURANTS - 2.6%
McDonald's Corp. 169,480 4,957,290
TOTAL MEDIA & LEISURE 24,462,906
NONDURABLES - 17.3%
BEVERAGES - 4.3%
Anheuser-Busch Companies, Inc. 57,067 2,903,284
Coca-Cola Company (The) 102,389 5,273,034
8,176,318
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
FOODS - 3.9%
General Mills, Inc. 50,000 $ 2,850,000
Ralston Purina Co. 35,298 1,575,173
Sara Lee Corp. 120,000 3,030,000
7,455,173
HOUSEHOLD PRODUCTS - 7.7%
Colgate-Palmolive Co. 60,000 3,802,500
Gillette Co. 67,172 5,021,107
International Flavors & Fragrances, Inc. 45,134 2,087,448
Procter & Gamble Co. 59,300 3,676,600
14,587,655
TOBACCO - 1.4%
Philip Morris Companies, Inc. 44,150 2,538,625
TOTAL NONDURABLES 32,757,771
RETAIL & WHOLESALE - 3.4%
APPAREL STORES - 0.4%
Edison Brothers Stores, Inc. 40,000 740,000
GENERAL MERCHANDISE STORES - 2.0%
Kmart Corp. 80,678 1,048,814
May Department Stores Co. (The) 82,126 2,771,753
3,820,567
GROCERY STORES - 1.0%
Supervalu, Inc. 76,080 1,863,960
TOTAL RETAIL & WHOLESALE 6,424,527
SERVICES - 1.4%
PRINTING - 1.1%
Harland (John H.) Co. 100,000 2,000,000
SERVICES - 0.3%
Jostens, Inc. 33,307 620,343
TOTAL SERVICES 2,620,343
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 6.9%
COMPUTERS & OFFICE EQUIPMENT - 3.4%
Hewlett-Packard Co. 58,289 $ 5,821,614
International Business Machines Corp. 9,097 668,630
6,490,244
ELECTRONICS - 2.5%
Motorola, Inc. 82,136 4,753,621
PHOTOGRAPHIC EQUIPMENT - 1.0%
Eastman Kodak Co. 37,192 1,775,918
TOTAL TECHNOLOGY 13,019,783
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
Union Pacific Corp. 19,090 870,981
UTILITIES - 6.2%
ELECTRIC UTILITY - 4.3%
Central Louisiana Electric Co., Inc. 60,000 1,417,500
Duke Power Co. 50,000 1,906,250
Hawaiian Electric Industries, Inc. 40,000 1,295,000
PacifiCorp. 55,400 1,004,125
Potomac Electric Power Co. 70,000 1,286,250
SCECorp. 80,000 1,170,000
8,079,125
GAS - 0.4%
Williams Companies, Inc. 30,680 770,835
TELEPHONE SERVICES - 1.5%
MCI Communications Corp. 80,000 1,470,000
Sprint Corp. 50,000 1,381,250
2,851,250
TOTAL UTILITIES 11,701,210
TOTAL COMMON STOCKS
(Cost $24,635,423) 174,528,510
NONCONVERTIBLE BONDS - 0.1%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Viacom, Inc. 8%, 7/7/06 (Cost $184,756) B2 $ 287,000 $ 246,103
REPURCHASE AGREEMENTS - 7.6%
MATURITY
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 5.77%, dated
12/30/94 due 1/3/95 $ 14,372,208 14,363,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $39,183,179) $ 189,137,613
LEGEND
(a) Non-income producing
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $39,183,179. Gross and net unrealized appreciation
amounted to $149,954,434 related to appreciated investment securities.
The fund hereby designates $6,027,092 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, 1994
ASSETS
Investment in securities, at value (including repurchase $ 189,137,613
agreements of $14,363,000) (cost $39,183,179) -
See accompanying schedule
Cash 97
Dividends receivable 440,664
Interest receivable 11,034
TOTAL ASSETS 189,589,408
LIABILITIES
Payable for fund shares redeemed $ 10,000
Distributions payable 3,861,259
Accrued management fee 83,977
Other payables and accrued expenses 35,326
TOTAL LIABILITIES 3,990,562
NET ASSETS $ 185,598,846
Net Assets consist of:
Paid in capital $ 32,622,972
Accumulated undistributed net realized gain (loss) 3,021,440
on investments
Net unrealized appreciation (depreciation) on investments 149,954,434
NET ASSETS, for 1,806,816 shares outstanding $ 185,598,846
NET ASSET VALUE, offering price and redemption price $102.72
per share ($185,598,846 (divided by) 1,806,816 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
INVESTMENT INCOME $ 5,262,755
Dividends
Interest 422,390
TOTAL INCOME 5,685,145
EXPENSES
Management fee $ 997,120
Transfer agent fees 10,150
Accounting fees and expenses 707
Non-interested trustees' compensation 1,048
Custodian fees and expenses 16,455
Registration fees 325
Audit 35,583
Legal 3,331
Reports to shareholders 4,887
Miscellaneous 132
TOTAL EXPENSES 1,069,738
NET INVESTMENT INCOME 4,615,407
REALIZED AND UNREALIZED GAIN (LOSS) 11,556,177
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (7,788,111)
investment securities
NET GAIN (LOSS) 3,768,066
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 8,383,473
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 4,615,407 $ 4,206,381
Net investment income
Net realized gain (loss) 11,556,177 5,630,947
Change in net unrealized appreciation (depreciation) (7,788,111) 2,103,145
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 8,383,473 11,940,473
FROM OPERATIONS
Distributions to shareholders (4,356,411) (4,206,381)
From net investment income
In excess of net investment income - (159,460)
From net realized gain (3,128,466) (1,424,592)
TOTAL DISTRIBUTIONS (7,484,877) (5,790,433)
Share transactions 1,974,773 1,315,811
Reinvestment of distributions
Cost of shares redeemed (6,632,358) (4,994,161)
Net increase (decrease) in net assets resulting from (4,657,585) (3,678,350)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,758,989) 2,471,690
NET ASSETS
Beginning of period 189,357,835 186,886,145
End of period (including under (over) distribution of net $ 185,598,846 $ 189,357,835
investment income of $0 and $(258,972),
respectively)
OTHER INFORMATION
Shares
Issued in reinvestment of distributions 19,403 13,062
Redeemed (65,474) (49,384)
Net increase (decrease) (46,071) (36,322)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning $ 102.20 $ 98.92 $ 97.48 $ 75.96 $ 80.22
of period
Income from Investment
Operations
Net investment income 2.56 2.26 2.19 2.13 2.16
Net realized and 2.12 4.14 2.34 21.49 (2.52)
unrealized gain (loss)
Total from investment 4.68 6.40 4.53 23.62 (.36)
operations
Less Distributions (2.42) (2.26) (2.23) (2.10) (2.20)
From net investment
income
In excess of net - (.09) - - -
investment income
From net realized gain (1.74) (.77) (.86) - (1.70)
Total distributions (4.16) (3.12) (3.09) (2.10) (3.90)
Net asset value, end of $ 102.72 $ 102.20 $ 98.92 $ 97.48 $ 75.96
period
TOTAL RETURN 4.66% 6.54% 4.68% 31.42% (.49)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 185,599 $ 189,358 $ 186,886 $ 187,876 $ 150,050
(000 omitted)
Ratio of expenses to .58% .57% .58% .58% .56%
average net assets
Ratio of net investment 2.50% 2.24% 2.23% 2.42% 2.72%
income to average net
assets
Portfolio turnover rate 0% 0% 0% 0% 0%
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
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 of their purchase date 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. Investment income
is recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
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.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
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 affiliated
entities of 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.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $816,407 and $12,772,966, respectively. Sales of securities
represent the current value of securities delivered in redemption of fund
shares.
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 $108,899. For the period, the management fee was equivalent to
an annual rate of .54% 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 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.
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 $712 for the period.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of 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, 1994, 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, 1994, 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, 1994, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
DISTRIBUTIONS
The Board of Trustees of Fidelity Exchange Fund voted to pay on February 6,
1995, to shareholders of record at the opening of business on February 3,
1995, a distribution of $1.72 derived from capital gains realized from
sales of portfolio securities.
A total of 100% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
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.
INVESTMENT ADVISER
Fidelity Management &
Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Gary L. French, 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
FIDELITY GROWTH AND INCOME FUNDS
Balanced Fund
Congress Street Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan Fund
Real Estate Investment 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
