(2_FIDELITY_LOGOS)FIDELITY
EXCHANGE
FUND
SEMIANNUAL REPORT
JUNE 30, 1997
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:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
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, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Exchange 21.44% 32.00% 138.78% 280.15%
S&P 500(registered trademark) 20.61% 34.70% 146.59% 292.69%
Growth and Income Funds Average 15.52% 28.07% 122.51% 232.50%
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 stock
prices. 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 626 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, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Exchange 32.00% 19.01% 14.29%
S&P 500 34.70% 19.78% 14.64%
Growth and Income Funds Average 28.07% 17.25% 12.67%
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
1987/06/30 10000.00 10000.00
1987/07/31 10489.47 10507.00
1987/08/31 10821.44 10898.91
1987/09/30 10569.66 10660.22
1987/10/31 8376.30 8364.01
1987/11/30 7705.31 7674.82
1987/12/31 8279.46 8258.87
1988/01/31 8583.20 8606.57
1988/02/29 9041.55 9007.64
1988/03/31 8752.65 8729.30
1988/04/30 8775.39 8826.20
1988/05/31 8771.38 8902.98
1988/06/30 9078.38 9311.63
1988/07/31 8987.63 9276.25
1988/08/31 8826.43 8960.85
1988/09/30 9162.37 9342.59
1988/10/31 9566.03 9602.31
1988/11/30 9483.40 9465.00
1988/12/31 9636.34 9630.63
1989/01/31 10203.35 10335.60
1989/02/28 10011.59 10078.24
1989/03/31 10250.99 10313.06
1989/04/30 10802.41 10848.31
1989/05/31 11201.22 11287.67
1989/06/30 11151.99 11223.33
1989/07/31 12171.37 12236.79
1989/08/31 12244.18 12476.64
1989/09/30 12162.63 12425.48
1989/10/31 11971.86 12137.21
1989/11/30 12286.41 12384.81
1989/12/31 12482.55 12682.05
1990/01/31 11660.96 11831.08
1990/02/28 11760.55 11983.70
1990/03/31 12074.87 12301.27
1990/04/30 11832.13 11993.74
1990/05/31 13145.43 13163.13
1990/06/30 13170.65 13073.62
1990/07/31 13082.46 13031.78
1990/08/31 11986.35 11853.71
1990/09/30 11428.84 11276.43
1990/10/31 11339.07 11227.94
1990/11/30 12055.64 11953.27
1990/12/31 12421.43 12286.77
1991/01/31 12830.24 12822.47
1991/02/28 13775.42 13739.28
1991/03/31 14146.63 14071.77
1991/04/30 14099.20 14105.54
1991/05/31 14714.06 14714.90
1991/06/30 13996.47 14040.96
1991/07/31 14711.10 14695.26
1991/08/31 15025.41 15043.54
1991/09/30 14739.23 14792.31
1991/10/31 15022.10 14990.53
1991/11/30 14552.30 14386.41
1991/12/31 16323.84 16032.22
1992/01/31 15967.16 15734.02
1992/02/29 16246.81 15938.56
1992/03/31 15935.34 15627.76
1992/04/30 16233.41 16087.22
1992/05/31 16332.21 16166.04
1992/06/30 15920.41 15925.17
1992/07/31 16663.45 16576.51
1992/08/31 16441.72 16236.69
1992/09/30 16509.43 16428.28
1992/10/31 16658.38 16485.78
1992/11/30 17166.15 17047.95
1992/12/31 17088.54 17257.64
1993/01/31 16955.53 17402.60
1993/02/28 17007.35 17639.28
1993/03/31 17397.77 18011.46
1993/04/30 17057.45 17575.59
1993/05/31 17491.05 18046.61
1993/06/30 17502.41 18098.95
1993/07/31 17177.55 18026.55
1993/08/31 17804.57 18709.76
1993/09/30 17656.11 18565.69
1993/10/31 18185.32 18950.00
1993/11/30 17933.81 18769.98
1993/12/31 18206.20 18997.10
1994/01/31 18500.14 19643.00
1994/02/28 18067.22 19110.67
1994/03/31 17327.49 18277.45
1994/04/30 17619.81 18511.40
1994/05/31 17912.14 18814.98
1994/06/30 17459.02 18354.02
1994/07/31 18010.47 18956.03
1994/08/31 18787.19 19733.23
1994/09/30 18606.98 19249.76
1994/10/31 19097.16 19682.88
1994/11/30 18758.36 18966.03
1994/12/31 19054.11 19247.30
1995/01/31 19746.01 19746.38
1995/02/28 20422.91 20515.90
1995/03/31 20767.91 21121.32
1995/04/30 21433.40 21743.34
1995/05/31 22234.64 22612.42
1995/06/30 22705.71 23137.71
1995/07/31 23459.83 23904.96
1995/08/31 23198.94 23964.96
1995/09/30 24301.56 24976.28
1995/10/31 24408.21 24887.12
1995/11/30 25421.33 25979.66
1995/12/31 25870.28 26480.03
1996/01/31 26815.98 27381.41
1996/02/29 27236.93 27635.23
1996/03/31 27523.33 27901.36
1996/04/30 27852.02 28312.63
1996/05/31 28626.64 29042.81
1996/06/30 28799.63 29153.46
1996/07/31 27323.02 27865.46
1996/08/31 27894.67 28453.15
1996/09/30 29489.48 30054.49
1996/10/31 29815.03 30883.39
1996/11/30 31952.43 33217.87
1996/12/31 31303.56 32559.82
1997/01/31 33137.90 34594.16
1997/02/28 33483.55 34865.38
1997/03/31 32450.51 33432.76
1997/04/30 34218.08 35428.69
1997/05/31 36225.24 37585.59
1997/06/30 38014.97 39269.43
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Exchange Fund on June 30, 1987. As the chart shows, by June 30,
1997, the value of the investment would have grown to $38,015 - a 280.15%
increase on the initial investment. For comparison, look at how the S&P 500
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $39,269 - a
292.69% 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
NOTE TO SHAREHOLDERS: Timothy E. Heffernan became Portfolio Manager of
Fidelity Exchange Fund on June 1, 1997.
Q. HOW DID THE FUND PERFORM, TIM?
A. For the six months that ended June 30, 1997, the fund had a total return
of 21.44%, beating the return of 20.61% for the Standard & Poor's 500
Index. The fund also outperformed the growth and income funds average,
tracked by Lipper Analytical Services, which posted a return of 15.52%
during the period. For the 12 months that ended June 30, 1997, the fund had
a total return of 32.00%. The fund slightly underperformed the 34.70%
return of the S&P 500, but beat the growth and income funds average of
28.07% for the 12-month period.
Q. WHAT FACTORS HELPED THE FUND'S PERFORMANCE DURING THE PERIOD?
A. Over the past six months, the market favored large-cap stocks that have
shown steady earnings growth - the type of stock found in this fund.
Despite stumbling a bit in the middle of the period due to some investor
uncertainty and inflation concerns, stocks continued on a swift road upward
in the first half of 1997. At the beginning of January, stock prices soared
after reports of solid corporate earnings for 1996. At the end of February,
Federal Reserve Board Chairman Alan Greenspan said he felt stock prices
were too high. He followed up on this comment by pushing the federal funds
rate - the rate banks charge each other for overnight loans - up 25 basis
points to 5.50% at the end of March. The market skidded a bit through these
months on the rate concerns, but picked up the pace again in late April.
Stocks in the financial, consumer goods and health care industries
performed very well, which helped the fund. Merger mania among banks
attracted investors seeking the efficiencies achieved through
consolidation. Consumer stocks did well as investors sought out
non-cyclical stocks with solid earnings growth. Finally, investors looked
to health care stocks as a defensive play, determining that the demand for
health services was fairly constant and did not rely heavily on the
strength of the economy. The fund was overweighted in both health care and
consumer nondurables compared with the S&P 500 during the period. And
although it was underweighted in finance stocks relative to the index, the
fund's finance investments performed better than the stocks from that
sector included in the S&P 500.
Q. WHICH STOCKS CONTRIBUTED MOST TO THE FUND'S STRONG PERFORMANCE?
A. General Electric, a company that has shown consistently strong earnings
growth, was a great performer during the period. The stock's value
increased considerably during the first half of 1997. Also generating
strong returns were the fund's health care investments. Four of the fund's
top 10 holdings - Schering-Plough, Bristol-Myers Squibb, American Home
Products and Pfizer - were health care stocks. The companies were
beneficiaries of investors who bought their stocks as defensive moves in an
extremely excitable market. Investors were not only seeking steady earnings
growth from these companies, but they also looked to reap the rewards of
efficiency brought by consolidation in the health care industry.
Nondurables, such as Gillette and Coca-Cola, also performed well.
Q. WHAT WERE SOME OF THE OTHER STOCKS THAT HELPED PERFORMANCE?
A. American Express did well during the six months, bolstered by healthy
consumer spending and a relatively stable interest rate environment during
the period. Parker-Hannifin, a maker of electrical equipment and mechanical
devices, was also a strong performer during the period.
Q. IT SEEMS LIKE MOST OF THE STOCKS THAT MAKE UP THE FUND PERFORMED VERY
WELL. WERE ANY AREAS OF THE FUND PARTICULARLY DISAPPOINTING IN THE FIRST
HALF OF THE YEAR?
A. The fund was underweighted in technology stocks relative to the S&P 500,
and the fund's investments in technology didn't perform as well as the
technology stocks included in the index. In particular, the fund held no
shares in some of the best-performing technology stocks in the index,
including Dell Computer, Lucent Technologies and Microsoft. Also detracting
from performance was the fund's holdings in John Harland Company, a
business services and printing firm. The company reported disappointing
earnings and had problems implementing its restructuring plan.
Q. WHAT'S YOUR OUTLOOK AS WE MOVE INTO THE SECOND HALF OF THE YEAR?
A. At the end of June, stocks continued their march upward, as the Dow
Jones Industrial Average approached 8000. With the market doing so well for
so long, investors are confident, but cautious - suspecting that any shock
to the market could turn the bulls into bears. While a variety of economic
factors indicate a path of moderate growth, the major consumer fundamentals
- - job growth and income gains - remain supportive of a stronger economy. If
consumer spending picks up, inflation may again enter the picture leading
to higher interest rates. With businesses running out of ways to reduce
costs, further margin improvement is limited. Higher interest rates could
ultimately lead to disappointing earnings and a downturn in the market.
Since valuations of large-cap stocks are already high, we will need to see
consistent earnings growth to sustain even higher stock prices.
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, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 4.3 3.8
Gillette Co. 4.0 4.1
Hewlett-Packard Co. 3.9 4.2
Disney (Walt) Co. 3.6 3.6
Schering-Plough Corp. 3.6 3.1
American Home Products Corp. 3.2 2.9
Bristol-Myers Squibb Co. 3.1 2.6
Pfizer, Inc. 2.9 2.5
Coca-Cola Co. (The) 2.4 2.2
American Express Co. 2.4 2.1
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Health 19.1 17.0
Nondurables 17.1 17.2
Media & Leisure 12.5 12.9
Energy 10.9 10.6
Industrial Machinery & Equipment 8.2 7.1
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 * AS OF DECEMBER 31, 1996 **
45.
Row: 1, Col: 1, Value: 3.7
Row: 1, Col: 2, Value: 46.3
Row: 1, Col: 3, Value: 50.0
Stocks 94.9%
Short-term
investments 5.1%
FOREIGN
INVESTMENTS 1.0%
Stocks 96.3%
Short-term
investments 3.7%
FOREIGN
INVESTMENTS 2.2%
Row: 1, Col: 1, Value: 5.1
Row: 1, Col: 2, Value: 44.9
Row: 1, Col: 3, Value: 50.0
*
**
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 2.1%
AEROSPACE & DEFENSE - 0.7%
United Technologies Corp. 26,672 $ 2,213,776
DEFENSE ELECTRONICS - 1.4%
Raytheon Co. 80,000 4,080,000
TOTAL AEROSPACE & DEFENSE 6,293,776
BASIC INDUSTRIES - 2.2%
CHEMICALS & PLASTICS - 2.2%
Air Products & Chemicals, Inc. 47,634 3,870,263
Cabot Corp. 91,700 2,601,988
6,472,251
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Dana Corp. 80,670 3,065,460
General Motors Corp. 30,000 1,670,625
4,736,085
CONSUMER DURABLES - 1.0%
Minnesota Mining & Manufacturing Co. 30,000 3,060,000
TOTAL DURABLES 7,796,085
ENERGY - 10.9%
ENERGY SERVICES - 3.0%
Dresser Industries, Inc. 40,000 1,490,000
Halliburton Co. 50,700 4,017,975
Schlumberger Ltd. 26,919 3,364,875
8,872,850
OIL & GAS - 7.9%
Amoco Corp. 40,000 3,477,500
Chevron Corp. 60,000 4,436,250
Exxon Corp. 95,800 5,891,700
Kerr-McGee Corp. 13,480 854,295
Mobil Corp. 72,000 5,031,000
Royal Dutch Petroleum Co. 60,000 3,262,500
Union Pacific Resources Group, Inc. 16,168 402,179
23,355,424
TOTAL ENERGY 32,228,274
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - 5.1%
CREDIT & OTHER FINANCE - 2.4%
American Express Co. 94,788 $ 7,061,706
INSURANCE - 2.4%
General Re Corp. 23,360 4,251,520
Highlands Insurance Group, Inc. (a) 370 7,446
Torchmark Corp. 41,616 2,965,140
7,224,106
SECURITIES INDUSTRY - 0.3%
Lehman Brothers Holdings, Inc. 18,357 743,459
TOTAL FINANCE 15,029,271
HEALTH - 19.1%
DRUGS & PHARMACEUTICALS - 14.8%
American Home Products Corp. 122,434 9,366,201
Bristol-Myers Squibb Co. 114,268 9,255,708
Lilly (Eli) & Co. 24,304 2,656,731
Merck & Co., Inc. 33,619 3,479,567
Pfizer, Inc. 72,080 8,613,560
Schering-Plough Corp. 222,370 10,645,829
44,017,596
MEDICAL EQUIPMENT & SUPPLIES - 4.3%
Becton, Dickinson & Co. 64,000 3,240,000
Guidant Corp. 30,799 2,617,915
Johnson & Johnson 107,095 6,894,241
12,752,156
TOTAL HEALTH 56,769,752
INDUSTRIAL MACHINERY & EQUIPMENT - 8.2%
ELECTRICAL EQUIPMENT - 4.9%
General Electric Co. 197,068 12,883,321
General Signal Corp. 40,000 1,745,000
14,628,321
INDUSTRIAL MACHINERY & EQUIPMENT - 2.7%
Parker-Hannifin Corp. 113,905 6,912,610
Stanley Works 28,748 1,149,920
8,062,530
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.6%
Waste Management, Inc. 50,000 $ 1,606,250
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 24,297,101
MEDIA & LEISURE - 12.5%
BROADCASTING - 0.1%
Cox Communications, Inc. Class A (a) 14,488 347,712
ENTERTAINMENT - 3.8%
Disney (Walt) Co. 134,440 10,788,810
Viacom, Inc. Class B (non-vtg.) (a) 15,283 458,490
11,247,300
PUBLISHING - 6.3%
Gannett Co., Inc. 55,214 5,452,383
Harcourt General, Inc. 40,000 1,905,000
Knight-Ridder, Inc. 64,400 3,159,625
McGraw-Hill, Inc. 69,512 4,088,175
Media General, Inc. Class A 24,382 975,280
Times Mirror Co. Class A 55,947 3,091,072
18,671,535
RESTAURANTS - 2.3%
McDonald's Corp. 143,980 6,956,034
TOTAL MEDIA & LEISURE 37,222,581
NONDURABLES - 17.1%
BEVERAGES - 4.0%
Anheuser-Busch Companies, Inc. 114,134 4,786,495
Coca-Cola Co. (The) 107,628 7,264,890
12,051,385
FOODS - 3.5%
General Mills, Inc. 42,400 2,761,300
Ralston Purina Co. 35,298 2,901,054
Sara Lee Corp. 111,000 4,620,375
10,282,729
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 7.6%
Colgate-Palmolive Co. 83,100 $ 5,422,275
Gillette Co. 125,807 11,920,213
International Flavors & Fragrances, Inc. 12,047 608,374
Procter & Gamble Co. 33,350 4,710,688
22,661,550
TOBACCO - 2.0%
Philip Morris Companies, Inc. 132,450 5,877,469
TOTAL NONDURABLES 50,873,133
RETAIL & WHOLESALE - 1.8%
APPAREL STORES - 0.3%
Payless ShoeSource, Inc. (a) 13,140 718,594
GENERAL MERCHANDISE STORES - 1.1%
May Department Stores Co. (The) 71,626 3,384,329
GROCERY STORES - 0.4%
Supervalu, Inc. 35,080 1,210,260
TOTAL RETAIL & WHOLESALE 5,313,183
SERVICES - 1.1%
PRINTING - 0.8%
Harland (John H.) Co. 100,000 2,281,250
SERVICES - 0.3%
Jostens, Inc. 33,307 878,472
TOTAL SERVICES 3,159,722
TECHNOLOGY - 7.3%
COMPUTERS & OFFICE EQUIPMENT - 4.4%
Hewlett-Packard Co. 206,578 11,568,368
International Business Machines Corp. 18,194 1,640,871
13,209,239
ELECTRONICS - 2.1%
Motorola, Inc. 81,906 6,224,856
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.8%
Eastman Kodak Co. 28,942 $ 2,221,299
Imation Corp. (a) 3,000 79,125
2,300,424
TOTAL TECHNOLOGY 21,734,519
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
Union Pacific Corp. 19,090 1,345,838
UTILITIES - 5.8%
CELLULAR - 0.1%
360 Degrees Communications Co. (a) 16,666 285,405
ELECTRIC UTILITY - 3.3%
Central Louisiana Electric Co., Inc. 45,500 1,279,688
Duke Power Co. 50,000 2,396,875
Edison International 80,000 1,990,000
Hawaiian Electric Industries, Inc. 40,000 1,545,000
PacifiCorp. 55,400 1,218,800
Potomac Electric Power Co. 49,800 1,151,625
9,581,988
GAS - 0.5%
Williams Companies, Inc. 35,020 1,532,125
TELEPHONE SERVICES - 1.9%
MCI Communications Corp. 80,000 3,062,500
Sprint Corp. 50,000 2,631,250
5,693,750
TOTAL UTILITIES 17,093,268
TOTAL COMMON STOCKS
(Cost $22,308,207) 285,628,754
CASH EQUIVALENTS - 3.7%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 $ 11,039,818 $ 11,038,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $33,346,207) $ 296,666,754
LEGEND
1. Non-income producing
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $33,346,207. Net unrealized appreciation aggregated
$263,320,547, of which $263,328,189 related to appreciated investment
securities and $7,642 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 296,666,754
agreements of $11,038,000) (cost $33,346,207) -
See accompanying schedule
Cash 119,738
Receivable for investments sold 579,717
Dividends receivable 241,463
TOTAL ASSETS 297,607,672
LIABILITIES
Payable for fund shares redeemed $ 582,996
Accrued management fee 132,683
Other payables and accrued expenses 44,249
TOTAL LIABILITIES 759,928
NET ASSETS $ 296,847,744
Net Assets consist of:
Paid in capital $ 23,307,102
Distributions in excess of net investment income (70,075)
Accumulated undistributed net realized gain (loss) 10,290,170
on investments
Net unrealized appreciation (depreciation) on 263,320,547
investments
NET ASSETS, for 1,543,131 shares outstanding $ 296,847,744
NET ASSET VALUE, offering price and redemption price $192.37
per share ($296,847,744 (divided by) 1,543,131 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INVESTMENT INCOME $ 2,366,703
Dividends
Interest 304,689
TOTAL INCOME 2,671,392
EXPENSES
Management fee $ 744,545
Transfer agent fees 102,677
Accounting fees and expenses 456
Non-interested trustees' compensation 999
Custodian fees and expenses 4,700
Registration fees 125
Audit 17,157
Legal 356
Miscellaneous 415
Total expenses before reductions 871,430
Expense reductions (3,052) 868,378
NET INVESTMENT INCOME 1,803,014
REALIZED AND UNREALIZED GAIN (LOSS) 10,290,558
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 41,760,430
investment securities
NET GAIN (LOSS) 52,050,988
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 53,854,002
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 1,803,014 $ 4,242,567
Net investment income
Net realized gain (loss) 10,290,558 20,766,828
Change in net unrealized appreciation (depreciation) 41,760,430 21,986,686
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 53,854,002 46,996,081
FROM OPERATIONS
Distributions to shareholders (1,853,905) (4,266,891)
From net investment income
From net realized gain - (1,239,290)
TOTAL DISTRIBUTIONS (1,853,905) (5,506,181)
Share transactions
Reinvestment of distributions 492,326 1,612,084
Cost of shares redeemed (10,780,273) (20,734,887)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (10,287,947) (19,122,803)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 41,712,150 22,367,097
NET ASSETS
Beginning of period 255,135,594 232,768,497
End of period (including distributions in excess of net $ 296,847,744 $ 255,135,594
investment income of $70,075 and $19,184,
respectively)
OTHER INFORMATION
Shares
Issued in reinvestment of distributions 2,514 10,325
Redeemed (60,058) (139,053)
Net increase (decrease) (57,544) (128,728)
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 1993 E 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 159.39 $ 134.59 $ 102.72 $ 102.20 $ 98.92 $ 97.48
beginning of period
Income from
Investment
Operations
Net investment 1.14 D 2.59 2.45 2.56 2.26 2.19
income
Net realized and 33.04 25.58 33.59 2.12 4.14 2.34
unrealized gain
(loss)
Total from 34.18 28.17 36.04 4.68 6.40 4.53
investment
operations
Less Distributions (1.20) (2.60) (2.45) (2.42) (2.26) (2.23)
From net investment
income
In excess of net - - - - (.09) -
investment income
From net realized - (.77) (1.72) (1.74) (.77) (.86)
gain
Total distributions (1.20) (3.37) (4.17) (4.16) (3.12) (3.09)
Net asset value, end $ 192.37 $ 159.39 $ 134.59 $ 102.72 $ 102.20 $ 98.92
of period
TOTAL RETURN B, C 21.44% 21.00% 35.77% 4.66% 6.54% 4.68%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 296,848 $ 255,136 $ 232,768 $ 185,599 $ 189,358 $ 186,886
period (000 omitted)
Ratio of expenses to .64% .64% .63% .58% .57% .58%
average net assets A
Ratio of expenses to .64% .63% .63% .58% .57% .58%
average net assets A F
after expense
reductions
Ratio of net investment 1.33% 1.72% 2.05% 2.50% 2.24% 2.23%
income to average A
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 EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F 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 June 30, 1997 (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
permit 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.
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 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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
$10,731,283, 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 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 $81,953. For the period, the management fee was equivalent to an
annualized 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 annualized rate of
.08% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into an arrangement with its 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
transfer agent fees were reduced by $3,052 under this arrangement.
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 Xpressprovides 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.
SM
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
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.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
SM
(PHONE_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 193
Boston, MA 02210-0193
(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 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
William J. Hayes, Vice President
Richard A. Spillane, Jr., Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Robert H. Morrison, Manager,
Security Transactions
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
Spartan Market Index Fund
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 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
