FIDELITY U.S. BOND INDEX PORTFOLIO 82 DEVONSHIRE STREET
A Portfolio of Fidelity Institutional Trust BOSTON, MASSACHUSETTS 02109
PROSPECTUS
Fidelity U.S. Bond Index Portfolio (the Portfolio) offers investors a
convenient and economical way to invest in an open-end, diversified,
management investment company. Fidelity U.S. Bond Index Portfolio seeks to
provide investment results that correspond to the aggregate price and
interest performance of the debt securities in the Lehman Brothers
Aggregate Bond Index (the Aggregate Bond Index or the Index).
This Prospectus is designed to provide you with information that an
investor should know before investing and to help you decide if the
Portfolio's goals match your own. Please read and retain this document for
future reference. The Annual Report to Shareholders is incorporated herein
beginning on page 19.
A Statement of Additional Information (dated April 2 9 , 1994) for the
Portfolio has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference. This free Statement and additional
copies of the Prospectus and Annual Report are available upon request from
Fidelity Distributors Corporation (Distributors), 82 Devonshire Street,
Boston, MA 02109.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL .
For information or assistance in opening a new account:
INDIVIDUAL ACCOUNTS (Participant)
If you are investing through a retirement plan sponsor or other
institution, please refer to your plan materials or contact your plan
sponsor directly.
RETIREMENT PLAN LEVEL ACCOUNTS (Trustees, Plan Sponsors)
Corporate Clients 800-962-1375
"Not for Profit" Clients 800-343-0860
FINANCIAL AND OTHER INSTITUTIONS
Nationwide 800-843-3001
TABLE OF CONTENTS
Summary of Portfolio Expenses
Financial Highlights
Investment Objective
Investment Policies , Risks, and Limitations
How to Invest
How to Exchange
How to Redeem
Distributions and Taxes
Portfolio Transactions
Performance
Management Contract, Distribution and Service Plan
Appendix
Performance Update 19
Portfolio Manager Interview 21
Financial Statements 23
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF PORTFOLIO EXPENSES
The expense summary format below was developed for use by all mutual funds
to help you make your investment decisions. Of course, you should consider
this expense information along with other important information, including
the Portfolio's investment objective and its past performance.
A. ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets):
Management Fees .00%*
Other Expenses .3 2 %
TOTAL PORTFOLIO OPERATING EXPENSES .3 2 %
* Net of reimbursement.
B. EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) a
5% annual return and (2) full redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$ 3 $ 10 $ 18 $ 41
EXPLANATION OF TABLE
A. ANNUAL PORTFOLIO OPERATING EXPENSES are based on the Portfolio's
historical expenses after reimbursement. Management Fees are paid by the
Portfolio to Fidelity Management & Research Company (FMR) for managing
its investments and business affairs. The Portfolio incurs other expenses
for maintaining shareholder records, furnishing shareholder statements and
reports, and for other services. Subject to revision upon 90 days'
notice to shareholders, FMR has voluntarily agreed to temporarily limit
the total operating expenses of the Portfolio to .32% of its average net
assets. If this agreement were not in effect, the Portfolio's
management fee, other expenses and total operating expenses would
have be en .32 %, .34 % and .66 %,
respectively. Management fees and other expenses are reflected in the
Portfolio's share price or dividends and are not charged directly to
individual shareholder accounts. Please refer to the section
"Management Contract, Distribution and Service Plan '' on page
for further information.
B. EXAMPLE: The hypothetical example illustrates the expenses associated
with a $1,000 investment over periods of 1, 3, 5 and 10 years, based on the
expenses in the table and an assumed annual rate of return of 5%. These
figures reflect FMR's voluntary reimbursement of fees and other expenses.
THE RETURN OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED INDICATIONS OF
ACTUAL OR EXPECTED PORTFOLIO PERFORMANCE, BOTH OF WHICH MAY VARY.
FINANCIAL HIGHLIGHTS
The table below gives you information about the Portfolio's financial
history and uses the Portfolio's fiscal year (which ends February 28).
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C>
Year Ended Four Months Years Ended October 31, March 8, 1990
February 28, Ended (commencement
February 28, of operations) to/r>
October 31,
1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning of period
$ 11.070 $ 10.910 $ 10.710 $ 10.040 $ 10.000
Income from Investment Operations
.697 .260 .839 .863 .559
Net investment income
Net realized and unrealized gain (loss) on investments
(.110) .324 .277 .668 .040
Total from investment operations
.587 .584 1.116 1.531 .599
Less Distributions
(.727) (.254) (.836) (.861) (.559)
From net investment income
From net realized gain on investments
(.070) (.170) (.080) - -
In excess of net realized gain on investments
(.030) -- -- -- --
Total distributions
(.827) (.424) (.916) (.861) (.559)
Net asset value, end of period
$ 10.830 $ 11.070 $ 10.910 $ 10.710 $ 10.040
TOTAL RETURN (DAGGER) (DOUBLE DAGGER)
5.38% 5.50% 10.84% 15.86% 6.14%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)
$ 288,504 $ 123,351 $ 86,149 $ 39,144 $ 25,600
Ratio of expenses to average net assets **
.32% .32%* .32% .32% .32%*
Ratio of expenses to average net assets before expense
.66% .87%* .83% .90% .84%*
reductions **
Ratio of net investment income to average net assets
6.93% 7.34%* 7.70% 8.33% 8.62%*
Portfolio turnover rate
160% 89%* 113% 50% 62%*
</TABLE>
* ANNUALIZED
** SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS ON PAGE 31.
(dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN.
(double dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
The Financial Highlights have been audited by Price Waterhouse, independent
accountants. Their unqualified report is included on page 32 . The
Annual Report begins on page 19.
INVESTMENT OBJECTIVE
The Portfolio's objective is to provide investment results that correspond
to the aggregate price and interest performance of the debt securities in
the Aggregate Bond Index. The Portfolio may not always achieve its
objective but it will follow the investment style described in "Investment
Policies , Risks, and Limitations '' below .
INVESTMENT POLICIES , RISKS, AND LIMITATIONS
Except for the Portfolio's investment objective and investment limitations
identified as fundamental, the Portfolio's policies described in this
Prospectus are not fundamental policies. Non-fundamental policies may be
changed without shareholder approval.
PORTFOLIO SECURITIES. FMR will pursue the Portfolio's investment
objective, while seeking to minimize transaction costs and other expenses,
by investing, under normal circumstances, at least 80% of the Portfolio's
assets in securities included in the Aggregate Bond Index. Should the
Portfolio's assets drop below $50 million, the assets invested in such
securities may drop to as low as 65%. In an attempt to mirror the
performance of the Index, the Portfolio also may invest up to 35% of its
total assets in repurchase agreements, options and futures contracts as
well as securities not listed in the Index, and may engage in
delayed-delivery transactions.
The Portfolio is not managed through traditional methods of investment,
which typically involve the frequent buying and selling of securities on
the basis of economic, financial and market analysis. The Portfolio will
attempt to maintain the weighting s of securities to correspond to
their respective weighting in the Index. For example, if 55% of the value
of the Index is represented by U.S. Treasury/agency securities, then
approximately 55% of the Portfolio also will be in U.S. Treasury/agency
securities. Similarly, if the Index were to be 24% "invested'' in mortgage
securities, the Portfolio also will be approximately 24% "invested'' in
mortgage securities. FMR expects to be able to invest within +/-10%
of the actual Index weighting of broad market sectors.
The Portfolio will attempt to duplicate the returns of the Index by holding
a combination of securities which, taken together, FMR expects to
perform similarly to the Index as a whole. The large number of issues in
the Index prevents the Portfolio from holding all issues in proportion to
their Index weighting. Instead, in an effort to duplicate the performance
of the Index, the Portfolio will hold issues which represent the
characteristics of securities in the Index. This technique is expected to
enable the Portfolio to track price movements within the Index while
minimizing transaction costs. FMR believes that this approach is an
effective method of substantially duplicating the total return of the
Index.
Issue types will be delineated along the lines of, among others, issuer
sector, term to maturity, coupon, interest rate volatility, liquidity, call
risk and correlation with other securities and ratings. The structure of
the U.S. fixed income markets is such that this strategy is believed by
FMR to be effective in matching the characteristics of the Index
with fewer securities than actually are held in the Index. As the Portfolio
grows, new issues may be added to the Portfolio based on the analysis of
FMR , providing for the coverage of previously unrepresented
categories of securities. Thus, FMR expects the Portfolio to have a
better record of tracking the Index as the assets of the Portfolio grow.
The Index is a total return index measuring both the capital price changes
and the income underlying the universe of securities weighted by market
value outstanding. Inclusion of a security in the Index in no way implies
an opinion by Lehman Brothers, Inc. as to its attractiveness or
appropriateness as an investment. Lehman Brothers, Inc. is neither a
sponsor of nor in any way affiliated with the Portfolio.
SUITABILITY
By itself, the Portfolio does not constitute a balanced investment plan.
The Portfolio's share price will fluctuate in response to changes in
interest rates and other market factors. An increase in interest rates
generally will reduce the value of the Portfolio's investments. Because of
the potential risks, the Portfolio may not be suitable for short-term
investors, or investors who require protection of principal, such as that
offered by a money market fund.
The Portfolio is designed as an economical and convenient investment
vehicle for investors whose objective is to achieve a return corresponding
to the return of the Aggregate Bond Index with reasonable consistency over
time, without assuming a substantial risk of under performance during any
individual year. Such investors may include those holding taxable accounts
or tax-qualified accounts such as 401(k) accounts and 403(b) accounts and
institutions with defined benefit or defined contribution plans, as well as
bank trust departments, foundations and endowments. The Portfolio has
arranged for special processing to assist banks and other institutions to
establish multiple accounts, which is described under "Subaccounting and
Special Services'' on page .
TRACKING THE INDEX. The number of issues held by the Portfolio will
increase as the Portfolio's asset level increases beyond the $50 million
level. FMR expects that as the asset level of the Portfolio grows,
the correlation between the performance of the Portfolio and that of the
Index will be above 0.90; a figure of 1.00 would indicate perfect
correlation. This level of correlation may be achieved before taking
Portfolio expenses into account. FMR will seek a performance
correlation of 0.90 or better. In the unlikely event that this correlation
is not achieved, the Board of Trustees will consider alternative
arrangements.
The Portfolio's ability to duplicate the total return of the Index will
depend, to some extent, on the size and frequency of cash flow into and out
of the Portfolio. FMR will make investment changes to accommodate
cash flow in order to maintain, to the maximum practicable extent, the
similarity of the Portfolio to the Index. Apart from changes resulting from
the Portfolio's cash flow, adjustments may be made in the Portfolio because
of the "aging'' of issues, quality upgrades and downgrades, changes in the
composition of the Index and similar reasons, but such changes and the
associated costs should be minimal.
INDEX COMPOSITION. The Aggregate Bond Index is comprised of the Lehman
Brothers Government Bond Index, Corporate Bond Index and Mortgage-Backed
Securities Index (the Indices). Combined, these Indices include U.S.
Treasury obligations, including bonds and notes; U.S. agency obligations,
including those of the Federal Farm Credit Bank, Federal Land Bank and the
Bank for Co-Operatives; foreign obligations, including U.S.
dollar-denominated World Bank issues and non-convertible debt issued by
foreign sovereign governments, foreign municipalities, foreign governmental
agencies or international agencies; U.S. investment-grade corporate debt,
including industrial, finance and utility issues, and mortgage-backed
obligations, including Government National Mortgage Association, Federal
National Mortgage Association and Federal Home Loan Mortgage Corporation
obligations.
With the exception of the Mortgage-Backed Securities Index, each of the
Indices has an intermediate component consisting of issues with maturities
between one and ten years and a long-term component consisting of issues
with maturities of ten years or greater.
As of February 28, 1994, 4,693 issues were included in the Index,
representing more than $ 4 trillion in market value. The four major
classes of bonds in the Index are U.S. government bond obligations,
mortgage-backed securities, corporate bonds and asset-backed securities.
The Index as of February 28, 1994 consisted approximately of:
NUMBER % OF
OF ISSUES ISSUE CLASS MARKET VALUE
854 U.S. government bonds 52 %
608 Mortgage-backed securities 29 %
3,113 Corporate debt issues 17 %
118 Asset-backed securities 2%
PORTFOLIO BOND RATINGS. All debt included in the Aggregate Bond Index has a
minimum Standard & Poor's Ratings Group (S&P) rating of BBB, a
minimum Moody's Investors Service, Inc. (Moody's) rating of Baa, or a
minimum Fitch Investors Service rating of BBB. The Portfolio will invest in
debt securities if the securities are rated investment grade by at least
one rating service (including Duff and Phelps Credit Rating Co.), as well
as in unrated securities of equivalent quality as determined by FMR.
Investment grade bonds are generally of medium to high quality. Those rated
in the lower end of the category (Baa/BBB), however, may possess
speculative characteristics and may be more sensitive to economic changes
and changes in the financial condition of issuers.
Government securities are issued or guaranteed, as to timely payment of
principal and interest, by the U.S. government or its agencies or
instrumentalities. They may be backed by the credit of the government as a
whole or only by the issuing agency. For example, securities issued by the
Federal Home Loan Mortgage Corporation are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities
issued by the Federal National Mortgage Association are supported by the
agency's right to borrow money from the U.S. Treasury under certain
circumstances. U.S. Treasury securities and some agency securities, such as
those issued by the Government National Mortgage Association, are backed by
the full faith and credit of the U.S. government and are the highest
quality government securities.
The Portfolio will invest some of its assets in Yankee bonds (foreign bonds
that are U.S. dollar-denominated), and SEC registered public debt issued or
guaranteed by foreign governments, municipalities, governmental agencies or
international agencies.
Foreign government securities involve greater credit risk than U.S.
government securities. Foreign government securities involve many special
risks associated with international investments, including possible
illiquidity due to currency controls, other government actions, or
differences in trading practices, and the risk of non-payment for political
reasons. Foreign companies generally are not subject to uniform
accounting, auditing, and financial reporting standards, practices, and
requirements comparable to those that apply to U.S. companies.
In the past several years, the Index has outperformed many active bond
managers who use traditional techniques such as interest rate forecasting
and sector swapping. Possible reasons for such a disparity in performance
include the continually fully invested nature of the Index, its broad
diversification and absence of transaction costs. However, there is no
assurance that the Index will outperform a majority of investment managers
in the future.
OTHER PORTFOLIO SECURITIES. The Portfolio may purchase debt securities not
included in the Aggregate Bond Index if FMR believes such purchases
will assist the Portfolio in approximating the return of the Index. In
purchasing debt securities not included in the Index, FMR will consider
only debt securities with ratings that are equivalent to those debt
securities included in the Index, as well as unrated securities of similar
quality as determined by FMR. The Portfolio may invest up to 10% of its
net assets in illiquid investments. In addition, the Portfolio may
purchase indexed securities, restricted securities, zero coupon securities,
asset-backed securities, mortgage-backed securities, options and futures,
loans and other direct debt instruments, and swap agreements.
The Portfolio may, for temporary defensive purposes, invest in short-term
securities such as: U.S. government securities, repurchase agreements, time
deposits, certificates of deposit, bankers' acceptances and high-grade
commercial paper.
LIMITING INVESTMENT RISKS. FMR follows specific guidelines in
managing the Portfolio's investments which may help to reduce risk.
1. The Portfolio will not purchase a security if, as a result: (a) more
than 25% of total assets would be invested in the securities of a single
issuer; or (b) with respect to 75% of total assets, more than 5% of total
assets would be invested in the securities of a single issuer or it would
hold more than 10% of the outstanding voting securities of such issuer.
2. The Portfolio may not purchase the securities of any issuer if, as a
result, more than 25% of its total assets would be invested in the
securities of issuers having their principal business activities in the
same industry.
3. The Portfolio (a) may borrow money from banks or from other funds
advised by FMR for temporary or emergency purposes in an aggregate
amount not exceeding 33 1/3% of its total assets; (b) may engage in reverse
repurchase agreements; and (c) will not purchase any security while
borrowings representing more than 5% of net assets are outstanding.
4. The Portfolio may temporarily lend portfolio securities to
broker-dealers and institutions when the loans are fully collateralized.
The Portfolio also may make cash loans to other funds advised by FMR.
Loans, in the aggregate, will be limited to 33 1/3% of the Portfolio's
total assets.
Limitations 1 and 2 do not apply to U.S. government securities. Limitations
1 and 2 and the percentage limitations on borrowing and lending in
limitations 3 and 4 are fundamental policies and may be changed only by
vote of a majority of the Portfolio's outstanding shares. The limitations
and the policies discussed in this Prospectus are considered at the time of
purchase. Except with respect to the Portfolio's borrowing policy, the sale
of securities is not required in the event of a subsequent change in
circumstances.
If the Portfolio borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. To this extent, purchasing
securities while borrowings are outstanding may involve an element of
leverage.
HOW TO INVEST
Shares of the Portfolio are offered continuously at their net asset value
per share (NAV) next determined after an order is received and
accepted. The Portfolio does not impose any sales charges in connection
with the purchase of its shares, although institutions may charge their
clients fees in connection with purchases and sales for the accounts of
their clients.
SHARE PRICE. The price of one share of the Portfolio is its NAV. Fidelity
Service Company (Service), an affiliate of FMR, calculates the NAV at the
close of the Portfolio's business day, which coincides with the close of
business of the New York Stock Exchange (NYSE) - normally 4:00 p.m. Eastern
time. The Portfolio is open for business each day the NYSE is open (see
"Holiday Schedule,'' below). NAV is computed for the Portfolio by adding
all securities plus cash and other assets, deducting liabilities and then
dividing the result by the number of shares outstanding. Bonds held by the
Portfolio are valued at fair value based on quotations supplied by a
pricing service approved by the Board of Trustees. Other portfolio
securities and assets are valued primarily on the basis of market
quotations, or if quotations are not available, by a method that the Board
of Trustees believes in good faith accurately reflects fair value.
HOLIDAY SCHEDULE. The Portfolio is open for business and the NAV is
calculated each day the NYSE is open for trading. The NYSE has designated
the following holiday closings for 1994: President's Day, Good Friday,
Memorial Day, Independence Day (observed) , Labor Day, Thanksgiving
Day and Christmas Day (observed). Although FMR expects the same holiday
schedule , with the addition of New Year's Day, to be observed in the
future, the NYSE may modify its holiday schedule at any time. On any day
that the NYSE closes early, or as permitted by the SEC, the right is
reserved to advance the time on that day by which purchase and redemption
orders must be received. To the extent that p ortfolio securities are
traded in other markets on days the NYSE is closed, the Portfolio's NAV may
be affected on days when investors do not have access to the
Portfolio to purchase or redeem shares. Certain Fidelity funds may follow
different holiday closing schedules.
HOW TO INVEST
INITIAL (minimum) INVESTMENT *
$100,000
METHOD
BY WIRE
ADDITIONAL (minimum) INVESTMENT
- - --
BY MAIL
$100,000
- - --
Fidelity U.S. Bond Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
Please make your check payable to
"Fidelity U.S. Bond Index
Portfolio", with your account
number on the check, and mail to:
THE ADDRESS PRINTED ON YOUR
ACCOUNT STATEMENT.
BY EXCHANGE
(From an account in
one of Fidelity's other
funds.)
$100,000
- - --
Not Available
BY FIDELITY MONEY LINE
$250
(You must have received prior
notification by mail from Fidelity
Investments Institutional
Operations Company (FIIOC)
that your Fidelity Money Line is
active. The maximum transaction
amount is $50,000.)
INDIVIDUAL ACCOUNTS (Participant)
If you are a participant investing through a retirement plan sponsor or
other institution, please refer to
your plan materials or contact your plan sponsor directly for all services.
INITIAL INVESTMENT Corporate Retirement Plans 800-962-1375
(Client Services) "Not for Profit" Retirement Plans 800-343-0860
Financial Institutions 800-843-3001
ADDITIONAL INVESTMENT Corporate Retirement Plans 800-962-1375
(Trading) "Not for Profit" Retirement Plans 800-343-0860
Financial Institutions 800-343-6310
* Minimum may be waived for tax-saving retirement plans.
MINIMUM INVESTMENT AND ACCOUNT BALANCE. The minimum initial investment
to establish a new account in the Portfolio is $100,000. Unless you
have a Fidelity mutual fund account, you must complete and sign an
application . Subsequent investments may be in any amount. If you
want to keep your account open, please leave $100,000 in it. If your
account balance falls below $100,000 due to redemption, your account may be
closed and the proceeds mailed to you at the record address. You will be
given 30 days' notice that your account will be closed unless you make an
additional investment to increase your account balance to the $100,000
minimum. The minimum investment requirement may not apply to
participants of tax-saving retirement plans.
ADDITIONAL INVESTMENTS. Additional investments by wire, mail or exchange
from another Fidelity fund may be made in any amount. The minimum and
maximum additional investment amount via Fidelity Money Line is $250 and
$50,000, respectively.
TO INVEST BY WIRE. Prior to opening an account by wire, all investors must
call the appropriate telephone number in the chart on page to advise
Client Services of the investment and to obtain an account number, wiring
instructions, and instructions regarding the establishment of an account.
To make additional investments by wire, you must call Trading before 4:00
p.m. Eastern time at the appropriate telephone number in the chart on
page . We must receive your wire payment by the close of the
Portfolio's following business day after you have placed your telephone
order (or your purchase may be canceled and you could be held liable for
resulting fees or losses). Your bank may charge a fee for wiring funds to
the Portfolio.
TO INVEST BY MAIL. To open an account by mail, you must send a check
payable to "Fidelity U.S. Bond Index Portfolio" to:
Fidelity U.S. Bond Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
To make additional investments by mail, please make your check payable to
"Fidelity U.S. Bond Index Portfolio," include your account number on the
check and mail your investment to the address printed on your account
statement.
Your purchase will be processed at the next NAV calculated after your order
is received and accepted. If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees incurred. When
you purchase by check or via Fidelity Money Line, the Portfolio may hold
payment on redemptions until it is reasonably satisfied that the investment
has been collected (which can take up to seven business days). To avoid
this collection period, you can invest by wire (see " To Invest by Wire,''
above).
TO INVEST BY EXCHANGE. When opening an account by exchange from an account
in one of Fidelity's other funds, your new account must be established with
the same name(s), address and taxpayer identification number as your other
Fidelity account. To open an account or make an additional investment by
exchange, please call Trading before 4:00 p.m. Eastern time at the
appropriate telephone number in the chart on page .
TO INVEST VIA FIDELITY MONEY LINE. Fidelity Money Line is available to
certain retirement investors who invest directly through Fidelity. Fidelity
Money Line allows you to authorize electronic transfers of money to buy or
sell shares. You can use Fidelity Money Line like an "electronic check'' to
move money between your bank account and your account in the Portfolio with
one tele phone call. Allow two to three business days after the call
for the transfer to take place.
To make additional investments via Fidelity Money Line, you must have
received prior notification from FIIOC that your Fidelity Money Line is
active. To make an additional investment via Fidelity Money Line, or to
inquire about the service, please call Client Services before 4:00 p.m.
Eastern time at the appropriate telephone number in the chart on page .
You may initiate many transactions by telephone. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
TO INVEST BY SECURITIES EXCHANGE. Shares of the Portfolio may be purchased
in exchange for securities held by an investor which are acceptable to the
Portfolio. Only securities which meet the Portfolio's investment objective,
policies and limitations will be eligible for exchange. However,
Distributors reserves the right to refuse a tender for any reason. A gain
or loss for federal income tax purposes may be realized by the investor
upon a securities exchange depending upon the cost basis of the securities
tendered.
If you are interested in purchasing shares by securities exchange you
should call Client Services at the appropriate telephone number in the
chart on page for further information, including specific details about
the securities exchange program and instructions on submission of a letter
of intention to Distributors. DO NOT SEND SECURITIES TO THE PORTFOLIO OR TO
DISTRIBUTORS.
CHOOSING A DISTRIBUTION OPTION. You may choose from three distribution
options when filling out an application.
A. The SHARE OPTION reinvests your income dividends and capital gain
distributions .
B. The INCOME-EARNED OPTION pays your income dividends in cash and
reinvests your capital gain distributions.
C. With the CASH OPTION , you receive income dividends and capital
gain distributions (if any) in cash. Distribution checks will be mailed no
later than seven days after the last day of the month.
TAX-SAVING RETIREMENT PLANS. Fidelity can set up your new account in the
Portfolio under one of several tax-sheltered plans. These plans let you
save for retirement and shelter your investment income from current taxes.
Minimums may differ from those listed on page .
(bullet) Defined Contribution Plans such as 401(k), company-sponsored IRA
programs, Thrift, Keogh or Corporate Profit-Sharing or Money-Purchase
Plans: are open to self-employed people and their partners or to
corporations, to benefit themselves and their employees.
(bullet) 403(b) Custodial Accounts: are open to employees of most
non-profit organizations.
(bullet) Defined Benefit Plans: are open to corporations of all
sizes to benefit their employees.
(bullet) 457 Plans: are open to employees of most government
agencies.
If you are a participant in certain tax-sheltered retirement plans, you may
move any distributions you receive from the plan to a Fidelity rollover IRA
without incurring a sales charge. You may do so by a direct transfer of
assets or by making the investment within 60 days of the date of the
distribution. Consult your plan administrator or a tax advisor for more
details. You also may elect to take your distributions in kind and
establish an IRA rollover account in the Portfolio. For such IRA rollovers
to the Portfolio, there is no minimum investment required when opening an
account. You may invest in most Fidelity retail funds through retirement
plans without paying a sales charge. See your plan materials for more
information.
SUBACCOUNTING AND SPECIAL SERVICES. Special processing has been arranged
with FIIOC for banks, corporations and other institutions that wish to open
multiple accounts (a master account and subaccounts). If you wish to
utilize FIIOC's subaccounting facilities or other special services for
individual or multiple accounts, you will be required to enter into a
separate agreement with FIIOC. Charges for these services, if any, will be
determined on the basis of the level of services to be rendered.
Subaccounts may be opened with the initial investment or at a later date
and may be established with registration either by name or by number.
HOW TO EXCHANGE
The exchange privilege is a convenient way to buy shares in the Portfolio
and in Fidelity's other funds as your goals or market conditions change
(see "To Invest by Exchange,'' page for instructions on exchanging shares
of other Fidelity funds for shares of the Portfolio). You may exchange
shares of this Portfolio for shares of Fidelity funds registered for sale
in your state. You may only exchange between accounts that are registered
in the same name, address, and taxpayer identification number. Please read
the prospectus of the Fidelity fund into which you want to exchange
Portfolio shares for relevant information including any applicable sales
charges. Each exchange may produce a capital loss or taxable capital gain.
(Please see "Distributions and Taxes'' on page .)
You may exchange all or any part of the value of your accounts on any day
the Portfolio is open for business. Exchanges may be requested in writing
or by telephone and are effected at the NAV next determined after receipt
of the exchange request. When exchanging Portfolio shares for the shares
of another Fidelity fund, you must meet the minimum investment
requirements of that fund. You should note that as exchange transactions
actually involve the purchase or redemption of shares, all exchanges will
be subject to conditions described in "How to Invest'' beginning on page
or in "How to Redeem,'' below. Written requests for exchange should be
mailed to:
Fidelity U.S. Bond Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
To exchange by telephone call Trading before 4:00 p.m. Eastern time, at the
appropriate telephone number indicated in the chart on page .
To protect the Portfolio's performance and shareholders, Fidelity
discourages frequent trading in response to short-term market fluctuations.
You may make four exchanges per calendar year out of the Portfolio; if you
exceed this limit, your future purchases of (including exchanges into)
Fidelity funds may be permanently refused. For purposes of the four
exchange limit, accounts under common ownership or control, including
accounts having the same taxpayer identification number, will be
aggregated. Other Fidelity funds may have different exchange restrictions.
Check each fund's prospectus for details. The exchange limit may be
modified for accounts in certain institutional retirement plans to conform
to plan exchange limits and Department of Labor regulations. See your plan
materials for further information.
The Portfolio reserves the right at any time without prior notice to refuse
exchange purchases by any person or group if, in FMR's judgment, the
Portfolio would be unable to invest effectively in accordance with its
investment objective and policies or might otherwise be adversely affected.
The Portfolio may terminate or modify the exchange privilege in the future.
HOW TO REDEEM
You may redeem all or a portion of your shares on any business day (see
"Holiday Schedule," page ). Your shares will be redeemed at the NAV next
calculated after the Portfolio has received and accepted your
redemption request. The wiring of redemption proceeds is available only to
investors who have previously established the wire privilege (see "To
Redeem by Telephone," on page ).
Once your shares are redeemed, the Portfolio normally will send you the
proceeds on the next business day. If making immediate payment could
adversely affect the Portfolio, it may take up to seven days to pay you.
Fidelity Money Line redemptions generally will be credited to your bank
account on the second or third business day (but may take up to seven
business days) after your telephone call. Remember that the Portfolio may
hold payment until it is reasonably satisfied that investments made by
check or via Fidelity Money Line have been collected (which may take up to
seven business days).
TO REDEEM BY MAIL. Send a letter of instruction with your signature(s)
guarantee to:
Fidelity U.S. Bond Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
The letter should specify the name of the Portfolio, the number of shares
to be sold, your name, your account number, and should include the
additional requirements listed below that apply to your particular account.
Type of Registration Requirements
Corporations, Letter of instruction and
Associations a corporate resolution,
signed by person(s)
required to sign for the
account accompanied by
signature guarantee(s).
Trusts A letter of instruction
signed by the
Trustee(s)with a
signature guarantee. (If
the Trustee's name is
not registered on your
account, also provide a
copy of the trust
document, certified
within the last 60 days.)
If you do not fall into any of these registration categories, (e.g.,
Executors, Administrators, Conservators or Guardians), please call Client
Services at the appropriate telephone number in the chart on page for
further instructions.
A signature guarantee is a widely accepted way to protect you and FIIOC by
verifying the signature on your request; it may not be provided by a notary
public. Signature guarantees will be accepted from banks, brokers, dealers,
municipal securities dealers, municipal securities brokers, government
securities dealers, government securities brokers, credit unions (if
authorized under state law), national securities exchanges, registered
securities associations, clearing agencies and savings associations.
TO REDEEM BY TELEPHONE. You may redeem an y amount from your account
in the Portfolio by instructing FIIOC to have the proceeds of redemptions
wired directly to your previously designated bank account(s). There is no
charge imposed for wiring of redemption proceeds. In making redemption
requests, the name(s) of the registered shareholder(s) and the account
number(s) must be supplied.
Provided that your account registration has not changed within the last
3 0 days, you may redeem shares of the Portfolio worth $100,000 or
less by telephone. Your redemption proceeds will be sent to the record
address. To redeem by telephone call Trading before 4:00 p.m. Eastern time
at the appropriate telephone number below:
INDIVIDUAL ACCOUNTS (Participant)
If you are investing through a retirement plan sponsor or other
institution, please refer to your plan materials or contact your plan
sponsor directly.
RETIREMENT PLANS
Corporate 800-962-1375
"Not for Profit" 800-343-0860
FINANCIAL INSTITUTIONS 800-343-6310
TO REDEEM VIA FIDELITY MONEY LINE. You must have received prior
notification by mail from FIIOC that your Fidelity Money Line is active.
The minimum and maximum redemption amounts are $2,500 and $50,000,
respectively. Accounts may not be closed by this service. To redeem via
Fidelity Money Line call the appropriate numbers listed above .
ADDITIONAL INFORMATION. In order to allow FMR to manage the Portfolio most
effectively, investors are strongly urged to initiate all trades
(investments, exchanges and redemptions of shares) as early in the day as
possible and to notify Client Services at least one day in advance of
trades in excess of $500,000. In making these trade notifications, the
name(s) of the registered shareholder(s) and the account number(s) must be
supplied.
When the NYSE is closed (or when trading is restricted) for any reason
other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, the
Portfolio may suspend redemption or postpone payment dates. If you are
unable to execute your transactions by telephone (for example, during times
of unusual market activity) consider placing your order by mail.
The offering of shares of the Portfolio may be suspended for a period of
time, and the Portfolio reserves the right to reject any specific purchase
order, including certain purchases by exchange. Purchase orders may be
refused if, in FMR's opinion, they are of a size that would disrupt
management of the Portfolio. The Portfolio may discontinue offering its
shares at any time or in any particular state without notice to
shareholders.
STATEMENTS AND REPORTS. You will receive a statement after every
transaction (except a reinvestment of dividends or capital gains) that
affects your share balance or your account registration. The Portfolio does
not issue share certificates, but FIIOC mails investors a confirmation of
each investment or redemption from their account. FIIOC will send
retirement plan participants account statements setting forth the
transactions in their account for the quarter and quarter-end balances; all
other investors will receive a similar statement for the month and the
month-end balances of full and fractional shares held in the account. This
account statement will be sent within ten days after the close of the
period.
At least twice a year you will receive the Portfolio's financial
statements. To reduce expenses, only one copy of most reports (such as the
Portfolio's Annual Report) may be mailed to your household. Write to the
Portfolio if you need to have additional reports sent each time. The
Portfolio pays for these shareholder services but not for special services,
such as a request for a historical transcript of an account. You may be
required to pay a fee for these special services.
DISTRIBUTIONS AND TAXES
The following discussion describes the status of distributions for federal
income tax purposes. Whether it is applicable to you depends on your filing
status. If you have invested through a tax-sheltered retirement plan, you
generally will not incur federal income tax liability from your investment
in the Portfolio until you withdraw money from the retirement plan.
Income dividends are declared daily and paid monthly. Any net capital gains
normally are distributed in December.
FEDERAL TAXES. Distributions from the Portfolio's income and short-term
capital gains are taxed as dividends, and long-term capital gain
distributions are taxed as long-term capital gains. The Portfolio's
distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares, except that distributions declared
in December and paid in January are taxable as if paid on December 31. Each
year, the Portfolio will send you a tax statement by January 31 showing the
tax status of the distributions you received in the past year, and will
file a copy with the Internal Revenue Service (IRS).
CAPITAL GAINS. You may realize a capital gain or loss when you redeem
(sell) or exchange shares of the Portfolio. For most types of accounts, the
Portfolio will report the proceeds of your redemptions to you and the IRS
annually. However, because the tax treatment also depends on your purchase
price and your personal tax position, you should also keep your regular
account statements to use in determining your tax.
"BUYING A DIVIDEND.'' On the record date for a distribution from capital
gains, the Portfolio's share price is reduced by the amount of the
distribution. If you buy shares just before the record date ("buying a
dividend''), you will pay the full price for the shares, and then receive a
portion of the price back as a taxable distribution.
OTHER TAX INFORMATION. In addition to federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your
area. Tax considerations may be different for investors purchasing shares
of the Portfolio through certain retirement plans.
When you sign your account application, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the
Portfolio to withhold 31% of your taxable distributions and redemptions.
PORTFOLIO TRANSACTIONS
Portfolio securities generally are traded in the over-the-counter market
through broker-dealers. A broker-dealer is a securities firm or bank which
makes a market for securities by offering to buy at one price and sell at a
slightly higher price. The difference between the prices is known as a
spread. FMR chooses broker-dealers by judging professional ability and
quality of service. Since FMR trades a large number of securities,
including those of Fidelity's other funds, broker-dealers are willing to
work with the Portfolio on a more favorable spread than would be possible
for most individual investors. Also, the Portfolio generally pays lower
commissions when placing trades with broker-dealers. The Portfolio will pay
commissions in connection with transactions in futures contracts and
related options.
The Portfolio has authorized FMR to allocate transactions to some
broker-dealers who help distribute the Portfolio's shares or the shares of
Fidelity's other funds, and on an agency basis, to Fidelity Brokerage
Services, Inc. (FBSI), an affiliate of FMR. FMR will make such allocations
if commissions are comparable to those charged by non-affiliated, qualified
broker-dealers for similar services.
Higher commissions may be paid to those firms that provide research
services to the extent permitted by law. FMR also is authorized to allocate
brokerage transactions to FBSI in order to secure from FBSI research
services produced by third party, independent entities. FMR may use this
research information in managing the Portfolio's assets, as well as assets
of other clients.
The Portfolio may engage in short-term trading when consistent with its
investment objective. Also, a security may be sold and another of
comparable quality simultaneously purchased to take advantage of what
FMR believes to be a temporary disparity in the normal yield
relationship of the two securities. The frequency of portfolio transactions
- - - the Portfolio's turnover rate - will vary from year to year depending on
market conditions. The Portfolio's turnover rate for the fiscal year ended
February 28, 1994 was 160 %. Because a high turnover rate
increases transaction costs and may increase taxable capital gains, FMR
carefully weighs the anticipated benefits of short-term investments against
these consequences.
PERFORMANCE
The Portfolio's performance may be quoted in advertising in terms of YIELD
and TOTAL RETURN. All performance information is historical and is not
intended to indicate future performance.
Yield is a way of showing the rate of income the Portfolio earns on its
investments as a percentage of the Portfolio's share price. To calculate
yield, the Portfolio takes the interest income it earned from its portfolio
of investments for a 30-day period (net of expenses), divides it by the
average number of Portfolio shares entitled to receive dividends, and
expresses the result as an annualized percentage rate based on the
Portfolio's share price at the end of the 30-day period. Yields are
calculated according to accounting methods that are standardized for all
stock and bond funds. Because yield accounting methods differ from the
methods used for other accounting purposes, the Portfolio's yield may not
equal the income paid to your account, or the income reported in the
Portfolio's financial statements.
TOTAL RETURNS are based on the overall dollar or percentage change in value
of a hypothetical investment in t he Portfolio, including changes in
share price and assuming all of the Portfolio's dividend and capital
gain distributions are reinvested. A CUMULATIVE TOTAL RETURN reflects the
Portfolio's performance over a stated period of time. An AVERAGE ANNUAL
TOTAL RETURN reflects the hypothetical annually compounded return that
would have produced the same cumulative total return if the Portfolio's
performance had been constant over the entire period. Because average
annual returns tend to smooth out variations in the Portfolio's return, you
should recognize that they are not the same as actual year-by-year returns.
To illustrate the components of overall performance, the Portfolio may
separate its cumulative and average annual returns into income results and
capital gain or loss. The Portfolio may quote its total returns on a
before-tax or after-tax basis.
HISTORICAL RESULTS. The following chart shows the Portfolio's 30-day yield
and total returns (as compared to the cumulative total returns of the
Index) for the periods ended February 28, 1994. Figures for the Index are
reported for all sectors on a month-end to month-end basis. All returns are
market value weighted inclusive of accrued interest. (For additional
i nformation on the Index , see "Index Composition,'' page .)
30-DAY YIELD
5.35 %
LEHMAN BROS.
AVERAGE AGGREGATE BOND
ANNUAL CUMULATIVE INDEX CUMULATIVE
TOTAL RETURNS TOTAL RETURNS RETURNS
One Year 5.38 % 5.38 % 5.40 %
Life of Portfolio* 11.00 % 51.55 % 49.66 % **
* Life of Portfolio March 8, 1990 (commencement of operations) to February
28, 1994.
** Total returns are from month-end closest to Portfolio's commencement of
operations.
If Fidelity had not reimbursed certain Portfolio expenses during
these periods, the 30-day yield would have been 5.01 % and the total
returns would have been lower.
The Portfolio may quote its adjusted net asset value, which includes all
distributions paid and may be averaged over specific periods.
MANAGEMENT CONTRACT, DISTRIBUTION AND SERVICE PLAN
For managing its investments and business affairs, the Portfolio pays a
monthly management fee to FMR at the annual rate of .32% of the average net
assets of the Portfolio. One-twelfth of this annual fee rate is applied to
the net assets averaged over the most recent month, giving a dollar amount
which is the management fee for that month.
FMR has voluntarily agreed, subject to revision or termination on 90 days'
notice to shareholders, to reimburse the Portfolio if, and to the extent
that any of the Portfolio's aggregate expenses (generally excluding
interest, taxes, brokerage commissions and extraordinary expenses), exceed
an annual rate of .32% of the average net assets of the Portfolio for any
fiscal year or for a portion of such year if FMR's agreement is terminated
or revised before year end. Such reimbursements have the effect of
decreasing the Portfolio's expenses, thereby increasing the Portfolio's
yield and total return. If this policy were not in effect, aggregate
operating expenses for the Portfolio would have been . 66 % of average
net assets for the fiscal year ended February 28, 1994.
FIIOC, 82 Devonshire Street, Boston, MA 02109, an affiliate of FMR, is
transfer and shareholder servicing agent for the Portfolio and maintains
shareholder records. The Portfolio pays FIIOC transfer agent fees based on
the type, size and number of accounts in the Portfolio and the number of
monetary transactions made by shareholders.
Service, 82 Devonshire Street, Boston, MA 02109, an affiliate of FMR,
calculates the Portfolio's daily share price, maintains its general
accounting records and administers the Portfolio's securities lending
program. The fees for pricing and bookkeeping services are based on the
Portfolio's average net assets but must fall within a range of $45,000 and
$750,000 per year. The fees for securities lending services are based on
the number and duration of individual securities loans.
DISTRIBUTION AND SERVICE PLAN. The Portfolio has adopted a Distribution and
Service Plan (the Plan) under Rule 12b-1 under the Investment Company Act
of 1940. No separate payments are authorized to be made by the Portfolio
under the Plan. Rather, the Plan recognizes that FMR may use its management
fee or other resources to pay expenses associated with activities primarily
intended to result in the sale of the Portfolio's shares. It also provides
that FMR may make payments from these sources to third parties, such as
banks or broker-dealers, that provide shareholder support services or
engage in the sale of Portfolio shares. The Board of Trustees has not yet
authorized such payments.
Distributors may, at its own expense, provide promotional incentives to
Investment Professionals (defined below) who support the sale of shares of
the Portfolio without reimbursement from the Portfolio. Investment
Professionals are securities dealers who have sold the Portfolio's shares,
or other entities, including banks and other financial institutions, that
have special arrangements in connection with Distributors' sales
activities. In some instances, these incentives may be offered only to
certain institutions whose representatives have sold or are expected to
sell significant amounts of shares.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been fully defined, in Distributors' opinion, it
should not prohibit banks from being paid for shareholder servicing and
recordkeeping. If, because of changes in law or regulation, or because of
new interpretations of existing law, a bank or a fund were prevented from
continuing these arrangements, it is expected that the Board of Trustees
would make other arrangements for these services and that shareholders
would not suffer adverse financial consequences. In addition, state
securities laws on this issue may differ from the interpretations of
federal law expressed herein, and banks and other financial institutions
may be required to register as dealers pursuant to state laws.
FIDELITY U.S. BOND INDEX PORTFOLIO AND THE FIDELITY ORGANIZATION. Fidelity
U.S. Bond Index Portfolio is a diversified portfolio of Fidelity
Institutional Trust (the Trust), an open-end, management investment company
established as a Massachusetts business trust on July 21, 1987. The Trust's
Board of Trustees supervises the Portfolio's activities and reviews
contractual arrangements with companies that provide the Portfolio with
services.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings, although special meetings may be called for a
specific portfolio or for the Trust, as a whole, for purposes such as
electing or removing Trustees, changing fundamental investment policies, or
approving a management contract. As a shareholder you receive one vote for
each full share and fractional votes for fractional shares of the Portfolio
you own. Separate votes are taken by each p ortfolio if a matter
affects just that portfolio.
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, MA 02109. It includes a number of
different subsidiaries and divisions which provide a variety of financial
services and products. The Portfolio employs various Fidelity companies to
perform certain activities required for its operation .
FMR is the original Fidelity company, founded in 1946. It provides a number
of mutual funds and other clients with investment research and portfolio
management services. It maintains a large staff of experienced investment
personnel and a full complement of related support facilities. As of
February 28, 1994, FMR advised funds having more than 15 million
shareholder accounts with a total value of more than $ 225 billion.
Distributors distributes shares for the Fidelity funds. FMR Corp. is the
parent company for the Fidelity companies. Through ownership of voting
common stock, Edward C. Johnson 3d, (President and a Trustee of the Trust),
Johnson family members, and various trusts for the benefit of the Johnson
family, form a controlling group with respect to FMR Corp.
APPENDIX
The following paragraphs provide a brief description of securities in which
the Portfolio may invest and transactions it may make. The Portfolio is not
limited by this discussion, however, and may purchase other types of
securities and enter into other types of transactions if they are
consistent with the Portfolio's investment objective and policies.
ASSET-BACKED SECURITIES. Asset-backed securities represent interests in
pools of consumer loans (generally unrelated to mortgage loans) and most
often are structured as pass-through securities. Interest and principal
payments ultimately depend on payment of the underlying loans by
individuals, although the securities may be supported by letters of credit
or other credit enhancements. The value of asset-backed securities also may
depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the
credit enhancement.
DELAYED-DELIVERY TRANSACTIONS. The Portfolio may buy and sell securities on
a when-issued or delayed-delivery basis, with payment and delivery taking
place at a future date. The market value of securities purchased in this
way may change before the delivery date, which could increase fluctuations
in the Portfolio's yield. Ordinarily, the Portfolio will not earn interest
on securities purchased until they are delivered.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of the Portfolio's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for the Portfolio to sell them promptly at an acceptable price.
INDEXED SECURITIES. The Portfolio may invest in indexed securities whose
value is linked to currencies, interest rates, commodities, indices, or
other financial indicators. Most indexed securities are short to
intermediate term debt securities whose values at maturity or
interest rates rise or fall according to the change in one or more
specified underlying instruments. Indexed securities may be positively or
negatively indexed (i.e., their value may increase or decrease if the
underlying instrument appreciates), and may have return characteristics
similar to direct investments in the underlying instrument or to one or
more options on the underlying instrument. Indexed securities may be more
volatile than the underlying instrument itself.
INTERFUND BORROWING PROGRAM. The Portfolio has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. Interfund loans and borrowings normally will extend
overnight, but can have a maximum duration of seven days. The Portfolio
will lend through the program only when the returns are higher than
those available at the same time from other short-term investments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. The Portfolio
will not lend more than 7.5% of its assets to other funds, and will not
borrow through the program if, after doing so, total outstanding borrowings
would exceed 15% of total assets. Loans may be called on one day's
notice, and the Portfolio may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity
or additional borrowing costs.
MORTGAGE-BACKED SECURITIES. The Portfolio may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
Portfolio may invest in them if FMR determines they are consistent with the
Portfolio's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
OPTIONS AND FUTURES CONTRACTS. The Portfolio may buy and sell options and
futures contracts to manage its exposure to changing interest rates and
security prices. Some options and futures strategies, including selling
futures, buying puts, and writing calls, tend to hedge the Portfolio's
investments against price fluctuations. Other strategies, including buying
futures, writing puts, and buying calls, tend to increase market exposure.
Options and futures may be combined with each other in order to adjust the
risk and return characteristics of the overall strategy. The Portfolio may
invest in options and futures based on any type of security or
index, including options not traded on exchanges.
Options and futures can be volatile investments, and involve certain risks.
If FMR applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower the Portfolio's
return. The Portfolio could also experience losses if the prices of its
options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an
illiquid secondary market. Options and futures do not pay interest, but
may produce taxable capital gains.
The Portfolio will not hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In
addition, the Portfolio will not buy futures or write puts whose underlying
value exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security at one price and simultaneously agrees to sell it
back at a higher price. The Portfolio may also make securities loans to
broker-dealers and institutional investors, including FBSI. In the event of
the bankruptcy of the other party to either a repurchase agreement or a
securities loan, the Portfolio could experience delays in recovering its
cash or the securities it lent. To the extent that, in the meantime, the
value of the securities purchased had decreased, or the value of the
securities lent had increased, the Portfolio could experience a loss. In
all cases, FMR must find the creditworthiness of the other party to the
transaction satisfactory.
RESTRICTED SECURITIES are securities which cannot be sold to the
public without registration under the Securities Act of 1933. Unless
registered for sale, these restricted securities can only be sold in
privately negotiated transactions or pursuant to an exemption from
registration.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
SWAP AGREEMENTS. As one way of managing its exposure to different types
of investments, the Portfolio may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars, and
floors. In a typical interest rate swap, one party agrees to make regular
payments equal to a floating interest rate times a "notional principal
amount," in return for payments equal to a fixed rate times the same
amount, for a specified period of time. If a swap agreement provides for
payments in different currencies, the parties might agree to exchange the
notional principal amount as well. Swaps may also depend on other prices or
rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift the Portfolio 's investment
exposure from one type of investment to another. For example, if the
Portfolio agreed to exchange payments in dollars for payments in foreign
currency, the swap agreement would tend to decrease the Portfolios exposure
to U.S. interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of the Portfolio's investments
and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on the Portfolio's performance. Swap agreements are
subject to risks and related to the counterparty's ability to perform, and
may decline in value if the counterparty's creditworthiness deteriorates.
The Portfolio may also suffer losses if it is unable to terminate
outstanding swap agreements or reduce its exposure through offsetting
transactions.
The Portfolio will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
If the Portfolio enters into a swap agreement on a net basis, it will
segregate assets with a daily value at least equal to the excess, if any,
of the Portfolio accrued obligations under the swap agreement over the
accrued amount the Portfolio is entitled to receive under the agreement.
If the Portfolio enters into a swap agreement on other than a net basis, it
will segregate assets with a value equal to the full amount of the
Portfolio's accrued obligations under the agreement.
ZERO COUPON BONDS. Zero coupon bonds do not make interest payments;
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, the Portfolio takes into account
as income a portion of the difference between a zero coupon bond's purchase
price and its face value.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon securities
originally issued by the U.S. government, a government agency, or a
corporation in zero coupon form.
PERFORMANCE UPDATE
$100,000 OVER LIFE OF FUND FIDELITY U.S. BAGGREGATE BOND
03/31/90 100000.00 100000.00
04/30/90 98902.15 99080.00
05/31/90 101848.95 102012.77
06/30/90 103292.33 103655.17
07/31/90 104861.21 105085.61
08/31/90 103552.15 103677.47
09/30/90 104402.79 104537.99
10/31/90 105789.53 105865.62
11/30/90 107912.50 108141.73
12/31/90 109639.20 109828.75
01/31/91 110945.70 111190.62
02/28/91 111681.87 112135.74
03/31/91 112576.10 112909.48
04/30/91 113908.48 114128.90
05/31/91 114705.76 114790.85
06/30/91 114615.94 114733.45
07/31/91 116187.71 116328.25
08/31/91 118683.00 118840.94
09/30/91 121180.33 121253.41
10/31/91 122572.39 122599.32
11/30/91 123844.12 123727.24
12/31/91 127589.07 127401.93
01/31/92 126089.96 125669.27
02/29/92 126777.93 126486.12
03/31/92 126332.43 125777.80
04/30/92 127155.24 126683.40
05/31/92 129563.13 129077.71
06/30/92 131479.58 130858.99
07/31/92 134384.14 133528.51
08/31/92 135838.14 134877.15
09/30/92 137508.21 136482.18
10/31/92 135863.10 134666.97
11/30/92 135802.93 134693.90
12/31/92 137757.57 136835.54
01/31/93 140497.87 139462.78
02/28/93 143334.35 141903.38
03/31/93 143928.50 142499.37
04/30/93 145002.73 143496.87
05/31/93 145185.51 143683.41
06/30/93 147708.59 146284.08
07/31/93 148811.01 147117.90
08/31/93 151228.56 149692.47
09/30/93 151744.95 150096.64
10/31/93 152254.88 150651.99
11/30/93 151011.42 149371.45
12/31/93 151827.71 150178.06
01/31/94 153733.22 152205.46
02/28/94 151041.84 149557.09
$100,000 OVER LIFE OF FUND: LET'S SAY YOU INVESTED $100,000 IN FIDELITY
U.S. BOND INDEX PORTFOLIO ON MARCH 31, 1990, SHORTLY AFTER THE FUND
STARTED. BY FEBRUARY 28, 1994, THE VALUE OF YOUR INVESTMENT WOULD HAVE
GROWN TO $151,042 - A 51.04% INCREASE ON YOUR INITIAL INVESTMENT. FOR
COMPARISON, LOOK AT HOW A $100,000 INVESTMENT IN THE LEHMAN BROTHERS
AGGREGATE BOND INDEX(WITH DIVIDENDS REINVESTED) DID OVER THE SAME PERIOD.
IT WOULD HAVE GROWN TO $149,557 - A 49.56% INCREASE.
AVERAGE ANNUAL TOTAL RETURNS
FIDELITY
U.S. BOND INDEX
PORTFOLIO
LEHMAN
BROTHERS
AGGREGATE
BOND INDEX
FOR THE PERIOD ENDED FEBRUARY 28, 1994
One-year total return* 5.38% 5.40%
Life of fund average annual total return* 11.00% n/a
FOR THE PERIOD ENDED FEBRUARY 28, 1994
One-year total return* 5.38% 5.40%
Life of fund cumulative total return* 51.55% n/a
CUMULATIVE TOTAL RETURNS
PERFORMANCE UPDATE - CONTINUED
FIDELITY
U.S. BOND INDEX
PORTFOLIO
FOR THE PERIOD ENDED FEBRUARY 28, 1994
30-day annualized net yield 5.35%
One-year dividends per share 72.70(cents)
One-year dividend rate** 6.54%
YIELD AND DIVIDENDS
* TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY. FIGURES FOR MORE THAN ONE YEAR ASSUME
A STEADY COMPOUNDED RATE OF RETURN AND ARE NOT THE FUND'S YEAR-BY-YEAR
RESULTS, WHICH FLUCTUATED OVER THE PERIODS SHOWN. LIFE OF FUND FIGURES ARE
FROM COMMENCEMENT OF OPERATIONS, MARCH 8, 1990, TO THE PERIODS LISTED
ABOVE. THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS A BROAD MEASURE OF THE
BOND MARKET. IT INCLUDES REINVESTED DIVIDENDS AND CAPITAL GAINS, IF ANY.
** THE DIVIDEND RATE REFLECTS ACTUAL DIVIDENDS PAID DURING THE PERIOD. IT
IS BASED ON AN AVERAGE SHARE PRICE OF $11.12.
IF FIDELITY HAD NOT REIMBURSED CERTAIN FUND EXPENSES DURING THE PERIODS
SHOWN, THE 30-DAY YIELD WOULD HAVE BEEN 5.01% AND THE TOTAL RETURNS WOULD
HAVE BEEN LOWER.
ALL PERFORMANCE NUMBERS ARE HISTORICAL; THE FUND'S SHARE PRICE, YIELD AND
RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
AN INTERVIEW WITH
CHRISTINE THOMPSON,
PORTFOLIO MANAGER OF
FIDELITY U.S. BOND INDEX PORTFOLIO
Q. CHRISTINE, HOW HAS THE FUND PERFORMED?
A. For the year ended February 28, 1994, the fund's total return was 5.38%.
That was in line with the Lehman Brothers Aggregate Bond Index, which
returned 5.40% for the same period.
Q. WHAT ACCOUNTS FOR THOSE NUMBERS?
A. The goal of the fund is to replicate, as closely as possible, the
performance of the index, so let's start with each of the sectors within
the Lehman Brothers Aggregate Bond Index. Over the past 12 months, Treasury
securities, which made up about 47% of the index, returned 5.4%;
mortgage-backed securities, at roughly 29% of the index, returned about
4.7%; corporate securities, which comprise roughly 17% of the index,
returned about 6.7%; agencies, which were about 6% of the index, returned
5.6%; and asset-backed securities, which were nearly 2% of the total,
returned about 5%.
Q. DID YOU KEEP THE FUND'S WEIGHTINGS IN EACH OF THESE SECTORS IN LINE WITH
THE INDEX?
A. The sector weightings were similar, but the fund differed from the index
in the individual securities it owned. The Lehman Brothers Aggregate Bond
Index is made up of over 4,000 individual securities. It's impractical for
the fund to own everything in that index, so I use a technique called
stratified sampling. That involves selecting and prioritizing
characteristics, and dissecting the index into cells that define the
parameters for those characteristics.
Q. HOW DO YOU USE THESE CELLS?
A. Let's take the characteristic I prioritize as most important, which is
duration, a measure of a bond's sensitivity to changes in interest rates. I
determine what percentage of the index falls within a duration of zero to
one year, one to two years, and so on. Then in structuring the fund, I look
for securities that will give the fund the same duration breakdown as the
index. In addition to duration, I use many other security characteristics
including, but not limited to, sector, maturity, and credit quality. The
challenge in managing the fund is prioritizing cells I think will be most
important in determining the index's, and ultimately, the fund's
performance.
Q. ONCE YOU'VE PRIORITIZED THOSE PARAMETERS, WHAT'S NEXT?
A. The next step is to select a specific security. Typically, I look at
more than one parameter at a time. For instance, I might need to add a bond
with a five-year duration and at the same time need to add a corporate
bond. Within those parameters, I draw on Fidelity's research resources,
which allow me to pick securities that have the characteristics I need, and
also offer the potential for performing better than other securities with
similar characteristics. That security selection has helped keep the fund's
performance in line with the index, even after expenses are factored in.
Q. CAN YOU GIVE US AN EXAMPLE OF HOW A SPECIFIC CHOICE MIGHT HAVE IMPROVED
PERFORMANCE?
A. One example was the fund's stake in banks. While banks made up a portion
of the corporate bond sector of the index, I concentrated a comparatively
large stake in regional banks that Fidelity's credit research department
identified as having the potential to be upgraded. Many of these bonds were
subsequently upgraded, which helped the fund. Also, up to 20% of the fund
can be invested in securities that are not technically a part of the index.
Recently that flexibility allowed me to purchase floating rate notes, which
provide some price protec-
tion against rising interest rates. The fund's position in floating rate
notes helped performance, especially after the Federal Reserve raised
short-term interest rates on February 4.
Q. WHAT CAN INVESTORS EXPECT OVER THE NEXT YEAR?
A. The fund's return will be dictated by the direction of interest rates.
No matter which way interest rates go, I'll continue to keep the fund fully
invested. If interest rates continue to rise, investors should expect lower
returns than we saw over the past year. On the other hand, if interest
rates start to fall again, the fund's performance could benefit.
FIDELITY U.S. BOND INDEX PORTFOLIO
INVESTMENTS/FEBRUARY 28, 1994
(Showing Percentage of Total Value of Investments)
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1) (UNAUDITED) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - 27.5%
BASIC INDUSTRIES - 0.3%
PAPER & FOREST PRODUCTS - 0.3%
Chesapeake Corp.:
10 3/8%, 1/1/00 Baa3 $ 300,000 $ 351,969 165159AD
9 7/8%, 5/1/03 Baa3 350,000 408,828 165159AE
760,797
ENERGY - 1.6%
ENERGY SERVICES - 1.5%
Financiera Energetica Nacional
6 5/8%, 12/13/96 (a) - 1,000,000 990,000 317703AA
McDermott International, Inc.
10 1/4%, 6/1/95 Baa3 2,250,000 2,376,900 580033AK
Petroliam Nasional Berhad yankee
6 7/8%, 7/1/03 (a) A2 1,250,000 1,242,187 716708AA
4,609,087
OIL & GAS - 0.1%
Societe Nationale Elf Aquitaine
7 3/4%, 5/1/99 Aa3 150,000 160,365 833658AC
TOTAL ENERGY 4,769,452
FINANCE - 19.1%
ASSET-BACKED SECURITIES - 2.6%
Capital Auto Receivables Asset
Trust, 5.85%, 1/15/98 Aaa 867,348 876,022 139732AE
Chase Manhattan Credit Card
Master Trust, 7.65%, 11/15/98 Aaa 1,000,000 1,036,875 161612AB
Discover Card Trust, 6 1/8%,
5/15/98 A2 1,435,000 1,445,762 25466LAT
MBNA Master Credit Card Trust
7 3/4%, 10/15/98 Aaa 750,000 793,828 55262NAA
Standard Credit Card Master Trust I:
8 1/4%, 9/7/95 A2 2,380,000 2,430,575
8 1/4%, 10/7/97 A2 250,000 268,437 85333JAH
5 1/2%, 9/7/98 A2 715,000 707,627 85333JAX
6 1/4%, 9/7/98 A2 350,000 353,937 85333JAU
7,913,063
BANKS - 11.0%
Bancomer SA eurobonds 8%,
7/7/98 (a) - 1,000,000 1,015,000 059682AB
Bancomer SNC euro 8%, 7/7/98 Ba2 500,000 507,500 05999KAT
Bank of Boston Corp.:
9 1/2%, 8 /15/97 Baa2 100,000 112,000 060716AM
10.3%, 9/1/00 Baa2 1,461,000 1,577,880 060716AL
Bankers Trust 6%, 10/15/08 A2 2,000,000 1,819,820 066365BL
Barnett Bank 10.875%, 3/15/03 Baa1 115,000 144,780 06805LAA
Chase Manhattan Corp. euro
5%, 5/31/00 (b) Baa2 $ 900,000 $ 902,531 16199BAB
Citicorp:
8 1/2%, 2/11/97 Baa3 300,000 323,493 17303LJC
euro 5 1/4%, 7/10/97 Baa3 110,000 110,275 269990PS
Continental Bank Corp.
4 1/2%, 5/18/00 Baa3 1,500,000 1,498,125 211113AC
Czech National Bank Prague euro
7%, 4/6/96 Baa3 1,000,000 1,017,500 232840AA
Export-Import Bank Korea
7.85%, 11/1/96 A1 500,000 526,495 30215MAA
First of America Bank Corp.
8.5%, 2/1/04 A3 750,000 831,135 318906AA
First Bank Systems, Inc. euro:
5 1/4%, 11/29/96 (b) Baa1 2,000,000 2,000,000 3192799K
5 1/4%, 11/30/10 (b) A3 550,000 550,000 319279AK
First Fidelity Bancorporation:
8 1/2%, 4/1/98 A3 594,000 646,248 320194AE
9 3/4%, 5/25/95 A3 250,000 264,275 320195AA
First Hawaiian Bank secured
6.93%, 12/1/03 (a) A1 1,000,000 990,800 320500AA
First Interstate Bancorp:
9 3/8%, 1/23/02 Baa1 150,000 172,864 32055CAF
9 1/8%, 2/1/04 Baa3 270,000 311,180 320548BK
First Maryland Bancorp:
10 3/8%, 8/1/99 Baa1 655,000 772,815 320806AE
8 3/8%, 5/15/02 Baa1 1,050,000 1,141,875 320806AF
First National Bank of Boston
8 3/8%, 12/15/02 Baa2 200,000 219,400 323585TV
Fleet Financial Group, Inc.
8 1/8%, 7/01/04 Baa1 500,000 542,090 338915AA
Fleet/Norstar Financial Group,
Inc. 9.9%, 6/15/01 Baa3 1,250,000 1,468,762 339018AD
Korea Development Bank 6 1/4%,
5/1/00 A1 2,000,000 1,952,920 500630AF
Manufacturers Hanover Corp.
8 1/2%, 2/15/99 Baa1 1,000,000 1,091,210 564809BM
Manufacturers Hanover Trust, NY
euro (b):
5 1/4%, 4/30/97 A3 500,000 501,875 564997HK
8 1/2%, 7/15/97 Baa1 500,000 502,500 564997HJ
Marine Midland Banks, Inc.
8 5/8%, 3/1/97 Baa1 772,000 833,737 568287AE
Mercantile Bancorporation, Inc.
7 5/8%, 10/15/02 Baa1 300,000 314,781 587342AC
Merchants National Corp. 9 7/8%,
10/1/99 A2 750,000 872,812 589152AA
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1) (UNAUDITED) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Midland American Capital Corp.
gtd. 12 3/4%, 11/15/03 A1 $ 1,530,000 $ 1,913,265 597418AA
Provident Bank 7 1/8%, 3/15/03 Baa3 1,300,000 1,311,375 743838AC
Shawmut Corp.:
8 7/8%, 4/1/96 Baa1 875,000 934,850 820480AB
8 1/8%, 2/1/97 Baa1 580,000 617,445 820480AC
Signet Banking Corp.:
5 1/4%, 5/15/97 (b) Baa2 1,150,000 1,151,437 065446AP
5 1/4%, 4/15/98 (b) Baa2 150,000 150,187 065446AN
9 5/8%, 6/1/99 Baa2 400,000 454,448 826681AA
UJB Financial Corp. 8 5/8%,
12/10/02 Baa3 1,000,000 1,107,570 902760AB
33,177,255
CREDIT & OTHER FINANCE - 2.8%
Fleet Mortgage Group, Inc.
6 1/8%, 8/15/97 A3 200,000 202,167 339012AA
General Motors Acceptance Corp.:
8 1/4%, 8/1/96 Baa1 500,000 529,790 370424FP
8.15%, 9/17/96 A3 1,000,000 1,056,220 37042LY6
7.6%, 1/9/97 Baa1 400,000 417,856 37042MCL
7 3/4%, 1/28/97 Baa1 750,000 786,630 37042MEH
Greyhound Financial Corp.
6.95%, 1/28/98 Baa2 750,000 778,125 39804HBC
Margaretten Financial Corp.
6 3/4%, 6/15/00 Baa3 1,000,000 992,000 566576AA
Nationwide Mutual 6 1/2%,
2/15/04 (a) Aa3 1,500,000 1,467,750 638671AA
Railcar Trust, 7 3/4%, 6/1/04 Aaa 1,911,240 2,045,027 750755AA
8,275,565
INSURANCE - 1.0%
Metropolitan Life Insurance Co.
6 3/10%, 11/1/03 (a) Aa3 2,000,000 1,932,400 592173AA
New York Life Insurance Co.
6 2/5%, 12/15/03 (a) Aa2 1,000,000 974,400 64952GAA
2,906,800
SAVINGS & LOANS - 1.7%
Ahmanson (H.F.) & Co. 9 7/8%,
11/15/99 Baa3 1,000,000 1,156,120 008677AA
Golden West Finance Corp.
8 3/8%, 4/15/02 A3 500,000 548,250 381317AF
Home Savings of America:
10 1/4%, 12/5/96 Baa1 500,000 541,250 436904AN
10 1/2%, 6/12/97 Baa1 2,000,000 2,182,500 436904AP
Household Bank 8.45%, 12/10/02 A3 $ 650,000 $ 721,558 441800GF
5,149,678
TOTAL FINANCE 57,422,361
MEDIA & LEISURE - 0.5%
PUBLISHING - 0.5%
News America Holdings, Inc.
8 5/8%, 2/1/03 Ba1 1,500,000 1,599,120 652478AG
NONDURABLES - 0.5%
TOBACCO - 0.5%
RJR Nabisco, Inc. 9 1/4%, 5/1/95 Baa3 1,516,000 1,572,911 74960LAL
RETAIL & WHOLESALE - 0.3%
GENERAL MERCHANDISE STORES - 0.2%
Dayton Hudson Corp.
9.18%, 2/27/98 A3 250,000 278,017 239992BW
May Department Stores Co.
9 7/8%, 12/1/02 A2 150,000 181,411 577778AQ
459,428
GROCERY STORES - 0.1%
Great Atlantic & Pacific Tea, Inc.
9 1/8%, 1/15/98 Baa3 300,000 319,554 390064AA
TOTAL RETAIL & WHOLESALE 778,982
SERVICES - 1.1%
LEASING & RENTAL - 1.1%
Ryder System, Inc. 9.2%, 3/15/98 Baa1 2,188,000 2,294,665 783549AX
U.S. Leasing International, Inc.
8 3/4%, 5/1/96 A2 225,000 240,163 912129AB
6.54%, 11/15/00 A2 900,000 897,894 91213LDN
3,432,722
TECHNOLOGY - 1.9%
COMPUTERS & OFFICE EQUIPMENT - 0.7%
Comdisco, Inc.:
9 3/4%, 1/15/97 Baa2 150,000 165,052 200336AF
9.3%, 6/27/00 Baa2 1,250,000 1,421,875 20033RBF
9 1/4%, 7/6/00 Baa2 375,000 426,562 20033RBH
2,013,489
ELECTRONICS - 0.9%
Grupo Condumex SA de CV,
6 1/4%, 7/27/96 (a) - 2,750,000 2,691,562 399904AA
PHOTOGRAPHIC EQUIPMENT - 0.3%
Eastman Kodak Co. 9 5/8%,
11/15/99 A3 942,000 973,312 277461AJ
TOTAL TECHNOLOGY 5,678,363
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1) (UNAUDITED) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.2%
AMR Corp. 9 1/2%, 7/15/98 Baa3 $ 250,000 $ 273,130 001765AN
Southwest Airlines Co. secured
9.40%, 7/1/01 Baa1 245,000 280,748 844741AD
553,878
TRUCKING & FREIGHT - 0.0%
Consolidated Freightways, Inc.
9 1/8%, 8/15/99 Baa3 100,000 107,987 209237AC
TOTAL TRANSPORTATION 661,865
UTILITIES - 2.0%
ELECTRIC UTILITY - 1.6%
Gulf States Utilities Co.
9.72%, 7/1/98 Baa3 1,340,000 1,473,598 402550BW
Long Island Lighting Co.:
7.3%, 7/15/99 Baa3 1,000,000 1,017,580 542671CK
8.75%, 5/1/96 Baa3 1,000,000 1,061,460 542671CF
Middle South Energy, Inc. 1st mtg.
11%, 5/1/00 Baa3 788,000 795,880 595822AC
United Illuminating Co. 9.76%,
1/2/06 Baa3 337,000 363,286 910637AJ
4,711,804
GAS - 0.4%
Southwest Gas Co. 9 3/4%,
6/15/02 Ba1 1,250,000 1,399,075 844895AK
TOTAL UTILITIES 6,110,879
TOTAL NONCONVERTIBLE BONDS
(Cost $86,206,954) 82,787,452
U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS - 41.0%
U.S. TREASURY OBLIGATIONS - 35.8%
8.875%, 7/15/95 Aaa 7,100,000 7,519,326 912827WK
7 3/4%, 2/15/95 Aaa 2,905,000 3,003,044 912827YG
8 7/8%, 2/15/96 Aaa 4,870,000 5,244,357 912827TF
9 3/8%, 4/15/96 Aaa 10,100,000 11,029,503 912827XK
8 1/2%, 5/15/97 Aaa 1,000,000 1,097,500 912827UW
6%, 12/31/97 Aaa 5,700,000 5,830,017 912827J2
9 1/4%, 8/15/98 Aaa 8,000,000 9,177,520 912827WN
6 3/8%, 1/15/00 Aaa 9,200,000 9,464,500 912827J3
8 3/8%, 8/15/00 Aaa 2,500,000 2,632,031 912810BV
7 7/8%, 8/15/01 Aaa 2,000,000 2,220,620 912827B9
6 3/8%, 8/15/02 Aaa 1,300,000 1,321,333 912827G5
10 3/4%, 8/15/05 Aaa 3,230,000 4,376,133 912810DR
9 7/8%, 11/15/15 Aaa 7,500,000 10,101,525 912810DT
8 7/8%, 8/15/17 Aaa $ 2,405,000 $ 2,975,442 912810DZ
8 1/8%, 8/15/19 Aaa 17,750,000 20,456,875 912810ED
8 1/2%, 11/15/20 Aaa 6,400,000 7,305,024 912827ZN
12%, 8/15/23 Aaa 2,605,000 3,910,339 912810DF
107,665,089
U.S. GOVERNMENT AGENCY OBLIGATIONS - 5.2%
Financing Corporation:
9.80%, 4/6/18 Aaa 1,900,000 2,484,844 317705AE
8.60%, 9/26/19 Aaa 1,950,000 2,287,594 317705AP
Coupon Strips Series D,
2/3/97 Aaa 1,073,000 920,902 31771JQQ
Government Trust Certificates
8%, 5/15/98 Aaa 1,876,466 1,988,285 38375HAR
Private Export Funding Corporation
secd. notes, Series CC,
9 1/2%, 3/31/99 Aaa 1,600,000 1,852,560 742651BE
Tennessee Valley Authority
8 1/4%, 11/15/96 Aaa 5,715,000 6,156,141 880591BC
15,690,326
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $123,317,093) 123,355,415
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 25.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.0%
8%, 7/1/16 Aaa 63,279 65,494 31343FCS
8 1/2%, 9/1/19 Aaa 85,159 89,151 31347WD9
9%, 11/1/01 to 10/1/16 Aaa 2,068,066 2,188,769 31341SBM
10.00%, 6/1/20 Aaa 485,733 532,484 313959TD
10 1/2%, 5/1/09 to 7/1/15 Aaa 1,736,051 1,895,232 313411NC
11%, 12/1/15 to 7/1/19 Aaa 1,456,331 1,611,066 31341JVG
11 1/2%, 2/1/15 to 6/1/20 Aaa 1,052,443 1,169,530 313401RX
11 3/4%, 9/1/13 Aaa 138,861 153,962 31340AHS
12%, 2/1/13 to12/1/14 Aaa 192,044 217,612 31341C3S
12 3/4%, 8/1/12 to 10/1/13 Aaa 204,579 236,802 31340XBP
13 1/2%, 1/1/23 Aaa 719,360 842,097 31290KVV
9,002,199
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 11.5%
5 1/2%, 10/1/08 to 12/1/08 Aaa 2,024,248 1,930,628 31370YLW
6 1/2%, 1/1/24 to 3/1/24 Aaa 18,688,316 18,185,979 993130VJ
7 1/2%, 5/1/07 to 6/1/08 Aaa 823,433 850,961 31369XBM
8%, 7/1/02 to 6/1/03 Aaa 277,903 289,888 31365DB3
8 1/2%, 6/1/17 to 9/1/17 Aaa 518,034 549,635 313613QY
9%, 11/1/01 to 9/1/06 Aaa 8,841,226 9,399,836 313614V2
10 1/2%, 4/1/01 Aaa 219,509 234,737 31365DAD
10 3/4%, 8/1/10 to 5/1/14 Aaa 718,895 796,178 31360FGA
11%, 8 /1/10 to 6/1/15 Aaa 522,099 586,058 313626TA
MOODY'S
RATINGS PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION - CONTINUED
11 1/4%, 5/1/01 Aaa $ 174,359 $ 195,282 31360JG8
11 1/2%, 8/1/14 Aaa 380,368 429,578 31361BMX
12 1/4%, 6/1/13 Aaa 126,846 143,256 31360D2C
12 1/2%, 1/1/15 Aaa 105,850 120,670 31360TLT
13%, 1/1/15 Aaa 109,414 125,691 31360NUQ
13 1/4%, 2/1/13 to 10/1/13 Aaa 27,758 31,884 31360YT5
13 1/2%, 8/1/14 to11/1/14 Aaa 96,499 111,096 31360MWE
14%, 3/1/12 to 10/1/14 Aaa 435,118 505,282 31360MWB
34,486,639
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 11.0%
6 1/2%, 11/15/23 to 2/15/24 Aaa 3,812,992 3,708,138 36203FGK
7%, 2/15/22 to 9/15/23 Aaa 3,396,453 3,401,757 36224SXX
7 1/2%, 11/15/22 to 10/15/23 Aaa 8,888,254 9,127,091 36224GZU
8%, 4/15/22 to 9/15/23 Aaa 4,298,916 4,508,492 36203XGL
8 1/2%, 3/15/17 to 2/15/23 Aaa 3,722,096 3,952,290 36203LMW
9%, 4/15/16 to 10/15/21 Aaa 4,964,843 5,329,359 362155S2
9 1/2%, 5/15/18 to 10/15/20 Aaa 626,804 679,315 36218RYC
11%, 6/15/10 to 1/15/16 Aaa 1,158,916 1,321,169 36215PVW
11 1/2%, 3/15/10 to 8/15/13 Aaa 981,966 1,131,719 362067FA
33,159,330
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $76,293,790) 76,648,168
FOREIGN GOVERNMENT OBLIGATIONS - 0.7%
Malaysia euro 9 1/2%, 10/31/96 A2 820,000 894,210 5609049C
Victorian Public Authorities
Finance Agency 8.45%,
10/1/2001 A1 1,000,000 1,117,000 926391AC
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $2,039,408) 2,011,210
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 5.3%
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 3.47% dated
2/28/94 due 3/1/94 $ 16,068,549 16,067,000
TOTAL INVESTMENTS - 100%
(Cost $303,924,245) $ 300,869,245
LEGEND
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $11,304,099 or 3.9% of net
assets.
(b) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S S&P
RATINGS RATINGS
Aaa, Aa, A 78.2% AAA, AA, A 78.7%
Baa 13.8% BBB 12.5%
Ba 1.3% BB 1.1%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 1.4%.
INCOME TAX INFORMATION
At February 28, 1994, the aggregate cost of investment securities for
income tax purposes was $303,980,854. Net unrealized depreciation
aggregated $3,111,609, of which $2,037,591 related to appreciated
investment securities and $5,149,200 related to depreciated investment
securities.
The fund hereby designates $381,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
February 28, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $16,067,000) (cost $303,924,245) $ 300,869,245
(Notes 1 and 2) - See accompanying schedule
Receivable for investments sold 4,461,331
Interest receivable 3,598,728
Receivable from investment adviser for expense reductions (Note 5) 159,972
Total assets 309,089,276
LIABILITIES
Payable to custodian bank $ 85,283
Payable for investments purchased 20,079,317
Payable for fund shares redeemed 72,588
Dividends payable 153,421
Accrued management fee 76,953
Other payables and accrued expenses 118,185
Total liabilities 20,585,747
NET ASSETS $ 288,503,529
Net Assets consist of (Note 1):
Paid in capital $ 290,710,418
Undistributed net investment income 812,462
Accumulated undistributed net realized gain (loss) on investments (35,649)
Net unrealized appreciation (depreciation) on investment securities (3,055,000)
NET ASSETS, for 26,634,875 shares outstanding $ 288,503,529
NET ASSET VALUE, offering price and redemption price per share ($288,503,529 (divided by) 26,634,875 shares) $10.83
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended February 28, 1994
INVESTMENT INCOME $ 13,790,382
Interest
EXPENSES
Management fee (Note 4) $ 610,385
Transfer agent fees (Note 4) 419,436
Accounting fees and expenses (Note 4) 79,841
Non-interested trustees' compensation 1,131
Custodian fees and expenses 33,756
Registration fees 87,898
Audit 15,271
Legal 3,097
Miscellaneous 1,772
Total expenses before reductions 1,252,587
Expense reductions (Note 5) (644,001) 608,586
Net investment income 13,181,796
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3) 1,625,689
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on investment securities (7,742,283)
Net gain (loss) (6,116,594)
Net increase (decrease) in net assets resulting from operations $ 7,065,202
</TABLE>
Statement of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED FOUR MONTHS YEAR ENDED
FEBRUARY 28, ENDED OCTOBER 31,
1994 FEBRUARY 28, 1992
1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 13,181,796 $ 2,529,616 $ 4,284,181
Net investment income
Net realized gain (loss) on investments 1,625,689 59,118 1,516,990
Change in net unrealized appreciation (depreciation) on investments (7,742,283) 3,410,551 (584,433)
Net increase (decrease) in net assets resulting from operations 7,065,202 5,999,285 5,216,738
Distributions to shareholders (12,348,634) (2,451,588) (4,259,084)
From net investment income
From net realized gain (1,625,689) (1,395,998) (287,653)
In excess of net realized gain (603,620) - -
Total distributions (14,577,943) (3,847,586) (4,546,737)
Share transactions 329,923,999 49,854,118 105,408,120
Net proceeds from sales of shares
Reinvestment of distributions from: 10,638,672 2,014,595 3,276,643
Net investment income
Net realized gain 1,941,084 1,301,100 266,949
Cost of shares redeemed (169,838,606) (18,119,062) (62,617,445)
Net increase (decrease) in net assets resulting from share transactions 172,665,149 35,050,751 46,334,267
Total increase (decrease) in net assets 165,152,408 37,202,450 47,004,268
NET ASSETS
Beginning of period 123,351,121 86,148,671 39,144,403
End of period (including undistributed net investment income of $812,462, $108,004,$ 288,503,529 $ 123,351,121 $ 86,148,671
and $29,976 respectively)
OTHER INFORMATION
Shares
Sold 29,686,344 4,615,505 9,692,453
Issued in reinvestment of distributions from: 959,559 184,714 301,485
Net investment income
Net realized gain 175,823 121,598 24,856
Redeemed (15,332,829) (1,671,882) (5,777,014)
Net increase (decrease) 15,488,897 3,249,935 4,241,780
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED FEBRUARY 28, 1994
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity U.S. Bond Index Portfolio (the fund) is a fund of Fidelity
Institutional Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust 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. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which market quotations are not readily available are valued
at their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
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 current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practical to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
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 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. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Mortgage security paydown gains
(losses) are taxable as ordinary income and, therefore, increase (decrease)
taxable ordinary income available for distribution.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
mortgage-backed securities and losses deferred due to wash sales.
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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective March 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,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of February 28,1993 have been reclassified to
reflect a decrease in paid in capital of $277,287, an increase in
undistributed net investment income of $567,177 and a decrease in
accumulated net realized gain on investments of $289,890.
2. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
INDEXED SECURITIES. The fund may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $469,314,921 and $299,646,357, respectively, of which U.S.
government and government agency obligations aggregated $393,410,525 and
$272,402,630, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee that
is computed daily at an annual rate of .32% of the fund's average net
assets.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives fees based on the type,
size, number of accounts and the number of transactions made by
shareholders. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEE. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .32% of average net assets. For the
period, the reimbursement reduced the expenses by $644,001.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Institutional Trust and the
Shareholders of Fidelity U.S. Bond Index Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for Moody's and Standard
& Poor's ratings), 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 U.S. Bond Index
Portfolio (a fund of Fidelity Institutional Trust) at February 28, 1994,
the results of its operations for the year then ended, the changes in its
net assets and the financial highlights for the periods indicated in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fidelity U.S. Bond Index
Portfolio'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 generally accepted auditing
standards 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 owned at February 28, 1994 by correspondence
with the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse
Boston, Massachusetts
April 20, 1994
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.
FIDELITY U.S. EQUITY INDEX PORTFOLIO 82 DEVONSHIRE STREET
A Portfolio of Fidelity Institutional Trust BOSTON, MASSACHUSETTS 02109
PROSPECTUS
Fidelity U.S. Equity Index Portfolio (the Portfolio) offers investors a
convenient and economical way to invest in an open-end, diversified
management investment company. The Portfolio seeks to provide investment
results that correspond to the total return (i.e., the combination of
capital changes and income) performance of common stocks publicly traded in
the United States. In seeking this objective, the Portfolio attempts to
duplicate the composition and total return of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500" or "Index"), while keeping
transaction costs and other expenses low.
This Prospectus is designed to provide you with information that an
investor should know before investing and to help you decide if the
Portfolio's goals match your own. Please read and retain this document for
future reference. The Annual Report to shareholders is incorporated herein
beginning on page 17.
A Statement of Additional Information (dated April 29 , 1994) for the
Portfolio has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference. This free Statement and
additional copies of the Prospectus and Annual Report are available
upon request from Fidelity Distributors Corporation (Distributors), 82
Devonshire Street, Boston, Massachusetts 02109.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
For information or assistance in opening a new account:
INDIVIDUAL ACCOUNTS (Participant)
If you are investing through a retirement plan sponsor or other
institution, please refer to your plan materials or contact your plan
sponsor directly.
RETIREMENT PLAN LEVEL ACCOUNTS (Trustees, Plan Sponsors)
Corporate Clients 800-962-1375
"Not for Profit" Clients 800-343-0860
FINANCIAL AND OTHER INSTITUTIONS
Nationwide 800-843-3001
TABLE OF CONTENTS
Summary of Portfolio Expenses
Financial Highlights
Investment Objective
Investment Policie s, Risks, and Limitations
Suitability
How to Invest
How to Exchange
How to Redeem
Distributions and Taxes
Portfolio Transactions
Performance
Management Contract, Distribution Plan and Service Agreements
Appendix
Financial Statements. 17
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
6.SUMMARY OF PORTFOLIO EXPENSES
The purpose of the table below is to assist you in understanding the
various costs and expenses that an investor in the Portfolio would bear
directly or indirectly. The expense summary format below was developed for
use by all mutual funds to help you make your investment decisions. Of
course, you should consider this expense information along with other
important information, including the Portfolio's investment
objective and its past performance.
A. ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets):
Management Fees .00%*
Other Expenses .28%*
TOTAL PORTFOLIO OPERATING EXPENSES .28%*
* NET OF REIMBURSEMENT.
B. EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) a
5% annual return and (2) full redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$3 $9 $16 $36
EXPLANATION OF TABLE:
A. ANNUAL PORTFOLIO OPERATING EXPENSES are based on the Portfolio's
historical expenses after reimbursement. Management fees are paid by the
Portfolio to Fidelity Management & Research Company (FMR) for managing
its investments and business affairs. The Portfolio incurs other expenses
for maintaining shareholder records, furnishing shareholder statements and
reports, and providing other services. Expenses eligible for
reimbursement by FMR do not include interest, taxes, brokerage commissions
(if any) or extraordinary expenses. Subject to revision upon 90 days'
notice to shareholders, FMR has voluntarily agreed to temporarily
limit the Portfolio's total operating expenses to .28% of
its average net assets. If this agreement were not in effect,
management fees, other expenses and total portfolio operating expenses
would have been .28%, .33% and .61%, respectively. Management fees and
other expenses are reflected in the Portfolio's share price, and are not
charged directly to individual accounts. Please refer to the section
"Management Contract, Distribution Plan and Service Agreements" on page
for further information.
B. EXAMPLE. The hypothetical example illustrates the expenses associated
with a $1,000 investment over periods of one, three, five and ten years,
based on the expenses in the table and an assumed annual rate of return of
5%. These figures reflect FMR's voluntary reimbursement of fees and other
expenses. THE RETURN OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED PORTFOLIO PERFORMANCE, BOTH OF WHICH MAY
VARY.
7. FINANCIAL HIGHLIGHTS
The table below gives you information about the Portfolio's financial
history and uses the Portfolio's fiscal year (which ends February 28).
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C>
Year Ended Four Years Ended October 31, February 17,
February 28, Months 1988
Ended (commencemen
February 28, t of operations)
to October 31,
1994 1993 1992 1991 1990 1989 1988
SELECTED PER-SHARE DATA
Net asset value, beginning of period
$ 16.73 $ 15.77 $ 14.97 $ 11.61 $ 13.23 $ 10.81 $ 10.00
Income from Investment Operations
Net investment income
.44 .15 .42 .42 .44 .38 .23
Net realized and unrealized gain (loss)
.88 .94 .97 3.38 (1.44) 2.41 .74
on investments
Total from investment operations
1.32 1.09 1.39 3.80 (1.00) 2.79 .97
Less Distributions
From net investment income
(.44) (.13) (.43) (.44) (.48) (.35) (.16)
From net realized gain
(.25) - (.16) - (.14) (.02) -
Total distributions
(.69) (.13) (.59) (.44) (.62) (.37) (.16)
Net asset value, end of period
$ 17.36 $ 16.73 $ 15.77 $ 14.97 $ 11.61 $ 13.23 $ 10.81
TOTAL RETURN (dagger) (double dagger)
8.06% 6.93% 9.59% 33.13% (7.98)% 26.30% 9.77%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)
$ 1,892,254 $ 1,472,102 $ 1,454,684 $ 960,442 $ 435,641 $ 303,859 $ 34,576
Ratio of expenses to average net assets **
.28% .28%* .28% .28% .28% .28% .28%*
Ratio of expenses to average net assets before
.61% .66%* .64% .67% .66% .97% 1.83%*#
expense reductions **
Ratio of net investment income to average
2.59% 2.95%* 2.78% 3.14% 3.55% 3.79% 4.56%*
net assets
Portfolio turnover rate
4% 28%* 6% 4% 2% 10% 3%*
</TABLE>
* ANNUALIZED
** SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS ON PAGE 33.
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
(double dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. SEE NOTE 7 OF NOTES TO
FINANCIAL STATEMENTS ON PAGE 33.
# EXPENSES FOR THE PERIOD FEBRUARY 17, 1988 (COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1988 WOULD HAVE BEEN LIMITED IN ACCORDANCE WITH A STATE
EXPENSE LIMITATION IF THE VOLUNTARY LIMITATION HAD NOT BEEN IN EFFECT.
The Financial Highlights have been audited by Price Waterhouse,
independent accountants. Their unqualified report is included on page 34.
The Annual Report begins on page 17.
8.INVESTMENT OBJECTIVE
Fidelity U.S. Equity Index Portfolio's investment objective is to provide
investment results that correspond to the total return (I.E., the
combination of capital changes and income) performance of common stocks
publicly traded in the United States. In seeking this objective, the
Portfolio attempts to duplicate the composition and total return of the
S&P 500 while keeping transaction costs and other expenses low.
Except for the Portfolio's investment objective and the investment
limitations identified as fundamental, the Portfolio's policies described
in this Prospectus are not fundamental policies. Non-fundamental policies
may be changed without shareholder approval.
9. INVESTMENT POLICIES, RISKS, AND LIMITATIONS
The S&P 500 is a widely recognized unmanaged index of common stock
prices and represents over 75% of the market value of all common stocks
that are publicly traded in the United States. Total returns for the Index
assume reinvestment of dividends but do not include the effect of taxes,
brokerage commissions or other fees. The Portfolio will attempt to
duplicate the capital performance and dividend income of the S&P 500.
The Portfolio may not always achieve its objective, but will follow the
investment style described herein.
PORTFOLIO SECURITIES. Under normal conditions, 90% of the
Portfolio's assets will be invested in securities of companies which
compose the S&P 500. Should the Portfolio's assets drop to below $20
million, the assets invested in such securities may drop to as low as 65%.
Standard & Poor's Ratings Group (S&P) selects the 500 common
stocks, most of which are listed on the NYSE, to be included in the Index
on the basis of statistics such as the viability of a particular company,
the extent to which a company represents the industry group to which it is
assigned, the extent to which the market price of a company's common stock
generally is responsive to changes in the affairs of a respective industry,
and the market value and trading activity of the common stock of a company.
S&P may, from time to time, add and delete stocks from the Index.
Inclusion of a stock in the Index in no way implies an opinion by S&P
as to its attractiveness as an investment, nor is S&P a sponsor or in
any other way affiliated with the Portfolio. At some time in the future FMR
may, subject to shareholders' approval and 30 days' notice, select another
index if such a standard of comparison is deemed to be more representative
of the performance of U.S. common stocks.
In the normal course of managing the Portfolio, FMR may invest a portion
of the Portfolio's assets in high quality short-term money market
instruments, including U.S. government securities, domestic and foreign
money market securities, such as commercial paper, bankers' acceptances,
repurchase agreements and time deposits, when the Portfolio has monies not
yet invested or so that the Portfolio will be prepared to meet redemption
requests. This position normally would be no more than 10% of the
Portfolio's net assets. In addition, the Portfolio may invest in futures
contracts and options, illiquid investments, indexed securities, swap
agreements and warrants.
The Portfolio may also invest a portion of its assets in instruments
whose return depends on stock market prices. These may include debt
securities whose prices or interest rates are indexed to the return of the
S&P 500, or swap agreements linked to the S&P 500, and options and
futures contracts. The Portfolio would invest in these types of instruments
in order to seek to match the total return of the S&P 500 in accordance
with its investment objective. However, instruments linked to stock market
returns may not track the return of the S&P 500 in all cases, and may
involve additional credit risks.
10. SUITABILITY
By itself, the Portfolio does not constitute a balanced investment plan.
The Portfolio's share price, yield and total return will fluctuate and your
investment may be worth more or less than its original cost when you redeem
your shares.
The Portfolio is designed as an economical and convenient investment
vehicle for investors whose objective is to seek a return corresponding to
the return of the S&P 500 with reasonable consistency over time. Such
investors may include those holding taxable accounts or tax-qualified
accounts such as 401(k) accounts and 403(b) accounts and institutions with
defined benefit or defined contribution plans, as well as bank trust
departments, foundations and endowments. The Portfolio has arranged for
special processing to assist banks and other institutions to establish
multiple accounts, described under "Subaccounting and Special Services" on
page .
TRACKING THE INDEX. The Portfolio attempts to duplicate the
investment results of the S&P 500 through an investment technique known
as "full replication." The number of shares owned by the Portfolio of each
stock is proportional to the number of shares in the Index. Because the
representation of stocks in the Index is based on each stock's number of
shares outstanding, the weight of each stock in both the Index and the
Portfolio will be proportional to its total market capitalization, which is
its shares outstanding times its market price per share.
FMR believes that with total assets of $20 million or more, the
Portfolio duplicates the investment results of the S&P 500 with a
relatively small margin of tracking error. At this asset level, the
Portfolio seeks a correlation between its performance and that of the Index
of .98 or better; a figure of 1.00 would indicate perfect correlation. The
Portfolio's ability to duplicate the performance of the Index will depend
to some extent on the cash flow relative to the Portfolio's size. FMR will
make investment changes to accommodate cash flow in order to maintain, to
the maximum practicable extent, the similarity of the Portfolio to the
Index. In the unlikely event that this correlation is not achieved, the
Board of Trustees will consider alternative arrangements.
The Portfolio may compensate for the omission from its investments of
illiquid or other stocks that are included in the S&P 500 Index, or for
purchasing stocks included in the Index in proportions which are less than
their weightings in the Index, by purchasing stocks (which may or may not
be included in the Index) with a combination of characteristics similar to
omitted stocks. Such characteristics include those from the same or similar
industry groups and with similar market capitalizations, which are believed
to cause stock prices generally to move together.
FMR will not attempt to manage the Portfolio's assets in the traditional
investment sense using economic, financial and market analysis to select
undervalued stocks or stocks of companies which may experience
above-average growth. Similarly, the adverse financial situation of a
company will not directly result in its elimination from the Portfolio
unless, of course, the company is removed from the Index. FMR reserves the
right, without obligation, to remove an investment from the Portfolio
following objective criteria if, in the judgment of FMR, the merit of the
investment has been substantially impaired by extraordinary events or
financial conditions. From time to time, adjustments may be made in the
Portfolio because of mergers, tender offers, changes in the composition of
the Index and similar reasons, but such changes should be infrequent.
LIMITING INVESTMENT RISKS. FMR follows specific guidelines in
managing the Portfolio's investments which may help to reduce risk.
1. The Portfolio will not purchase a security if, as a result: (a) more
than 25% of total assets would be invested in securities of any single
issuer; or (b) with respect to 75% of total assets, more than 5% of total
assets would be invested in the securities of a single issuer; or (c) it
would hold more than 10% of the outstanding voting securities of such
issuer.
2. The Portfolio will not purchase the securities of any issuer if, as a
result, more than 25% of the Portfolio's total assets (taken at current
value) would be invested in the securities of issuers having their
principal business activities in the same industry.
3. The Portfolio may (a) borrow money from banks or from other funds
advised by FMR for temporary or emergency purposes in an aggregate amount
not exceeding 33 1/3% of the value of total assets; (b) may engage in
reverse repurchase agreements; and (c) may not purchase any security while
borrowings representing more than 5% of net assets are outstanding.
4. The Portfolio temporarily may lend portfolio securities to brokers,
dealers and institutions when the loans are fully collateralized. The
Portfolio also may make cash loans to other funds advised by FMR. FMR will
limit all loans to 33 1/3% of total assets.
Limitations 1 and 2 do not apply to U.S. government securities. The
Portfolio's investment objective, Limitations 1 and 2 and the percentage
limitations on borrowing and lending in Limitations 3 and 4 are fundamental
policies and can only be changed by vote of a majority of the Portfolio's
outstanding shares. The limitations and policies discussed in this
Prospectus are considered at the time of purchase. Except with respect to
the Portfolio's borrowing policy, the sale of securities is not required in
the event of a subsequent change in circumstances.
If the Portfolio borrows money, its share price may be subject to
greater fluctuation until the borrowing is paid off. To this extent,
purchasing securities while borrowings are outstanding may involve an
element of leverage.
11.HOW TO INVEST
Shares of the Portfolio are offered continuously at their net asset value
next determined after an order is received and accepted. The Portfolio does
not impose any sales charges in connection with the purchase of its shares
although institutions may charge their clients fees in connection with
purchases and sales for the accounts of their clients.
SHARE PRICE. The price of one share of the Portfolio is its net asset value
per share (NAV). Fidelity Service Co mpany (Service), an affiliate of
FMR, calculates the NAV at the close of the Portfolio's business day, which
coincides with the close of business of the New York Stock Exchange (NYSE)
- - - normally 4:00 p.m. Eastern time. The Portfolio is open for business each
day the NYSE is open (see "Holiday Schedule," below). NAV is computed for
the Portfolio by adding all securities plus cash and other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding. Portfolio securities and other assets are valued primarily on
the basis of market quotations, or if quotations are not available, by a
method that the Board of Trustees believes in good faith accurately
reflects fair value.
HOLIDAY SCHEDULE. The Portfolio is open for business and the NAV is
calculated each day the NYSE is open for trading. The NYSE has designated
the following holiday closings for 1994: Presidents' Day, Good Friday,
Memorial Day (observed) , Independence Day (observed) , Labor
Day, Thanksgiving Day, and Christmas Day (observed). Although FMR expects
the same holiday schedule, with the addition of New Year's Day, to be
observed in the future, the NYSE may modify its holiday schedule at any
time. On any day that the NYSE closes early, or as permitted by the SEC,
the right is reserved to advance the time on that day by which purchase and
redemption orders must be received. To the extent that the Portfolio's
securities are traded in other markets on days when the NYSE is closed, the
Portfolio's NAV may be affected on days when investors do not have access
to the Portfolio to purchase or redeem shares. Certain Fidelity
funds may follow different holiday schedules.
HOW TO INVEST
INITIAL (minimum) INVESTMENT *
$100,000
METHOD
BY WIRE
ADDITIONAL (minimum) INVESTMENT
- - --
BY MAIL
$100,000
- - --
Fidelity U.S. Equity Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
Please make your check payable to
"Fidelity U.S. Equity Index
Portfolio", with your account
number on the check, and mail to:
THE ADDRESS PRINTED ON YOUR
ACCOUNT STATEMENT.
BY EXCHANGE
(From an account in
one of Fidelity's other
funds.)
$100,000
- - --
Not Available
BY FIDELITY MONEY LINE
$250
(You must have received prior
notification by mail from Fidelity
Investments Institutional
Operations Company (FIIOC)
that your Fidelity Money Line is
active. The maximum transaction
amount is $50,000.)
INDIVIDUAL ACCOUNTS (Participant)
If you are a participant investing through a retirement plan sponsor or
other institution, please refer to
your plan materials or contact your plan sponsor directly for all services.
INITIAL INVESTMENT Corporate Retirement Plans 800-962-1375
(Client Services) "Not for Profit" Retirement Plans 800-343-0860
Financial Institutions 800-843-3001
ADDITIONAL INVESTMENT Corporate Retirement Plans 800-962-1375
(Trading) "Not for Profit" Retirement Plans 800-343-0860
Financial Institutions 800-343-6310
* Minimum may be waived for tax-saving retirement plans.
MINIMUM INVESTMENT AND ACCOUNT BALANCE. The minimum initial investment to
establish a new account in the Portfolio is $100,000. If you do not
already have a Fidelity mutual fund account, a completed, signed
application must precede or accompany your initial investment.
Subsequent investments may be in any amount. If you want to keep your
account open, please leave $100,000 in it. If your account balance falls
below $100,000 due to redemption, your account may be closed and the
proceeds mailed to you at the record address. You will be given 30 days'
notice that your account will be closed unless you make an additional
investment to increase your account balance to the $100,000 minimum. The
minimum investment requirement may not apply to participants of tax-saving
retirement plans.
ADDITIONAL INVESTMENTS. Additional investments by wire, mail or exchange
from another Fidelity fund may be made in any amount. The minimum and
maximum additional investment amount via Fidelity Money Line is $250 and
$50,000, respectively.
TO INVEST BY WIRE. Prior to opening an account by wire, all investors must
call the appropriate telephone number in the chart on page 7
to advise Client Services of the investment and to obtain an account
number, wiring instructions, and instructions regarding the establishment
of an account.
To make additional investments by wire, you must call Trading before 4:00
p.m. Eastern time at the appropriate telephone number in the chart above.
We must receive your wire payment by the close of the Portfolio's following
business day after you have placed your telephone order (or your purchase
may be canceled and you could be held liable for resulting fees or losses).
Your bank may charge a fee for wiring funds to the Portfolio.
TO INVEST BY MAIL. To open an account by mail, you must send a check
payable to "Fidelity U.S. Equity Index Portfolio" to:
Fidelity U.S. Equity Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
To make additional investments by mail, please make your check payable to
"Fidelity U.S. Equity Index Portfolio", include your account number on the
check and mail your investment to the address printed on your account
statement.
Your purchase will be processed at the next NAV calculated after your order
is received and accepted. If your check does not clear, your purchase will
be canceled and you could be held liable for any losses or fees incurred.
When you purchase by check or via Fidelity Money Line , the Portfolio
may hold payment on redemptions until it is reasonably satisfied that the
investment has been collected (which can take up to seven business
days). To avoid this collection period you can invest by wire (see "To
Invest by Wire," above).
12.TO INVEST BY EXCHANGE. When opening an account by exchange from an
account in one of Fidelity's other funds, your new account must be
established with the same name(s), address and taxpayer identification
number as your other Fidelity account. To open an account or make an
additional investment by exchange, please call Trading before 4:00 p.m.
Eastern time at the appropriate telephone number in the chart on page .
TO INVEST VIA FIDELITY MONEY LINE. Fidelity Money Line is available to
certain retirement investors who invest directly through Fidelity. Fidelity
Money Line allows you to authorize electronic transfers of money to buy or
sell shares. You can use Fidelity Money Line like an "electronic check" to
move money between your bank account and your account in the Portfolio with
one telephone call. Allow two to three business days after the call for the
transfer to take place.
To make additional investments via Fidelity Money Line, you must have
received prior notification from FIIOC that your Fidelity Money Line is
active. When you purchase via Fidelity Money Line, the Portfolio may
hold payment on redemptions until it is reasonably satisfied that the
investment has been collected (which can take up to seven business
days). To avoid this collection period you can invest by wire (see "To
Invest by Wire," above). To make an additional investment via Fidelity
Money Line, or to inquire about the service, please call Client Services
before 4:00 p.m. Eastern time at the appropriate telephone number in the
chart on page .
You may initiate many transactions by telephone. Note that
Fidelity will not be responsible for any losses resulting from
unauthorized telephone transactions if it follows reasonable procedures
designed to verify the identity of the caller. Fidelity will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of your confirmation statements
immediately after you receive them. If you do not want the ability to
redeem and exchange by telephone, call Fidelity for instructions.
TO INVEST BY SECURITIES EXCHANGE. Shares of the Portfolio may be purchased
in exchange for securities held by an investor which are acceptable to the
Portfolio. Only securities which meet the Portfolio's investment objective,
policies and limitations will be eligible for exchange. However,
Distributors reserves the right to refuse a tender for any reason. A gain
or loss for federal income tax purposes may be realized by the investor
upon a securities exchange depending upon the cost basis of the securities
tendered.
If you are interested in purchasing shares by securities exchange you
should call Client Services at the appropriate telephone number in
the chart on page for further information, including specific details
about the securities exchange program and instructions on submission of a
letter of intention to Distributors. DO NOT SEND SECURITIES TO THE
PORTFOLIO OR TO DISTRIBUTORS.
CHOOSING A DISTRIBUTION OPTION. You may choose from three distribution
options when filling out an application :
A. The SHARE OPTION reinvests your income dividends and capital gain
distributions.
B. The INCOME-EARNED OPTION pays your income dividends in cash and
reinvests your capital gain distributions.
C. With the CASH OPTION you receive income dividends and capital gain
distributions in cash.
On the day the Portfolio goes ex-dividend, the amount of the distribution
is deducted from its share price. Reinvestment of distributions will be
made at that day's NAV. Cash distributions checks will be mailed within
seven days.
TAX-SAVING RETIREMENT PLANS. Fidelity can set up your new account in the
Portfolio under one of several tax-sheltered plans. These plans let you
save for retirement and shelter your investment income from current taxes.
Minimums may differ from those listed on page .
(bullet) Defined Contribution Plans such as 401(k), company sponsored IRA
programs, Thrift, Keogh or Corporate Profit-Sharing or Money-Purchase Plans
are open to self-employed people and their partners or to corporations, to
benefit themselves and their employees.
(bullet) 403(b) Custodial Accounts are open to employees of most
non-profit organizations.
(bullet) Defined Benefit Plans are open to corporations of all sizes to
benefit their employees.
(bullet) 457 Plans are open to employees of most government agencies.
If you are a participant in certain tax-sheltered retirement plans, you may
move any distributions you receive from the plan to a Fidelity Rollover IRA
without incurring a sales charge. You may do so by a direct transfer of
assets or by making the investment within 60 days of the date of the
distribution. Consult your plan administrator or a tax adviser for more
details. You also can elect to take your distributions in kind and
establish an IRA rollover account in the Portfolio. For such IRA rollovers
to the Portfolio, there is no minimum investment required when opening an
account. You may invest in most Fidelity retail funds without paying a
sales charge. See your plan materials for more information.
SUBACCOUNTING AND SPECIAL SERVICES. Special processing has been arranged
with FIIOC for banks, corporations and other institutions that wish to open
multiple accounts (a master account and subaccounts). If you wish to
utilize FIIOC's subaccounting facilities or other special services for
individual or multiple accounts, you will be required to enter into a
separate agreement with FIIOC. Charges for these services, if any, will be
determined on the basis of the level of services to be rendered.
Subaccounts may be opened with the initial investment or at a later date
and may be established with registration either by name or by number.
13.HOW TO EXCHANGE
The exchange privilege is a convenient way to buy shares in Fidelity's
other funds and in the Portfolio as your goals or market conditions change
(see "To Invest by Exchange," page for instructions on exchanging shares
of other Fidelity funds for shares of the Portfolio). You may exchange
shares of this Portfolio for shares of Fidelity funds registered for
sale in your state. You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
Please read the prospectus of the fund into which you want to exchange
for relevant information, including any applicable sales charges. Each
exchange may produce a capital loss or taxable capital gain. (Please
consult "Distributions and Taxes," page .)
You may exchange all or any part of the value of your accounts on any day
the Portfolio is open for business. Exchanges may be requested in writing
or by telephone and are effected at the NAV next determined after receipt
of the exchange request. When exchanging into a nother Fidelity fund,
you must meet the minimum investment requirements of that fund. You should
note that as exchange transactions actually involve the purchase or
redemption of shares, all exchanges will be subject to conditions described
in "How to Invest," beginning on page or in "How to Redeem," page .
Written requests for exchange should be mailed to:
Fidelity U.S. Equity Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
To exchange by telephone call Trading before 4:00 p.m. Eastern time at the
appropriate telephone number in the chart on page .
To protect the Portfolio's performance and shareholders, Fidelity
discourages frequent trading in response to short-term market fluctuations.
You may make four exchanges per calendar year out of the Portfolio; if you
exceed this limit, your future purchases of (including exchanges into)
Fidelity funds may be permanently refused. For purposes of the four
exchange limit, accounts under common ownership or control, including
accounts having the same taxpayer identification number, will be
aggregated. Other funds may have different exchange restrictions. Check
each fund's prospectus for details. The exchange limit may be modified for
accounts in certain institutional retirement plans to conform to plan
exchange limits and Department of Labor regulations. See your plan
materials for further information.
The Portfolio reserves the right at any time without prior notice to refuse
exchange purchases by any person or group if, in FMR's judgment, the
Portfolio would be unable to invest effectively in accordance with its
investment objective and policies or might otherwise be adversely affected.
The Portfolio may terminate or modify the exchange privilege in the future.
14.HOW TO REDEEM
You may redeem all or a portion of your shares on any business day (see
"Holiday Schedule," page ). Your shares will be redeemed at the NAV next
calculated after the Portfolio has received and accepted your redemption
request. The wiring of redemption proceeds is available only to investors
who have previously established the wire privilege (see "To Redeem by
Telephone," page ).
Once your shares are redeemed, the Portfolio normally will send you the
proceeds on the next business day. If making immediate payment could
adversely affect the Portfolio, it may take up to seven business
days to pay you. Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day (but
may take up to seven business days) after your telephone call. Remember
that the Portfolio may hold payment until we are reasonably
satisfied that we have collected investments which were made by check or
via Fidelity Money Line (which may take up to seven business days).
TO REDEEM BY MAIL. Send a letter of instruction with your signature(s)
guarantee to:
Fidelity U.S. Equity Index Portfolio
FIIOC, ZR5
P.O. Box 1182
Boston, MA 02103-1182
The letter should specify the name of the Portfolio, the number of shares
to be sold, your name, your account number, and should include the
additional requirements listed below that apply to your particular account.
<TABLE>
<CAPTION>
<S> <C>
Type of Registration Requirements
Individual, Joint Tenants, Sole Proprietorship, Custodial (Uniform Gifts or Letter of instruction
Transfers to Minors Act), General Partners signed by all person(s)
required to sign for the
account exactly as it is
registered, accompanied
by signature
guarantee(s).
Corporations, Associations Letter of instruction and
a corporate resolution,
signed by person(s)
required to sign for the
account accompanied by
signature guarantee(s).
Trusts A letter of instruction
signed by the
Trustee(s)with a
signature guarantee. (If
the Trustee's name is
not registered on your
account, also provide a
copy of the trust
document, certified
within the last 60 days.)
</TABLE>
If you do not fall into any of these registration categories (e.g.,
Executors, Administrators, Conservators, or Guardians), please call Client
Services at the appropriate telephone number in the chart on page for
further instructions.
A signature guarantee is a widely accepted way to protect you and FIIOC by
verifying the signature on your request; it may not be provided by a notary
public. Signature guarantees will be accepted from banks, brokers, dealers,
municipal securities dealers, municipal securities brokers, government
securities dealers, government securities brokers, credit unions (if
authorized under state law), national securities exchanges, registered
securities associations, clearing agencies and savings associations.
TO REDEEM BY TELEPHONE. You may redeem an amount from your account in the
Portfolio by instructing FIIOC to have the proceeds of redemptions wired
directly to your previously designated bank account(s). There is no charge
imposed for wiring of redemption proceeds. In making redemption requests,
the name(s) of the registered shareholder(s) and the account number(s) must
be supplied. Provided that your account registration has not changed within
the last 60 days, you may redeem shares of the Portfolio worth $100,000 or
less by telephone. Your redemption proceeds will be sent to the record
address.
To redeem by telephone, call Trading before 4:00 p.m. Eastern time at the
appropriate telephone number below:
INDIVIDUAL ACCOUNTS (Participant)
If you are investing through a retirement plan sponsor or other
institution, please refer to your plan materials or contact your plan
sponsor directly.
RETIREMENT PLANS
Corporate 800-962-1375
"Not for Profit" 800-343-0860
FINANCIAL INSTITUTIONS 800-343-6310
TO REDEEM VIA FIDELITY MONEY LINE. You must have received prior
notification by mail from FIIOC that your Fidelity Money Line is active.
The minimum and maximum redemption amount via Fidelity Money Line is $2,500
and $50,000, respectively. Accounts may not be closed by this service. To
redeem via Fidelity Money Line call Client Services at the appropriate
telephone number above.
ADDITIONAL INFORMATION. In order to allow FMR to manage the Portfolio most
effectively, investors are strongly urged to initiate all trades
(investments, exchanges and redemptions of shares) as early in the day as
possible and to notify Client Services at least one day in advance of
trades in excess of $500,000. In making these trade notifications, the
name(s) of the registered shareholder(s) and the account number(s) must be
supplied.
When the NYSE is closed (or when trading is restricted) for any reason
other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, the
Portfolio may suspend redemption or postpone payment dates. If you are
unable to execute your transactions by telephone (for example, during times
of unusual market activity) consider placing your order by mail.
The offering of shares of the Portfolio may be suspended for a period of
time, and the Portfolio reserves the right to reject any specific purchase
order, including certain purchases by exchange. Purchase orders may be
refused if, in FMR's opinion, they are of a size that would disrupt
management of the Portfolio. The Portfolio may discontinue offering its
shares at any time or in any particular state without notice to
shareholders.
STATEMENTS AND REPORTS. You will receive a statement after every
transaction (except a reinvestment of dividends or capital gains) that
affects your share balance or your account registration. The Portfolio does
not issue share certificates, but FIIOC mails investors a confirmation of
each investment or redemption from their account. FIIOC will send
retirement plan participants account statements setting forth the
transactions in their account for the quarter and quarter-end balances; all
other investors will receive a similar statement for the month and the
month-end balances of full and fractional shares held in the account. This
account statement will be sent within ten days after the close of the
period.
At least twice a year you will receive the Portfolio's financial
statements. To reduce expenses, only one copy of most reports (such as the
Portfolio's Annual Report) may be mailed to your household. Write to the
Portfolio if you need to have additional reports sent each time. The
Portfolio pays for these shareholder services but not for special services,
such as a request for a historical transcript of an account. You may be
required to pay a fee for these special services.
15.DISTRIBUTIONS AND TAXES
The following discussion describes the status of distributions for federal
income tax purposes. Whether it is applicable to you depends on your filing
status. If you have invested through a tax-sheltered retirement plan, you
generally will not incur federal income tax liability from your investment
in the Portfolio until you withdraw money from the retirement plan.
Income dividends normally are delayed. Any net capital gains normally are
distributed in December.
FEDERAL TAXES. Distributions from the Portfolio's income and short-term
capital gains are taxed as dividends, and long-term capital gain
distributions are taxed as long-term capital gains. A portion of the
Portfolio's dividends may qualify for the dividends received deduction for
corporations. The Portfolio's distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares, except
that distributions declared in December and paid in January are taxable as
if paid on December 31st. The Portfolio will send you a tax statement by
January 31 showing the tax status of the distributions you received in the
past year, and will file a copy with the Internal Revenue Service (IRS).
CAPITAL GAINS. You may realize a capital gain or loss when you redeem
(sell) or exchange shares. For most types of accounts, the Portfolio will
report the proceeds of your redemptions to you and the IRS annually.
However, because the tax treatment also depends on your purchase price and
your personal tax position, you should also keep your regular account
statements to use in determining your tax.
"BUYING A DIVIDEND." On the record date for a distribution, the Portfolio's
share price is reduced by the amount of the distribution. If you buy shares
just before the record date (buying a dividend), you will pay the full
price for the shares and then receive a portion of the price back as a
taxable distribution.
OTHER TAX INFORMATION. In addition to federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your
area. Tax considerations may be different for investors purchasing shares
of the Portfolio through certain retirement plans.
When you sign your account application, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the
Portfolio to withhold 31% of your taxable distributions and redemptions.
16.PORTFOLIO TRANSACTIONS
FMR uses various brokerage firms to carry out the Portfolio's transactions.
FMR chooses broker-dealers by judging professional ability and quality of
service. Since FMR places a large number of transactions, including those
of Fidelity's other funds, the Portfolio pays lower commissions than those
paid by most individual investors.
The Portfolio has authorized FMR to allocate transactions to some
broker-dealers who help distribute the Portfolio's shares or the shares of
Fidelity's other funds, and on an agency basis, to Fidelity Brokerage
Services, Inc. (FBSI) and to Fidelity Brokerage Services, Ltd., affiliates
of FMR. FMR will make such allocations if commissions are comparable to
those charged by non-affiliated, qualified broker-dealers for similar
services.
FMR may also allocate brokerage transactions to the Portfolio's
custodian, acting as a broker-dealer, or to other broker-dealers, so long
as transaction quality and commission rates are comparable to those of
other broker-dealers, where the broker-dealers will allocate a portion of
the commissions paid toward payment of the Portfolio's expenses. These
expenses currently include transfer agent and custodian fees.
Higher commissions may be paid to those firms that provide research
services to the extent permitted by law. FMR also is authorized to allocate
brokerage transactions to FBSI in order to secure from FBSI research
services produced by third party, independent entities. FMR may use this
research information in managing the Portfolio's assets, as well as assets
of other clients.
The frequency of portfolio transactions - the Portfolio's turnover rate -
will vary from year to year depending on market conditions. The
Portfolio's turnover rate for the fiscal year ended February 28, 1994 was
4%.
17.PERFORMANCE
The Portfolio's performance may be quoted in advertising in terms of YIELD
and TOTAL RETURN. All performance information is historical and is not
intended to indicate future performance.
YIELD is a way of showing the rate of income the Portfolio earns on its
investments as a percentage of the Portfolio's share price. To calculate
yield, the Portfolio takes the income it earned from its portfolio of
investments for a 30-day period (net of expenses), divides it by the
average number of Portfolio shares entitled to receive dividends, and
expresses the result as an annualized percentage rate based on the
Portfolio's share price at the end of the 30-day period. Yields are
calculated according to accounting methods that are standardized for all
stock and bond funds. Because yield accounting methods differ from the
methods used for other accounting purposes, the Portfolio's yield may not
equal the income paid to your account, or the income reported in the
Portfolio's financial statements.
TOTAL RETURNS are based on the overall dollar or percentage change in value
of a hypothetical investment in a fund. The Portfolio's total return shows
its overall change in value, including changes in share price and assuming
all the Portfolio's dividends and capital gain distributions are
reinvested. A CUMULATIVE TOTAL RETURN reflects the Portfolio's performance
over a stated period of time. An AVERAGE ANNUAL TOTAL RETURN reflects the
hypothetical annually compounded return that would have produced the same
cumulative return if the Portfolio's performance had been constant over the
entire period. Because average annual total returns tend to smooth
out variations in the Portfolio's return, you should recognize that they
are not the same as actual year-by-year results. To illustrate the
components of overall performance, the Portfolio may separate its
cumulative and average annual total returns into income results and
capital gain or loss. The Portfolio may quote its total returns on a
before-tax or after-tax basis.
The Portfolio's total returns as compared to the cumulative total returns
of the S&P 500 for periods ended February 28, 1994 were as
follows:
Average Cumulative Cumulative
Annual Total Total S&P 500 Total
Returns** Returns** Returns
One Year 8.06% 8.06% 8.33%
Five Year 13.29% 86.64% 89.60%
Life of Portfolio* 13.52% 115.09% 119.11%
* Life of Portfolio: February 17, 1988 (commencement of operations) to
February 28, 1994.
** If FMR had not reimbursed certain Portfolio expenses during these
periods, the total returns would have been lower.
The figures for the S&P 500 show the change in value of the S&P 500
and assume reinvestment of all dividends paid by the S&P 500 stocks.
Tax consequences are not included in the illustration, nor are brokerage or
other fees included in the S&P 500 figures. The Portfolio may quote its
adjusted net asset value, including all distributions paid. This may be
averaged over specified periods and may be used to calculate the
Portfolio's moving average. Other illustrations may show moving averages
over specified periods.
18.MANAGEMENT CONTRACT, DISTRIBUTION PLAN AND SERVICE AGREEMENTS
For managing its investments and business affairs, the Portfolio
pays a monthly management fee to FMR at the annual rate of .28% of the
average net assets of the Portfolio. One-twelfth of this annual fee rate is
applied to the net assets averaged over the most recent month, giving a
dollar amount which is the management fee for that month.
FMR has voluntarily agreed, subject to revision or termination on 90 days'
notice to shareholders, to reimburse the Portfolio if, and to the extent
that, any of the Portfolio's aggregate operating expenses (including
the management fee, but generally excluding interest, taxes, brokerage
commissions and extraordinary expenses) exceed an annual rate of .28% of
the average net assets of the Portfolio for any fiscal year or for a
portion of such year if FMR's agreement is terminated or revised before a
year end. Such reimbursements have the effect of decreasing the Portfolio's
expenses, thereby increasing the Portfolio's total return. If this policy
were not in effect, aggregate operating expenses for the Portfolio would
have been .61% of the Portfolio's average net assets for the fiscal year
ended February 28, 1994.
FIIOC, 82 Devonshire Street, Boston, Massachusetts 02109, an
affiliate of FMR, is transfer and shareholders' servicing agent for the
Portfolio and maintains shareholder records. The Portfolio pays FIIOC
transfer agent fees based on the type, size and number of accounts in the
Portfolio and the number of monetary transactions made by shareholders.
Service, 82 Devonshire Street, Boston, Massachusetts 02109, an
affiliate of FMR, calculates the Portfolio's daily share price, maintains
its general accounting records and administers the Portfolio's securities
lending program. The fees for pricing and bookkeeping services are based on
the Portfolio's average net assets, but must fall within a range of $45,000
to $750,000. The fees for securities lending services are based on the
number and duration of individual securities loans.
DISTRIBUTION AND SERVICE PLAN. The Portfolio has adopted a Distribution and
Service Plan (the Plan) under Rule 12b-1 under the Investment Company
Act of 1940. No separate payments are authorized to be made by the
Portfolio under the Plan. Rather, the Plan recognizes that FMR may use its
management fee or other resources to pay expenses associated with
activities primarily intended to result in the sale of the Portfolio's
shares. It also provides that FMR may make payments from these sources to
third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of Portfolio shares. The Board of
Trustees has not yet authorized such payments.
Distributors may, at its own expense, provide promotional incentives to
investment professionals who support the sale of shares of the Portfolio
without reimbursement from the Portfolio. Investment professionals are
securities dealers who have sold the Portfolio's shares, or other entities,
including banks and other financial institutions that have special
arrangements in connection with Distributors' sales activities. In some
instances, these incentives may be offered only to certain institutions
whose representatives have sold or are expected to sell significant amounts
of shares.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been fully defined, in Distributors' opinion it
should not prohibit banks from being paid for shareholder servicing and
recordkeeping. If, because of changes in law or regulation, or because of
new interpretations of existing law, a bank or a fund were prevented from
continuing these arrangements, it is expected that the Board of Trustees
would make other arrangements for these services and that shareholders
would not suffer adverse financial consequences. In addition, state
securities laws on this issue may differ from the interpretations of
federal law expressed herein, and banks and other financial institutions
may be required to register as dealers pursuant to state laws.
FIDELITY U.S. EQUITY INDEX PORTFOLIO AND THE FIDELITY ORGANIZATION.
Fidelity U.S. Equity Index Portfolio is a diversified portfolio of Fidelity
Institutional Trust (the Trust), an open-end management investment company
established as a Massachusetts business trust on July 21, 1987. The Trust's
Board of Trustees supervises the Portfolio's activities and reviews
contractual arrangements with companies that provide the Portfolio with
services.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings, although special meetings may be called for a
specific portfolio or for the Trust as a whole, for purposes such as
electing or removing Trustees, changing fundamental investment policies or
limitations, or approving a management contract. As a shareholder you
receive one vote for each full share and fractional votes for fractional
shares of the portfolio you own. Separate votes are taken by each portfolio
if a matter affects just that portfolio.
Fidelity Investments is one of the largest investment management
organizations in the U.S. and has its principal business address at 82
Devonshire Street, Boston, Massachusetts. It includes a number of different
subsidiaries and divisions which provide a variety of financial services
and products. The Portfolio employs various Fidelity companies to perform
activities required for its operation.
FMR is the original Fidelity company, founded in 1946. It provides a
number of mutual funds and other clients with investment research and
portfolio management services. It maintains a large staff of experienced
investment personnel and a full complement of related support facilities.
As of February 28, 1994, FMR advised funds having more than 15
million shareholder accounts with a total value of more than $ 225
billion. Distributors distributes shares for the Fidelity funds. FMR Corp.
is the parent company for the Fidelity companies. Through ownership of
voting common stock, Edward C. Johnson 3d (President and a Trustee of
the Trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
19.APPENDIX
The following paragraphs provide a brief description of securities in which
the Portfolio may invest and transactions it may make. The Portfolio is not
limited by this discussion, however, and may purchase other types of
securities and enter into other types of transactions if they are
consistent with the Portfolio's investment objective and policies.
OPTIONS AND FUTURES CONTRACTS. The Portfolio may buy and sell options and
futures contracts to manage cash flow and to attempt to remain fully
invested, instead of or in addition to buying and selling stocks. Some
options and futures strategies, including selling futures, buying puts, and
writing calls, hedge the Portfolio's investments against price
fluctuations. Other strategies, including buying futures, writing puts, and
buying calls, tend to increase market exposure. Options and futures may be
combined with each other in order to adjust the risk and return
characteristics of the overall strategy. The Portfolio may invest in
options and futures based on any type of security or index related to its
investments, including options and futures traded on foreign exchanges and
options not traded on exchanges.
Options and futures can be volatile investments, and involve certain risks.
If FMR applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower the Portfolio's
return. Options and futures traded on foreign exchanges generally are not
regulated by U.S. authorities, and may offer less liquidity and less
protection to the Portfolio in the event of default by the other party to
the contract. The Portfolio could also experience losses if the prices of
its options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an
illiquid secondary market.
The Portfolio intends to use options and futures contracts in only a
portion of its portfolio, not to exceed 35% of its total assets. FMR
expects that the underlying index value of futures and options held by the
Portfolio will be less than 15% of total assets under normal conditions.
ILLIQUID INVESTMENTS. The Portfolio may invest up to 10% of its net assets
in illiquid investments. Under the supervision of the Board of Trustees,
FMR determines the liquidity of the Portfolio's investments. The absence of
a trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for the Portfolio to sell them promptly at an acceptable price.
INDEXED SECURITIES. Indexed securities include commercial paper,
certificates of deposit, and other fixed-income securities whose values at
maturity or coupon interest rates are determined by reference to the return
of the S&P 500 or a comparable stock index. Indexed securities can be
affected by changes in interest rates and the creditworthiness of their
issuers as well as stock prices, and may not track the S&P 500 as
accurately as direct investments in S&P 500 stocks.
SWAP AGREEMENTS. Swap agreements typically involve a commitment by the
Portfolio to pay specified amounts (such as fixed or floating interest
rate) at regular intervals in return for all or a portion of the investment
return of the S&P 500 or a comparable stock index. As with stock index
options and futures, swap agreements provide exposure to the stock market,
but may not track market returns as accurately as direct investments in
S&P 500 stocks. Swap agreements may fail to track their indices
effectively if the Portfolio does not hold assets that offset its payment
obligations. In addition, the Portfolio typically depends on the credit of
a single counterparty when investing in swap agreements, and may suffer
losses if the counterparty's credit declines.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security at one price and simultaneously agrees to sell it
back at a higher price. The Portfolio may also make securities loans to
broker-dealers and institutional investors, including FBSI . In the
event of bankruptcy of the other party to either a repurchase agreement or
a securities loan, the Portfolio could experience delays in recovering its
cash or the securities it lent. To the extent that, in the meantime, the
value of securities purchased had decreased, or the value of the securities
lent had increased, the Portfolio could experience a loss. In all cases,
FMR must find the creditworthiness of the other party to the transaction
satisfactory.
INTERFUND BORROWING PROGRAM. The Portfolio has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. Interfund loans and borrowings normally will extend
overnight, but can have a maximum duration of seven days. The Portfolio
will lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. The Portfolio will
not lend more than 5% of its assets to other funds, and will not borrow
through the program if, after doing so, total outstanding borrowings would
exceed 15% of its total assets. Loans may be called on one day's notice,
and the Portfolio may have to borrow from a bank at a higher interest rate
if an interfund loan is called or not renewed. Any delay in repayment to a
lending fund could result in a lost investment opportunity or additional
borrowing costs.
PERFORMANCE UPDATE
$100,000 OVER LIFE OF FUND
U.S. Equity Index (650)
02/17/88 100000.00 100000.00
02/29/88 103400.00 103287.20
03/31/88 100200.00 100095.63
04/30/88 100900.00 101206.69
05/31/88 101700.00 102087.19
06/30/88 106307.66 106772.99
07/31/88 106106.12 106367.25
08/31/88 102478.56 102750.77
09/30/88 106727.96 107127.95
10/31/88 109774.43 110106.11
11/30/88 108149.64 108531.59
12/31/88 110097.83 110430.89
01/31/89 118116.15 118514.43
02/28/89 115237.78 115563.42
03/31/89 117909.84 118256.05
04/30/89 124121.07 124393.54
05/31/89 129090.05 129431.48
06/30/89 128241.54 128693.72
07/31/89 139909.33 140314.76
08/31/89 142513.75 143064.93
09/30/89 141893.03 142478.36
10/31/89 138644.37 139172.87
11/30/89 141473.84 142011.99
12/31/89 144725.55 145420.28
01/31/90 134955.50 135662.58
02/28/90 136673.32 137412.63
03/31/90 140223.80 141054.06
04/30/90 136761.49 137527.71
05/31/90 150069.77 150936.66
06/30/90 148987.01 149910.29
07/31/90 148442.06 149430.58
08/31/90 134818.53 135922.05
09/30/90 128134.10 129302.65
10/31/90 127584.64 128746.65
11/30/90 135826.54 137063.68
12/31/90 139466.58 140887.76
01/31/91 145578.66 147030.47
02/28/91 155913.64 157543.14
03/31/91 159698.28 161355.69
04/30/91 160034.02 161742.94
05/31/91 166860.64 168730.24
06/30/91 159228.13 161002.39
07/31/91 166552.85 168505.10
08/31/91 170496.93 172498.67
09/30/91 167580.94 169617.95
10/31/91 169850.14 171890.83
11/30/91 162929.06 164963.63
12/31/91 181531.45 183835.47
01/31/92 178058.27 180416.13
02/29/92 180373.73 182761.54
03/31/92 176779.45 179197.69
04/30/92 181906.87 184466.10
05/31/92 182839.13 185369.98
06/30/92 180038.57 182607.97
07/31/92 187427.77 190076.64
08/31/92 183557.24 186180.06
09/30/92 185665.47 188376.99
10/31/92 186137.60 189036.31
11/30/92 192511.37 195482.45
12/31/92 194881.44 197886.88
01/31/93 196428.12 199549.13
02/28/93 199045.58 202263.00
03/31/93 203226.05 206530.75
04/30/93 198196.36 201532.70
05/31/93 203494.44 206933.78
06/30/93 203984.00 207533.89
07/31/93 203136.08 206703.75
08/31/93 210888.44 214537.82
09/30/93 209194.03 212885.88
10/31/93 213458.32 217292.62
11/30/93 211387.09 215228.34
12/31/93 213970.40 217832.60
01/31/94 221156.43 225238.91
02/28/94 215085.47 219112.41
$100,000 OVER LIFE OF FUND: LET'S SAY YOU INVESTED $100,000 IN FIDELITY
U.S. EQUITY INDEX PORTFOLIO ON FEBRUARY 17, 1988, WHEN THE FUND STARTED. BY
FEBRUARY 28, 1994, THE VALUE OF YOUR INVESTMENT WOULD HAVE GROWN TO
$215,085 - A 115.09% INCREASE ON YOUR INITIAL INVESTMENT. FOR COMPARISON,
LOOK AT HOW A $100,000 INVESTMENT IN THE S&P 500 (WITH DIVIDENDS
REINVESTED) DID OVER THE SAME PERIOD. IT WOULD HAVE GROWN TO $219,112 - A
119.11% INCREASE.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED FEBRUARY 28, 1994
Life of
One Five Fund
Year Years
FIDELITY U.S. EQUITY
8.06% 86.64% 115.09%
INDEX PORTFOLIO
S&P 500(Registered trademark) 8.33% 89.60 119.11%
%
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED FEBRUARY 28, 1994
Life of
One Five Fund
Year Years
FIDELITY U.S. EQUITY
8.06% 13.29% 13.52%
INDEX PORTFOLIO
S&P 500(Registered trademark) 8.33% 13.65% 13.87%
THE CHARTS ABOVE SHOW FIDELITY U.S. EQUITY INDEX PORTFOLIO'S TOTAL RETURNS,
WHICH INCLUDE CHANGES IN SHARE PRICE, AND REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS. FIGURES FOR THE S&P 500, AN UNMANAGED INDEX OF COMMON
STOCK PRICES, INCLUDE REINVESTMENT OF DIVIDENDS. S&P 500 IS A
REGISTERED TRADEMARK OF STANDARD & POOR'S CORPORATION.
AVERAGE ANNUAL TOTAL RETURNS ARE LOAD ADJUSTED. FIGURES FOR MORE THAN ONE
YEAR ASSUME A STEADY COMPOUNDED RATE OF RETURN AND ARE NOT THE FUND'S
YEAR-BY-YEAR RESULTS, WHICH FLUCTUATED OVER THE PERIODS SHOWN. THE LIFE OF
FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS, FEBRUARY 17, 1988, TO THE
PERIODS LISTED ABOVE.
ALL PERFORMANCE NUMBERS ARE HISTORICAL; THE FUND'S SHARE PRICE AND RETURN
WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
FIDELITY FUND 1ST PAGE PROOF - DISTRIBUTED 2/13/92
AN INTERVIEW WITH
JENNIFER FARRELLY,
PORTFOLIO MANAGER OF
FIDELITY U.S. EQUITY INDEX PORTFOLIO
Q. JENNIFER, HOW DID THE FUND DO?
A. The fund had a total return of 8.06% for the 12 months ended February
28, 1994. That's slightly below the benchmark against which it's measured,
the S&P 500 index, which was up 8.33% for the year. Since the fund
attempts to mirror the index, the slight difference in these returns can be
attributed to management expenses.
Q. WHICH SECTORS LED THE FUND'S PERFORMANCE?
A. Broadly speaking, cyclical stocks - those that tend to rise and fall
with the economy - were among the fund's best performers over the past
year. These stocks benefited from a strengthening U.S. economy, and they
cut across several sectors.
Q. CAN YOU GIVE US SOME EXAMPLES?
A. Although they were only about 5% of the fund on February 28, as measured
by the S&P 500 index industry groupings, consumer durables had the best
return of any sector. The Big Three auto makers - Chrysler, Ford and
General Motors - made up most of this group, and together they returned
more than 42% over the past year. Other stocks that benefited from the
improving economy included those in the capital goods sector - nearly 7% of
the fund. Machinery companies, in particular, effectively cut costs while
experiencing a surge in orders. Clark Equipment - up more than 140% - was
the S&P 500's top performer.
Q. WERE THERE ANY OTHER SECTORS THAT PROVIDED ATTRACTIVE RETURNS?
A. I would add technology, which made up more than 13% of the fund at the
end of February, and basic industries, nearly 8% of the fund, to the list
of winners. On the technology side, the boom in personal computers fueled
strong returns for the stocks of computer manufacturers and companies
specializing in computer networking, semiconductors and software. As for
the basic industries sector, gold and precious metals stocks led the way.
They benefited from an increased demand worldwide, and rose 56% over the
past year.
Q. THERE MUST HAVE BEEN LAGGARDS...
A. By far the most disappointing sector was consumer non-durables, which
made up nearly 20% of the index at the end of the period. These stocks
included food, beverage and tobacco companies, as well as apparel
manufacturers and health-care companies. Together, these stocks had a total
return of about -5% for the year.
Q. WHY THE POOR SHOWING?
A. With inflation remaining low, many of the food, beverage and tobacco
companies lost the ability to raise prices. In addition, consumers flocked
to generic, off-brand items to save money, which left manufacturers of
traditional, brand-name products struggling for sales. Apparel
manufacturers were also hurt by slow sales, as low interest rates enticed
consumers to splurge on larger, durable goods like homes and automobiles.
Q. WHAT ABOUT HEALTH CARE?
A. The health-care group had a split personality. Uncertainty over
health-care reform hurt the performance of many of these stocks; investors
worried about the ability of some health-care companies to raise prices
going forward. For example, hospital supply companies fell 22% for the year
and drug stocks were down about 8%. However, investors felt hospital
management companies, which purchase these supplies, would benefit from
lower prices. So while the health-care sector as a whole finished about -3%
for the year, hospital management companies were the S&P 500's top
performing industry, up more than 80%.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The volatility of S&P 500 stocks was unusually low last year, and I
expect that might change because the market's valuation - stock prices
compared to other measures like earnings - remains quite high. In fact, in
March, after the period ended, stocks fell on fears of rising interest
rates. It's tough to predict whether this might be part of a correction or
even a longer market downturn. However, history shows that over the long
term, stocks have been one of the best performing asset classes.
FIDELITY U.S. EQUITY INDEX PORTFOLIO
INVESTMENTS/FEBRUARY 28, 1994
(Showing Percentage of Total Value of Investments)
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - 97.3%
AEROSPACE & DEFENSE - 1.7%
AEROSPACE & DEFENSE - 1.2%
Boeing Co. 187,319 $ 8,757,108 09702310
Grumman Corp. 18,738 702,675 40018110
Lockheed Corp. 34,377 2,255,991 53982110
Martin Marietta Corp. 52,624 2,420,704 57290010
McDonnell Douglas Corp. 21,747 2,593,330 58016910
Northrop Corp. 27,054 1,088,924 66680710
Rockwell International Corp. 121,522 5,058,353 77434710
22,877,085
DEFENSE ELECTRONICS - 0.4%
E-Systems, Inc. 18,536 843,388 26915730
Loral Corp. 45,556 1,759,601 54385910
Raytheon Co. 74,866 4,641,692 75511110
7,244,681
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 17,050 1,589,913 36955010
TOTAL AEROSPACE & DEFENSE 31,711,679
BASIC INDUSTRIES - 7.4%
CHEMICALS & PLASTICS - 4.3%
Air Products & Chemicals, Inc. 63,028 3,001,709 00915810
Avery Dennison Corp. 32,151 1,004,719 05361110
Cytec Industries, Inc. (WI) (a) 7,072 108,732 23282010
du Pont (E.I.) de Nemours & Co. 373,740 19,948,373 26353410
Dow Chemical Co. 151,186 9,619,209 26054310
Eastman Chemical Co. 45,029 1,879,961 27743210
Engelhard Corp. 52,929 1,455,548 29284510
Ethyl Corp. 65,244 1,198,859 29765910
FMC Corp.(a) 19,753 965,428 30249130
First Mississippi Corp. 11,023 161,211 32089110
Goodrich (B.F.) Company 14,229 583,389 38238810
Grace (W.R.) & Co. 51,298 2,295,586 38388310
Great Lakes Chemical Corp. 39,200 3,067,400 39056810
Hercules, Inc. 23,462 2,701,063 42705610
Minnesota Mining & Manufacturing Co 118,965 12,535,937 60405910
Monsanto Co. 65,378 5,009,589 61166210
Morton International, Inc. 26,855 2,802,991 61933110
NL Industries, Inc. (a) 27,792 246,654 62915640
Nalco Chemical Co. 38,000 1,368,000 62985310
PPG Industries, Inc. 58,635 4,500,236 69350610
Praxair, Inc. 73,795 1,383,656 74005P10
Raychem Corp. 23,200 870,000 75460310
Rohm & Haas Co. 37,380 2,135,333 77537110
Union Carbide Corp. 83,695 1,998,218 90558110
80,841,801
IRON & STEEL - 0.4%
Armco, Inc. (a) 57,301 $ 329,481 04217010
Bethlehem Steel Corp. (a) 50,275 1,093,481 08750910
Inland Steel Industries, Inc. (a) 22,139 736,122 45747210
Nucor Corp. 47,900 2,772,213 67034610
USX-U.S. Steel Group 38,016 1,568,160 90337T10
Worthington Industries, Inc. 49,750 970,125 98181110
7,469,582
METALS & MINING - 0.7%
ASARCO, Inc. 23,045 581,886 04341310
Alcan Aluminium Ltd. 123,815 2,935,962 01371610
Aluminum Co. of America 48,803 3,672,426 02224910
Cyprus Amax Minerals Co. 50,373 1,523,783 23280910
Inco Ltd. 64,310 1,572,605 45325840
Phelps Dodge Corp. 38,872 2,181,691 71726510
Reynolds Metals Co. 32,962 1,672,822 76176310
14,141,175
PACKAGING & CONTAINERS - 0.2%
Ball Corp. 16,282 411,121 05849810
Bemis Co., Inc. 28,160 637,120 08143710
Crown Cork & Seal Co., Inc. (a) 48,608 1,841,028 22825510
2,889,269
PAPER & FOREST PRODUCTS - 1.8%
Boise Cascade Corp. 21,036 546,936 09738310
Champion International Corp. 51,211 1,613,147 15852510
Federal Paper Board Co., Inc. 23,244 621,777 31369310
Georgia-Pacific Corp. 49,423 3,521,389 37329810
International Paper Co. 68,023 4,940,170 46014610
James River Corp. of Virginia 44,959 859,841 47034910
Kimberly-Clark Corp. 88,700 4,900,675 49436810
Louisiana-Pacific Corp. 60,462 2,599,866 54634710
Mead Corp. 32,673 1,437,612 58283410
Potlatch Corp. 16,031 745,442 73762810
Scott Paper Co. 40,784 1,850,574 80987710
Stone Container Corp. (a) 39,227 622,729 86158910
Temple-Inland, Inc. 30,420 1,559,025 87986810
Union Camp Corp. 38,586 1,856,951 90553010
Westvaco Corp. 36,776 1,268,772 96154810
Weyerhaeuser Co. 113,038 5,369,305 96216610
34,314,211
TOTAL BASIC INDUSTRIES 139,656,038
CONGLOMERATES - 1.4%
Allied-Signal, Inc. 78,076 5,963,055 01951210
Crane Co. 16,503 470,336 22439910
Dial Corp. (The) 26,000 1,157,000 25247010
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
CONGLOMERATES - CONTINUED
Harris Corp. 21,948 $ 1,116,605 41387510
ITT Corp. 65,565 6,327,023 45067910
Litton Industries, Inc. (a) 25,060 1,675,888 53802110
Teledyne, Inc. 30,670 640,236 87933510
Textron, Inc. 48,701 2,824,658 88320310
Tyco Laboratories, Inc. 25,500 1,332,375 90212010
United Technologies Corp. 69,053 4,695,604 91301710
Whitman Corp. 59,130 946,080 96647K10
27,148,860
CONSTRUCTION & REAL ESTATE - 0.7%
BUILDING MATERIALS - 0.4%
Armstrong World Industries, Inc. 20,555 1,112,539 04247610
Masco Corp. 84,254 2,959,422 57459910
Owens-Corning Fiberglas Corp. (a) 23,646 957,663 69073420
Sherwin-Williams Co. 48,904 1,723,866 82434810
6,753,490
CONSTRUCTION - 0.1%
Centex Corp. 17,438 649,566 15231210
Kaufman & Broad Home Corp. (a) 17,793 366,981 48616810
Morrison-Knudsen Corp. 17,500 457,188 61844710
Pulte Corp. 15,128 512,461 74586710
Skyline Corp. 6,213 128,920 83083010
2,115,116
ENGINEERING - 0.2%
EG&G, Inc. 31,664 589,742 26845710
Fluor Corp. 45,292 2,009,833 34386110
Foster Wheeler Corp. 19,741 826,654 35024410
3,426,229
TOTAL CONSTRUCTION & REAL ESTATE 12,294,835
DURABLES - 4.7%
AUTOS, TIRES, & ACCESSORIES - 3.9%
Chrysler Corp. 194,312 11,027,206 17119610
Cooper Tire & Rubber Co. 46,200 1,247,400 21683110
Cummins Engine Co., Inc. 20,474 1,000,667 23102110
Dana Corp. 25,552 1,418,136 23581110
Eaton Corp. 38,398 2,222,284 27805810
Echlin, Inc. 32,065 957,942 27874910
Ford Motor Co. 274,113 17,029,270 34537010
General Motors Corp. 391,932 22,830,039 37044210
Genuine Parts Company 68,488 2,602,544 37246010
Goodyear Tire & Rubber Co. 82,832 3,748,148 38255010
Johnson Controls, Inc. 22,344 1,321,089 47836610
NACCO Industries, Inc. Class A 5,010 287,449 62957910
Navistar International Corp. (a) 40,307 $ 972,406 63934E10
PACCAR, Inc. 21,523 1,253,715 69371810
Pep Boys - Manny, Moe & Jack 33,500 954,750 71327810
SPX Corp. 7,614 123,728 78463510
Snap-on Tools Corp. 23,448 1,025,850 83303410
TRW, Inc. 35,169 2,571,733 87264910
72,594,356
CONSUMER ELECTRONICS - 0.4%
Black & Decker Corp. 46,168 940,673 09179710
Fedders USA Inc. (a) 11,115 77,805 31313510
Maytag Co. 59,190 1,035,825 57859210
Newell Co. 43,500 1,750,875 65119210
Stanley Works 24,701 1,062,143 85461610
Whirlpool Corp. 38,781 2,627,413 96332010
7,494,734
HOME FURNISHINGS - 0.0%
Bassett Furniture Industries, Inc. 8,031 238,922 07020310
TEXTILES & APPAREL - 0.4%
Hartmarx Corp. (a) 18,124 117,806 41711910
Liz Claiborne, Inc. 45,101 1,031,685 53932010
NIKE, Inc. Class B 41,800 2,163,150 65410610
Oshkosh B'Gosh, Inc. Class A 8,117 119,726 68822220
Reebok International Ltd. 46,531 1,541,339 75811010
Russell Corp. 22,646 639,750 78235210
Springs Industries, Inc. Class A 9,621 374,016 85178310
Stride Rite Corp. 27,800 476,075 86331410
VF Corp. 35,616 1,816,416 91820410
8,279,963
TOTAL DURABLES 88,607,975
ENERGY - 9.7%
COAL - 0.0%
Eastern Enterprises Co. 12,427 306,015 27637F10
ENERGY SERVICES - 0.8%
Baker Hughes, Inc. 77,395 1,470,505 05722410
Dresser Industries, Inc. 75,976 1,728,454 26159710
Halliburton Co. 63,023 1,977,347 40621610
Helmerich & Payne, Inc. 13,528 358,492 42345210
McDermott International, Inc. 29,443 680,869 58003710
Rowan Companies, Inc. (a) 46,182 334,820 77938210
Schlumberger Ltd. 134,200 7,632,625 80685710
14,183,112
OIL & GAS - 8.9%
Amerada Hess Corp. 50,998 2,365,032 02355110
Amoco Corp. 274,198 14,326,846 03190510
Ashland Oil, Inc. 33,000 1,353,000 04454010
Atlantic Richfield Co. 87,808 8,846,656 04882510
Burlington Resources, Inc. 71,800 3,087,400 12201410
Chevron Corp. 179,598 15,580,127 16675110
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Exxon Corp. 685,059 $ 44,443,203 30229010
Kerr-McGee Corp. 28,556 1,281,451 49238610
Louisiana Land & Exploration Co. 18,236 679,291 54626810
Maxus Energy Corp. (a) 73,904 351,044 57773010
Mobil Corp. 220,278 17,319,358 60705910
Occidental Petroleum Corp. 168,238 3,049,314 67459910
Oryx Energy Co. 53,426 961,668 68763F10
Pennzoil Co. 25,248 1,350,768 70990310
Phillips Petroleum Co. 144,166 3,910,503 71850710
Royal Dutch Petroleum Co. 295,824 31,616,190 78025770
Santa Fe Energy Resources, Inc. 49,632 459,096 80201210
Sun Company, Inc. 58,826 2,007,437 86676210
Texaco, Inc. 142,732 9,259,739 88169410
USX-Marathon Group 158,182 2,728,640 90290582
Unocal Corp. 132,972 3,656,730 91528910
168,633,493
TOTAL ENERGY 183,122,620
FINANCE - 10.9%
BANKS - 5.1%
Banc One Corp. 206,915 7,035,110 05943810
Bank of Boston Corp. 49,239 1,150,962 06071610
Bankers Trust New York Corp. 44,989 3,694,722 06636510
Bank America Corp. 197,235 8,505,759 06605010
Barnett Banks, Inc. 53,644 2,239,637 06805510
Boatmen's Bancshares, Inc. 57,100 1,627,350 09665010
Chase Manhattan Corp. 101,191 3,301,356 16161010
Chemical Banking Corp. 139,127 5,182,481 16372210
Citicorp (a) 207,237 8,600,336 17303410
Core States Financial Corp. 67,500 1,746,563 21869510
First Chicago Corp. 45,848 2,240,821 31945510
First Fidelity Bancorporation 44,404 1,942,675 32019510
First Interstate Bancorp 42,932 2,871,078 32054810
First Union Corp. 92,754 3,802,914 33735810
Fleet Financial Group, Inc. 76,244 2,477,930 33891510
Mellon Bank Corp. 35,310 1,959,705 58550910
Morgan (J.P.) & Co., Inc. 107,179 7,301,569 61688010
NBD Bancorp, Inc. 88,543 2,545,611 62890010
Nations Bank Corp. 149,982 7,330,370 63858510
Norwest Corp. 160,604 3,774,194 66938010
PNC Financial Corp. 129,068 3,565,504 69347510
Shawmut National Corp. 51,900 1,102,875 82048410
SunTrust Banks, Inc. 68,600 3,104,150 86791410
U.S. Bancorp 54,750 1,450,875 91159610
Wachovia Corp. 95,400 $ 3,028,950 92977110
Wells Fargo & Co. 30,863 4,255,236 94974010
95,838,733
CREDIT & OTHER FINANCE - 1.0%
American Express Co. 267,891 7,835,812 02581610
Beneficial Corp. 28,654 1,081,689 08172110
Dean Witter Discover & Co. 93,720 3,373,920 24240V10
Household International, Inc. 52,072 1,802,993 44181510
MBNA Corp. 82,050 1,702,538 55262L10
National Intergroup, Inc. (a) 7,300 114,975 63654010
Transamerica Corporation 42,588 2,161,341 89348510
18,073,268
FEDERAL SPONSORED CREDIT - 0.9%
Federal Home Loan Mortgage Corporation 98,900 5,513,675 31340030
Federal National Mortgage Association 150,700 12,526,938 31358610
18,040,613
INSURANCE - 3.3%
Aetna Life & Casualty Co. 61,532 3,691,920 00814010
Alexander & Alexander Services, Inc. 22,600 460,475 01447610
American General Corp. 119,608 3,214,465 02635110
American International Group, Inc. 175,168 15,370,992 02687410
CIGNA Corp. 39,794 2,606,507 12550910
CNA Financial Corp. (a) 34,174 2,366,550 12611710
Capital Holding Corp. 55,712 1,922,064 14018610
Chubb Corp. (The) 48,294 3,555,646 17123210
Continental Corp. 30,371 766,868 21132710
General Re Corp. 46,700 4,932,688 37056310
Jefferson Pilot Corp. 27,819 1,310,970 47507010
Lincoln National Corp. 51,900 2,114,925 53418710
Marsh & McLennan Companies, Inc. 40,387 3,347,073 57174810
SAFECO Corp. 34,778 1,995,388 78642910
St. Paul Companies, Inc. (The) 23,554 1,957,926 79286010
Torchmark Corp. 40,750 1,752,250 89102710
Travelers, Inc. (The) 237,627 8,851,606 89419010
USF&G Corp. 46,789 666,743 90329010
USLIFE Corp. 12,431 484,809 91731810
61,369,865
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 64,514 1,137,059 00867710
Golden West Financial Corp. 35,400 1,464,675 38131710
Great Western Financial Corp. 72,463 1,240,929 39144210
3,842,663
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 115,654 4,698,444 59018810
Salomon, Inc. 60,953 3,032,412 79549B10
7,730,856
TOTAL FINANCE 204,895,998
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
HEALTH - 7.7%
DRUGS & PHARMACEUTICALS - 4.9%
ALZA Corp. Class A 42,700 $ 960,750 02261510
Allergan, Inc. 36,600 860,100 01849010
American Cyanamid Co. 49,506 2,196,829 02532110
American Home Products Corp. 171,142 10,247,127 02660910
Amgen, Inc. (a) 74,400 3,106,200 03116210
Bristol-Myers Squibb Co. 285,814 15,791,224 11012210
IMCERA Group, Inc. 42,196 1,566,527 45245410
Lilly (Eli) & Co. 161,524 8,904,011 53245710
Merck & Co., Inc. 707,531 22,906,316 58933110
Pfizer, Inc. 175,084 10,154,872 71708110
Schering-Plough Corp. 106,574 6,367,797 80660510
Syntex Corporation 121,976 1,890,628 87161610
Upjohn Co. 95,918 2,781,622 91530210
Warner-Lambert Co. 74,668 4,750,752 93448810
92,484,755
MEDICAL EQUIPMENT & SUPPLIES - 2.2%
Abbott Laboratories 456,456 12,609,597 00282410
Bard (C.R.), Inc. 28,768 809,100 06738310
Bausch & Lomb, Inc. 32,670 1,641,668 07170710
Baxter International, Inc. 152,280 3,464,370 07181310
Becton, Dickinson & Co. 41,592 1,632,486 07588710
Biomet, Inc. (a) 63,600 683,700 09061310
Johnson & Johnson 360,604 14,469,236 47816010
McKesson Corp. 22,147 1,417,408 58155610
Medtronic, Inc. 31,660 2,524,885 58505510
Millipore Corp. 15,500 666,500 60107310
Pall Corp. 64,128 1,154,304 69642930
St. Jude Medical, Inc. 25,700 732,450 79084910
U.S. Surgical Corp. 30,900 540,750 91270710
42,346,454
MEDICAL FACILITIES MANAGEMENT - 0.6%
Beverly Enterprises, Inc. (a) 44,967 680,126 08785110
Columbia/HCA Healthcare Corp. 188,817 8,119,131 19767710
Community Psychiatric Centers 23,654 422,815 20401510
Manor Care, Inc. 31,620 830,025 56405410
National Medical Enterprises, Inc. 91,574 1,430,844 63688610
11,482,941
TOTAL HEALTH 146,314,150
INDUSTRIAL MACHINERY & EQUIPMENT - 5.9%
ELECTRICAL EQUIPMENT - 3.7%
Corning, Inc. 111,016 3,385,988 21935010
Emerson Electric Co. 124,373 8,006,512 29101110
General Electric Co. 470,665 49,596,324 36960410
General Signal Corp. 25,872 879,648 37083810
Grainger (W.W.), Inc. 28,166 $ 1,742,771 38480210
Honeywell, Inc. 74,000 2,479,000 43850610
Scientific-Atlanta, Inc. 20,490 553,230 80865510
Westinghouse Electric Corp. 193,634 2,807,693 96040210
Zenith Electronics Corp. (a) 18,730 245,831 98934910
69,696,997
INDUSTRIAL MACHINERY & EQUIPMENT - 1.6%
Briggs & Stratton Corp. 7,917 674,924 10904310
Caterpillar, Inc. 56,015 6,070,626 14912310
Cincinnati Milacron, Inc. 18,428 439,969 17217210
Clark Equipment Co. (a) 9,620 588,023 18139610
Cooper Industries, Inc. 62,914 2,437,918 21666910
Deere & Co. 46,279 3,904,791 24419910
Dover Corp. 31,578 1,934,153 26000310
Giddings & Lewis, Inc. 18,700 476,850 37504810
Harnischfeger Industries, Inc. 14,144 357,136 41334510
Illinois Tool Works, Inc. 62,320 2,679,760 45230810
Ingersoll-Rand Co. 58,122 2,230,432 45686610
Parker-Hannifin Corp. 26,753 946,387 70109410
TRINOVA Corp. 15,740 592,218 89667810
Tenneco, Inc. 93,349 5,204,207 88037010
Timken Co. 16,884 601,493 88738910
Varity Corp. (a) 19,659 894,485 92224R60
30,033,372
POLLUTION CONTROL - 0.6%
Browning-Ferris Industries, Inc. 95,070 2,709,495 11588510
Ogden Corp. 24,045 547,024 67634610
Rollins Environmental Services, Inc. 33,224 170,273 77570910
Safety Kleen Corp. 31,907 498,547 78648410
WMX Technologies, Inc. 266,247 6,556,332 92929Q10
Zurn Industries, Inc. 6,914 195,321 98982410
10,676,992
TOTAL INDUSTRIAL MACHINERY
& EQUIPMENT 110,407,361
MEDIA & LEISURE - 4.9%
BROADCASTING - 1.3%
CBS, Inc. 8,611 2,645,730 12484510
Capital Cities/ABC, Inc. 8,589 5,712,759 13985910
Comcast Corp. Class A 121,650 2,463,413 20030020
Tele-Communications, Inc. Class A (a) 247,952 5,857,866 87924010
Time Warner, Inc. 206,674 7,879,446 88731510
24,559,214
ENTERTAINMENT - 0.8%
Disney (Walt) Co. 295,112 14,202,265 25468710
King World Productions, Inc. 20,450 761,763 49566710
14,964,028
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 52,503 $ 1,115,689 11704310
Fleetwood Enterprises, Inc. 25,154 562,821 33909910
Hasbro, Inc. 48,441 1,707,545 41805610
Mattel, Inc. 92,548 2,417,817 57708110
Outboard Marine Corp. 10,923 273,075 69002010
6,076,947
LODGING & GAMING - 0.4%
Bally Manufacturing Corp. (a) 23,433 207,968 05873210
Hilton Hotels Corp. 26,458 1,921,512 43284810
Marriott International, Inc. 64,340 1,881,945 57190010
Promus Companies, Inc. (a) 56,343 2,774,893 74342A10
6,786,318
PUBLISHING - 1.3%
American Greetings Corp. Class A 40,700 1,134,513 02637510
Dow Jones & Co Inc. 54,913 2,182,792 26056110
Dun & Bradstreet Corp. 97,620 5,942,618 26483010
Gannett Co., Inc. 80,988 4,373,352 36473010
Harcourt Gen. Inc. 42,298 1,475,143 41163G10
Knight-Ridder, Inc. 30,067 1,721,336 49904010
McGraw-Hill, Inc. 27,159 1,914,710 58064510
Meredith Corp. 8,122 359,399 58943310
New York Times Co. (The) Class A 58,395 1,635,060 65011110
Times Mirror Co., Series A 70,850 2,435,469 88736010
Tribune Co. 36,892 2,148,959 89604710
25,323,351
RESTAURANTS - 0.8%
Luby's Cafeterias, Inc. 15,106 353,103 54928210
McDonald's Corp. 194,842 11,812,296 58013510
Ryan's Family Steak Houses, Inc. (a) 29,400 224,175 78351910
Shoney's, Inc. (a) 22,342 519,452 82503910
Wendy's International, Inc. 54,662 963,418 95059010
13,872,444
TOTAL MEDIA & LEISURE 91,582,302
NONDURABLES - 11.1%
AGRICULTURE - 0.1%
Pioneer Hi-Bred International, Inc. 49,300 1,811,775 72368610
BEVERAGES - 3.3%
Anheuser-Busch Companies, Inc. 148,184 7,335,108 03522910
Brown-Forman Corp. Class B 14,587 1,243,542 11563720
Coca-Cola Company (The) 716,648 30,547,121 19121610
Coors (Adolph) Co. Class B 21,042 391,907 21701610
PepsiCo, Inc. 437,509 17,117,540 71344810
Seagram Co. Ltd. 205,544 5,883,021 81185010
62,518,239
FOODS - 3.0%
Archer-Daniels-Midland Co. 183,846 $ 4,711,054 03948310
Borden, Inc. 77,872 1,158,346 09959910
CPC International, Inc. 82,790 4,056,710 12614910
Campbell Soup Co. 138,802 5,829,684 13442910
ConAgra, Inc. 138,529 3,792,231 20588710
General Mills, Inc. 87,906 4,900,760 37033410
Gerber Products Co. 38,192 1,074,150 37371210
Heinz (H.J.) Co. 139,598 4,554,385 42307410
Hershey Foods Corp. 49,705 2,547,381 42786610
Kellogg Co. 126,088 6,367,444 48783610
Pet, Inc. 57,530 1,129,026 71582510
Quaker Oats Co. 37,393 2,374,456 74740210
Ralston Purina Co. 57,360 2,495,160 75127730
SYSCO Corp. 101,808 2,761,542 87182910
Sara Lee Corp. 267,816 5,992,383 80311110
Wrigley (Wm.) Jr. Company 64,144 2,982,696 98252610
56,727,408
HOUSEHOLD PRODUCTS - 2.9%
Alberto Culver Co. Class B 15,932 352,496 01306810
Avon Products, Inc. 39,682 2,296,596 05430310
Clorox Co. 29,962 1,599,222 18905410
Colgate-Palmolive Co. 85,258 5,552,427 19416210
Gillette Company 123,246 7,610,441 37576610
International Flavors & Fragrances, Inc. 62,232 2,310,363 45950610
Premark International, Inc. 17,500 1,408,750 74045910
Procter & Gamble Co. 376,578 21,606,163 74271810
Rubbermaid, Inc. 88,370 2,673,193 78108810
Unilever NV ADR 88,386 9,976,570 90478450
55,386,221
TOBACCO - 1.8%
American Brands, Inc. 111,156 3,682,043 02470310
Philip Morris Companies, Inc. 483,718 27,088,208 71815410
UST, Inc. 114,660 3,052,823 90291110
33,823,074
TOTAL NONDURABLES 210,266,717
PRECIOUS METALS - 0.6%
American Barrick Resoures Corp. 156,500 3,928,446 02451E10
Echo Bay Mines Ltd. 61,700 794,396 27875110
Homestake Mining Co. 75,610 1,606,713 43761410
Newmont Mining Corp. 37,677 2,043,977 65163910
Placer Dome Inc. 131,235 3,172,687 72590610
11,546,219
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
RETAIL & WHOLESALE - 6.6%
APPAREL STORES - 0.6%
Brown Group, Inc. 9,721 $ 341,450 11565710
Charming Shoppes, Inc. 56,716 737,308 16113310
Gap, Inc. 80,064 3,622,896 36476010
Genesco, Inc. (a) 12,718 57,231 37153210
Limited, Inc. (The) 200,340 3,906,630 53271610
Melville Corp. 58,026 2,248,508 58574510
TJX Companies, Inc. 40,566 1,090,211 87254010
12,004,234
DRUG STORES - 0.2%
Long Drug Stores, Inc. 11,225 444,791 54316210
Rite Aid Corporation 48,496 927,486 76775410
Walgreen Co. 67,844 2,756,163 93142210
4,128,440
GENERAL MERCHANDISE STORES - 4.0%
Dayton Hudson Corp. 39,516 2,825,394 23975310
Dillard Department Stores, Inc. Class A 62,261 2,218,048 25406310
K mart Corp. 225,168 4,278,192 48258410
May Department Stores Co. (The) 137,130 5,999,438 57777810
Mercantile Stores Co., Inc. 20,393 782,581 58753310
Nordstrom, Inc. 45,194 1,762,566 65566410
Penney (J.C.) Co., Inc. 129,924 7,113,339 70816010
Price/Costco, Inc. 119,963 2,399,260 74143W10
Sears, Roebuck & Co. 193,540 8,830,263 81238710
Wal-Mart Stores, Inc. 1,267,928 35,977,457 93114210
Woolworth Corp. 72,852 1,602,744 98088310
73,789,282
GROCERY STORES - 0.7%
Albertson's, Inc. 139,612 4,031,297 01310410
American Stores Co. 39,070 1,865,593 03009610
Bruno's, Inc. 43,000 344,000 11688110
Fleming Companies, Inc. 20,285 522,339 33913010
Giant Food, Inc. Class A 32,870 854,620 37447810
Great Atlantic & Pacific Tea Co., Inc. 21,044 555,036 39006410
Kroger Co. (The) (a) 59,094 1,425,643 50104410
Supervalue, Inc. 39,087 1,446,219 86853610
Winn-Dixie Stores, Inc. 41,296 2,100,934 97428010
13,145,681
RETAIL & WHOLESALE, MISC - 1.1%
Circuit City Stores, Inc. 52,900 1,005,100 17273710
Handleman Co. (Del.) 18,511 212,877 41025210
Home Depot, Inc. (The) 247,100 10,285,538 43707610
Lowe's Companies, Inc. 40,592 2,684,146 54866110
Tandy Corp. 35,265 $ 1,463,498 87538210
Toys "R" Us, Inc. (a) 160,750 5,867,375 89233510
21,518,534
TOTAL RETAIL & WHOLESALE 124,586,171
SERVICES - 1.0%
ADVERTISING - 0.1%
Interpublic Group of Companies, Inc 41,400 1,355,850 46069010
LEASING & RENTAL - 0.2%
Blockbuster Entertainment Corp. 124,300 3,278,413 09367610
Ryder Systems, Inc. 42,191 1,133,883 78354910
4,412,296
PRINTING - 0.4%
Alco Standard Corp. 28,634 1,599,925 01378810
Deluxe Corp. 45,599 1,550,366 24801910
Donnelley (R.R.) & Sons Co. 85,282 2,643,742 25786710
Harland (John H.) Co. 16,900 399,263 41269310
Moore Corporation Ltd. 54,807 1,025,473 61578510
7,218,769
SERVICES - 0.3%
Block (H&R), Inc. 58,020 2,676,173 09367110
Ecolab, Inc. 34,600 795,800 27886510
Jostens, Inc. 25,000 446,875 48108810
National Education Corp. (a) 16,200 103,275 63577110
National Service Industries, Inc. 27,257 752,975 63765710
Pittston Company Services Group 22,448 620,126 72570110
Service Corp. International 46,232 1,236,706 81756510
6,631,930
TOTAL SERVICES 19,618,845
TECHNOLOGY - 7.3%
COMMUNICATIONS EQUIPMENT - 0.6%
Andrew Corp. (a) 9,124 447,076 03442510
Cisco Systems, Inc. (a) 68,200 5,029,750 17275R10
DSC Communications Corp. (a) 30,246 1,644,626 23331110
M/A-Com, Inc. (a) 13,836 91,664 55261810
Northern Telecom Ltd. 138,275 4,162,595 66581510
11,375,711
COMPUTER SERVICES & SOFTWARE - 1.1%
Autodesk, Inc. 13,300 768,075 05276910
Automatic Data Processing, Inc. 77,380 3,956,053 05301510
Ceridian Corp. (a) 24,448 556,192 15677T10
Computer Associates International Inc. 91,551 3,364,499 20491210
Computer Sciences Corp. (a) 27,954 1,090,206 20536310
Lotus Development Corp. (a) 24,049 1,671,406 54570010
Novell, Inc. (a) 172,800 4,406,400 67000610
Oracle Systems Corp. (a) 157,100 5,184,300 68389X10
Shared Medical Systems Corp. 12,429 332,476 81948610
21,329,607
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 2.8%
Amdahl Corp. 62,922 $ 369,667 02390510
Apple Computer, Inc. 64,146 2,341,329 03783310
Compaq Computer Corp. (a) 45,500 4,493,125 20449310
Cray Research, Inc. (a) 14,418 434,342 22522410
Data General Corp. (a) 19,432 155,456 23768810
Digital Equipment Corp. (a) 74,547 2,171,181 25384910
Hewlett-Packard Co. 140,200 12,705,625 42823610
Intergraph Corp. (a) 25,366 247,319 45868310
International Business Machines Corp. 319,027 16,868,553 45920010
Pitney Bowes, Inc. 87,178 3,824,935 72447910
Sun Microsystems, Inc. (a) 56,400 1,529,850 86681010
Tandem Computers, Inc. (a) 62,407 928,304 87537010
Unisys Corp. (a) 89,885 1,303,333 90921410
Xerox Corp. 57,273 5,555,481 98412110
52,928,500
ELECTRONIC INSTRUMENTS - 0.1%
Perkin-Elmer Corp. 24,153 908,757 71404110
Tektronix, Inc. 16,932 450,815 87913110
1,359,572
ELECTRONICS - 2.2%
AMP, Inc. 57,926 3,678,301 03189710
Advanced Micro Devices, Inc. (a) 50,290 1,081,235 00790310
Intel Corp. 229,580 15,812,323 45814010
Motorola, Inc. 149,800 15,298,325 62007610
National Semiconductor Corp. (a) 61,120 1,329,360 63764010
Texas Instruments, Inc. 49,891 4,028,698 88250810
Thomas & Betts Corp. 10,320 665,640 88431510
41,893,882
PHOTOGRAPHIC EQUIPMENT - 0.5%
Eastman Kodak Co. 181,919 7,822,517 27746110
Polaroid Corp. 25,891 815,567 73109510
8,638,084
TOTAL TECHNOLOGY 137,525,356
TRANSPORTATION - 1.9%
AIR TRANSPORTATION - 0.3%
AMR Corp. (a) 41,768 2,641,826 00176510
Delta Air Lines, Inc. 27,557 1,367,516 24736110
UAL Corp. (a) 13,424 1,802,172 90254910
USAir Group, Inc. (a) 32,450 369,119 91190510
6,180,633
RAILROADS - 1.3%
Burlington Northern, Inc. 48,886 3,073,707 12189710
CSX Corp. 57,329 5,044,952 12640810
Conrail, Inc. 43,960 2,731,015 20836810
Norfolk Southern Corp. 76,521 $ 5,279,949 65584410
Santa Fe Pacific Corp. 100,931 2,296,180 80218310
Union Pacific Corp. 113,144 6,760,354 90781810
25,186,157
TRUCKING & FREIGHT - 0.3%
Consolidated Freightways, Inc. (a) 19,445 520,154 20923710
Federal Express Corp. (a) 30,461 2,280,767 31330910
Roadway Services, Inc. 21,797 1,531,239 76974810
Yellow Corp. 15,433 447,557 98550910
4,779,717
TOTAL TRANSPORTATION 36,146,507
UTILITIES - 13.8%
CELLULAR - 0.3%
McCaw Cellular Communications, Inc.
Class A (a) 113,700 5,713,425 57946810
ELECTRIC UTILITY - 4.3%
American Electric Power Co., Inc. 101,725 3,369,641 02553710
Baltimore Gas & Electric Co. 80,038 1,860,884 05916510
Carolina Power & Light Co. 88,600 2,414,350 14414110
Central & South West Corp. 104,020 2,847,548 15235710
Commonwealth Edison Co. 117,740 3,149,545 20279510
Consolidated Edison Co. of New York, Inc. 129,168 3,826,602 20911110
Detroit Edison Company 81,071 2,280,122 25084710
Dominion Resources, Inc. (Va.) 92,415 3,812,119 25747010
Duke Power Co. 112,936 4,362,153 26439910
Entergy Corp. 154,538 5,138,389 29364G10
FPL Group, Inc. 103,651 3,498,221 30257110
Houston Industries, Inc. 71,836 2,900,379 44216110
Niagara Mohawk Power Corp. 78,249 1,467,169 65352210
Northern States Power Co. (Minn.) 36,773 1,516,886 66577210
Ohio Edison Co. 84,077 1,723,579 67734710
PSI Resources, Inc. 31,463 755,112 69363210
Pacific Gas & Electric Co. 238,628 7,546,611 69430810
PacifiCorp. 153,700 2,766,600 69511410
Peco Energy Co. 122,025 3,279,422 69330410
Public Service Enterprise Group, Inc. 133,438 4,053,179 74457310
SCEcorp 247,106 4,447,908 78388210
Southern Co. 353,180 7,262,264 84258710
Texas Utilities Co. 125,134 4,833,301 88284810
Union Electric Co. 56,400 2,086,800 90654810
81,198,784
GAS - 0.9%
Arkla, Inc. 67,600 540,800 04123710
Coastal Corp. (The) 57,529 1,812,164 19044110
Columbia Gas System, Inc. (The) (a) 27,852 790,301 19764810
Consolidated Natural Gas Co. 51,297 2,250,656 20961510
ENSERCH Corp. 36,566 566,773 29356710
Enron Corp. 131,916 4,204,823 29356110
VALUE MATURITY VALUE
SHARES (NOTE 1) AMOUNT (NOTE 1)
COMMON STOCKS - CONTINUED
UTILITIES - CONTINUED
GAS - CONTINUED
NICOR, Inc. 30,200 $ 815,400 65408610
ONEOK, Inc. 14,632 265,205 68267810
Pacific Enterprises 46,369 985,341 69423210
Panhandle Eastern Corp. 65,707 1,437,341 69846210
People's Energy Corp. 19,138 571,748 71103010
Sonat, Inc. 47,894 1,454,780 83541510
Transco Energy Co. 22,200 344,100 89353210
Williams Companies, Inc. 56,788 1,398,405 96945710
17,437,837
TELEPHONE SERVICES - 8.3%
American Telephone & Telegraph Co. 745,086 39,117,015 03017710
Ameritech Corp. 300,444 12,055,316 03095410
Bell Atlantic Corp. 240,462 13,165,295 07785310
BellSouth Corp. 273,660 15,256,545 07986010
GTE Corp. 521,268 17,006,369 36232010
MCI Communications Corp. 295,862 8,099,222 55267310
NYNEX Corp. 227,776 8,484,656 67076810
Pacific Telesis Group 229,203 12,491,564 69489010
Southwestern Bell Corp. 330,598 12,934,647 84533310
Sprint Corporation 188,200 6,986,925 85206110
U.S. West, Inc. 242,642 9,948,322 91288910
155,545,876
TOTAL UTILITIES 259,895,922
TOTAL COMMON STOCKS
(Cost $1,615,063,297) 1,835,327,555
PREFERRED STOCKS - 0.0%
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
National Intergroup, Inc., Series A,
$4.20 exchangeable 5,115 189,255 63654030
TOTAL PREFERRED STOCKS
(Cost $158,848) 189,255
PRINCIPAL
AMOUNT
U.S. TREASURY OBLIGATIONS - 0.3%
8 5/8%, 1/15/95 (b) $ 500,000 519,295 912827VT
11 1/4%, 2/15/95 (b) 1,000,000 1,067,030 912827RW
8 1/2%, 5/15/95 (b) 500,000 524,455 912827YQ
8 5/8%, 10/15/95 (b) 3,000,000 3,189,840 912827WT
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,533,358) 5,300,620
Repurchase Agreements - 2.4%
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 3.47% dated
2/28/94 due 3/1/94 $ 45,282,302 $ 45,278,000
TOTAL INVESTMENTS - 100%
(Cost $1,666,033,503) $ 1,886,095,430
LEGEND:
(c) Non-income producing
(d) A portion of the securities were pledged to cover margin requirements
for futures contracts. At the period end, the value of securities pledged
amounted to $5,300,620.
OTHER INFORMATION:
The fund had the following futures contracts open at period end (see Note 2
of Notes to Financial Statements):
NUMBER OF AGGREGATE EXPIRATION UNREALIZED
CONTRACTS CONTRACTS FACE VALUE DATE GAIN/(LOSS)
Sell:
S&P 500
Stock Index 238 $ 55,471,850 March 1994 $ (580,605)
S&P 500
Stock Index 5 $ 1,168,625 June 1994 $ (125)
$ 56,640,475 $ (580,730)
THE VALUE OF FUTURES CONTRACTS SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.0%
INCOME TAX INFORMATION:
At February 28, 1994, the aggregate cost of investment securities for
income tax purposes was $1,667,176,574. Net unrealized appreciation
aggregated $218,918,856, of which $325,010,408 related to appreciated
investment securities and $106,091,552 related to depreciated investment
securities.
The fund hereby designates $4,981,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
February 28, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $45,278,000) (cost $ 1,886,095,430
$1,666,033,503) (Notes 1 and 2) - See accompanying schedule
Cash 888
Receivable for fund shares sold 3,797,410
Dividends receivable 6,366,934
Interest receivable 118,285
Other receivables 36,772
Receivable from investment adviser for expense reductions (Note 7) 586,777
Total assets 1,897,002,496
LIABILITIES
Payable for investments purchased $ 3,167
Payable for fund shares redeemed 3,134,445
Accrued management fee 444,852
Payable for daily variation on futures contracts 12,735
Other payables and accrued expenses 645,548
Collateral on securities loaned, at value (Note 5) 507,600
Total liabilities 4,748,347
NET ASSETS $ 1,892,254,149
Net Assets consist of (Note 1):
Paid in capital $ 1,657,635,829
Undistributed net investment income 6,424,856
Accumulated undistributed net realized gain (loss) on investments 8,712,267
Net unrealized appreciation (depreciation) on:
Investment securities 220,061,927
Futures contracts (580,730)
NET ASSETS, for 109,011,478 shares outstanding $ 1,892,254,149
NET ASSET VALUE, offering price and redemption price per share ($1,892,254,149 (divided by) 109,011,478 shares) $17.36
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended February 28, 1994
INVESTMENT INCOME $ 45,639,646
Dividends
Interest (including security lending fees of $18,458) (Note 5) 1,588,733
Total income 47,228,379
EXPENSES
Management fee (Note 4) $ 4,629,801
Transfer agent fees (Note 4) 4,446,394
Accounting fees and expenses (Note 4) 652,621
Non-interested trustees' compensation 10,528
Custodian fees and expenses 113,785
Registration fees 126,966
Audit 52,145
Legal 31,749
Interest (Note 6) 20,894
Miscellaneous 22,883
Total expenses before reductions 10,107,766
Expense reductions (Note 7) (5,496,132) 4,611,634
Net investment income 42,616,745
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3)
Net realized gain (loss) on:
Investment securities 21,628,382
Futures contracts 5,843,140 27,471,522
Change in net unrealized appreciation (depreciation) on:
Investment securities 58,016,820
Futures contracts (3,074,560) 54,942,260
Net gain (loss) 82,413,782
Net increase (decrease) in net assets resulting from operations $ 125,030,527
</TABLE>
Statement of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED FOUR MONTH YEAR ENDED
FEBRUARY 28, PERIOD OCTOBER 31, 1992
1994 ENDED
FEBRUARY 28,
1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 42,616,745 $ 14,071,349 $ 33,928,421
Net investment income
Net realized gain (loss) on investments 27,471,522 83,803,720 27,083,520
Change in net unrealized appreciation (depreciation) on investments 54,942,260 (1,004,355) 43,192,633
Net increase (decrease) in net assets resulting from operations 125,030,527 96,870,714 104,204,574
Distributions to shareholders (41,085,662) (12,288,344) (33,222,396)
From net investment income
From net realized gain (23,556,130) - (10,417,240)
Total distributions (64,641,792) (12,288,344) (43,639,636)
Share transactions 1,395,243,466 476,652,352 1,348,834,171
Net proceeds from sales of shares
Reinvestment of distributions from: 38,438,715 11,505,440 30,898,358
Net investment income
Net realized gain 22,506,339 - 9,778,815
Cost of shares redeemed (1,096,425,419) (555,321,881) (955,834,705)
Net increase (decrease) in net assets resulting from share transactions 359,763,101 (67,164,089) 433,676,639
Total increase (decrease) in net assets 420,151,836 17,418,281 494,241,577
NET ASSETS
Beginning of period 1,472,102,313 1,454,684,032 960,442,455
End of period (including undistributed net investment income of $6,424,856,$ 1,892,254,149 $ 1,472,102,313 $ 1,454,684,032
$5,295,132, and $3,512,127, respectively)
OTHER INFORMATION
Shares
Sold 85,203,118 29,370,355 86,843,554
Issued in reinvestment of distributions from: 2,265,160 706,722 2,039,602
Net investment income
Net realized gain 1,332,090 - 687,197
Redeemed (67,776,697) (34,311,255) (61,524,484)
Net increase (decrease) 21,023,671 (4,234,178) 28,045,869
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED FEBRUARY 28, 1994
20. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity U.S. Equity Index Portfolio (the fund) is a fund of Fidelity
Institutional Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust 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. 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 maturing within sixty days 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 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. Interest income is accrued as earned. Dividend and
interest income is recorded net of foreign taxes where recovery of such
taxes is not assured.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
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 are primarily due to differing treatments for
futures and options transactions, foreign currency transactions,
redemptions in kind, non-taxable dividends and losses due to wash sales.
The fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications to paid in
capital.
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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective March 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,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of February 28, 1993 have been reclassified to
reflect an increase in paid in capital of $107,671,644, a decrease in
undistributed net investment income of $372,874 and a decrease in
accumulated net realized gain on investments of $107,298,770.
21. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures contracts and
write options. These investments involve, to varying degrees, elements of
market risk and risks in excess of the amount recognized in the Statement
of Assets and Liabilities. The face or contract amounts reflect the extent
of the involvement the fund has in the particular classes of instruments.
Risks may be caused by an imperfect correlation between movements in the
price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary
market for the instruments, or due to the inability of counterparties to
perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
22. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $469,000,980 and $67,817,327, respectively, of which U.S.
government and government agency obligations sales aggregated $4,312,500.
The market value of futures contracts opened and closed amounted to
$236,325,050 and $302,709,855, respectively.
23. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee that
is computed daily at an annual rate of .28% of the fund's average net
assets.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives fees based on the type,
size, number of accounts and the number of transactions made by
shareholders. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Co. (FSC), an
affiliate of FMR, maintains the fund's accounting records and administers
the security lending program. The security lending fee is based on the
number and duration of lending transactions. The accounting fee is based on
the level of average net assets for the month plus out-of-pocket expenses.
24. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, the value of the
securities loaned and the value of collateral amounted to $493,500 and
$507,600, respectively.
25. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $8,817,000 and $3,596,362,
respectively. The weighted average interest rate was 3.62%.
26. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .28% of average net assets. For the
period, the reimbursement reduced the expenses by $5,496,132.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Institutional Trust and the Shareholders of
Fidelity U.S. Equity Index Portfolio:
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 U.S. Equity Index Portfolio (a fund of Fidelity Institutional
Trust) at February 28, 1994, the results of its operations for the year
then ended, the changes in its net assets and the financial highlights for
the periods indicated in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Fidelity U.S. Equity Index Portfolio'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
generally accepted auditing standards 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 owned at February 28, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Boston, Massachusetts
April 19, 1994
DISTRIBUTIONS
The Board of Trustees of Fidelity U.S. Equity Index Portfolio voted to pay
on April 11, 1994, to shareholders of record at the opening of business on
April 8, 1994, a distribution of $.06 derived from capital gains realized
from sales of portfolio securities.
