(2_FIDELITY_LOGOS)
FIDELITY(REGISTERED TRADEMARK)
EXCHANGE
FUND
ANNUAL REPORT
DECEMBER 31, 1999
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.
REPORT OF INDEPENDENT 22 The Auditors' opinion.
ACCOUNTANTS
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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 1-800-544-6666 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
The NASDAQ, S&P 500(Registered trademark) and Dow Jones Industrial
Average all closed 1999 at record highs. Investors should note,
however, that much of the year's returns were driven by a single
sector: technology. Most other stocks were flat or down in 1999.
Likewise, bond investors had little cause to celebrate at year's end.
Steadily rising interest rates left the benchmark 30-year Treasury at
its highest yield level in two years.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. 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 DECEMBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY EXCHANGE 10.41% 189.33% 341.65%
S&P 500 21.04% 251.12% 432.89%
Growth & Income Funds Average 13.76% 167.25% 293.90%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case 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 SM Index - a market capitalization-weighted
index of common stocks. To measure how the fund's performance stacked
up against its peers, you can compare it to the growth & income funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past one year average represents
a peer group of 913 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges. Lipper has created new comparison categories that group funds
according to portfolio characteristics and capitalization, as well as
by capitalization only. These averages are listed on page 5 of this
report.*
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY EXCHANGE 10.41% 23.67% 16.01%
S&P 500 21.04% 28.56% 18.21%
Growth & Income Funds Average 13.76% 21.34% 14.42%
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 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
1989/12/31 10000.00 10000.00
1990/01/31 9341.81 9329.00
1990/02/28 9421.59 9449.34
1990/03/31 9673.40 9699.75
1990/04/30 9478.93 9457.26
1990/05/31 10531.04 10379.34
1990/06/30 10551.25 10308.76
1990/07/31 10480.59 10275.77
1990/08/31 9602.48 9346.84
1990/09/30 9155.85 8891.65
1990/10/31 9083.94 8853.42
1990/11/30 9657.99 9425.35
1990/12/31 9951.03 9688.32
1991/01/31 10278.54 10110.73
1991/02/28 11035.74 10833.64
1991/03/31 11333.12 11095.82
1991/04/30 11295.13 11122.45
1991/05/31 11787.70 11602.94
1991/06/30 11212.83 11071.52
1991/07/31 11785.33 11587.46
1991/08/31 12037.13 11862.08
1991/09/30 11807.86 11663.98
1991/10/31 12034.48 11820.28
1991/11/30 11658.11 11343.92
1991/12/31 13077.33 12641.67
1992/01/31 12791.58 12406.53
1992/02/29 13015.62 12567.82
1992/03/31 12766.09 12322.74
1992/04/30 13004.88 12685.03
1992/05/31 13084.03 12747.19
1992/06/30 12754.13 12557.26
1992/07/31 13349.39 13070.85
1992/08/31 13171.76 12802.90
1992/09/30 13226.00 12953.97
1992/10/31 13345.33 12999.31
1992/11/30 13752.11 13442.58
1992/12/31 13689.94 13607.93
1993/01/31 13583.38 13722.24
1993/02/28 13624.90 13908.86
1993/03/31 13937.67 14202.33
1993/04/30 13665.03 13858.64
1993/05/31 14012.40 14230.05
1993/06/30 14021.50 14271.32
1993/07/31 13761.25 14214.23
1993/08/31 14263.56 14752.95
1993/09/30 14144.63 14639.35
1993/10/31 14568.59 14942.39
1993/11/30 14367.10 14800.44
1993/12/31 14585.32 14979.52
1994/01/31 14820.80 15488.82
1994/02/28 14473.98 15069.08
1994/03/31 13881.37 14412.07
1994/04/30 14115.55 14596.54
1994/05/31 14349.74 14835.92
1994/06/30 13986.74 14472.44
1994/07/31 14428.52 14947.14
1994/08/31 15050.76 15559.97
1994/09/30 14906.39 15178.75
1994/10/31 15299.08 15520.27
1994/11/30 15027.66 14955.03
1994/12/31 15264.59 15176.81
1995/01/31 15818.89 15570.34
1995/02/28 16361.17 16177.12
1995/03/31 16637.55 16654.51
1995/04/30 17170.69 17144.98
1995/05/31 17812.57 17830.27
1995/06/30 18189.95 18244.46
1995/07/31 18794.10 18849.45
1995/08/31 18585.09 18896.76
1995/09/30 19468.42 19694.21
1995/10/31 19553.86 19623.90
1995/11/30 20365.49 20485.39
1995/12/31 20725.15 20879.93
1996/01/31 21482.77 21590.69
1996/02/29 21820.00 21790.83
1996/03/31 22049.44 22000.68
1996/04/30 22312.76 22324.97
1996/05/31 22933.33 22900.73
1996/06/30 23071.90 22987.98
1996/07/31 21888.97 21972.37
1996/08/31 22346.93 22435.77
1996/09/30 23624.56 23698.46
1996/10/31 23885.37 24352.06
1996/11/30 25597.67 26192.83
1996/12/31 25077.85 25673.95
1997/01/31 26547.37 27278.06
1997/02/28 26824.28 27491.92
1997/03/31 25996.69 26362.28
1997/04/30 27412.72 27936.10
1997/05/31 29020.70 29636.85
1997/06/30 30454.49 30964.59
1997/07/31 32347.90 33428.44
1997/08/31 30171.11 31555.78
1997/09/30 31950.54 33284.09
1997/10/31 31360.03 32172.40
1997/11/30 32816.50 33661.66
1997/12/31 33687.95 34239.63
1998/01/31 33982.62 34618.32
1998/02/28 36046.90 37114.99
1998/03/31 37470.88 39015.65
1998/04/30 38034.73 39408.15
1998/05/31 37239.92 38730.72
1998/06/30 38183.14 40303.96
1998/07/31 37204.95 39874.73
1998/08/31 32498.10 34109.64
1998/09/30 34110.28 36294.70
1998/10/31 36900.77 39246.91
1998/11/30 38492.13 41625.67
1998/12/31 40001.85 44024.14
1999/01/31 40425.00 45865.23
1999/02/28 40132.17 44439.74
1999/03/31 41511.05 46217.77
1999/04/30 42794.99 48007.79
1999/05/31 42455.50 46874.32
1999/06/30 43347.73 49475.85
1999/07/31 42319.72 47931.21
1999/08/31 42678.55 47693.95
1999/09/30 40456.05 46386.66
1999/10/31 42665.62 49322.01
1999/11/30 43105.28 50324.73
1999/12/31 44164.89 53288.85
IMATRL PRASUN SHR__CHT 19991231 20000112 140856 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Exchange Fund on December 31, 1989. As the chart
shows, by December 31, 1999, the value of the investment would have
grown to $44,165 - a 341.65% 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 would have grown to $53,289 - a 432.89% 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)
* THE LIPPER LARGE-CAP VALUE FUNDS AVERAGE REFLECTS THE PERFORMANCE
(EXCLUDING SALES CHARGES) OF MUTUAL FUNDS WITH SIMILAR PORTFOLIO
CHARACTERISTICS AND CAPITALIZATION. THE LIPPER LARGE-CAP SUPERGROUP
AVERAGE REFLECTS THE PERFORMANCE (EXCLUDING SALES CHARGES) OF MUTUAL
FUNDS WITH SIMILAR CAPITALIZATION. AS OF DECEMBER 31, 1999, THE ONE
YEAR, FIVE YEAR AND 10 YEAR CUMULATIVE AND AVERAGE ANNUAL TOTAL
RETURNS FOR THE LIPPER LARGE-CAP VALUE FUNDS AVERAGE WERE 11.23%,
176.57%, 306.70%, AND 11.23%, 22.35%, 14.91%, RESPECTIVELY; AND THE
ONE YEAR, FIVE YEAR AND 10 YEAR CUMULATIVE AND AVERAGE ANNUAL TOTAL
RETURNS FOR THE LIPPER LARGE-CAP SUPERGROUP AVERAGE WERE 24.93%,
227.59%, 397.83%, AND 24.93%, 26.34%, 17.07%, RESPECTIVELY.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Despite the fifth consecutive year
of returns exceeding 20% for the
Standard & Poor's 500 Index, this
performance was not necessarily an
entirely accurate representation of
the overall health of the U.S. equity
markets. For example, during the
12-month period ending December
31, 1999, the S&P 500 - a
market-capitalization-weighted
index of 500 widely held U.S. stocks
- - returned 21.04%. Interestingly,
however, the top 50 stocks in the
S&P 500 - the so-called "Nifty 50"
- - accounted for 115% of its total
return. Meanwhile, the remaining
450 stocks had a cumulative return
of -3.13%. Overall, more stocks fell
than rose in 1999. Additionally, just
one sector - technology - was
responsible for approximately 70%
of the S&P's return. This incredibly
narrow market breadth was further
illustrated by the technology-laden
NASDAQ Index. Its 12-month return
of 86.12% was the all-time highest
annual return for any major U.S. stock
index. The Dow Jones Industrial
Average - an index of 30 blue-chip
stocks - posted a 27.13% return
during the period. Also dominating
headlines in 1999 was the Federal
Reserve Board's persistent inflation
worries, and its attempts to keep the
same in check by increasing key
short-term interest rates by 0.25
percentage points on three occasions.
(Photograph of Tim Heffernan)
An interview with Tim Heffernan, Portfolio Manager of Fidelity
Exchange Fund
Q. HOW DID THE FUND PERFORM, TIM?
A. For the 12 months that ended December 31, 1999, the fund had a
total return of 10.41%. That trailed the 21.04% return posted by the
Standard & Poor's 500 Index for the same time frame. The growth and
income funds average tracked by Lipper Inc. returned 13.76% during the
same 12-month period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK DURING THE 12-MONTH
PERIOD?
A. Much of why the fund lagged the S&P 500 - and to a degree, its
Lipper peer group - is attributable to its underexposure to the
high-flying technology sector. The fund lost ground by not holding the
stocks that led the tech rush and powered the `new economy,' such as
Cisco, Oracle, Qualcomm, Nortel Networks, Sun Microsystems, America
Online and EMC. Having an underweighted position in Microsoft also
hurt relative performance. Being overexposed to an otherwise weak
health care sector also hurt, most notably in poorly performing drug
stocks such as Bristol-Myers Squibb and Pfizer. Selected holdings in
nondurables, namely Philip Morris, as well as media and leisure
player, Disney, also hampered returns.
Q. WHAT FACTORS HELPED FUND PERFORMANCE?
A. The fund benefited from its healthy underweighting of the
predominantly weak finance sector, which was plagued by markedly
higher interest rates during the period. Having no exposure to
rate-sensitive S&P 500 benchmark issues such as Bank of America, First
Union and Banc One was one of the keys to our success here. Even
though the fund was unable to post a perfect score with respect to its
performance in a narrowly led market, it did get partial credit for
holding some of the stronger performers within technology and
telecommunications. Hewlett-Packard (HP), Motorola and Sprint were
some of the big winners that readily come to mind. Also, various plays
in the industrial machinery and equipment sector, such as General
Electric (GE) and Parker-Hannifin, worked out quite well for the fund.
Q. WHAT STOCKS WERE KEY CONTRIBUTORS TO THE FUND?
A. GE, the fund's top holding, continued to exceed earnings
expectations due to the strength of its underlying businesses. HP
soared on rising demand for home PCs and related peripherals, the
appointment of a new CEO and a successful restructuring effort that
involved the spin-off of Agilent Technologies - a testing and
measurement devices concern. American Express was buoyed by its
vibrant credit card and asset management businesses, along with its
successful Internet strategy and introduction of the `blue card,'
which is expected to lead to renewed card growth. Motorola benefited
from strong growth in its cellular handset business and its expansion
into the broadband cable market.
Q. WHICH STOCKS DETRACTED FROM PERFORMANCE?
A. It was a difficult period overall for drug stocks, as they
confronted growing concerns of increased government regulation in the
face of an election year, slowing product pipelines and impending
patent expirations. American Home Products and Schering-Plough
recoiled in response to these numerous challenges. Medical equipment
and supply manufacturer Becton, Dickinson and Co. felt the pinch of
heavy investment spending related to a number of acquisitions, which
slowed earnings growth. Gillette languished from weakness in its
non-core businesses and poor performance in international markets.
Q. WHAT'S YOUR OUTLOOK?
A. I'm generally positive. However, rising interest rates and concerns
about inflation usually pose dangers for equities, and the current
cycle doesn't seem to be an exception. While investor enthusiasm and
positive business fundamentals have been powerful forces driving the
market higher, the short-term outlook remains cloudy until the Federal
Reserve Board believes the pace of economic growth has cooled. Longer
term, however, if the market can effectively overcome concerns about
inflation and interest rates, I believe it can maintain its advances.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF DECEMBER
31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
General Electric Co. 8.6 5.9
Hewlett-Packard Co. 6.6 5.4
American Express Co. 4.4 3.2
Exxon Mobil Corp. 3.8 3.7
Motorola, Inc. 3.4 2.1
Walt Disney Co. 3.3 3.3
McDonald's Corp. 3.3 3.2
Bristol-Myers Squibb Co. 3.3 3.6
Johnson & Johnson 2.8 2.8
Gannet Co., Inc. 2.5 2.1
42.0 35.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
HEALTH 16.8 19.4
MEDIA & LEISURE 15.2 13.8
TECHNOLOGY 12.7 9.2
NONDURABLES 12.0 13.3
INDUSTRIAL MACHINERY & 11.0 8.3
EQUIPMENT
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF DECEMBER 31, 1999 * AS OF JUNE 30, 1999 **
Stocks 97.6% Stocks 96.6%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.4% Net Other Assets 3.4%
* FOREIGN INVESTMENTS 2.9% ** FOREIGN INVESTMENTS 3.0%
</TABLE>
Row: 1, Col: 1, Value: 97.59999999999999
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.4
Row: 1, Col: 1, Value: 96.59999999999999
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 3.4
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS IS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 97.6%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.6%
AEROSPACE & DEFENSE - 1.0%
United Technologies Corp. 53,344 $ 3,467,360
DEFENSE ELECTRONICS - 0.6%
Raytheon Co.:
Class A 1,913 47,466
Class B 80,000 2,125,000
2,172,466
TOTAL AEROSPACE & DEFENSE 5,639,826
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 1.2%
Air Products & Chemicals, 95,268 3,197,432
Inc.
Cabot Corp. 53,400 1,088,025
4,285,457
DURABLES - 2.8%
AUTOS, TIRES, & ACCESSORIES -
2.0%
Dana Corp. 80,670 2,415,058
Delphi Automotive Systems 18,280 287,910
Corp.
General Motors Corp. 26,155 1,901,142
SPX Corp. (a) 27,908 2,255,315
6,859,425
CONSUMER DURABLES - 0.8%
Minnesota Mining & 30,000 2,936,250
Manufacturing Co.
TOTAL DURABLES 9,795,675
ENERGY - 10.0%
ENERGY SERVICES - 2.5%
Halliburton Co. 132,094 5,316,784
Schlumberger Ltd. 53,568 3,013,200
Transocean Sedco Forex, Inc. 10,370 349,339
8,679,323
OIL & GAS - 7.5%
BP Amoco PLC sponsored ADR 55,996 3,321,263
Chevron Corp. 59,410 5,146,391
Exxon Mobil Corp. 168,730 13,593,311
Kerr-McGee Corp. 13,480 835,760
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Royal Dutch Petroleum Co. (NY 60,000 $ 3,626,250
Registry Gilder 1.25)
Union Pacific Resources 13,243 168,848
Group, Inc.
26,691,823
TOTAL ENERGY 35,371,146
FINANCE - 7.0%
CREDIT & OTHER FINANCE - 4.4%
American Express Co. 94,788 15,758,505
INSURANCE - 2.0%
Berkshire Hathaway, Inc. 2,452 4,487,160
Class B (a)
Highlands Insurance Group, 370 3,515
Inc. (a)
Torchmark Corp. 83,232 2,418,930
6,909,605
SECURITIES INDUSTRY - 0.6%
Lehman Brothers Holdings, 18,357 1,554,608
Inc.
Waddell & Reed Financial, Inc.:
Class A 4,735 128,437
Class B 20,383 512,123
2,195,168
TOTAL FINANCE 24,863,278
HEALTH - 16.8%
DRUGS & PHARMACEUTICALS - 11.5%
American Home Products Corp. 156,668 6,178,594
Bristol-Myers Squibb Co. 180,666 11,596,499
Eli Lilly & Co. 48,608 3,232,432
Merck & Co., Inc. 67,238 4,509,148
Pfizer, Inc. 234,754 7,614,833
Schering-Plough Corp. 177,593 7,492,205
40,623,711
MEDICAL EQUIPMENT & SUPPLIES
- - 5.3%
Becton, Dickinson & Co. 128,000 3,424,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - CONTINUED
Guidant Corp. 114,574 $ 5,384,978
Johnson & Johnson 107,095 9,973,222
18,782,200
TOTAL HEALTH 59,405,911
INDUSTRIAL MACHINERY &
EQUIPMENT - 11.0%
ELECTRICAL EQUIPMENT - 8.6%
General Electric Co. 197,068 30,496,270
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.2%
Parker-Hannifin Corp. 135,907 6,973,728
The Stanley Works 28,748 866,034
7,839,762
POLLUTION CONTROL - 0.2%
Waste Management, Inc. 36,250 623,047
TOTAL INDUSTRIAL MACHINERY & 38,959,079
EQUIPMENT
MEDIA & LEISURE - 15.2%
BROADCASTING - 0.4%
Cox Communications, Inc. 28,976 1,492,264
Class A (a)
ENTERTAINMENT - 3.8%
Viacom, Inc. Class B 30,566 1,847,333
(non-vtg.) (a)
Walt Disney Co. 403,320 11,797,110
13,644,443
PUBLISHING - 7.7%
Gannet Co., Inc. 110,428 9,006,784
Harcourt General, Inc. 40,000 1,610,000
Knight-Ridder, Inc. 64,400 3,831,800
McGraw-Hill Companies, Inc. 139,024 8,567,354
Media General, Inc. Class A 7,482 389,064
Times Mirror Co. Class A 55,947 3,748,449
27,153,451
RESTAURANTS - 3.3%
McDonald's Corp. 287,960 11,608,388
TOTAL MEDIA & LEISURE 53,898,546
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - 12.0%
BEVERAGES - 3.1%
Anheuser-Busch Companies, 81,409 $ 5,769,863
Inc.
The Coca-Cola Co. 90,888 5,294,226
11,064,089
FOODS - 1.9%
Agribrands International, 2,134 98,164
Inc. (a)
General Mills, Inc. 66,558 2,379,449
Sara Lee Corp. 192,510 4,247,252
6,724,865
HOUSEHOLD PRODUCTS - 6.1%
Colgate-Palmolive Co. 120,345 7,822,425
Gillette Co. 158,614 6,532,914
Procter & Gamble Co. 66,700 7,307,819
21,663,158
TOBACCO - 0.9%
Philip Morris Companies, Inc. 132,450 3,071,184
TOTAL NONDURABLES 42,523,296
RETAIL & WHOLESALE - 1.6%
APPAREL STORES - 0.2%
Payless ShoeSource, Inc. (a) 13,140 617,580
GENERAL MERCHANDISE STORES -
1.0%
Neiman Marcus Group, Inc. 12,052 324,651
Class B (a)
The May Department Stores Co. 107,439 3,464,908
3,789,559
GROCERY STORES - 0.4%
SUPERVALU, Inc. 70,160 1,403,200
TOTAL RETAIL & WHOLESALE 5,810,339
TECHNOLOGY - 12.7%
COMPUTER SERVICES & SOFTWARE
- - 1.6%
Microsoft Corp. (a) 49,000 5,720,750
COMPUTERS & OFFICE EQUIPMENT
- - 7.7%
Hewlett-Packard Co. 202,563 23,079,522
International Business 36,388 3,929,904
Machines Corp.
27,009,426
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - 3.4%
Motorola, Inc. 81,906 $ 12,060,659
TOTAL TECHNOLOGY 44,790,835
TRANSPORTATION - 0.2%
RAILROADS - 0.2%
Union Pacific Corp. 19,090 832,801
UTILITIES - 5.5%
CELLULAR - 0.8%
ALLTEL Corp. 1,756 145,199
Sprint Corp. - PCS Group 25,000 2,562,500
Series 1 (a)
2,707,699
GAS - 0.6%
Williams Companies, Inc. 70,040 2,140,598
TELEPHONE SERVICES - 4.1%
MCI WorldCom, Inc. (a) 149,268 7,920,533
Sprint Corp. - FON Group 100,000 6,731,250
14,651,783
TOTAL UTILITIES 19,500,080
TOTAL COMMON STOCKS 345,676,269
(Cost $21,866,264)
CASH EQUIVALENTS - 2.4%
MATURITY AMOUNT
Investments in repurchase $ 8,463,383 8,461,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.38%,
dated 12/31/99 due 1/3/00
TOTAL INVESTMENT PORTFOLIO - 354,137,269
100.0%
(Cost $30,327,264)
NET OTHER ASSETS - 0.0% 112,189
NET ASSETS - 100% $ 354,249,458
</TABLE>
LEGEND
(a) Non-income producing
INCOME TAX INFORMATION
At December 31, 1999, the aggregate
cost of investment securities for income tax purposes was $30,327,264.
Net unrealized appreciation aggregated $323,810,005, all of which was
related to appreciated investment securities.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $20,000 all of which will expire on December 31, 2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 354,137,269
value (including repurchase
agreements of $8,461,000)
(cost $30,327,264) - See
accompanying schedule
Cash 323
Receivable for investments 544,274
sold
Dividends receivable 323,093
TOTAL ASSETS 355,004,959
LIABILITIES
Payable for fund shares $ 550,783
redeemed
Accrued management fee 158,389
Other payables and accrued 46,329
expenses
TOTAL LIABILITIES 755,501
NET ASSETS $ 354,249,458
Net Assets consist of:
Paid in capital $ 30,437,331
Undistributed net investment 22,264
income
Accumulated undistributed net (20,142)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 323,810,005
(depreciation) on investments
NET ASSETS, for 1,301,640 $ 354,249,458
shares outstanding
NET ASSET VALUE, offering $272.16
price and redemption price
per share ($354,249,458
(divided by) 1,301,640
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 4,708,309
Dividends
Interest 590,140
TOTAL INCOME 5,298,449
EXPENSES
Management fee $ 1,956,717
Transfer agent fees 247,906
Non-interested trustees' 1,464
compensation
Custodian fees and expenses 8,477
Audit 31,456
Legal 1,868
Miscellaneous 1,917
Total expenses before 2,249,805
reductions
Expense reductions (6,358) 2,243,447
NET INVESTMENT INCOME 3,055,002
REALIZED AND UNREALIZED GAIN 33,215,397
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (655,818)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 32,559,579
NET INCREASE (DECREASE) IN $ 35,614,581
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 3,055,002 $ 3,527,467
income
Net realized gain (loss) 33,215,397 16,532,572
Change in net unrealized (655,818) 38,431,279
appreciation (depreciation)
NET INCREASE (DECREASE) IN 35,614,581 58,491,318
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (3,058,436) (3,564,824)
from net investment income
Share transaction
Reinvestment of distributions 891,613 1,076,729
Cost of shares redeemed (37,886,876) (17,405,529)
NET INCREASE (DECREASE) IN (36,995,263) (16,328,800)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (4,439,118) 38,597,694
IN NET ASSETS
NET ASSETS
Beginning of period 358,688,576 320,090,882
End of period (including $ 354,249,458 $ 358,688,576
undistributed net investment
income of $22,264 and
$25,698, respectively)
OTHER INFORMATION
Shares
Issued in reinvestment of 3,392 4,463
distributions
Redeemed (144,471) (75,203)
Net increase (decrease) (141,079) (70,740)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 248.62 $ 211.50 $ 159.39 $ 134.59 $ 102.72
of period
Income from Investment
Operations
Net investment income 2.21 B 2.39 B 2.46 B 2.59 2.45
Net realized and unrealized 23.58 37.17 52.10 25.58 33.59
gain (loss)
Total from investment 25.79 39.56 54.56 28.17 36.04
operations
Less Distributions
From net investment income (2.25) (2.44) (2.45) (2.60) (2.45)
From net realized gain - - - (.77) (1.72)
Total distributions (2.25) (2.44) (2.45) (3.37) (4.17)
Net asset value, end of period $ 272.16 $ 248.62 $ 211.50 $ 159.39 $ 134.59
TOTAL RETURN A 10.41% 18.74% 34.33% 21.00% 35.77%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 354,249 $ 358,689 $ 320,091 $ 255,136 $ 232,768
(000 omitted)
Ratio of expenses to average .62% .62% .63% .64% .63%
net assets
Ratio of expenses to average .62% .62% .63% .63% C .63%
net assets after expense
reductions
Ratio of net investment .84% 1.04% 1.31% 1.72% 2.05%
income to average net assets
Portfolio turnover rate 1% 0% 0% 0% 0%
</TABLE>
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Exchange Fund (the fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company organized as a Massachusetts business trust and is authorized
to issue 10 million shares. Shares of the fund are not currently
available for purchase. 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. Foreign securities are valued based
on quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. 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
and settlement date 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES - CONTINUED
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 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 and capital loss carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which 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.
Purchases of securities, other than short-term securities aggregated
$4,760,141. Sales of securities other than short-term
3. PURCHASES AND SALES OF INVESTMENTS - CONTINUED
securities aggregated $37,702,746, of which $37,686,093 represents the
current value of securities delivered in redemption of fund shares.
The realized gain of $33,213,471 on securities delivered in redemption
of fund shares is not taxable to the fund.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee
at a rate of 1/20 of 1% per month (which is equivalent to an annual
rate of 6/10 of 1%) of the fund's average net assets determined as of
the close of business on each business day throughout the month. In
addition, under the Management Contract, FMR provides portfolio
accounting and bookkeeping services to the fund and determines the net
asset value per share of the fund. The management fee is subject to a
reduction to the extent that the monthly average net assets of all
mutual funds advised by FMR exceed $4 billion in any month. The
management fee payable by the fund on its portion of the excess is
reduced by 10%. For the period, the management fee was equivalent to
an annual rate of .54% of average net assets.
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 annual 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
$26 and $6,332, respectively, under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and the Shareholders of Fidelity Exchange Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Exchange Fund at December 31, 1999, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fidelity Exchange Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 4, 2000
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 Automated Service Telephone 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)
FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST SM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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 EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(computer_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
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 1-800-544-0240 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.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, 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
Abigail P. Johnson
Ned C. Lautenbach
* 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
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THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
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)
Fidelity Automated Service
Telephone (FAST SM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
