SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17
File No. 2-55225 and 811-2614
Fidelity Exchange Fund
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (617) 563-7000
Arthur S. Loring, Secretary
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Fidelity Service Company (FSC))
PART A: INFORMATION REQUIRED IN PROSPECTUS
ITEM 1. COVER PAGE - Not applicable.
ITEM 2. SYNOPSIS - Not applicable.
ITEM 3. CONDENSED FINANCIAL INFORMATION - Per-Share Data in Financial
Statements.
ITEM 4. GENERAL DESCRIPTION OF THE REGISTRANT.
(a) (i) Fidelity Exchange Fund (the fund) was organized as a limited
partnership under the Uniform Limited Partnership Act of Nebraska on
December 22, 1975. Effective as of the close of business on December 31,
1984, the fund was reorganized as a Massachusetts business trust. The fund
is classified as an open-end management investment company under the
Investment Company Act of 1940 (the 1940 Act).
(a) (ii) The fund seeks long-term growth of capital. This objective may
not be changed without a vote of the majority of the fund's voting
securities as defined by the 1940 Act. The fund seeks to accomplish its
objective by acquiring a diversified portfolio of equity securities, such
as common stocks and securities convertible into common stocks, and by
remaining substantially fully invested in equity securities, except for
cash and short-term debt obligations to meet current and anticipated cash
needs. The fund believes that over a period of time market prices and
dividend increases will generally follow increases in asset values and
earnings. Thus the fund expects to receive moderate income over time. It
is probable, however, that the securities acquired by the fund will have
relatively low dividends at the time of acquisition. The fund has the
flexibility to pursue its objective through domestic or foreign equity
securities.
Diversification, or the spreading of risk, is basic to a sound,
well-rounded investment program. The fund's manager, Fidelity Management &
Research Co. (FMR) seeks to diversify the fund's investments among
individual companies. It is also the fund's policy not to concentrate its
assets in any single industry. The emphasis on these policies in the
management of the fund's portfolio, however, cannot eliminate the market
risk inherent in any portfolio of equity securities.
Options and Futures Contracts. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short. FMR can use these
practices to adjust the risk and return characteristics of the fund's
portfolio of investments. If FMR judges market conditions incorrectly or
employs a strategy that does not correlate well with the fund's
investments, these techniques could result in a loss, regardless of whether
the intent was to reduce risk or increase return. These techniques may
increase the volatility of the fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
Options and futures can be volatile investments, and involve certain
risks. If FMR applies a hedge at an inappropriate time or judges market
conditions incorrectly, options and futures strategies may lower the fund's
return. The fund could also experience losses if the prices of its
options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an
illiquid secondary market.
The fund will not hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In
addition, the fund will not buy futures or write puts whose underlying
value exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets. The fund's policies regarding futures
contracts and options are not fundamental and may be changed at any time
without shareholder approval.
Securities Lending. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may
be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
Affiliated Bank Transactions. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
Exposure to Foreign Markets. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks and considerations. These include risks relating
to political or economic conditions in foreign countries, fluctuations in
foreign currencies, withholding or other taxes, operational risks,
increased regulatory burdens, and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to repay
principal and interest when due and may require that the conditions for
payment be renegotiated. All of these factors can make foreign investments,
especially those in developing countries, more volatile than U.S.
investments.
Fund's Rights as a Shareholder. The fund does not intend to direct or
administer the day-to-day operations of any company. The fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that the fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is increasingly
prone to litigation and it is possible that the fund could be involved in
lawsuits related to such activities. FMR will monitor such activities with
a view to mitigating, to the extent possible, the risk of litigation
against the fund and the risk of actual liability if the fund is involved
in litigation. No guarantee can be made, however, that litigation against
the fund will not be undertaken or liabilities incurred.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the
fund sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness is deemed satisfactory by FMR. Such transactions
may increase fluctuations in the market value of the fund's assets and may
be viewed as a form of leverage.
(b) The following are the fund's fundamental investment limitations set
forth in their entirety. Unless otherwise specified, neither these
restrictions nor the fund's investment objective described above may be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
The fund may not:
(1) purchase or otherwise acquire the securities of any issuer (other
than obligations issued or guaranteed as to principal and interest by the
government of the United States or any agency or instrumentality thereof)
if, as a result thereof, (a) more than 5% of the fund's total assets (taken
at current value) would be invested in the securities of such issuer, or
(b) the fund would own more than 10% of the outstanding voting securities
of such issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) make short sales of securities, unless at all times while a short
position is open the fund owns or has the right to acquire the same
securities in an amount at least equal thereto; and provided that, for this
purpose, transactions in options and futures contracts shall not constitute
short sales of securities;
(4) purchase securities on margin, provided that payment of initial or
variation margin in connection with transactions in futures contracts or
options on futures contracts shall not constitute purchasing securities on
margin;
(5) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed 33 1/3% of the fund's total assets by reason of a decline in
net assets will be reduced within 3 days to the extent necessary to comply
with the 33 1/3% limitation;
(6) act as an underwriter;
(7) knowingly purchase or otherwise acquire any securities which are
subject to legal or contractual restrictions on resale; but the fund may
acquire securities for which there is no readily available market, if, as a
result thereof, no more than 10% of the fund's total assets (taken at
current value) would thereby be invested in such securities;
(8) purchase or otherwise acquire the securities of any issuer (other
than obligations issued or guaranteed as to principal and interest by the
government of the United States or any agency or instrumentality thereof)
if, as a result thereof, more than 25% of the fund's total assets (taken at
current value) would be invested in the securities of one or more issuers
having their principal business activities in the same industry;
(9) buy or sell real estate;
(10) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(11) lend any security or make any other loan if, as a result, more than
33 1/3% of the fund's total assets would be lent to other parties, except
(i) through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies, and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities;
(12) invest in the securities of other investment companies;
(13) purchase or otherwise acquire the securities of any issuer (other
than obligations issued or guaranteed as to principal and interest by the
government of the United States or any agency or instrumentality thereof)
if, as a result thereof, more than 5% of the fund's total assets (taken at
current value) would be invested in the securities of companies which,
including predecessors, have a record of less than 3 years' continuous
operation;
(14) invest in oil, gas, or other mineral exploration or development
programs; or
(15) purchase or retain the securities of an issuer if the Trustees of
the fund, or the directors and officers of its Investment Adviser who
individually own more than 1/2 of 1% of such issuer's outstanding
securities, own, in the aggregate, more than 5% of such issuers outstanding
securities.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL:
(i) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (5)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(ii) The fund does not currently intend to lend assets other than
securities to other parties, except by lending money (up to 5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (This limitation
does not apply to purchases or debt securities or to repurchase
agreements.)
Investment Limitation (5) is construed in conformity with the 1940 Act,
and, accordingly, "3 days" means three days exclusive of Sundays and
holidays. If the fund borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. To this extent,
purchasing securities when borrowings are outstanding may involve an
element of leverage.
In a repurchase agreement, the fund purchases a security and
simultaneously commits to sell that security back to the original seller at
an agreed-upon price. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. To protect the fund from risk that the
original seller will not fulfill its obligation, the securities are held in
an account of the fund at a bank, marked-to-market daily, and maintained at
a value at least equal to the sale price plus the accrued incremental
amount. While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility that the value of the
underlying security will be less than the resale price, as well as delays
and costs to the fund in connection with bankruptcy proceedings), it is the
fund's current policy to engage in repurchase agreement transactions with
parties whose creditworthiness has been reviewed and found satisfactory by
FMR.
Interfund Borrowing Program Pursuant to an exemptive order issued by the
SEC, the fund has received permission to lend money to, and borrow money
from, other funds advised by FMR or its affiliates. Interfund loans and
borrowings normally extend overnight, but can have a maximum duration of
seven days. Loans may be called on one day's notice. A fund will lend
through the program only when the returns are higher than those available
from other short-term instruments (such as repurchase agreements), and will
borrow through the program only when the costs are equal to or lower than
the cost of bank loans. A fund may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity
or additional borrowing costs.
(c) Principal risk factors discussion in Item 4(a)(ii) is complete.
ITEM 5. MANAGEMENT OF THE FUND.
(a) The fund's Trustees are responsible for the overall management of the
fund.
(b) (i) The fund employs FMR to furnish investment advisory and other
services to the fund. FMR is the original Fidelity company, founded in
1946 with offices at 82 Devonshire Street, Boston, Massachusetts 02109. It
provides a number of mutual funds and other clients with investment
research and portfolio management services. It maintains a large staff of
experienced investment personnel and a full complement of related support
facilities. As of December 31, 1995 FMR advised funds having more than 23
million shareholder accounts with a total value of more than $354 billion.
(ii) Under its management contract with the fund, dated November 1, 1988
(approved by a vote of the majority of shareholders on October 18, 1988),
FMR acts as investment adviser and, subject to the supervision of the Board
of Trustees, directs the investments of the fund in accordance with its
investment objective, policies, and limitations. FMR also provides the
fund with all necessary office facilities and personnel for servicing the
fund's investments and compensates all officers of the fund, all Trustees
who are "interested persons" of the fund or of FMR, and all personnel of
the fund or FMR performing services relating to research, statistical, and
investment activities and, either itself or through such person as approved
by the Trustees, shall compute the net asset value of the shares of
beneficial interest of the fund as provided in the fund's Declaration of
Trust and shall maintain the portfolio and general accounting records of
the fund. In addition, FMR or its affiliates, subject to the supervision
of the Board of Trustees, provide the management and administrative
services necessary for the operation of the fund. The services include
providing facilities for maintaining the fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the fund's records and the registration of the fund's shares
under federal and state law; developing management and shareholder services
for the fund; and furnishing reports, evaluations, and analyses on a
variety of subjects to the fund's Board of Trustees.
(iii) For these services, the fund pays a management fee to FMR at the
rate of 1/20 of 1% per month (which is equivalent to an annual rate of 6/10
of 1%) of the average net assets of the fund throughout the month. The
contract also provides that, to the extent that the aggregate average net
assets of the Funds advised by FMR exceed $4 billion in any month, the
management fee payable by the fund for that month on its portion of that
excess (determined on the basis of the fund's portion of the aggregate
average net assets) will be reduced by 10%. In case of initiation or
termination of this contract during any month, the fee for that month will
be reduced proportionately on the basis of the number of business days
during which it is in effect and the fee will be computed using the average
net assets for the business days the contract was in effect. In addition,
the applicability of the 10% fee reduction will be determined on the basis
of average net assets of the funds advised by FMR over the same period.
For the years ended December 31, 1995, 19934 and 1993, FMR earned
$1,131,323, $997,120, and $1,015,757, respectively, for its services as
investment adviser after reductions of $123,973, $108,899, and $110,387,
respectively.
FMR has agreed to reimburse the fund, in an amount not in excess of the
amount of the management fee payable by the fund for any fiscal year, if
and to the extent that the aggregate operating expenses of the fund for its
fiscal year, including the management fee but excluding interest expense,
taxes, brokerage fees and commissions, and extraordinary expenses, are in
excess of an amount equal to 1% of the average net assets of the fund for
such fiscal year.
The management contract between the fund and FMR will continue in force
until July 31, 1990 and indefinitely thereafter, but only so long as such
continuance is approved at least annually (i) by the vote of a majority of
the Trustees of the fund who are not "interested persons" of the fund or
FMR, cast in person at a meeting called for the purpose of voting on such
approval, or by the vote of a majority of the Trustees of the fund or by
the vote of a majority of the outstanding voting securities of the fund.
The agreement is terminable without penalty on sixty days' written notice
by either the fund or FMR, and terminates automatically in the event of its
assignment. In the event that FMR ceases to be the investment adviser of
the fund, the right of the fund to use the identifying name "Fidelity" may
be withdrawn.
(c) Not applicable.
(d) Fidelity Service Co. (FSC), 82 Devonshire Street, Boston,
Massachusetts 02109, an affiliate of FMR, is transfer, dividend disbursing,
and shareholders' servicing agent for the fund. FSC receives annual
account fees and asset-based fees for each retail account and certain
institutional accounts based on account size. In addition, the fees for
retail accounts are subject to increase based on postal rate changes. With
respect to certain institutional retirement accounts, FSC receives
asset-based fees only. With respect to certain other institutional
retirement accounts, FSC receives annual account fees and asset based fees
based on fund type. The asset-based fees are subject to adjustment if the
year-to-date total return of the Standard & Poor's Composite Index of 500
Stocks is greater than positive or negative 15%. FSC also collects small
account fees from certain accounts with balances of less than $2,500.
Under the current contract, FSC pays out-of-pocket expenses associated
with providing transfer agent services. In addition, FSC bears the expense
of typesetting, printing, the mailing of reports, notices, and statements
to shareholders, except proxy statements.
The transfer agent fees paid to FSC for the fiscal years ended December
31, 1995, 1994, and 1993 were $137,642, $10,150, and $10,986, respectively.
For fiscal 1995, 1994, and 1993, the fund did not incur any securities
lending fees.
(e) In addition to the management fee payable to FMR and the fees payable
to FSC, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for the typesetting, printing, and
mailing of its proxy materials to shareholders, legal expenses, and the
fees of the custodian, auditor and non-interested Trustees. Although the
fund's current management contract provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders, the trust, on behalf of
the fund has entered into a revised transfer agent agreement with FSC,
pursuant to which FSC bears the costs of providing these services to
existing shareholders. Other expenses paid by the fund include interest,
taxes, brokerage commissions, and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. The fund is also
liable for such non-recurring expenses as may arise, including costs of any
litigation to which the fund may be a party, and any obligation it may have
to indemnify its officers and Trustees with respect to litigation.
(f) Not Applicable.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
(a) The fund's capital consists of shares of beneficial interest. No
certificates are issued. These shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Trustees can elect 100% of the Trustees if they choose to do
so. Because the fund is a Massachusetts business trust, the fund is not
required to hold annual meetings. However, a majority of the Board of
Trustees or shareholders representing 10% or more of the shares of the fund
may call meetings for any purpose, including the purpose of voting on
removal of one or more of the Trustees.
Each share of beneficial interest of the fund has one vote, and when
issued is fully paid and non-assessable. Fractional shares may be issued
by the fund and when issued have the same rights proportionately as full
shares. Each share of the fund is transferable by endorsement or stock
power in the customary manner, but the fund is not bound to recognize any
transfer until it is recorded on its books. Each share is entitled to
share equally in any dividends or distributions declared by the fund's
Board of Trustees. In the event of liquidation of the fund, the holders of
its shares are entitled to all assets remaining for distribution after
satisfaction of all outstanding liabilities and are entitled to share
therein in proportion to the number of shares held. The shares of the fund
carry no conversion, subscription, or other pre-emptive rights except the
rights to require redemption thereof by the fund.
Shareholder and Trustee Liability. The fund is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the fund shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
fund or the Trustees shall include a provision limiting the obligations
created thereby to the fund and its assets. The Declaration of Trust
provides for indemnification out of the fund's property of any shareholder
held personally liable for the obligations of the fund. The Declaration of
Trust also provides that the fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a Trustee
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
(b)-(d) Not Applicable.
(e) Shareholder inquiries may be made by writing Fidelity Investments, 82
Devonshire Street, Boston, Massachusetts 02109.
(f)-(g) Distributions. The Board of Trustees will determine the amounts
to be distributed to shareholders and the time or times when distributions
will be made. Dividends and distributions from capital gains are payable
in shares of the fund computed at net asset value or, at the election of
each shareholder, in cash.
The fund distributes all its net investment income (if any) as dividends
each year. Dividends normally are paid semiannually in June and December.
Whether a shareholder takes dividend payments in cash or reinvests them in
additional shares of the fund, they will be taxable as ordinary income. A
portion of the fund's income may qualify for the dividends-received
deduction available to corporate shareholders to the extent that the fund's
income is derived from qualifying dividends. Because the fund may earn
other types of income, such as interest, income from securities loans,
non-qualifying dividends, and short-term capital gains, the percentage of
dividends from the fund that qualifies for the deduction generally will be
less than 100%. The fund will notify corporate shareholders annually of the
percentage of fund dividends that qualifies for the dividends-received
deduction. A portion of the fund's dividends derived from certain U.S.
government obligations may be exempt from state and local taxation. Gains
(losses) attributable to foreign currency fluctuations are generally
taxable as ordinary income, and therefore will increase (decrease) dividend
distributions. Short-term capital gains are distributed as dividend income.
The fund will send each shareholder a notice in January describing the tax
status of dividends and capital gain distributions for the prior year.
Each year the fund distributes all of its net realized capital gains (if
any). When distributions are from the fund's long-term capital gains, the
Federal tax code treats them that way for shareholders, whether a
shareholder takes them in cash or reinvests them in additional shares of
the fund, and regardless of how long they have been a shareholder. The
determining factor is how long the fund has held the portfolio securities
that produced the gains. Shareholders may also receive distributions from
short-term capital gains, which will be taxed as ordinary income.
Distributions from short-term capital gains normally are declared in
December and February and paid in January and February. Long-term gains
are taxed at preferential rates for taxpayers in tax bracket above 28%.
The fund intends to continue to qualify each year as a "regulated
investment company" for tax purposes, so that it will not be liable for
federal tax on income and capital gains distributed to shareholders. In
order to qualify as a regulated investment company and avoid being subject
to federal income or excise taxes at the fund level, the fund intends to
distribute substantially all of its net taxable income and net realized
capital gains within each calendar year as well as on a fiscal year basis.
The fund also intends to comply with other tax rules applicable to
regulated investment companies, including a requirement that capital gains
from selling securities held less than three months may not constitute more
than 30% of the fund's gross income for each fiscal year. Gains from some
futures contracts and options are included in the 30% calculation, which
may limit the fund's investments in such instruments.
The fund's distributions are taxable when they are paid, whether you take
them in cash or reinvest them in additional shares,except that
distributions declared in December and paid in January are taxable as if
they were paid on December 31.
Redemptions. Shareholders have the right to redeem all or any portion of
their shares, and will ordinarily receive portfolio securities of the fund
in satisfaction of the redemption price. Generally speaking, a redemption
is a taxable transaction. An individual shareholder will be taxed on the
excess of the cash plus the fair market value of the portfolio securities
received over his basis in the fund shares surrendered. If the cash plus
the fair market value of the portfolio securities received on redemption do
not exceed the basis of the fund shares redeemed, the shareholder should
realize a capital loss. The basis in the hands of the shareholder of the
portfolio securities received on redemption of the fund shares is the fair
market value of such securities at the time of redemption.
Tax Returns and Tax Information. Following the close of each fiscal year
the fund will supply each shareholder with information regarding the fund's
activities for the year sufficient to allow him to complete his Federal
income tax returns for such year. The fund's fiscal year ends on December
31. The fund is required by Federal law to withhold 31% of reportable
payments (which includes dividends, capital gain distributions, and
redemptions) paid to certain accounts whose owners have not complied with
IRS regulations.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
(a) Not applicable (shares of the fund are not currently sold to the
public).
(b) Shares of the fund are not currently offered for sale to the public.
The term "net asset value," or NAV (for purposes of redemptions and
dividend reinvestments only) refers to the worth of one share. FSC
normally calculates the fund's NAV as of the close of business on the New
York Stock Exchange (NYSE), (normally 4:00 p.m., Eastern time). The NAV is
computed by adding the value of all assets of the fund, cash, and other
assets, deducting liabilities, and then dividing the result by the number
of shares outstanding. Securities owned by the fund are appraised by
various methods depending on the market or exchange on which they trade.
Securities traded on the New York Stock Exchange or the American Stock
Exchange are appraised at the last sale price, or if no sale has occurred,
at the closing bid price. Securities traded on other exchanges are
appraised as nearly as possible in the same manner. Securities and other
assets for which exchange quotations are not readily available are valued
on the basis of closing over-the-counter bid prices, if available, 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 are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value.
(c)-(e) Not applicable.
ITEM 8. REDEMPTION OF SHARES.
A shareholder may at any time require the fund to redeem all or any
portion of his shares at their net asset value. The redemption price will
be the net asset value of the shares next determined after receipt of a
written request for redemption in good order. Distribution of the proceeds
of a redemption will be made within seven days after that date.
A request for redemption or repurchase shall be deemed in good order if it
is accompanied by certificates for the shares (if certificates have been
issued) and a stock power (whether or not certificates have been issued)
signed by the holder(s) of record exactly as the shares are registered,
with signature(s) guaranteed by a bank, broker, dealer, credit union (if
authorized under state law), securities exchange, or saving association.
The request shall specify the number of shares to be redeemed and identify
the investor's account number. Further documentation may be required if
the request is made by a shareholder who is not an individual or by someone
other than the holder of record.
Redemptions may be suspended or payment dates postponed when the New York
Stock Exchange (NYSE) is closed (other than weekends or holidays), when
trading on the NYSE is restricted or as permitted by the SEC.
The net asset value of the shares on redemption or repurchase may be more
or less than the initial offering price of the shares depending upon the
market value of the fund's portfolio securities at the time of repurchase
or redemption.
In order to limit the realization of capital gains from the sale of
portfolio securities to meet redemptions and repurchases of shares, the
fund intends to follow a policy of redeeming or repurchasing its shares by
the distribution of one or more portfolio securities in kind, to the extent
it is practicable to do so. For this purpose portfolio securities
distributed in kind shall be valued at their fair value as determined for
purposes of computing the redemption or repurchase price. To the extent it
is not practicable to redeem shares by a redemption in kind, the fund will
redeem or repurchase its shares for cash. The securities which the fund
will utilize in honoring redemptions or repurchases in kind will tend to be
those which the fund believes are least likely to contribute to the
realization of its investment objective and will tend to be the lowest tax
cost lots of the security chosen.
The fund will not realize any capital gains for Federal income tax
purposes upon the distribution of portfolio securities in kind.
Shareholders who wish to sell securities distributed to them will have to
make their own arrangements for sale and will incur the brokerage or other
costs involved. Neither the fund nor FSC will arrange for the sale on
behalf of a shareholder of portfolio securities distributed in kind. The
fund will, however, arrange for the delivery of the securities to a broker
or dealer designated in advance by the redeeming shareholder. Unless
granted an exemption by the Securities and Exchange Commission, the fund
may be restricted in its ability to distribute portfolio securities in
satisfaction of a redemption by a shareholder owning 5% or more of the
fund's shares. If so requested by such a redeeming shareholder, the shares
would be redeemed for cash.
ITEM 9. PENDING LEGAL PROCEEDINGS. Not applicable.
PART B: INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE. Not applicable.
ITEM 11. TABLE OF CONTENTS. Not applicable.
ITEM 12. GENERAL INFORMATION AND HISTORY. Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
(a) Futures and Options. The following sections pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, Options and Futures Relating to Foreign
Currencies, OTC Options, Purchasing Put and Call Options, and Writing Put
and Call Options.
Asset Coverage for Futures and Options Positions. The fund will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
Combined Positions. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
Correlation of Price Changes. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
Futures Contracts. When the fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's Composite Index of 500
Stocks (S&P 500). Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
Futures Margin Payments. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
Limitations on Futures and Options Transactions. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The fund currently intends to treat the value of any over-the-counter
option it purchases as illiquid for the purposes of its investment
limitations. Similarly, for any over-the-counter option it writes, the
fund will treat as illiquid the value of the option's underlying
instrument; however, if the fund has a guaranteed right to close out the
option with a primary U.S. government securities dealer, only the maximum
price of the closing transaction minus the amount the option is
"in-the-money" will be considered illiquid.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere, are not fundamental policies and may be changed as
regulatory agencies permit.
Liquidity of Options and Futures Contracts. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC Options. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter (OTC) options (options not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows
the fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
Purchasing Put and Call Options. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
Writing Put and Call Options. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
(b)-(c) Information in Item 4 is complete.
(d) Portfolio Turnover. The fund's policy will be to limit portfolio
turnover to transactions necessary to carry out its investment objective.
It is not anticipated that annual portfolio turnover will exceed 15%. The
fund will not invest for short-term profits and expects that portfolio
turnover will be kept at the level required by prudent long-term investment
practices. One of the factors which will be considered before any
portfolio securities are sold will be the resulting tax liability; but the
fund will make changes in its investments, consistent with its investment
objective, when such changes are believed to be to the advantage of
shareholders even though capital gains will be realized.
For the fiscal years ended December 31, 1995 and 1994 the portfolio
turnover rates were 0% and 0%, respectively. The portfolio turnover rate
is calculated by dividing the lesser of purchases or sales of portfolio
securities for the year by the monthly average current value of the
portfolio securities (excluding U.S. government securities and all other
securities whose maturities at the time of acquisition were one year or
less).
ITEM 14. MANAGEMENT OF THE FUND.
(a)-(b) The Trustees and executive officers of the trust are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. All persons named as
Trustees also serve in similar capacities for other funds advised by FMR.
The business address of each Trustee and officer who is an "interested
person" (as defined in the Investment Company Act of 1940) is 82 Devonshire
Street, Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments, P.O.
Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who are
"interested persons" by virtue of their affiliation with either the trust
or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (65), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD (54), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX (63), Trustee (1991), is a consultant to Western Mining
Corporation (1994). Prior to February 1994, he was President of Greenhill
Petroleum Corporation (petroleum exploration and production, 1990). Until
March 1990, Mr. Cox was President and Chief Operating Officer of Union
Pacific Resources Company (exploration and production). He is a Director
of Sanifill Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University and
the University of Texas at Austin.
PHYLLIS BURKE DAVIS (64), Trustee (1992). Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of BellSouth
Corporation (telecommunications), Eaton Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail stores, 1990), and she previously
served as a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco
Brands, Inc. In addition, she is a member of the President's Advisory
Council of The University of Vermont School of Business Administration.
RICHARD J. FLYNN (71), Trustee, is a financial consultant. Prior to
September 1986, Mr. Flynn was Vice Chairman and a Director of the Norton
Company (manufacturer of industrial devices). He is currently a Trustee of
College of the Holy Cross and Old Sturbridge Village, Inc, and he
previously served as a Director of Mechanics Bank (1971-1995).
E. BRADLEY JONES (68), Trustee (1990). Prior to his retirement in 1984,
Mr. Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products, 1990),
and he previously served as a Director of NACCO Industries, Inc. (mining
and marketing, 1985-1995) and Hyster-Yale Materials Handling,
Inc.(1985-1995). In addition, he serves as a Trustee of First Union Real
Estate Investments, a Trustee and member of the Executive Committee of the
Cleveland Clinic Foundation, a Trustee and member of the Executive
Committee of University School (Cleveland), and a Trustee of Cleveland
Clinic Florida.
DONALD J. KIRK (63), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and he previously served as a Director of
Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Chairman of the Board of Directors of the National
Arts Stabilization Fund, Vice Chairman of the Board of Trustees of the
Greenwich Hospital Association, and as a Member of the Public Oversight
Board of the American Institute of Certified Public Accountants' SEC
Practice Section (1995).
*PETER S. LYNCH (52), Trustee (1990) is Vice Chairman and Director of FMR
(1992). Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice President
of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing
Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity
Investments Corporate Services (1991-1992). He is a Director of W.R. Grace
& Co. (chemicals) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield and Society for the
Preservation of New England Antiquities, and as an Overseer of the Museum
of Fine Arts of Boston (1990).
GERALD C. McDONOUGH (66), Trustee, is Chairman of G.M. Management Group
(strategic advisory services). Prior to his retirement in July 1988, he
was Chairman and Chief Executive Officer of Leaseway Transportation Corp.
(physical distribution services). Mr. McDonough is a Director of
ACME-Cleveland Corp. (metal working, telecommunications and electronic
products), Brush-Wellman Inc. (metal refining), York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp. (water
treatment equipment, 1992), and Associated Estates Realty Corporation (a
real estate investment trust, 1993). EDWARD H. MALONE (71), Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of the Naples Philharmonic Center for the
Arts and Rensselaer Polytechnic Institute, and he is a member of the
Advisory Boards of Butler Capital Corporation Funds and Warburg, Pincus
Partnership Funds.
MARVIN L. MANN (62), Trustee (1993) is Chairman of the Board, President,
and Chief Executive Officer of Lexmark International, Inc. (office
machines, 1991). Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is a
Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing
services, 1991), a Trammell Crow Co. In addition, he serves as the
Campaign Vice Chairman of the Tri-State United Way (1993) and is a member
of the University of Alabama President's Cabinet (1990).
THOMAS R. WILLIAMS (67), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
WILLIAM J. HAYES (61), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ARTHUR S. LORING (48), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (48), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
ROBERT H. MORRISON (55), Manager of Security Transactions of Fidelity's
equity funds, is Vice President of FMR.
JOHN H. COSTELLO (49), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (49), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation of
each current non-interested trustee of the fund for his or her services as
trustee for the fiscal year ended December 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
J. Gary Burkhead ** $ 0 $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 128,000
Phyllis Burke Davis 5,200 52,000 125,000
Richard J. Flynn 0 52,000 160,500
Edward C. Johnson 3d ** 0 0 0 0
E. Bradley Jones 5,200 49,400 128,000
Donald J. Kirk 5,200 52,000 129,500
Peter S. Lynch ** 0 0 0 0
Gerald C. McDonough 5,200 52,000 128,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 128,000
Thomas R. Williams 5,200 52,000 125,000
</TABLE>
* Information is as of December 31, 1995 for 219 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on the fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
The fund may invest in such designated securities under the Plan without
shareholder approval.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
(c) Not applicable.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
(a) Not applicable.
(b) Not applicable.
(c) As of December 31, 1994, the Trustees and officers of the fund owned,
in the aggregate, less than 1% of the fund's total outstanding shares.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
(a) (i) FMR is a wholly owned subsidiary of FMR Corp., a parent company
organized in 1972. At present, the principal operating activities of FMR
Corp. are those conducted by three of its divisions as follows: FSC, which
is the transfer and shareholder servicing agent for certain of the funds
advised by FMR; Fidelity Investments Institutional Operations Company,
which performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization. Through ownership of voting common stock, Edward C. Johnson
3d, President and a Trustee of the fund, and various trusts for the benefit
of Johnson family members form a controlling group with respect to FMR
Corp.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. Inc. and FMR Far East Inc., both
wholly owned subsidiaries of FMR formed in 1986, supply investment
research, and may supply portfolio management services, to FMR in
connection with certain funds advised by FMR. FMR Texas Inc., a wholly
owned subsidiary of FMR formed in 1989, supplies portfolio management and
research services in connection with certain money market funds advised by
FMR.
From time to time FMR, its officers and directors, and its affiliated
companies have transactions with various banks, including custodian banks
for certain of the funds advised by FMR. Transactions to date have
included mortgages and general business loans. In the judgment of the
fund's Trustees, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund relationships.
(ii) Information in Item 14 is complete.
(iii) Information in Item 5 is complete.
(b)-(c) Information in Item 5 is complete.
(d)-(g) Not applicable.
(h) Custodian. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased and sold by the fund. The fund may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian. The Boston branch of the fund's
custodian bank leases its office space from an affiliate of FMR at a lease
payment which, when entered into, was consistent with prevailing market
rates.
Auditor. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, serves as the fund's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
(i) Information in Item 5 is complete.
ITEM 17. BROKERAGE ALLOCATION.
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the management
contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment adviser. In selecting broker-dealers, subject to
applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions; and arrangements for payment of fund
expenses.
The fund may execute portfolio transactions with broker-dealers who
provide research or execution services to the fund or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effect
securities transactions and perform functions incidental thereto (such as
clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of such
research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the fund or its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI)
and Fidelity Brokerage Services (FBS), subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services. From
September 1992 through December 1994, FBS operated under the name Fidelity
Brokerage Services Limited, Inc. (FBSL). As of January 1995, FBSL was
converted to an unlimited liability company and assumed the name FBS. Prior
to September 4, 1992, FBSL operated under the name Fidelity Portfolio
Services, Ltd. (FPSL) as a wholly owned subsidiary of Fidelity
International Limited (FIL). Edward C. Johnson 3d is Chairman of FIL. Mr.
Johnson 3d, Johnson family members, and various trusts for the benefit of
the Johnson family own, directly or indirectly, more than 25% of the voting
common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commission paid by the fund toward payment of the fund's
expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal years ended December 31, 1995, 1994, and 1993, the fund
paid no brokerage commissions. The fund pays both commissions and spreads
in connection with the placement of portfolio transactions; FBSI is paid on
a commission basis. During fiscal 1995, the fund paid no brokerage
commissions to FBSI.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine, in the exercise of their business judgment,
whether it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as the fund is concerned. In other cases,
however, the ability of the fund to participate in volume transactions will
produce better executions and prices for the fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES. Information in Item 6 is
complete.
ITEM 19. PURCHASE, REDEMPTION, AND PRICING OF SECURITIES BEING OFFERED.
Information in Items 7 and 8 is complete.
ITEM 20. TAX STATUS. Information in Item 6 is complete.
ITEM 21. UNDERWRITERS. Not applicable (the fund's shares are not currently
offered to the public).
ITEM 22. CALCULATION OF YIELD QUOTATIONS OF MONEY MARKET FUNDS. Not
applicable.
ITEM 23. FINANCIAL STATEMENTS. Financial statements for the fund's fiscal
year ended December 31, 1995 were filed on February 9, 1996 for the fund
(File No. 2-55225 and 811-2614) pursuant to Rule 30d-1 under the Investment
Company Act of 1940 and are incorporated herein by reference.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements for Fidelity Exchange Fund for the fiscal year
ended December 31, 1995 were filed on February 9, 1996 for the fund (File
No. 2-55225 and 811-2614) pursuant to Rule 30d-1 under the Investment
Company Act of 1940 and are incorporated herein by reference.
(b) Exhibits:
1. The Registrant's Restated Declaration of Trust, dated April 18, 1996,
is filed herein as Exhibit 1.
2. (a) Bylaws of the Trust, as amended, are incorporated herein by
reference to Exhibit 2(a) to Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
3. Not applicable.
4. Not applicable.
5. Management Contract dated September 1, 1989 between Fidelity Exchange
Fund and Fidelity Management & Research Company is incorporated herein by
reference to Exhibit 5(a) of Post-Effective Amendment No. 16.
6. Not applicable.
7. (a) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, is incorporated herein by reference to Exhibit 7 of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(b) The Fee Deferrral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of December 1, 1995, is
incorporated herein by reference to Exhibit 7(b) of Fidelity School
Street Trust's (File No. 2-57167) Post-Effective Amendment No. 47.
8. (a) Custodian Agreement and Appendix C, dated September 1, 1994,
between Brown Brothers Harriman & Company and the Registrant is
incorporated herein by reference to Exhibit 8(a) of Fidelity Commonwealth
Trust's Post-Effective Amendment No. 56 (File No. 2-52322).
(b) Appendix A, dated September 14, 1995, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman and Company and
the Registrant is incorporated herein by reference to Exhibit 8(b) of
Fidelity Mt. Vernon Street Trust's Post-Effective Amendment No. 33 (File
No. 2-79755).
(c) Appendix B, dated September 14, 1995, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman and Company and
the Registrant is incorporated herein by reference to Exhibit 8(b) of
Fidelity Capital Trust's Post-Effective Amendment No. 63 (File No.
2-61760).
9. Not applicable.
10. Not applicable.
11. Consent of Coopers & Lybrand L.L.P. is filed herein as Exhibit 11.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Not applicable.
16. Not applicable.
17. Financial Data Schedules for the fund are filed herein as Exhibit 27.
18. Not applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant
The Board of Trustees of Registrant is the same as the Boards of other
funds advised by FMR, each of which has Fidelity Management & Research
Company as its investment adviser. In addition, the officers of these
funds are substantially identical. Nonetheless, Registrant takes the
position that it is not under common control with these other funds since
the power residing in the respective boards and officers arises as the
result of an official position with the respective funds.
Item 26. Number of Holders of Securities
December 31, 1996
Shares of Beneficial Interest
Title of Class Number of Record Holders
Fidelity Exchange Fund 399
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit, or
proceeding in which he is involved by virtue of his service as a Trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its duties, and
arises out of or in connection with the Transfer Agent's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman and Director of FMR.
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
William Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; Director of Technical Research.
Curtis Hollingsworth Vice President of FMR (1993).
Stephen P. Jonas Treasurer and Vice President of FMR (1993)); Treasurer of
FMR Texas Inc. (1993), Fidelity Management & Research
(U.K.) Inc. (1993), and Fidelity Management & Research
(Far East) Inc. (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); High Income
Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. MacNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR; Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.
Thomas T. Soviero Vice President of FMR (1993).
Richard Spillane Vice President of FMR; Senior Vice President and Director
of Operations and Compliance of FMR U.K. (1993).
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Gary L. Swayze Vice President of FMR and of funds advised by FMR;
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk, and General Counsel
of FMR; Vice President, Legal of FMR Corp.; Secretary of
funds advised by FMR.
</TABLE>
Item 29. Principal Underwriters
(a) Not applicable (shares of the Fund are not currently sold to the
public).
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant on behalf of Exchange Fund undertakes, provided the
information required by Item 5a is contained in the annual report, to
furnish each person to whom a prospectus has been delivered, upon their
request and without charge, a copy of the Registrant's latest annual report
to shareholders.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment No. 17 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and Commonwealth of Massachusetts, on
the 19th day of March, 1996.
FIDELITY EXCHANGE FUND
/s/Kenneth A. Rathgeber, Treasurer
Kenneth A. Rathgeber, Treasurer
Exhibit 1
RESTATED DECLARATION OF TRUST
DATED APRIL 18, 1996
RESTATED DECLARATION OF TRUST, made April 18, 1996 by each of the Trustees
whose signature is affixed hereto (the "Trustees")
WHEREAS, the Trustees desire to restate this Declaration of Trust for the
sole purpose of supplementing the Declaration to incorporate amendments
duly adopted; and
WHEREAS, this Trust was initially made on November 1, 1984 by Edward C.
Johnson 3d, Caleb Loring, Jr., and Frank Nesvet in order to establish a
trust fund for the investment and reinvestment of funds contributed
thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in Trust
under this Restated Declaration of Trust as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "Fidelity Exchange Fund".
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required by the context
or specifically provided:
(a) The Terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the
third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them
in the 1940 Act, as amended from time to time;
(b) The "Trust" refers to Fidelity Exchange Fund and reference to the
Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series;
(c) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article X, Section 3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" refer to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the
time being in office as such trustee or trustees;
(f) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series shall be divided from
time to time, and includes fractions of shares as well as whole shares
consistent with the requirements of Federal and/or other securities laws;
and
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
(h) "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source of
managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into such
transferable Shares of one or more separate and distinct Series as the
Trustees shall from time to time create and establish. The number of Shares
is unlimited and each Share shall be without par value and shall be fully
paid and nonassessable. The Trustees shall have full power and authority,
in their sole discretion and without obtaining any prior authorization or
vote of the Shareholders of the Trust to create and establish (and to
change in any manner) Shares with such preferences, voting powers, rights
and privileges as the Trustees may from time to time determine, to divide
or combine the Shares into a greater or lesser number, to classify or
reclassify any issued Shares into one or more Series of Shares, to abolish
any one or more Series of Shares, and to take such other action with
respect to the Shares as the Trustees may deem desirable.
ESTABLISHMENT OF SERIES
Section 2. The establishment of any Series shall be effective upon the
adoption of a resolution by a majority of the then Trustees setting forth
such establishment and designation and the relative rights and preferences
of the Shares of such Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated,
the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of the
Trust. The Trustees may make such rules as they consider appropriate for
the transfer of Shares and similar matters. The record books of the Trust
shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the
appropriate Series is authorized to invest, valued as provided in Article
X, Section 3. After the date of the initial contribution of capital, the
number of Shares to represent the initial contribution may in the Trustees'
discretion be considered as outstanding and the amount received by the
Trustees on account of the contribution shall be treated as an asset of the
Trust. Subsequent investments in the Trust shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however,
that the Trustees may, in their sole discretion, (a) impose a sales charge
upon investments in the Trust and (b) issue fractional Shares.
ASSETS AND LIABILITIES OF SERIES
Section 5. All consideration received by the Trust for the issue or sale
of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in
such manner as they, in their sole discretion, deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders
of all Series for all purposes, and shall be referred to as assets
belonging to that Series. The assets belonging to a particular Series shall
be so recorded upon the books of the Trust, and shall be held by the
Trustees in Trust for the benefit of the holders of Shares of that Series.
The assets belonging to each particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged by the
Trustees between or among any one or more of the Series in such manner as
the Trustees in their sole discretion deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes. Any creditor of any Series may look only to the
assets of that Series to satisfy such creditor's debt.
NO PREEMPTIVE RIGHTS
Section 6. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust
or the Trustees.
LIMITATION OF PERSONAL LIABILITY
Section 7. The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares or
otherwise. Every note, bond, contract or other undertaking issued by or on
behalf of the Trust or the Trustees relating to the Trust shall include a
recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder).
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility.
ELECTION: INITIAL TRUSTEES
Section 2. On a date fixed by the Trustees, the Shareholders shall elect
not less than three Trustees. A Trustee shall not be required to be a
Shareholder of the Trust. The initial Trustees shall be Edward C. Johnson
3d, Caleb Loring, Jr. and Frank Nesvet and such other individuals as the
Board of Trustees shall appoint pursuant to Section 4 of the Article IV.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a) that
any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) that any Trustee may
be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when
such removal shall become effective; (c) that any Trustee who requests in
writing to be retired or who has become incapacitated by illness or injury
may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (d) a Trustee may be
removed at any Special Meeting of the Trust by a vote of two-thirds of the
outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation, retirement,
removal, incapacity, or inability of any of the Trustees, or in case a
vacancy shall, by reason of an increase in number, or for any other reason,
exist, the remaining Trustees shall fill such vacancy by appointing such
other person as they in their discretion shall see fit consistent with the
limitations under the Investment Company Act of 1940. Such appointment
shall be evidenced by a written instrument signed by a majority of the
Trustees in office or by recording in the records of the Trust, whereupon
the appointment shall take effect. Within three months of such appointment
the Trustees shall cause notice of such appointment to be mailed to each
Shareholder at his address as recorded on the books of the Trust. An
appointment of a Trustee may be made by the Trustees then in office and
notice thereof mailed to Shareholders as aforesaid in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number
of Trustees effective at a later date, provided that said appointment shall
become effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted this trust, the trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder.
The power of appointment is subject to the provisions of Section 16(a) of
the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney, delegate his power for
a period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three (3) nor more than
twelve (12), serving hereunder at any time shall be determined by the
Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from the Commonwealth of
Massachusetts or, if not a domiciliary of Massachusetts, is absent from his
state of domicile, or is physically or mentally incapacitated by reason of
disease or otherwise, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy,
absence or incapacity, shall be conclusive, provided, however, that no
vacancy shall remain unfilled for a period longer than six calendar months.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of
the Trust shall at all times be considered as vested in the Trustees. No
Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or any right of partition or possession thereof, but
each Shareholder shall have a proportionate undivided beneficial interest
in the Trust.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Subject to any applicable limitation in the Declaration of
Trust or the Bylaws of the Trust, the Trustees shall have power and
authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by
any present or future law or custom in regard to investments by Trustees,
and to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ a bank or trust company as custodian of any assets of the
Trust subject to any conditions set forth in this Declaration of Trust or
in the Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or both.
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, custodian or underwriter.
(i) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XII, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its
own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III.
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series or to apportion the same between or among two or more
Series, provided that any liabilities or expenses incurred by a particular
Series shall be payable solely out of the assets belonging to that Series
as provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes.
(q) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided for.
(r) To borrow money and to pledge, mortgage and hypothecate the assets of
the Trust, subject to the applicable requirements of the 1940 Act.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving notice
to such Shareholder.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or
upon their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of Shares to the same extent as if he were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be issued
and sold Shares to and buy such Shares from any such person of any firm or
company in which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of such Shares; and all
subject to any restrictions which may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone
consent provided a quorum of Trustees participate in any such telephonic
meeting, unless the 1940 Act requires that a particular action be taken
only at a meeting of the Trustees. At any meeting of the Trustees, a
majority of the Trustees shall constitute a quorum. Meetings of the
Trustees may be called orally or in writing by the Chairman of the Trustees
or by any two other Trustees. Notice of the time, date and place of all
meetings of the Trustees shall be given by the party calling the meeting to
each Trustee by telephone or telegram sent to his home or business address
at least twenty-four hours in advance of the meeting or by written notice
mailed to his home or business address at least seventy-two hours in
advance of the meeting. Notice need not be given to any Trustee who attends
the meeting without objecting to the lack of notice or who executes a
written waiver of notice with respect to the meeting. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to
any one of their number their authority to approve particular matters or
take particular actions on behalf of the Trust.
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be Chairman of
the Board of Trustees. The Chairman shall preside at all meetings of the
Trustees, shall be responsible for the execution of policies established by
the Trustees and the administration of the Trust, and may be the chief
executive, financial and accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the Trust estate or the assets belonging
to the appropriate Series for their expenses and disbursements, including,
without limitation, fees and expenses of Trustees who are not Interested
Persons of the Trust, interest expense, taxes, fees and commissions of
every kind, expenses of pricing Trust portfolio securities, expenses of
issue, repurchase and redemption of shares including expenses attributable
to a program of periodic repurchases or redemptions, expenses of
registering and qualifying the Trust and its Shares under Federal and State
laws and regulations, charges of custodians, transfer agents, and
registrars, expenses of preparing and setting up in type Prospectuses and
Statements of Additional Information, expenses of printing and distributing
prospectuses sent to existing Shareholders, auditing and legal expenses,
reports to Shareholders, expenses of meetings of Shareholders and proxy
solicitations therefor, insurance expense, association membership dues and
for such non-recurring items as may arise, including litigation to which
the Trust is a party, and for all losses and liabilities by them incurred
in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series prior to any rights or interests
of the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL, UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees may in
their discretion from time to time enter into an investment advisory or
management contract(s) with respect to the Trust or any Series thereof
whereby the other party(ies) to such contract(s) shall undertake to furnish
the Trustees such management, investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and
all upon such terms and conditions, as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser(s) (subject to such general
or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities and other
investment instruments of the Trust on behalf of the Trustees or may
authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all
without further action by the Trustees). Any such purchases, sales and
exchanges shall be deemed to have been authorized by all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more sub-advisers from time to time to perform
such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser
and sub-adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time enter
into (a) contract(s) providing for the sale of the Shares, whereby the
Trust may either agree to sell the Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In
either case, the contract shall be on such terms and conditions as may be
prescribed in the Bylaws, if any, and such further terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article VII, or of the Bylaws, if any; and such contract
may also provide for the repurchase or sale of Shares by such other party
as principal or as agent of the Trust.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time to time enter
into a transfer agency and Shareholder service contract whereby the other
party shall undertake to furnish the Trustees with transfer agency and
Shareholder services. The contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Declaration of Trust or of the Bylaws, if any. Such
services may be provided by one or more entities.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2 and 3
of this Article VII or in Article IX hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more
of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no
such contract shall be invalidated or rendered voidable by reason of the
existence of any relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable
for any profit realized directly or indirectly therefrom, provided that the
contract when entered into was reasonable and fair and not inconsistent
with the provisions of this Article VII or the Bylaws, if any. The same
person (including a firm, corporation, partnership, trust, or association)
may be the other party to contracts entered into pursuant to Sections 1, 2
and 3 above or Article IX, and any individual may be financially interested
or otherwise affiliated with persons who are parties to any or all of the
contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of this
Article VII shall be consistent with and subject to the requirements of
Section 15 of the 1940 Act (including any amendments thereof or other
applicable Act of Congress hereafter enacted) with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any
contract, entered into pursuant to Section 1 shall be effective unless
assented to by a Majority Shareholder Vote.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote (i) for the election
of Trustees as provided in Article IV, Section 2, (ii) for the removal of
Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory or management contract as provided in Article VII,
Section 1, (iv) with respect to the amendment of this Declaration of Trust
as provided in Article XII, Section 7, (v) to the same extent as the
shareholders of a Massachusetts business corporation, as to whether or not
a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, provided, however, that a Shareholder of a particular Series
shall not be entitled to bring any derivative or class action on behalf of
any other Series of the Trust, and (vi) with respect to such additional
matters relating to the Trust as may be required or authorized by law, by
this Declaration of Trust, or the Bylaws of the Trust, if any, or any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any State, as the Trustees may consider desirable. On any
matter submitted to a vote of the Shareholders, all shares shall be voted
by individual Series, except (i) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series; and (ii) when
the Trustees have determined that the matter affects only the interests of
one or more Series, then only the Shareholders of such Series shall be
entitled to vote thereon. Each whole Share shall be entitled to one vote as
to any matter on which it is entitled to vote, and each fractional Share
shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in
person or by proxy. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required or permitted by
law, this Declaration of Trust or any Bylaws of the Trust to be taken by
Shareholders.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings of the Shareholders
of any Series may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth
of the outstanding Shares entitled to vote. Whenever ten or more
Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as the same may be amended from time to time, seek the
opportunity of furnishing materials to the other Shareholders with a view
to obtaining signatures on such a request for a meeting, the Trustees shall
comply with the provisions of said Section 16(c) with respect to providing
such Shareholders access to the list of the Shareholders of record of the
Trust or the mailing of such materials to such Shareholders of record.
Shareholders shall be entitled to at least fifteen days' notice of any
meeting.
QUORUM AND REQUIRED VOTE
Section 3. A majority of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Declaration of
Trust permits or requires that holders of any Series shall vote as a Series
then a majority of the aggregate number of Shares of that Series entitled
to vote shall be necessary to constitute a quorum for the transaction of
business by that Series. Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting, without the
necessity of further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the Bylaws, a majority of the
Shares voted in person or by proxy shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of law
or of this Declaration of Trust permits or requires that the holders of any
Series shall vote as a Series, then a majority of the Shares of that Series
voted on the matter shall decide that matter insofar as that Series is
concerned.
ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
Section 1. The Trustees shall at all times employ a bank or trust company
having capital, surplus and undivided profits of at least two million
dollars ($2,000,000), or such other amount or entity as shall be allowed by
the Commission or by the 1940 Act, as custodian with authority as its
agent, but subject to such restrictions, limitations or other requirements,
if any, as may be contained in the By-laws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same upon
written order or oral order, if confirmed in writing, or by such
electro-mechanical or electronic devices as are agreed to by the Trust and
the custodian, if such procedures have been authorized in writing by the
Trust;
2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
and
3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
1) to keep the books and accounts of the Trust and furnish clerical and
accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net Asset Value
of any Series in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by
it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital and surplus and undivided profits of at least
two million dollars ($2,000,000) or such other person as may be permitted
by the Commission, or otherwise in accordance with the 1940 Act as from
time to time amended.
CENTRAL CERTIFICATE SYSTEM
Section 2. Subject to such rules, regulations and orders as the
Commission may adopt, the Trustees may direct the custodian to deposit all
or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities
exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person
as may be permitted by the Commission, or otherwise in accordance with the
1940 Act as from time to time amended, pursuant to which system all
securities of any particular class or series of any issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided
that all such deposits shall be subject to withdrawal only upon the order
of the Trust.
ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends. The
amount of such dividends and the payment of them shall be wholly in the
discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by the
laws of Massachusetts, at any time to declare and cause to be paid
dividends on Shares of a particular Series, from the assets belonging to
that Series, which dividends, at the election of the Trustees, may be paid
daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, and may be
payable in Shares of that Series at the election of each Shareholder of
that Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute pro rata among the
Shareholders of a particular Series as of the record date of that Series
fixed as provided in Section 3 hereof a "stock dividend".
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular Series
desires to dispose of his Shares, he may deposit at the office of the
transfer agent or other authorized agent of the Series a written request or
such other form of request as the Trustees may from time to time authorize,
requesting that the Series purchase the Shares in accordance with this
Section 2; and the Shareholder so requesting shall be entitled to require
the Series to purchase, and the Series or the principal underwriter of the
Series shall purchase his said Shares, but only at the Net Asset Value
thereof (as described in Section 3 hereof). The Series shall make payment
for any such Shares to be redeemed, as aforesaid, in cash or property from
the assets of that Series and payment for such Shares shall be made by the
Series or the principal underwriter of the Series to the Shareholder of
record within seven (7) days after the date upon which the request is
effective.
DETERMINATION OF NET ASSET VALUE
AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series, exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value per Share
shall be determined separately for each Series of Shares and shall be
determined on such days and at such times as the Trustees may determine.
Such determination shall be made with respect to securities for which
market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees, provided, however, that
the Trustees, without Shareholder approval, may alter the method of
appraising portfolio securities insofar as permitted under the 1940 Act and
the rules, regulations and interpretations thereof promulgated or issued by
the Commission or insofar as permitted by any Order of the Commission
applicable to the Series. The Trustees may delegate any of its powers and
duties under this Section 3 with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the value par Share last
determined to be determined again in similar manner and may fix the time
when such redetermined value shall become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment as permitted under the 1940 Act.
Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no
right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share existing after the
termination of the suspension.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 1. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of
the Trust, the Trustees shall not be responsible for or liable in any event
for neglect or wrongdoing of them or any officer, agent, employee or
investment adviser of the Trust, but nothing contained herein shall protect
any Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as "Covered Person") shall be indemnified by the
appropriate Series to the fullest extent permitted by law against liability
and against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes involved as
a party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or (B) not to
have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(a) by the court or other body approving the settlement;
(b) by at least a majority of those Trustees who are neither interested
persons of the Trust nor are parties to the matter based upon a review of
readily available facts (as opposed to a full trial-type inquiry); or
(c) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees, or by
independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other
than Trustees and officers, and other persons may be entitled by contract
or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in paragraph (a) of this Section 2 may be paid by the applicable Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the applicable Series if it is ultimately determined
that he is not entitled to indemnification under this Section 2; provided,
however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured against
losses arising out of any such advance payments or (c) either a majority of
the Trustees who are neither interested persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under
this Section 2.
SHAREHOLDERS
Section 3. In case any Shareholder or former Shareholder of any Series of
the Trust shall be held to be personally liable solely by reason of his
being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the applicable
Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Series shall, upon request by the
Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon.
ARTICLE XII
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to
bind personally either the Trust's officers or any Shareholder. All persons
extending credit to, contracting with or having any claim against the Trust
or the Trustees shall look only to the assets of the appropriate Series for
payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees, nor any of their agents, whether past, present or future,
shall be personally liable therefor. Nothing in this Declaration of Trust
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to the
provisions of Section 1 of this Article XII and to Article XI, the Trustees
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust, and subject to the
provisions of Section 1 of this Article XII and to Article XI, shall be
under no liability for any act or Omission in accordance with such advice
or for failing to follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the Trust
for a period not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for the payment of any dividends, or
the date for the allotment of rights, or the date when any change or
conversion or exchange of Shares shall go into effect; or in lieu of
closing the stock transfer books as aforesaid, the Trustees may fix in
advance a date, not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion
or exchange of Shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote at,
any such meeting, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of
any such change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders as shall be Shareholders of record
on the date so fixed shall be entitled to such notice of, and to vote at,
such meeting, or to receive payment of such dividend, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed or aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 4.
(b) Subject to a Majority Shareholder Vote of each Series affected by the
matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell and convey the assets of the Trust or any affected Series to
another trust, partnership, association or corporation organized under the
laws of any state which is a diversified open-end management investment
company as defined in the 1940 Act, for adequate consideration which may
include the assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust or any affected Series,
and which may include shares of beneficial interest or stock of such trust,
partnership, association or corporation; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
Upon making provision for the payment of all such liabilities in either
(i) or (ii), by such assumption or otherwise, the Trustees shall distribute
the remaining proceeds or assets (as the case may be) ratably among the
holders of the Shares of the Trust or any affected Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest
of all parties shall be cancelled and discharged.
FILING OF COPIES, REFERENCES, HEADINGS
Section 5. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental declaration of trust shall be filed by
the Trustees with the Secretary of the Commonwealth of Massachusetts and
the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to whether
or not any such supplemental declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and with the same
effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this instrument or of any
such supplemental declaration of trust. In this instrument or in any such
supplemental declaration of trust, references to this instrument and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to
refer to this instrument as amended or affected by any such supplemental
declaration of trust. Headings are placed herein for convenience of
reference only and in case of any conflict, the text of this instrument,
rather than the headings, shall control. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 6. The trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
trust.
AMENDMENTS
Section 7. If authorized by votes of the Trustees and a Majority
Shareholder Vote, or by any larger vote which may be required by applicable
law or this Declaration of Trust in any particular case, the Trustees shall
amend or otherwise supplement this instrument, by making a declaration of
trust supplemental hereto, which thereafter shall form a part hereof,
except that an amendment which shall affect the Shareholders of one or more
Series but not the Shareholders of all outstanding Series shall be
authorized by vote of the Shareholders holding a majority of the Shares
entitled to vote of each Series affected and no vote of Shareholders of a
Series not affected shall be required. Amendments having the purpose of
changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require authorization by
Shareholder vote. Copies of the supplemental declaration of trust shall be
filed as specified in Section 5 of this Article XII.
FISCAL YEAR
Section 8. The fiscal year of the Trust shall end on a specified date as
set forth in the Bylaws, provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
Section 9. Fidelity Management & Research Company ("FMR") has consented
to the use by any Series of the Trust of the identifying word "Fidelity" in
the name of any Series of the Trust at some future date. Such consent is
conditioned upon the employment of FMR as investment adviser of each Series
of the Trust. As between the Trust and itself, FMR controls the use of the
name of the Trust insofar as such name contains the identifying word
"Fidelity". FMR may from time to time use the identifying word "Fidelity"
in other connections and for other purposes, including, without limitation,
in the names of other investment companies, corporations or businesses
which it may manage, advise, sponsor or own or in which it may have a
financial interest. FMR may require the Trust or any Series thereof to
cease using the identifying word "Fidelity" in the name of the Trust or any
Series thereof if the Trust or any Series thereof ceases to employ FMR or a
subsidiary or affiliate thereof as investment adviser.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument this 18th day of April, 1996.
/s/Edward C. Johnson 3d /s/Donald S. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Gerald C. McDonough
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Marvin L. Mann
Richard J. Flynn Marvin L. Mann
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
The business address of the
members of the Board of
Trustees is:
82 Devonshire Street
Boston, MA 02109
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Post Effective
Amendment No. 17 to the Registration Statement No. 2-55225 and 811-2614 on
Form N-1A of Fidelity Exchange Fund of our report dated January 31, 1996,
which appears in the Annual Report to Shareholders relating to the
financial statements and financial highlights of Fidelity Exchange Fund
which is incorporated by reference in said Post-Effective Amendment.
We further consent to the references to our Firm under the caption
"Auditor" in Part B of this Post-Effective Amendment.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 19, 1996
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