(2_FIDELITY_LOGOS)FIDELITY
EXCHANGE
FUND
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 8 A summary of major shifts in the fund's
investments over the past six months.
INVESTMENTS 9 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS 15 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 19 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Exchange 13.34% 25.38% 172.32% 425.01%
S&P 500 (registered trademark) 17.71% 30.16% 182.41% 448.92%
Growth and Income Funds Average 12.11% 22.86% 139.00% 332.40%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Standard & Poor's 500 Index - a widely recognized, unmanaged
index of common stocks. To measure how the fund's performance stacked
up against its peers, you can compare it to the growth and income
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. The
past six months average represents a peer group of 754 mutual funds.
These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Exchange 25.38% 22.18% 18.04%
S&P 500 30.16% 23.08% 18.56%
Growth and Income Funds Average 22.86% 18.93% 15.61%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Exchange S&P 500
00033 SP001
1988/06/30 10000.00 10000.00
1988/07/31 9900.03 9962.00
1988/08/31 9722.47 9623.29
1988/09/30 10092.51 10033.24
1988/10/31 10537.15 10312.17
1988/11/30 10446.14 10164.70
1988/12/31 10614.60 10342.59
1989/01/31 11239.17 11099.66
1989/02/28 11027.94 10823.28
1989/03/31 11291.64 11075.46
1989/04/30 11899.05 11650.28
1989/05/31 12338.34 12122.12
1989/06/30 12284.12 12053.02
1989/07/31 13406.98 13141.41
1989/08/31 13487.19 13398.98
1989/09/30 13397.36 13344.05
1989/10/31 13187.22 13034.46
1989/11/30 13533.70 13300.37
1989/12/31 13749.76 13619.58
1990/01/31 12844.76 12705.70
1990/02/28 12954.46 12869.61
1990/03/31 13300.69 13210.65
1990/04/30 13033.30 12880.38
1990/05/31 14479.92 14136.22
1990/06/30 14507.71 14040.10
1990/07/31 14410.56 13995.17
1990/08/31 13203.17 12730.00
1990/09/30 12589.07 12110.05
1990/10/31 12490.19 12057.98
1990/11/30 13279.50 12836.92
1990/12/31 13682.43 13195.07
1991/01/31 14132.74 13770.38
1991/02/28 15173.88 14754.96
1991/03/31 15582.76 15112.03
1991/04/30 15530.53 15148.30
1991/05/31 16207.80 15802.71
1991/06/30 15417.37 15078.94
1991/07/31 16204.54 15781.62
1991/08/31 16550.76 16155.65
1991/09/30 16235.52 15885.85
1991/10/31 16547.11 16098.72
1991/11/30 16029.62 15449.94
1991/12/31 17981.00 17217.41
1992/01/31 17588.11 16897.17
1992/02/29 17896.15 17116.83
1992/03/31 17553.06 16783.05
1992/04/30 17881.40 17276.48
1992/05/31 17990.23 17361.13
1992/06/30 17536.62 17102.45
1992/07/31 18355.09 17801.94
1992/08/31 18110.85 17437.00
1992/09/30 18185.43 17642.76
1992/10/31 18349.50 17704.51
1992/11/30 18908.82 18308.23
1992/12/31 18823.34 18533.42
1993/01/31 18676.82 18689.10
1993/02/28 18733.90 18943.27
1993/03/31 19163.95 19342.98
1993/04/30 18789.09 18874.88
1993/05/31 19266.71 19380.72
1993/06/30 19279.22 19436.93
1993/07/31 18921.38 19359.18
1993/08/31 19612.05 20092.89
1993/09/30 19448.52 19938.18
1993/10/31 20031.46 20350.90
1993/11/30 19754.42 20157.56
1993/12/31 20054.46 20401.47
1994/01/31 20378.23 21095.12
1994/02/28 19901.36 20523.44
1994/03/31 19086.54 19628.62
1994/04/30 19408.54 19879.87
1994/05/31 19730.54 20205.90
1994/06/30 19231.42 19710.85
1994/07/31 19838.86 20357.37
1994/08/31 20694.42 21192.02
1994/09/30 20495.92 20672.82
1994/10/31 21035.86 21137.95
1994/11/30 20662.66 20368.11
1994/12/31 20988.44 20670.17
1995/01/31 21750.58 21206.15
1995/02/28 22496.20 22032.55
1995/03/31 22876.23 22682.73
1995/04/30 23609.28 23350.74
1995/05/31 24491.85 24284.07
1995/06/30 25010.74 24848.19
1995/07/31 25841.43 25672.15
1995/08/31 25554.04 25736.59
1995/09/30 26768.60 26822.67
1995/10/31 26886.08 26726.92
1995/11/30 28002.05 27900.23
1995/12/31 28496.57 28437.59
1996/01/31 29538.28 29405.60
1996/02/29 30001.96 29678.19
1996/03/31 30317.44 29963.99
1996/04/30 30679.49 30405.66
1996/05/31 31532.76 31189.82
1996/06/30 31723.30 31308.66
1996/07/31 30096.79 29925.44
1996/08/31 30726.48 30556.57
1996/09/30 32483.19 32276.29
1996/10/31 32841.79 33166.47
1996/11/30 35196.17 35673.52
1996/12/31 34481.43 34966.83
1997/01/31 36501.99 37151.56
1997/02/28 36882.73 37442.83
1997/03/31 35744.82 35904.30
1997/04/30 37691.82 38047.79
1997/05/31 39902.75 40364.14
1997/06/30 41874.17 42172.45
1997/07/31 44477.57 45528.11
1997/08/31 41484.53 42977.63
1997/09/30 43931.20 45331.51
1997/10/31 43119.27 43817.44
1997/11/30 45121.89 45845.75
1997/12/31 46320.11 46632.92
1998/01/31 46725.27 47148.68
1998/02/28 49563.61 50549.04
1998/03/31 51521.54 53137.66
1998/04/30 52296.82 53672.23
1998/05/31 51203.98 52749.60
1998/06/30 52500.89 54892.29
IMATRL PRASUN SHR__CHT 19980630 19980709 103328 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Exchange Fund on June 30, 1988. As the chart
shows, by June 30, 1998, the value of the investment would have grown
to $52,501 - a 425.01% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $54,892 - a 448.92%
increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
While U.S. equity markets did
not perform as well in the second
quarter as they did in the first, the
Standard & Poor's 500 Index -
a measure of the U.S. stock market
- - still produced a return of 17.71%
for the six-month period that ended
June 30, 1998. Recent volatility in
the U.S. equity markets was triggered
in part by renewed concerns over
corporate profits and continued
problems with Asian economies
and stock markets. In mid-June,
the major U.S. indexes along with
Asian markets continued to sell off,
driven by the fear that problems
with Asian currencies and the
Japanese economy may take longer
than expected to be resolved.
Contributing to the decline were
concerns that Asia's crisis will inhibit
the earnings growth of American
companies. In typical fashion,
however, U.S. stocks rebounded
late in the period amid news that
the economy grew stronger than
expected - 5.4% annually - with
inflation at 1.1%, a 34-year low.
Overall, market sentiment during
the past six-month period was
influenced by the same factors that
have supported U.S. stock prices
over the past year - stable growth
in the U.S. economy, low interest
rates and low inflation.
An interview with Tim Heffernan, Portfolio Manager of Fidelity
Exchange Fund
Q. HOW DID THE FUND PERFORM, TIM?
A. For the six months that ended June 30, 1998, the fund had a total
return of 13.34%, trailing the 17.71% return of the Standard & Poor's
500 Index. However, the fund outperformed the 12.11% return for the
growth and income funds average tracked by Lipper Analytical Services.
For the 12 months that ended June 30, 1998, the fund returned 25.38%,
compared to 30.16% for the S&P 500 and 22.86% for the Lipper average.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. We saw a continuation of some key trends that have been in place
for the past few years. The overall market was strong once again, and
investors showed a preference for large-company stocks over those of
mid-sized and smaller companies. This helped the fund outperform the
Lipper average, which tends to have a lower concentration of
large-company stocks than the fund does. Performance also was aided by
the fund's overweighting in the strong health care sector compared to
the S&P 500 index. Within that sector, drug stocks were especially
strong performers and were well represented in the fund's holdings.
However, the fund's performance relative to the index was hurt because
of its underweighting in two of the strongest sectors during the first
half of the year: financial services and technology. Also hampering
performance was the fact that the fund's technology holdings
significantly underperformed those in the S&P 500.
Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE?
A. Schering-Plough, American Home Products, and Pfizer were all drug
stocks that performed well. Pharmaceutical companies were attractive
in virtue of their healthy pipelines of new products, the ability to
bring products to market more rapidly and relaxed regulations that
permitted more aggressive advertising. Medical equipment manufacturer
Becton, Dickinson & Co. also helped the fund, as its stock advanced in
response to the company's strong sales and earnings growth. McDonald's
performed well based on expanding restaurant operations in Europe.
Finally, American Express posted earnings gains, reflecting continued
strong consumer spending and an overall favorable economic environment
for financial services companies. The stock performed well as a
result.
Q. WHAT WERE THE DISAPPOINTMENTS?
A. Energy service company Halliburton and industrial machinery company
Parker-Hannifin, with its large energy services business, were victims
of lower energy prices and the resulting weaker demand for exploration
and drilling services. Increasing competition from the low end of the
personal computer and laser printer market, as well as overall slower
sales for the industry, resulted in lower earnings and earnings
prospects for Hewlett-Packard, one of the fund's largest holdings. Not
having positions in such high-flying technology as Dell Computer or
Microsoft also hurt the fund's performance relataive to the S&P 500.
Q. WHAT'S YOUR OUTLOOK FOR THE REST OF THE YEAR, TIM?
A. The economy continues to show surprisingly strong growth, interest
rates have stabilized at low levels and inflation is virtually
nonexistent. Thus, the overall backdrop for stocks is good. Corporate
earnings must continue to be strong, however, for the market to keep
advancing. The high price-to earnings ratios we are seeing on some of
the popular large-capitalization stocks will make it increasingly
difficult for investors to justify the purchase of those stocks
without stellar earnings growth. The shares of companies that report
disappointing earnings will continue to be punished severely by market
participants. Furthermore, multinational companies that derive a
significant part of their revenues from Asia are feeling the effects
of the slowdown in that region and, I believe, will continue to do so
for at least the next few months.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 5.1 4.5
Schering-Plough Corp. 4.0 3.3
Disney (Walt) Co. 4.0 4.1
Gillette Co. 4.0 3.8
American Home Products Corp. 3.6 2.9
Bristol-Myers Squibb Co. 3.5 3.3
Hewlett-Packard Co. 3.5 4.0
American Express Co. 3.1 2.6
McDonald's Corp. 2.8 2.1
Coca-Cola Co. (The) 2.6 2.2
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
HEALTH 20.7 18.5
NONDURABLES 16.4 17.1
MEDIA & LEISURE 14.1 13.5
ENERGY 9.9 10.8
INDUSTRIAL MACHINERY & EQUIPMENT 7.8 8.2
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1998 * AS OF DECEMBER 31, 1997 **
ROW: 1, COL: 1, VALUE: 3.4
ROW: 1, COL: 2, VALUE: 96.59999999999999
STOCKS 96.0%
SHORT-TERM
INVESTMENTS 4.0%
FOREIGN
INVESTMENTS 2.3%
STOCKS 96.6%
SHORT-TERM
INVESTMENTS 3.4%
FOREIGN
INVESTMENTS 2.0%
ROW: 1, COL: 1, VALUE: 4.0
ROW: 1, COL: 2, VALUE: 96.0
*
**
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 96.6%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 2.1%
AEROSPACE & DEFENSE - 0.7%
United Technologies Corp. 26,672 $ 2,467,160
DEFENSE ELECTRONICS - 1.4%
Raytheon Co.:
Class A 1,913 110,237
Class B 80,000 4,730,000
4,840,237
TOTAL AEROSPACE & DEFENSE 7,307,397
BASIC INDUSTRIES - 1.9%
CHEMICALS & PLASTICS - 1.9%
Air Products & Chemicals, Inc. 95,268 3,810,720
Cabot Corp. 91,700 2,963,056
6,773,776
DURABLES - 2.5%
AUTOS, TIRES, & ACCESSORIES - 1.8%
Dana Corp. 80,670 4,315,845
General Motors Corp. 30,000 2,004,375
6,320,220
CONSUMER DURABLES - 0.7%
Minnesota Mining & Manufacturing Co. 30,000 2,465,625
TOTAL DURABLES 8,785,845
ENERGY - 9.9%
ENERGY SERVICES - 2.8%
Dresser Industries, Inc. 40,000 1,762,500
Halliburton Co. 101,400 4,518,638
Schlumberger Ltd. 53,568 3,659,364
9,940,502
OIL & GAS - 7.1%
Amoco Corp. 80,000 3,330,000
Chevron Corp. 60,000 4,983,750
Exxon Corp. 95,800 6,831,738
Kerr-McGee Corp. 13,480 780,155
Mobil Corp. 72,000 5,517,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Royal Dutch Petroleum Co. 60,000 $ 3,288,750
Union Pacific Resources Group, Inc. 16,168 283,950
25,015,343
TOTAL ENERGY 34,955,845
FINANCE - 6.2%
CREDIT & OTHER FINANCE - 3.1%
American Express Co. 94,788 10,805,832
INSURANCE - 2.7%
General Re Corp. 23,360 5,921,760
Highland Insurance Group, Inc. (a) 370 6,845
Torchmark Corp. 83,232 3,807,864
9,736,469
SECURITIES INDUSTRY - 0.4%
Lehman Brothers Holdings, Inc. 18,357 1,423,815
TOTAL FINANCE 21,966,116
HEALTH - 20.7%
DRUGS & PHARMACEUTICALS - 15.8%
American Home Products Corp. 244,868 12,671,919
Bristol-Myers Squibb Co. 107,923 12,404,400
Lilly (Eli) & Co. 48,608 3,211,166
Merck & Co., Inc. 33,619 4,496,541
Pfizer, Inc. 80,788 8,780,646
Schering-Plough Corp. 154,873 14,190,239
55,754,911
MEDICAL EQUIPMENT & SUPPLIES - 4.9%
Becton, Dickinson & Co. 64,000 4,968,000
Guidant Corp. 61,598 4,392,707
Johnson & Johnson 107,095 7,898,256
17,258,963
TOTAL HEALTH 73,013,874
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 7.8%
ELECTRICAL EQUIPMENT - 5.5%
General Electric Co. 197,068 $ 17,933,181
General Signal Corp. 40,000 1,440,000
19,373,181
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
Parker-Hannifin Corp. 135,907 5,181,454
Stanley Works 28,748 1,194,839
6,376,293
POLLUTION CONTROL - 0.5%
Waste Management, Inc. 50,000 1,750,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 27,499,474
MEDIA & LEISURE - 14.1%
BROADCASTING - 0.2%
Cox Communications, Inc. Class A (a) 14,488 701,763
ENTERTAINMENT - 4.3%
Disney (Walt) Co. 134,440 14,124,603
Viacom, Inc. Class B (non-vtg.) (a) 15,283 890,235
15,014,838
PUBLISHING - 6.8%
Gannett, Inc. 110,428 7,847,290
Harcourt General, Inc. 40,000 2,380,000
Knight Ridder, Inc. 64,400 3,546,025
Mcgraw-Hill Companies, Inc. 69,512 5,669,573
Media General, Inc. Class A 24,382 1,188,623
Times Mirror Co. Class A 55,947 3,517,668
24,149,179
RESTAURANTS - 2.8%
McDonald's Corp. 143,980 9,934,620
TOTAL MEDIA & LEISURE 49,800,400
NONDURABLES - 16.4%
BEVERAGES - 3.7%
Anheuser-Busch Companies, Inc. 81,409 3,841,487
Coca-Cola Co. (The) 107,628 9,202,194
13,043,681
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
FOODS - 3.7%
Agribrands International, Inc. 2,134 $ 64,554
General Mills, Inc. 42,400 2,899,100
Ralston Purina Co. 35,298 4,123,248
Sara Lee Corp. 111,000 6,209,063
13,295,965
HOUSEHOLD PRODUCTS - 7.5%
Colgate-Palmolive Co. 67,475 5,937,800
Gillette Co. 246,014 13,945,919
International Flavors & Fragrances, Inc. 12,047 523,292
Procter & Gamble Co. 66,700 6,073,869
26,480,880
TOBACCO - 1.5%
Philip Morris Companies, Inc. 132,450 5,215,219
TOTAL NONDURABLES 58,035,745
RETAIL & WHOLESALE - 2.1%
APPAREL STORES - 0.3%
Payless ShoeSource, Inc. (a) 13,140 968,254
GENERAL MERCHANDISE STORES - 1.3%
May Department Stores Co. (The) 71,626 4,691,503
GROCERY STORES - 0.5%
Supervalu, Inc. 35,080 1,556,675
TOTAL RETAIL & WHOLESALE 7,216,432
SERVICES - 0.7%
PRINTING - 0.5%
Harland (John H.) Co. 100,000 1,693,750
SERVICES - 0.2%
Jostens, Inc. 33,307 803,531
TOTAL SERVICES 2,497,281
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 5.9%
COMPUTERS & OFFICE EQUIPMENT - 4.1%
Hewlett-Packard Co. 206,578 $ 12,368,858
International Business Machines Corp. 18,194 2,088,899
14,457,757
ELECTRONICS - 1.2%
Motorola, Inc. 81,906 4,305,184
PHOTOGRAPHIC EQUIPMENT - 0.6%
Eastman Kodak Co. 28,942 2,114,575
Imation Corp. (a) 2,145 35,527
2,150,102
TOTAL TECHNOLOGY 20,913,043
TRANSPORTATION - 0.2%
RAILROADS - 0.2%
Union Pacific Corp. 19,090 842,346
UTILITIES - 6.1%
CELLULAR - 0.0%
360 Degrees Communications Co. (a) 2,374 75,968
ELECTRIC UTILITY - 3.1%
CLECO Corp. 45,500 1,353,625
Duke Energy Corp. 50,000 2,962,500
Edison International 80,000 2,365,000
Hawaiian Electric Industries, Inc. 40,000 1,587,500
PacifiCorp 55,400 1,253,425
Potomac Electric Power Co. 49,800 1,248,113
10,770,163
GAS - 0.7%
Williams Companies, Inc. 70,040 2,363,850
TELEPHONE SERVICES - 2.3%
MCI Communications Corp. 80,000 4,650,000
Sprint Corp. 50,000 3,525,000
8,175,000
TOTAL UTILITIES 21,384,981
TOTAL COMMON STOCKS 340,992,555
(Cost $21,820,743)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 3.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements (U.S. Treasury $ 12,043,893 $ 12,042,000
obligations), in a joint trading account at 5.66%
dated 6/30/98 due 7/1/98
TOTAL INVESTMENT IN SECURITIES - 100% $ 353,034,555
(Cost $33,862,743)
</TABLE>
LEGEND
(a) Non-income producing
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $33,862,743. Net unrealized appreciation
aggregated $319,171,812, all of which was related to appreciated
investment securities.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 353,034,555
AGREEMENTS OF $12,042,000) (COST $33,862,743) -
SEE ACCOMPANYING SCHEDULE
CASH 939
DIVIDENDS RECEIVABLE 324,906
TOTAL ASSETS 353,360,400
LIABILITIES
ACCRUED MANAGEMENT FEE $ 157,032
OTHER PAYABLES AND ACCRUED EXPENSES 49,985
TOTAL LIABILITIES 207,017
NET ASSETS $ 353,153,383
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 26,533,365
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (7,768)
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) 7,455,974
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 319,171,812
NET ASSETS, FOR 1,480,749 SHARES OUTSTANDING $ 353,153,383
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE $238.50
PER SHARE ($353,153,383 (DIVIDED BY) 1,480,749 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME $ 2,455,378
DIVIDENDS
INTEREST 338,668
TOTAL INCOME 2,794,046
EXPENSES
MANAGEMENT FEE $ 921,910
TRANSFER AGENT FEES 120,521
NON-INTERESTED TRUSTEES' COMPENSATION 1,332
CUSTODIAN FEES AND EXPENSES 3,393
AUDIT 18,390
LEGAL 22,635
MISCELLANEOUS 1033
TOTAL EXPENSES BEFORE REDUCTIONS 1,089,214
EXPENSE REDUCTIONS (3,370) 1,085,844
NET INVESTMENT INCOME 1,708,202
REALIZED AND UNREALIZED GAIN (LOSS) 7,455,520
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 33,137,268
INVESTMENT SECURITIES
NET GAIN (LOSS) 40,592,788
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 42,300,990
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 1,708,202 $ 3,824,289
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 7,455,520 16,664,642
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 33,137,268 64,474,427
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 42,300,990 84,963,358
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (1,778,550) (3,742,136)
FROM NET INVESTMENT INCOME
SHARE TRANSACTIONS 535,869 1,059,351
REINVESTMENT OF DISTRIBUTIONS
COST OF SHARES REDEEMED (7,995,808) (17,325,285)
TOTAL INCREASE (DECREASE) IN NET ASSETS 33,062,501 64,955,288
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (7,459,939) (16,265,934)
FROM SHARE TRANSACTIONS
NET ASSETS
BEGINNING OF PERIOD 320,090,882 255,135,594
END OF PERIOD (INCLUDING UNDER (OVER) DISTRIBUTION OF $ 353,153,383 $ 320,090,882
NET INVESTMENT INCOME OF $(7,768) AND $62,580,
RESPECTIVELY)
OTHER INFORMATION
SHARES
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 2,288 5,292
REDEEMED (34,998) (92,508)
NET INCREASE (DECREASE) (32,710) (87,216)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 211.50 $ 159.39 $ 134.59 $ 102.72 $ 102.20 $ 98.92
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME 1.14 D 2.46 D 2.59 2.45 2.56 2.26
NET REALIZED AND 27.06 52.10 25.58 33.59 2.12 4.14
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT 28.20 54.56 28.17 36.04 4.68 6.40
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (1.20) (2.45) (2.60) (2.45) (2.42) (2.26)
INCOME
IN EXCESS OF NET - - - - - (.09)
INVESTMENT INCOME
FROM NET REALIZED GAIN - - (.77) (1.72) (1.74) (.77)
TOTAL DISTRIBUTIONS (1.20) (2.45) (3.37) (4.17) (4.16) (3.12)
NET ASSET VALUE, $ 238.50 $ 211.50 $ 159.39 $ 134.59 $ 102.72 $ 102.20
END OF PERIOD
TOTAL RETURN B, C 13.34% 34.33% 21.00% 35.77% 4.66% 6.54%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 353,153 $ 320,091 $ 255,136 $ 232,768 $ 185,599 $ 189,358
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .65% A .63% .64% .63% .58% .57%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .64% A, E .63% .63% E .63% .58% .57%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT 1.01% A 1.31% 1.72% 2.05% 2.50% 2.24%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 0% 0% 0% 0% 0% 0%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Exchange Fund (the fund) is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business
trust and is authorized to issue 10 million shares. The financial
statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income is accrued as
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
earned. Investment income is recorded net of foreign taxes withheld
where recovery of such taxes is uncertain.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for redemptions in kind.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments may include
temporary book and tax basis differences that will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year
end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Sales of securities, other than short-term securities, aggregated
$7,895,456, which represents the current value of securities delivered
in redemption of fund shares. There were no purchases of securities
during the period.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee
at a rate of 1/20 of 1% per month (which is equivalent to an annual
rate of 6/10 of 1%) of the fund's average net assets determined as of
the close of business on each business day throughout the month. In
addition, under
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
the Management Contract, FMR provides portfolio accounting and
bookkeeping services to the fund and determines the net asset value
per share of the fund. The management fee is subject to a reduction to
the extent that the monthly average net assets of all mutual funds
advised by FMR exceed $4 billion in any month. The management fee
payable by the fund on its portion of the excess is reduced by 10%.
For the period, the management fee was reduced by $101,680. For the
period, the management fee was equivalent to an annualized rate of
.55% of average net assets after the fee reduction.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .07% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by
$4 and $3,366, respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
To speak to a Fidelity representative.
0
*
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY
MARKET FUNDS WILL BE ABLE TO
MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND
IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Richard A. Spillane, Jr., Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Congress Street Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Exchange Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Puritan Fund(registered trademark)
Real Estate Investment Portfolio
Utilities Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
