FIDELITY EXCHANGE FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PART A SECTION
1 *
2 *
3 Financial Statements
4 General Description of the Registrant; Part B Section,
Item 13: Investment Objectives and Policies
5 Management of the Fund; Part B Section, Item 16:
Investment Advisory and Other Services
5 *
5A *
6 Capital Stock and Other Securities
7 Purchase of Securities Being Offered
8 Redemption or Repurchase of Shares
9 *
* Not Applicable
FIDELITY EXCHANGE FUND
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER PART B SECTION
10, 11 *
12 *
13 Investment Objectives and Policies; Brokerage
Allocation and Other Practices
14 Management of the Fund
15 Control Persons and Principal Holders of
Securities
16 Investment Advisory and Other Services
17 Brokerage Allocation and Other Practices
18 Part A Section, Item 6: Capital Stock and Other
Securities
19 Purchase, Redemption and Pricing of Securities
Being Offered
20 Part A Section, Item 6: Capital Stock and Other
Securities
21 *
22 *
23 Financial Statements
* Not Applicable
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
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 Compan y, Inc. (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.
FIDELITY EXCHANGE FUND is a diversified mutual fund of Fidelity
Exchange Fund, an open-end management invest ment company organized as a
Massachusetts business trust on December 31, 1984.
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.
EQUITY SECURITIES may include common stocks, preferred stocks,
convertible securities, and warrants. Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation. Although
equity securities have a history of long-term growth in value, their prices
fluctuate based on changes in a company's financial condition and on
overall market and economic conditions. Smaller companies are especially
sensitive to these factors.
RESTRICTIONS: With respect to 100% of total assets, the fund may not
purchase more than 10% of the outstanding voting securities of a single
issuer.
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 pay
interest and repay principal 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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. 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.
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.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 100% of its total assets, the fund may not
purchase a security if, as a result, more than 5% would be invested in the
securities of any issuer. This limitation does not apply to U.S. Government
securities.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering the
fund's securities. The fund may also lend money to other funds advised by
FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the fund's
total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS.
The fund seeks long-term growth of capital.
With respect to 100% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any issuer and may not purchase more than 10% of the outstanding voting
securities of a single issuer.
The fund may not invest more than 25% of its total assets in any one
industry.
The fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
Loans, in the aggregate, may not exceed 33% of the fund's total assets.
ITEM 5. MANAGEMENT OF THE FUND.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs. As of December 31, 1996, FMR advised funds
having more than 29 million shareholder accounts with a total value of more
than $432 billion.
Jay Weed is Vice President and manager of Fidelity Exchange Fund, which he
has managed since 1995. He also manages other Fidelity funds. Since
joining Fidelity in 1984, Mr. Weed has worked as an analyst, portfolio
manager, chief investment officer and joint Chief Investment Strategist for
Portfolio Advisory Services (PAS).
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Service Company, Inc. (FSC), 82 Devonshire Street, Boston,
Massachusetts 02109, an affiliate of FMR, is transfer, dividend disbursing,
and shareholder servicing agent for the fund. In the fiscal year ended
December 1996, the fund paid FSC fees equal to 0.08% of its average net
assets.
FMR Corp. is the ultimate parent company of FMR. Members of the Edward C.
Johnson 3d family are the predominant owners of a class of shares of common
stock representing approximately 49% of the voting power of FMR Corp. Under
the Investment Company Act of 1940 (the 1940 Act), control of a company is
presumed where one individual or group of individuals owns more than 25% of
the voting stock of that company; therefore, the Johnson family may be
deemed under the 1940 Act to form a controlling group with respect to FMR
Corp.
A broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
the fund's transactions, provided that the fund receives brokerage services
and commission rates comparable to those of other broker-dealers.
ITEM 5A. MANAGEMENT'S DISCUSSION OF PERFORMANCE. Not applicable.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. You are entitled to one
vote for each share you own.
Shareholder inquiries may be made by writing Fidelity Investments, 82
Devonshire Street, Boston, Massachusetts 02109.
Fidelity Exchange Fund (the fund) is an open-end management investment
company originally 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.
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.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust 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 trust 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
trust or the Trustees shall include a provision limiting the obligations
created thereby to the trust 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 Trustees
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.
VOTING RIGHTS. The fund's capital consists of shares of
beneficial interest. The shares have no preemptive or conversion rights;
the voting and dividend rights, the right of redemption, and the privilege
of exchange are described in the Prospectus. Shares are fully paid and
nonassessable, except as set forth under the heading "Shareholder and
Trustee Liability" above. Shareholders representing 10% or more of the
trust or a fund may, as set forth in the Declaration of Trust, call
meetings of the trust or a fund for any purpose including the purpose of
voting on removal of one or more Trustees. The trust or any fund may be
terminated upon the sale of its assets to another open-end management
investment company, or upon liquidation and distribution of its assets, if
approved by vote of the holders of a majority of the outstanding shares of
the trust or the fund. If not so terminated, the trust and the fund will
continue indefinitely.
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.
Shares of the fund are not currently offered to the public.
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates the fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued on the basis of amortized cost. This method
minimizes the effect of changes in a security's market value. In addition,
if quotations are not readily available, or if the values have been
materially affected by events occurring after the closing of a foreign
market, assets may be valued by a method that the Board of Trustees
believes accurately reflects fair value.
ITEM 8. REDEMPTION OR REPURCHASE 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 next determined after a
written request for redemption is received and accepted. 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 received and
accepted 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 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 SEC , 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.
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 1940 Act) 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.
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 1940 Act. 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 SEC, 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 significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar.
Foreign investments involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments,
and may be affected by actions of foreign governments adverse to the
interests of U.S. investors. Such actions may include the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention.
There is no assurance that FMR will be able to anticipate these potential
events or counter their effects. These risks are magnified for investments
in developing countries, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade
a small number of securities.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States. Foreign
markets may offer less protection to investors than U.S. markets. It is
anticipated that in most cases the best available market for foreign
securities will be on an exchange or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may result in increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer, and
may involve substantial delays. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions and custodial
costs, are generally higher than for U.S. investors. In general, there is
less overall governmental supervision and regulation of securities
exchanges, brokers, and listed companies than in the United States. It may
also be difficult to enforce legal rights in foreign countries. Foreign
issuers are generally not bound by uniform accounting, auditing, and
financial reporting requirements and standards of practice comparable to
those applicable to U.S. issuers.
Some foreign securities impose restrictions on transfer within the United
States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs including European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs), are certificates evidencing ownership of shares of a
foreign issuer. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere.
The underlying shares are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depository bank
may not have physical custody of the underlying securities at all times and
may charge fees for various services, including forwarding dividends and
interest and corporate actions. ADRs are an alternative to directly
purchasing the underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks
of the underlying issuer's country.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) or forward basis (i.e., by entering
into forward contracts to purchase or sell foreign currencies). Although
foreign exchange dealers generally do not charge a fee for such
conversions, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency at one rate, while offering a
lesser rate of exchange should the counterparty desire to resell that
currency to the dealer. Forward contracts are customized transactions that
require a specific amount of a currency to be delivered at a specific
exchange rate on a specific date or range of dates in the future. Forward
contracts are generally traded in an interbank market directly between
currency traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated currency exchange. A fund may use currency forward contracts
for any purpose consistent with its investment objective.
The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a fund
against an adverse change in foreign currency values between the date a
security is purchased or sold and the date on which payment is made or
received. Entering into a forward contract for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction
for a fixed amount of U.S. dollars "locks in" the U.S. dollar price of the
security. Forward contracts to purchase or sell a foreign currency may
also be used by a fund in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a direct
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. This type of strategy, sometimes known as a
"cross-hedge," will tend to reduce or eliminate exposure to the currency
that is sold, and increase exposure to the currency that is purchased, much
as if a fund had sold a security denominated in one currency and purchased
an equivalent security denominated in another. Cross-hedges protect
against losses resulting from a decline in the hedged currency, but will
cause a fund to assume the risk of fluctuations in the value of the
currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, a fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in currency
exchange rates and could result in losses to a fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged a fund by selling that currency in exchange for
dollars, a fund would not participate in the currency's appreciation. If
FMR hedges currency exposure through proxy hedges, a fund could realize
currency losses from both the hedge and the security position if the two
currencies do not move in tandem. Similarly, if FMR increases a fund's
exposure to a foreign currency and that currency's value declines, a fund
will realize a loss. There is no assurance that FMR's use of currency
management strategies will be advantageous to a fund or that it will hedge
at appropriate times.
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.
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 Stan dard & Poor's 500 Index ( 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.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency
futures contracts are similar to forward currency exchange contracts,
except that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency, which
generally is purchased or delivered in exchange for U.S. dollars, or may be
a futures contract. The purchaser of a currency call obtains the right to
purchase the underlying currency, and the purchaser of a currency put
obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed above.
The fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the fund's investments exactly over
time.
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.
INTERFUND BORROWING AND LENDING 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. The fund
will lend through the program only when the returns are higher than those
available from an investment in repurchase agreements, and will borrow
through the program only when the costs are equal to or lower than the cost
of bank loans. The 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.
REPURCHASE AGREEMENTS. 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.
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 has been found 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.
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
(NYSE) 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 Securities and
Exchange Commission (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).
ITEM 14. MANAGEMENT OF THE FUND.
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 ( 66 ), 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 ( 55 ), 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 ( 64 ), Trustee (1991), is a management consultant
(1994). Prior to February 1994, he was President of Greenhill Petroleum
Corporation (petroleum exploration and production). 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), CH2M Hill Companies
(engineering), Rio Grande, Inc. (oil and gas production), and Daniel
Industries (petroleum measurement equipment manufacturer). In addition, he
is a member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS ( 65 ), 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), and 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.
ROBERT M. GATES (53), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence Agency
(CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as Assistant to
the President of the United States and Deputy National Security Advisor.
Mr. Gates is currently a Trustee for the Forum For International Policy, a
Board Member for the Virginia Neurological Institute, and a Senior Advisor
of the Harvard Journal of World Affairs. In addition, Mr. Gates also serves
as a member of the corporate board for LucasVarity PLC (automotive
components and diesel engines), Charles Stark Draper Laboratory
(non-profit), NACCO Industries, Inc. (mining and manufacturing), and TRW
Inc. (original equipment and replacement products).
E. BRADLEY JONES ( 69 ), Trustee. 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), 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 ( 64 ), 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, Chairman of the Board of Trustees of the Greenwich
Hospital Association, a Member of the Public Oversight Board of the
American Institute of Certified Public Accountants' SEC Practice Section
(1995), and as a Public Governor of the National Association of
Securities Dealers, Inc. (1996) .
*PETER S. LYNCH ( 53 ), Trustee, 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 (1989), and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston (1990).
WILLIAM O. McCOY (63), Trustee (1997), is the Vice President of Finance
for the University of North Carolina (16-school system, 1995). Prior to
his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board
of BellSouth Corporation (telecommunications, 1984) and President of
BellSouth Enterprises (1986). He is currently a Director of Liberty
Corporation (holding company, 1984), Weeks Corporation of Atlanta (real
estate, 1994), Carolina Power and Light Company (electric utility, 1996),
and the Kenan Transport Co. (1996). Previously, he was a Director of First
American Corporation (bank holding company, 1979-1996). In addition, Mr.
McCoy serves as a member of the Board of Visitors for the University of
North Carolina at Chapel Hill (1994) and for the Kenan-Flager Business
School (University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH ( 67 ), Trustee and Chairman of the
non-interested Trustees , 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 Trans portation
Corp. (physical distribution services). Mr. McDonough is a Director of
Brush-Wellman Inc. (metal refining), York International Corp. (air
conditioning and refrigeration), Commercial Intertech Corp. (hydraulic
systems, building systems, and metal products, 1992), CUNO, Inc. (liquid
and gas filtration products, 1996), and Associated Estates Realty
Corporation (a real estate investment trust, 1993). Mr. McDonough served as
a Director of ACME-Cleveland Corp. (metal working, telecommunications and
electronic products) from 1987-1996.
MARVIN L. MANN ( 63 ), 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.
THOMAS R. WILLIAMS ( 68 ), 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 ( 62 ), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
JONATHAN WEED ( 38 ), Vice President, is manager of Exchange Fund,
which he has managed since 1995. He also manages other Fidelity funds.
Since joining Fidelity in 1984, Mr. Weed has worked as an analyst,
portfolio manager, chief investment officer and joint Chief Investment
Strategist for Portfolio Advisory Services (PAS).
ARTHUR S. LORING ( 49 ), 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 ( 49 ), 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 ( 56 ), Manager of Security Transactions of
Fidelity's equity funds, is Vice President of FMR.
JOHN H. COSTELLO ( 50 ), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH ( 50 ), 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) and
Chief Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993).
The following table sets forth information describing the compensation of
each Trustee of the fund for his or her services for the fiscal year
ended December 31, 199 6 .
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Total
Compensation Compensation
from from the Fund
Exchange FundA,B Complex*A
J. Gary Burkhead ** $ 0 $ 0
Ralph F. Cox 83 137,700
Phyllis Burke Davis 82 134,700
Richard J. Flynn *** 102 168,000
Edward C. Johnson 3d ** 0 0
E. Bradley Jones 82 134,700
Donald J. Kirk 83 136,200
Peter S. Lynch ** 0 0
William O. McCoy**** 45 85,333
Gerald C. McDonough 83 136,200
Edward H. Malone *** 82 136,200
Marvin L. Mann 81 134,700
Thomas R. Williams 83 136,200
</TABLE>
* Information is for the calendar year ended December 31, 1996
for 235 f unds in the complex.
** Interested Trustees of the fund are compensated by FMR.
*** Richard J. Flynn and Edward H. Malone served on the Board of
Trustees through December 31, 1996.
**** During the period from May 1, 1996 through December 31, 1996, William
O. McCoy served as a Member of the Advisory Board of the trust. Mr. McCoy
was appointed to the Board of Trustees effective January 1, 1997.
A Compensation figures include cash, a pro rata portion of benefits accrued
under the retirement program for the period ended December 30, 1996 and
required to be deferred, and may include amounts deferred at the election
of Trustees.
B The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $3, Phyllis
Burke Davis, $3, Richard J. Flynn, $0, E. Bradley Jones, $3, Donald J.
Kirk, $3, William O. McCoy, $0, Gerald C. McDonough, $3, Edward H. Malone,
$3, Marvin L. Mann, $3 and Thomas R. Williams, $3.
Under a retirement program adopted in July 1988 and modified in
November 1995 and November 1996 , each non-interested Trustee who
retired before December 30, 1996 may receive payments from a Fidelity fund
during his or her lifetime based on his or her basic trustee fees and
length of service. The obligation of a fund to make such payments
is neither secured n or funded. A Trustee became eligible to
participate in the program at the end of the calendar year in which he or
she reached age 72, provided that, at the time of retirement, he or she had
served as a Fidelity fund Trustee for at least five years.
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 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 funds to retain the services of any
Trustee or to pay any particular level of compensation to the Trustee. The
funds may invest in such designated securities under the Plan without
shareholder approval.
As of December 30, 1996, the non-interested Trustees terminated the
retirement program for Trustees who retire after such date. In connection
with the termination of the retirement program, each existing
non-interested Trustee received a credit to his or her Plan account equal
to the present value of the estimated benefits that would have been payable
under the retirement program. The amounts credited to the non-interested
Trustees' Plan accounts are subject to vesting. The termination of the
retirement program and related crediting of estimated benefits to the
Trustees' Plan accounts did not result in a material cost to the funds.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of February 28, 1997 , 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.
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, 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,
compensates all officers of the fund and all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the fund or FMR
performing services relating to research, statistical, and investment
activities.
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. These 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
laws; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees.
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.
FMR is the fund's manager pursuant to a management contract dated November
1, 1988, which was approved by shareholders on October 18, 1988.
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 fiscal years ended December 31, 1996, 1995, and 1994, FMR
earned $1,331,711, $1,131,323, and $997,120, respectively, for its services
as investment adviser after reductions of $146,371, $123,973, and $108,899,
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.
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the Investment Company Act of 1940 (1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company.
Therefore, through their ownership of voting common stock and the execution
of the shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect to FMR
Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
FSC, an affiliate of FMR, is transfer, dividend disbursing, and
shareholder servicing agent for the fund. FSC receives an annual account
fee and an asset-based fee each based on account size and fund type for
each retail account and certain institutional accounts. With respect to
certain institutional retirement accounts, FSC receives an annual account
fee and an asset-based fee based on account type or fund type. These annual
account fees are subject to increase based on postal rate changes. The
asset-based fees are subject to adjustment if the year-to-date total return
of the S&P 500 exceeds a positive or negative 15%. FSC also collects small
account fees from certain accounts with balances of less than $2,500.
FSC pays out-of-pocket expenses associated with providing transfer agent
services. In addition, FSC bears the expense of typesetting, printing, and
mailing prospectuses, statements of additional information, and all other
reports, notices, and statements to shareholders, with the exception of
proxy statements.
The transfer agent fees paid to FSC for the fiscal years ended December
1996, 1995, and 1994 were $187,355, $137,642, and $10,150, respectively.
FSC also receives fees for administering the fund's securities lending
program. For the fiscal years ended December 1996, 1995, and
1994 , the fund did not incur any securities lending fees.
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 a fund's assets and the appointment of
any subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of a fund or in deciding which
securities are purchased or sold by a fund. However, a fund may invest in
obligations of the custodian and may purchase securities from or sell
securities to the custodian. The Bank of New York and The Chase
Manhattan Bank, each headquartered in New York, also may serve as special
purpose custodians of certain assets in connection with repurchase
agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board
of Trustees may, from time to time, conduct transactions with various
banks, including banks serving as custodians for certain funds advised by
FMR. The Boston branch of the fund's custodian leases its office space
from an affiliate of FMR at a lease payment which, when entered into, was
consistent with prevailing market rates. Transactions that have occurred to
date include mortgages and personal and general business loans. In the
judgment of FMR, the terms and conditions of those transactions were
not influenced by existing or potential custodial or other fund
relationships.
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.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
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; the
reasonableness of any commissions; and arrangements for payment of fund
expenses.
The fund may execute portfolio transactions with broker-dealers who
provide research and 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; and the availability of
securities or the purchasers or sellers of securities. In addition,
such broker-dealers may furnish analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy, and performance of accounts; effect securities transactions, and
perform functions incidental thereto (such as clearance and settlement).
The selection of such broker-dealers generally is 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 the
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 and 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 (FBSL) . As of January 1995, FBSL was
converted to an unlimited liability company and assumed the name FBS.
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 commissions 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.
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 1996 and 1995, the fund's portfolio
turnover rates were 0% and 0%. 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).
For the fiscal years ended December 1996, 1995, and 1994, the fund paid
no brokerage commissions. During the fiscal year ended December 1996, the
fund paid no fees to brokerage firms that provided research services.
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.
Shares of the fund are not currently offered to the public.
VALUATION. FSC normally determines the fund's net asset value per
share (NAV) as of the close of the New York Stock Exchange (NYSE) (normally
4:00 p.m. Eastern time). The valuation of portfolio securities is
determined as of this time for the purpose of computing the fund's NAV.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Most equity securities for
which the primary market is the United States are valued at last sale price
or, if no sale has occurred, at the closing bid price. Most equity
securities for which the primary market is outside the United States are
valued using the official closing price or the last sale price in the
principal market in which they are traded. If the last sale price (on the
local exchange) is unavailable, the last evaluated quote or last bid price
normally is used.
Fixed-income securities and other assets for which market quotations are
readily available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal market is
an exchange) in the principal market in which they normally are traded, as
furnished by recognized dealers in such securities or assets. Or,
fixed-income securities and convertible securities may be valued on the
basis of information furnished by a pricing service that uses a valuation
matrix which incorporates both dealer-supplied valuations and electronic
data processing techniques. Use of pricing services has been approved by
the Board of Trustees. A number of pricing services are available, and the
fund may use various pricing services or discontinue the use of any pricing
service.
Futures contracts and options are valued on the basis of market
quotations, if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less for
which market quotations are not readily available are valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. In addition, securities and other assets for
which there is no readily available market value may be valued in good
faith by a committee appointed by the Board of Trustees. The procedures
set forth above need not be used to determine the value of the securities
owned by the fund if, in the opinion of a committee appointed by the Board
of Trustees, some other method would more accurately reflect the fair
market value of such securities.
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. The fund's financial statements and
financial highlights for the fiscal year ended December 31, 1996, and
report of the auditor, are included in the fund's Annual Report, which is a
separate report. The fund's financial statements, including the financial
highlights, and report of the auditor are incorporated herein by
reference.
Part C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements and Financial Highlights for Fidelity Exchange
Fund for the fiscal year ended December 31, 1996 were filed on February 9,
1997 for the fund (File No. 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 incorporated herein by reference to Exhibit 1 of Post-Effective
Amendment No. 17.
2. (a) Bylaws of the Trust, as amended, are incorporated herein by
reference to Exhibit 2(a) of Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
3. Not applicable.
4. Not applicable.
5. Management Contract between Fidelity Exchange Fund and Fidelity
Management & Research Company, dated September 1, 1989, 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, as amended on November 16, 1995, is incorporated
herein by reference to Exhibit 7(a) of Fidelity Select Port
folio's (File No. 2-69972) Post-Effective Amendment No. 54.
(b) The Fee Deferral 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 January 18, 1996, to the Custodian Agreement, dated
September 1, 1994, between Brown Brothers Harriman & Company and the
Registrant is incorporated herein by reference to Exhibit 8(d) of Fidelity
Investment Trust's Post-Effective Amendment No. 65 (File No. 2-90649).
(c) Appendix B, dated May 16, 1996, to the Custodian Agreement, dated
September 1, 1994, between Brown Brothers Harriman & Company and the
Registrant is incorporated herein by reference to Exhibit 8(e) of Fidelity
Securities Fund's Post-Effective Amendment No. 35 (File No. 2-93601).
(d) Fidelity Group Repo Custodian Agreement among The Bank of New York,
J. P. Morgan Securities, Inc., and the Registrant, dated February 12, 1996,
is incorporated herein by reference to Exhibit 8(d) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective Amendment
No. 31.
(e) Schedule 1 to the Fidelity Group Repo Custodian Agreement between The
Bank of New York and the Registrant, dated February 12, 1996, is
incorporated herein by reference to Exhibit 8(e) of Fidelity Institutional
Cash Portfolios' (File No. 2-74808) Post-Effective Amendment No. 31.
(f) Fidelity Group Repo Custodian Agreement among Chemical Bank,
Greenwich Capital Markets, Inc., and the Registrant, dated November 13,
1995, is incorporated herein by reference to Exhibit 8(f) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective Amendment
No. 31.
(g) Schedule 1 to the Fidelity Group Repo Custodian Agreement between
Chemical Bank and [the Registrant, dated November 13, 1995, is incorporated
herein by reference to Exhibit 8(g) of Fidelity Institutional Cash
Portfolios' (File No. 2-74808) Post-Effective Amendment No. 31.
(h) Joint Trading Account Custody Agreement between The Bank of New York
and the Registrant, dated May 11, 1995, is incorporated herein by reference
to Exhibit 8(h) of Fidelity Institutional Cash Portfolios' (File No.
2-74808) Post-Effective Amendment No. 31.
(i) First Amendment to Joint Trading Account Custody Agreement between
The Bank of New York and the Registrant, dated July 14, 1995, is
incorporated herein by reference to Exhibit 8(i) of Fidelity Institutional
Cash Portfolios' (File No. 2-74808) Post-Effective Amendment No. 31.
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 substantially the same as the
Boards of other funds which have FMR as their investment adviser. In
addition, the officers of these funds are substantially identical with the
Officers of Registrant. 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: February 28, 1997
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Exchange Fund 416
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, Inc.
("Service") is appointed transfer agent, the Registrant agrees to indemnify
and hold Service harmless against any losses, claims, damages, liabilities
or expenses (including reasonable counsel fees and expenses) resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, including by a shareholder, which names Service and/or the
Registrant as a party and is not based on and does not result from the
Service's willful misfeasance, bad faith or negligence or reckless
disregard of duties, and arises out of or in connection with Service's
performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by Service's willful misfeasance, bad faith or negligence or reckless
disregard of duties) which results from the negligence of the Registrant,
or from Service'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 Service's acting in reliance upon advice
reasonably believed by Service to have been given by counsel for the
Registrant, or as a result of Service'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.
Item 28. Business and Other Connections of Investment Adviser.
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
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 Director of FMR, FMR
Corp., FMR Texas Inc., FMR (U.K.) Inc., and FMR
(Far East) Inc.; Chairman of the Board and
Representative Director of Fidelity Investments Japan
Limited; President and Trustee of funds advised by
FMR.
J. Gary Burkhead President and Director of FMR, FMR Texas Inc., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Managing
Director of FMR Corp.; Senior Vice President and
Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
Marta Amieva Vice President of FMR.
Dwight D. Churchill Vice President of FMR.
John D. Crumrine Assistant Treasurer of FMR, FMR (U.K.) Inc., FMR
(Far East) Inc., and FMR Texas Inc.; Vice President
and Treasurer of FMR Corp.
William Danoff Vice President of FMR and of a fund advised by FMR.
Scott E. DeSano Vice President of FMR.
Craig P. Dinsell Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
George C. Domolky Vice President of FMR.
Larry A. Domash Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and a fund advised by FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Secretary of
FMR Texas Inc.
Robert Gervis Vice President of FMR.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Kevin E. Grant Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Vice President of FMR.
Bart Grenier Vice President of FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
William J. Hayes Senior Vice President of FMR; Vice President of
Equity funds advised by FMR.
Richard Hazlewood Vice President of FMR and of a fund advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR; Vice President of
Fixed-Income funds advised by FMR.
John R. Hickling Vice President of FMR and of a fund advised by FMR.
Robert F. Hill Vice President of FMR; Director of Technical
Research.
Curt Hollingsworth Vice President of FMR and of funds advised by FMR.
Abigail P. Johnson Vice President of FMR and of a fund advised by FMR.
Stephen P. Jonas Vice President of FMR; Treasurer of FMR, FMR
(U.K.) Inc., FMR (Far East) Inc., and FMR Texas Inc.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
(U.K.) Inc.
David P. Kurrasch Vice President of FMR.
Robert A. Lawrence Senior Vice President of FMR; Vice President of High
Income funds advised by FMR.
Alan Leifer Vice President of FMR.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Arthur S. Loring Senior Vice President, Clerk, and General Counsel of
FMR; Vice President/Legal, and Assistant Clerk of
FMR Corp.; Secretary of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Malcolm W. MacNaught II Vice President of FMR and of a fund advised by FMR.
Robert H. Morrison Vice President of FMR; Director of Equity Trading.
David L. Murphy Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR.
Kenneth A. Rathgeber Vice President of FMR; Treasurer of funds advised by
FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Vice President of FMR; Senior Vice President and
Director of Operations and Compliance of FMR (U.K.)
Inc.
Robert E. Stansky Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Thomas Sweeney Vice President of FMR and of a fund advised by FMR.
Beth F. Terrana Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR.
</TABLE>
Item 29. Principal Underwriters
(a)-(c) Not applicable.
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
Company, Inc., 82 Devonshire Street, Boston, MA 02109 or the fund's
custodian Brown Brothers Harriman & Co., 40 Water Street, Boston, MA.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant on behalf of Fidelity 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. 18 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 16th day of April, 1997.
FIDELITY EXCHANGE FUND
/s/Kenneth A. Rathgeber, Treasurer *
Kenneth A. Rathgeber, Treasurer
* Signature affixed by John H. Costello pursuant to a power of attorney
dated December 19, 1996 and filed herewith.<F1>
POWER OF ATTORNEY
I, the undersigned Treasurer and principal financial and accounting
officer of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company or an affiliate acts as investment adviser and for which the
undersigned individual serves as President and Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and appoint
John H. Costello and John E. Ferris each of them singly my true and lawful
attorneys-in-fact, with full power of substitution, and with full power to
each of them to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration Statements on
Form N-1A or any successor thereto, any Registration Statements on Form
N-14, and any supplements or other instruments in connection therewith, and
generally to do all such things in my name and behalf in connection
therewith as said attorneys-in-fact deems necessary or appropriate, to
comply with the provisions of the Securities Act of 1933 and the Investment
Company Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof. This power of attorney is effective for all documents filed on or
after January 1, 1997.
WITNESS my hand on the date set forth below.
/s/Kenneth A. Rathgeber__________ December 19, 1996
Kenneth A. Rathgeber
<F1>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Post-Effective
Amendment No. 18 to the Registration Statement on Form N-1A of Fidelity
Exchange Fund, of our report dated February 7, 1997 on the financial
statements and financial highlights included in the December 31, 1996
Annual Report to Shareholders of Fidelity Exchange Fund.
We further consent to the references to our Firm under the heading
"Auditor" in Part B of this Post-Effective Amendment.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 16, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000320254
<NAME> Fidelity Exchange Fund
<SERIES>
<NUMBER> 11
<NAME> Fidelity Exchange Fund
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-END> dec-31-1996
<INVESTMENTS-AT-COST> 35,781
<INVESTMENTS-AT-VALUE> 257,341
<RECEIVABLES> 571
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 257,913
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,777
<TOTAL-LIABILITIES> 2,777
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,595
<SHARES-COMMON-STOCK> 1,601
<SHARES-COMMON-PRIOR> 1,729
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 19
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 221,560
<NET-ASSETS> 255,136
<DIVIDEND-INCOME> 5,193
<INTEREST-INCOME> 613
<OTHER-INCOME> 0
<EXPENSES-NET> 1,563
<NET-INVESTMENT-INCOME> 4,243
<REALIZED-GAINS-CURRENT> 20,766
<APPREC-INCREASE-CURRENT> 21,987
<NET-CHANGE-FROM-OPS> 46,996
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,267
<DISTRIBUTIONS-OF-GAINS> 1,239
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 139
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> 22,367
<ACCUMULATED-NII-PRIOR> 5
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,332
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,571
<AVERAGE-NET-ASSETS> 246,225
<PER-SHARE-NAV-BEGIN> 134.590
<PER-SHARE-NII> 2.590
<PER-SHARE-GAIN-APPREC> 25.580
<PER-SHARE-DIVIDEND> 2.600
<PER-SHARE-DISTRIBUTIONS> .770
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 159.390
<EXPENSE-RATIO> 64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
