(registered trademark)
UBI-ANN-0496
0000
FIDELITY
U.S. BOND INDEX
PORTFOLIO
ANNUAL REPORT
FEBRUARY 29, 1996
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PERFORMANCE A-1 How the fund has done over time.
FUND TALK A-4 The manager's review of fund performance,
strategy and outlook.
INVESTMENT CHANGES A-6 A summary of major shifts in the fund's
investments
over the past six months.
INVESTMENTS A-7 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS A-13 Statements of assets and liabilities, operations,
and
changes in net assets, as well as financial
highlights.
NOTES A-17 Notes to the financial statements.
REPORT OF INDEPENDENT A-19 The auditors' opinion
ACCOUNTANTS
</TABLE>
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $100,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells investments that have grown in value). You can also look at the
fund's income to measure performance. If Fidelity had not reimbursed
certain fund expenses during the periods shown, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 29, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity U.S. Bond Index 12.13% 54.52% 73.15%
Lehman Brothers Aggregate Bond Index 12.24% 52.36% n/a
Intermediate U.S. Government Funds Average 10.39% 43.33% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
began on March 8, 1990. For example, if you invested $1,000 in a fund that
had a 5% return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the Lehman
Brothers Aggregate Bond Index, which is composed of fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities. Issues included in the Index are rated investment-grade or
above and have maturities of at least one year. To measure how the fund's
performance stacked up against its peers, you can compare it to the
intermediate U.S. government funds average, which reflects the performance
of 110 intermediate U.S. government funds with similar objectives tracked
by Lipper Analytical Services over the past 12 months. Both benchmarks
include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 29, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity U.S. Bond Index 12.13% 9.09% 9.60%
Lehman Brothers Aggregate Bond Index 12.24% 8.79% n/a
Intermediate U.S. Government Funds Average 10.39% 7.45% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$100,000 OVER LIFE OF FUND
Fidelity U.LB Aggregate Bond Index (SH01)
03/31/90 100000.00 100000.00
04/30/90 98902.15 99083.85
05/31/90 101848.95 102017.56
06/30/90 103292.33 103654.45
07/31/90 104861.22 105088.32
08/31/90 103552.16 103684.91
09/30/90 104402.79 104542.69
10/31/90 105789.54 105869.96
11/30/90 107912.50 108148.92
12/31/90 109639.21 109834.03
01/31/91 110945.71 111191.76
02/28/91 111681.88 112140.90
03/31/91 112576.12 112912.39
04/30/91 113908.49 114135.62
05/31/91 114705.78 114803.07
06/30/91 114615.95 114744.70
07/31/91 116187.72 116335.90
08/31/91 118683.01 118853.42
09/30/91 121180.35 121261.80
10/31/91 122572.41 122611.92
11/30/91 123844.13 123736.17
12/31/91 127589.08 127410.92
01/31/92 126089.97 125677.60
02/29/92 126777.95 126494.77
03/31/92 126332.45 125781.65
04/30/92 127155.26 126690.18
05/31/92 129563.14 129080.80
06/30/92 131479.59 130857.27
07/31/92 134384.15 133527.05
08/31/92 135838.15 134879.71
09/30/92 137508.23 136478.53
10/31/92 135863.12 134669.07
11/30/92 135802.95 134699.52
12/31/92 137757.58 136841.44
01/31/93 140497.88 139465.54
02/28/93 143334.37 141906.91
03/31/93 143928.53 142498.22
04/30/93 145002.76 143490.51
05/31/93 145185.54 143673.23
06/30/93 147708.62 146277.03
07/31/93 148811.04 147104.35
08/31/93 151228.58 149682.77
09/30/93 151744.97 150093.90
10/31/93 152254.90 150654.76
11/30/93 151011.43 149373.16
12/31/93 151827.73 150182.72
01/31/94 153733.24 152210.44
02/28/94 151041.86 149566.03
03/31/94 147851.94 145878.59
04/30/94 146592.88 144713.73
05/31/94 146472.17 144693.43
06/30/94 146357.40 144373.67
07/31/94 148983.72 147241.40
08/31/94 149184.14 147424.12
09/30/94 147199.85 145254.29
10/31/94 147124.76 145124.86
11/30/94 146887.75 144802.56
12/31/94 147861.23 145802.46
01/31/95 150615.89 148687.95
02/28/95 153906.27 152223.12
03/31/95 154741.75 153157.04
04/30/95 156921.63 155296.42
05/31/95 162915.09 161305.96
06/30/95 164175.49 162488.58
07/31/95 163920.93 162125.67
08/31/95 165680.40 164082.33
09/30/95 167266.66 165678.61
10/31/95 169659.14 167833.21
11/30/95 172051.51 170348.19
12/31/95 174475.09 172738.81
01/31/96 175635.69 173885.90
02/29/96 172573.36 170863.36
$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. As the chart shows, by February 29, 1996, the value of your
investment would have grown to $172,573 - a 72.57% increase on your initial
investment. For comparison, look at how the Lehman Brothers Aggregate Bond
Index did over the same period. With dividends reinvested, the same
$100,000 would have grown to $170,863 - a 70.86% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share
price, return, and yield of a fund that invests in
bonds will vary. That means if you sell your
shares during a market downturn, you might
lose money. But if you can ride out the market's
ups and downs, you may have a gain.
(checkmark)
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 29, 1996 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.89(cents) 37.12(cents) 75.48(cents)
Annualized dividend rate 6.82% 6.88% 7.09%
30-day annualized yield 6.00% - -
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $10.87 over the past month, $10.82
over the past six months and $10.65 over the past year, you can compare the
fund's income over these three periods.
The 30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's investments
at the end of the period. It also helps you compare funds from different
companies on an equal basis. It does not reflect the cost of hedging and
other currency gains and losses. If Fidelity had not reimbursed certain
fund expenses during the period shown, the yield would have been 5.87%.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Christine
Thompson,
Portfolio Manager
of Fidelity U.S.
Bond Index
Portfolio
Q. CHRISTINE, HOW HAS THE FUND PERFORMED?
A. The taxable fixed-income market performed quite well over the past year
and the fund's performance reflects that. I'm pleased that the fund's
performance closely tracked the Lehman Brothers Aggregate Bond Index, as it
is designed to do. For the 12-month period ended February 29, 1996, the
fund's total return was 12.13%. That was in line with the index, which
returned 12.24% for the same period. The fund's total return is slightly
lower than the index due to operating expenses. For the same 12-month
period, the intermediate U.S. government funds average returned 10.39%, as
tracked by Lipper Analytical Services.
Q. HOW DID INDIVIDUAL SECTORS OF THE TAXABLE BOND MARKET FARE OVER THE PAST
YEAR?
A. Sector performance was dictated mainly by duration, which measures how
sensitive a security's price is to changes in interest rates. The shorter a
security's duration, the less sensitive its price is to changes in interest
rates. During the past year, the longer-duration securities - including
Treasury, agency and corporate securities - performed better than
shorter-duration asset-backed and mortgage securities. Interestingly, the
corporate bond market led all other sectors and did extremely well,
supported both by technical and fundamental factors. On the technical side,
supply was very favorable with new issuance coming to the market at
manageable levels. We also saw some increased demand as insurance
companies, banks and mutual funds sought to buy corporate debt. On the
fundamental side, corporate performance - as measured by the factors that
are important to credit quality (earnings, cash flow and capitalization
trends, for instance) - has largely been positive. That said, here's how
individual sectors of the Aggregate Bond Index performed during the past 12
months: Treasury securities, which made up 46.13% of the index, returned
12.15%; mortgage-backed securities, at 28.76% of the index, returned
11.42%; corporates, at 17.29% of the index, returned 14.32%; agency
securities, which accounted for 6.58%, returned 11.77%; and asset-backed
securities, at roughly 1.24%, returned 9.95%.
Q. TURNING TO THE FUND, WHAT ACCOUNTED FOR ITS PERFORMANCE?
A. Individual security selection helped the fund offset expenses and
transaction costs and perform so closely in line with the index. Since the
index is made up of more than 4,000 individual securities, it's impractical
for the fund to own everything in it. Although I keep the fund's sector
weightings approximately in line with the index, within a given sector I
select individual securities based on their relative attractiveness and
their potential to outperform other securities in that sector.
Q. SO WHICH SECURITIES DID YOU CHOOSE?
A. Within the corporate market, there was some differential performance
among sub-sectors. Throughout the year, the fund had a modest overweighting
- - compared to the index - in securities issued by banks and financial
companies, a strategy that served the fund well. These sectors benefited
from improved credit measures as well as consolidation trends in the
banking sector. The trend toward consolidation was a positive, because a
number of the issuers of our bank holdings merged, and emerged as larger,
more competitive entities. In many cases, these bonds experienced improved
credit ratings.
Q. WITHIN THE CORPORATE SECTOR, WHAT TYPES OF SECURITIES DID YOU AVOID?
A. The fund was underweighted in the electric utility sector, which is in
the beginning of a period of deregulation. I expect that deregulation will
dramatically change the competitive nature of the industry. As various
state regulatory bodies announced initiatives in this direction, investors
became concerned about the credit quality of electric utilities in those
regions. So the fund's underweighting in this sector was a positive. Within
the utility sector, I have focused instead on gas utilities, which have
already emerged from the deregulation process that occurred in the 1980s.
Q. WHAT CHOICES DID YOU MAKE WITHIN THE MORTGAGE SECTOR?
A. The mortgage market experienced a very interesting period over the past
12 months. As interest rates declined, investors seemed to be expecting
prepayment rates to accelerate. While the rate of prepayments increased,
the magnitude of the increase was lower than expected. As a result, there
was some volatility in mortgage valuations which, in turn, created
opportunities. For example, in the latter part of the year I felt that
high-coupon mortgages, which had generally traded at a premium, were
overpriced. In my view, discount current coupon mortgage pass-through
securities offered a much better value. In place of some premium
pass-throughs, I invested in commercial mortgage-backed and asset-backed
securities, which have similar durations, but offered, in my opinion,
superior risk/return relationships.
Q. WHAT CHOICES DID YOU MAKE IN THE AGENCY SECTOR?
A. Our emphasis was on non-callable issues, which I felt selectively
offered attractive relative value. Most of the new issues in the agency
market came as callable securities. I believed that these were priced above
their value, so we focused on buying non-callable issues.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks to provide investment results
that correspond to the aggregate price and
interest performance of the debt securities in
the Aggregate Bond Index
START DATE: March 8, 1990
SIZE: as of February 29, 1996, more than
$475 million
MANAGER: Christine Thompson, since 1990;
co-manager, Fidelity Global Bond Fund, since
March 1996; manager, Fidelity Target Timeline
Funds, since February 1996; manager, Fidelity
Intermediate Bond Fund, since October 1995;
joined Fidelity in 1985 as a senior bond analyst
(checkmark)
CHRISTINE THOMPSON ON HER OUTLOOK FOR THE FUND
AND INVESTMENT STRATEGY:
The fund's returns will be determined primarily
by the direction of interest rates. Unless there is
some major market event - which will have a
varying impact on different sectors of the
taxable fixed-income market - duration will
continue to overwhelm other factors that
determine bond prices. Credit-related yield
spreads currently are extremely compressed.
Under these conditions, it is more difficult for
the fund to outpace the index. My goal will be
to structure the portfolio so that it mimics the
index's performance, as it is designed to do.
"In choosing the fund's investments, I use a
technique known as stratified sampling. This
process entails dividing the benchmark index
into subsectors, or cells, and assembling a
portfolio which replicates the characteristics of
each subsector. One example is duration, which
is a measure of a security's price sensitivity to
changes in interest rates. The duration of the
fund and the distribution of duration are always
set to approximate the index. I determine what
percent of the index falls within a duration of
zero- to one-year, one- to two-years, and so on.
The next step is to identify securities that will
give the fund the same duration breakdown as
the index. I follow the same procedure for other
security characteristics including, but not
limited to, sector, maturity and credit quality.
"The next step is to pick individual securities,
using Fidelity's research resources. I choose
securities that have the characteristics I need,
and also offer the potential for performing better
than other securities with similar characteristics.
Usually I look at more than one parameter at a
time. For example, I may need a Treasury
security, and at the same time, a security with a
10-year duration. I also consider relative prices
in a historical context and how valuations have
differed at various points in the economic
cycle."
DISTRIBUTIONS
A total of 40.56% of the dividends distributed
during the fiscal year was derived from interest
on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January
1997 of the applicable percentage for use in
preparing 1996 income tax returns.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF FEBRUARY 29, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Aaa 70.3 73.4
Aa 2.4 3.4
A 12.7 10.4
Baa 11.8 9.6
Ba 0.0 0.3
Not rated 0.0 0.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED "BA" OR BELOW WERE
RATED INVESTMENT GRADE OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME
OF ACQUISITION BY FIDELITY, BUT DOWNGRADED SUBSEQUENT TO ACQUISITION DATE.
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 29, 1996
6 MONTHS AGO
Years 7.6 8.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 29, 1996
6 MONTHS AGO
Years 4.5 4.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF FEBRUARY 29, 1996 * AS OF AUGUST 31, 1995 **
Row: 1, Col: 1, Value: 2.8
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 24.8
Row: 1, Col: 4, Value: 24.9
Row: 1, Col: 5, Value: 43.2
U.S. government
and government
agency obligations 46.7%
Mortgage-backed securities 26.3%
Corporate bonds 20.4%
Asset-backed securities 4.1%
Short-term investments 2.5%
FOREIGN INVESTMENTS 4.4%
U.S. government
and government
agency obligations 44.0%
Mortgage-backed securities 24.9%
Corporate bonds 24.8%
Asset-backed securities 3.5%
Short-term investments 2.8%
FOREIGN INVESTMENTS 5.4%
Row: 1, Col: 1, Value: 2.5
Row: 1, Col: 2, Value: 4.1
Row: 1, Col: 3, Value: 20.4
Row: 1, Col: 4, Value: 26.3
Row: 1, Col: 5, Value: 46.7
*
**
INVESTMENTS FEBRUARY 29, 1996
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 27.4%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
AEROSPACE & DEFENSE - 0.3%
Northrop Grumman
7%, 3/01/06 (b) Baa3 $1,330,000 $ 1,320,145
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.6%
Methanex Corp.
8 7/8%, 11/15/01 A3 2,820,000 3,091,143
PAPER & FOREST PRODUCTS - 0.5%
Chesapeake Corp.:
10 3/8%, 10/1/00 Baa3 300,000 345,633
9 7/8%, 5/1/03 Baa3 900,000 1,039,221
Great Northern Nekoosa Corp.
9 1/8%, 2/1/98 Baa2 750,000 790,260
2,175,114
TOTAL BASIC INDUSTRIES 5,266,257
ENERGY - 1.6%
ENERGY SERVICES - 0.8%
Petroliam Nasional yankee
6 7/8%, 7/1/03 (b) A1 3,970,000 4,004,063
OIL & GAS - 0.8%
Nationale Elf Aquitaine yankee
7 3/4%, 5/1/99 Aa3 150,000 157,233
Occidental Petroleum Corp.:
5.85%, 11/9/98 Baa3 500,000 497,110
5.90%, 11/9/98 Baa3 600,000 597,264
5.93%, 11/9/98 Baa3 800,000 796,936
6 3/4%, 9/16/99 Baa3 750,000 763,050
6.09%, 11/29/99 Baa3 390,000 388,397
Union Oil Co. of California
9 1/8%, 2/15/06 Baa 625,000 725,075
3,925,065
TOTAL ENERGY 7,929,128
FINANCE - 18.2%
ASSET-BACKED SECURITIES - 3.5%
Boatmens Auto Trust
6.35%, 10/15/01 A2 430,000 433,419
Capital Auto Receivables Asset
Trust 5.85%, 1/15/98 Aaa 453,116 453,045
Ford Credit Grantor Trust
5.90%, 10/15/00 Aaa 4,128,793 4,137,180
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
KeyCorp Auto Grantor Trust
5.80%, 7/15/00 A3 $ 317,845 $ 317,750
Premier Auto Trust 1994-3B
6.80%, 12/02/98 Aa3 796,226 804,188
Prime Credit Card Master Trust
7.45%, 11/15/02 Aaa 1,420,000 1,488,338
Standard Credit Card Master
Trust I:
6 1/4%, 9/7/98 A2 3,190,000 3,210,436
4.85%, 3/7/99 A2 1,000,000 991,560
9 1/4, 9/07/99 A2 2,290,000 2,462,824
7.65%, 2/15/00 A2 430,000 444,378
participation certificates
5 1/2%, 9/7/98 A2 960,000 955,050
United Federal Savings Bank
Grantor Trust 1994-B
6.975%, 7/10/00 Baa2 1,222,479 1,220,951
16,919,119
BANKS - 9.5%
Bank of Boston Corp.
9 1/2%, 8/15/97 Baa1 1,716,000 1,805,043
Banponce Corp.
5 3/4%, 3/1/99 Baa1 930,000 920,189
Barnett Bank, Inc.:
8 1/2%, 3/1/99 A3 1,170,000 1,248,940
10 7/8%, 3/15/03 A3 1,020,000 1,249,898
Capital One Bank
8 5/8%, 1/15/97 Baa3 1,000,000 1,023,020
Citicorp:
9%, 4/15/99 A2 156,000 168,734
8.80%, 2/1/00 A1 920,000 944,288
Comerica, Inc. 9 3/4%, 5/1/99 A3 1,000,000 1,093,020
Corporacion Andina De Fomento:
euro 7 1/4%, 4/30/98 Baa3 250,000 253,400
yankee 7 1/4%, 4/30/98 (b) Baa2 3,000,000 3,040,800
Export Import Bank of Korea
6 3/8%, 2/15/06 A1 2,220,000 2,143,610
First Fidelity Bancorporation
8 1/2%, 4/1/98 A2 1,000,000 1,040,000
First Hawaiian Bank secured
6.93%, 12/1/03 (b) A1 1,000,000 978,200
First Interstate Bancorp:
12 3/4%, 5/1/97 A3 190,000 204,558
8 5/8%, 4/1/99 A3 1,042,000 1,116,399
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
First Maryland Bancorp
10 3/8%, 8/1/99 Baa1 $ 750,000 $ 845,768
First Security Corp. 7%,
7/15/05 Baa1 750,000 757,463
First Tennessee National Corp.
6 3/4%, 11/15/05 Baa1 620,000 608,592
Firstar Corp. 7.15%, 9/1/00 A3 1,300,000 1,328,756
Fleet Financial Group, Inc.
7 5/8%, 12/1/99 A3 1,250,000 1,303,975
Fleet/Norstar Financial Group, Inc.
9.90%, 6/15/01 A3 1,390,000 1,595,136
Kansallis-Osake-Pankki NY Branch
10%, 5/1/02 A3 760,000 888,356
Korea Development Bank:
9 1/4%, 6/15/98 A1 1,000,000 1,061,920
7%, 7/15/99 A1 1,000,000 1,022,610
6 1/4%, 5/1/00 A1 2,000,000 1,993,160
Merchants National Corp.
9 7/8%, 10/1/99 A2 1,650,000 1,842,044
Merita Bank Ltd. yankee
6 1/2%, 1/15/06 A3 2,100,000 2,027,025
Midlantic Corp.:
9 7/8%, 12/1/99 A3 653,000 730,740
9.20%, 8/1/01 A3 1,337,000 1,491,611
NCNB Corp.
10.20%, 7/15/15 A3 2,000,000 2,585,120
Nationsbank Corp.
5 1/8%, 9/15/98 A2 190,000 186,949
Provident Bank:
6 1/8%, 12/15/00 A3 1,800,000 1,780,884
7 1/8%, 3/15/03 Baa2 1,675,000 1,681,583
Shawmut National Corp.:
8 5/8%, 12/15/99 A3 880,000 949,960
7.20%, 4/15/03 A3 1,000,000 1,019,760
Signet Banking Corp.
9 5/8%, 6/1/99 Baa2 1,139,000 1,241,385
Union Planters Corp.
6 3/4%, 11/1/05 Baa3 1,500,000 1,476,660
45,649,556
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
CREDIT & OTHER FINANCE - 3.5%
Case Equipment Loan Trust
6.45%, 9/15/02 A3 $ 1,000,000 $ 1,023,460
Fleet Mortgage Group, Inc.
6 1/2% 6/15/00 A3 800,000 805,512
Ford Capital BV 9%, 8/15/98 A1 2,000,000 2,137,680
General Motors Acceptance Corp.:
6.40%, 6/8/98 A3 2,000,000 2,020,580
6%, 12/30/98 A3 2,000,000 1,999,400
Greyhound Financial Corp.:
8 1/4%, 3/11/97 Baa1 2,500,000 2,561,225
6.95%, 1/28/98 Baa2 750,000 761,355
8 1/2%, 5/1/98 Baa1 1,000,000 1,049,060
MCN Investment Corp.:
5.84%, 2/1/99 Baa2 1,460,000 1,448,773
6.03%, 2/1/01 Baa2 1,940,000 1,910,279
MNC Financial, Inc.
9 3/8%, 5/1/97 A3 197,000 204,815
Tenneco Credit Corp.
10 1/8%, 12/1/97 Baa2 300,000 320,382
Union Acceptance Corp.
7.075%, 7/10/02 Baa2 467,123 470,332
16,712,853
INSURANCE - 1.3%
Metropolitan Life Insurance Co.
6.30%, 11/1/03 (b) Aa3 2,560,000 2,480,486
Nationwide Mutual Insurance Co.
6 1/2%, 2/15/04 (b) Aa3 2,690,000 2,621,997
New York Life Insurance Co.
6.40%, 12/15/03 (b) Aa2 1,500,000 1,481,190
6,583,673
SAVINGS & LOANS - 0.4%
Great Western Financial Corp.
6 3/8%, 7/1/00 Baa1 1,000,000 1,003,580
Home Savings of America
6%, 11/1/00 A3 1,000,000 986,290
1,989,870
TOTAL FINANCE 87,855,071
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
Tenneco, Inc. 10%, 8/1/98 Baa2 1,200,000 1,305,804
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
MEDIA & LEISURE - 0.1%
PUBLISHING - 0.1%
News America Holdings, Inc.
8 5/8%, 2/1/03 Baa3 $ 355,000 $ 390,106
NONDURABLES - 0.5%
FOODS - 0.5%
Quaker Oats Co.:
9 1/8%, 10/1/99 A3 440,000 481,774
6.91%, 5/15/03 A3 540,000 548,273
9 1/8%, 7/15/04 A3 210,000 241,809
7.51%, 5/2/05 A3 540,000 564,640
7.30%, 8/29/05 A3 480,000 492,806
2,329,302
SERVICES - 0.2%
LEASING & RENTAL - 0.2%
U.S. Leasing International, Inc.
8 3/4%, 12/1/01 A1 1,000,000 1,106,240
TECHNOLOGY - 1.0%
COMPUTERS & OFFICE EQUIPMENT - 1.0%
Comdisco, Inc.:
7 1/4%, 4/15/98 Baa2 1,565,000 1,606,097
9.30%, 6/27/00 Baa2 1,250,000 1,403,125
9 1/4%, 7/6/00 Baa2 375,000 420,825
5 3/4%, 2/15/01 Baa2 1,500,000 1,465,260
4,895,307
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.3%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 1,000,000 1,024,500
9 1/2%, 7/15/98 Baa3 350,000 374,007
1,398,507
UTILITIES - 3.8%
ELECTRIC UTILITY - 1.6%
British Columbia Hydro & Power
Authority yankee
12 1/2%, 1/15/14 Aa2 750,000 901,358
Gulf States Utilities Co. 1st mtg.
6.67%, 11/1/96 Baa3 2,430,000 2,441,178
Long Island Lighting Co.
8 3/4%, 5/1/96 Baa3 2,400,000 2,425,080
United Illuminating Co.:
7 3/8%, 1/15/98 Baa3 1,500,000 1,522,725
9.76%, 1/2/06 Baa3 311,000 326,942
7,617,283
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
GAS - 2.2%
Columbia Gas System, Inc.:
6.39%, 11/28/00 Baa3 $ 1,000,000 $ 1,003,370
6.61%, 11/28/02 Baa3 1,000,000 1,002,210
Enron Corp.:
10%, 6/01/98 Baa2 500,000 539,890
8 1/2%, 2/01/00 Baa2 470,000 480,636
InterNorth, Inc.
9 5/8%, 3/15/06 Baa2 1,500,000 1,798,035
Sonat, Inc. 9 1/2%, 8/15/99 Baa1 1,034,000 1,136,366
Southwest Gas Corp., Series F,
9 3/4%, 6/15/02 Baa3 2,870,000 3,294,817
Transco Energy Co.
9 1/8%, 5/1/98 Baa2 1,490,000 1,577,865
10,833,189
TOTAL UTILITIES 18,450,472
TOTAL NONCONVERTIBLE BONDS
(Cost $131,723,576) 132,246,339
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 44.0%
U.S. TREASURY OBLIGATIONS - 36.4%
8 3/4%, 10/15/97 Aaa 5,050,000 5,308,813
7 3/8%, 11/15/97 Aaa 8,365,000 8,623,813
9%, 5/15/98 Aaa 4,700,000 5,039,293
9 1/4%, 8/15/98 Aaa 13,170,000 14,285,367
8 7/8%, 11/15/98 Aaa 4,155,000 4,497,123
5 1/8%, 12/31/98 Aaa 1,335,000 1,320,809
9 1/8%, 5/15/99 Aaa 3,901,000 4,295,976
7 3/4%, 12/31/99 Aaa 19,300,000 20,645,017
7 7/8%, 8/15/01 Aaa 16,125,000 17,672,033
6 1/4%, 2/15/03 Aaa 172,000 174,325
11 1/4%, 8/15/03 Aaa 180,000 234,225
11 3/4%, 2/15/10 Aaa 5,460,000 7,511,759
12 3/4%, 11/15/10 Aaa 7,310,000 10,721,722
9 7/8%, 11/15/15 Aaa 12,500,000 17,017,625
9%, 11/15/18 Aaa 13,550,000 17,293,188
8 7/8%, 2/15/19 Aaa 13,710,000 17,304,625
8 1/8%, 8/15/19 Aaa 8,580,000 10,078,840
12%, 8/15/23 Aaa 9,315,000 13,726,492
TOTAL U.S. TREASURY OBLIGATIONS 175,751,045
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.6%
Agency for International
Development (guaranteed by
U.S. Government)
6.80%, 2/15/12 Aaa $ 280,000 $ 281,032
Farm Credit System Financial
Assistance Corp. Series A,
9 3/8%, 7/21/03 Aaa 1,010,000 1,192,749
Federal Agricultural Mortgage
Corp. 6.92%, 8/10/02 Aaa 1,040,000 1,083,129
Federal Home Loan Bank
6.37%, 6/30/03 Aaa 510,000 513,885
Federal Home Loan Mortgage
Corporation 8%, 1/26/05 Aaa 580,000 639,177
Federal Farm Credit Bank:
6.32%, 9/9/02 Aaa 730,000 737,390
6.40%, 10/3/02 Aaa 360,000 364,572
Federal National Mortgage
Association:
7%, 7/13/98 Aaa 710,000 742,616
7.40%, 7/1/04 Aaa 2,040,000 2,178,108
Government Trust Certificates
(assets of the Trust guaranteed by
U.S. Government through Defense
Security Assistance Agency):
Class G-2,
8%, 5/15/98 Aaa 1,080,563 1,107,155
Class 1-C,
9 1/4%, 11/15/01 Aaa 560,000 613,794
Class 2-E,
9.40%, 5/15/02 Aaa 1,310,000 1,442,598
Class T-2, 9 5/8%,
5/15/02 Aaa 782,000 861,422
Government Trust Certificates
(assets of the Trust guaranteed by
U.S. Government through
Export-Import Bank):
Series 1992-A,
7.02%, 9/1/04 Aaa 569,500 591,710
Series 1993-C,
5.20%, 10/15/04 Aaa 1,058,556 1,026,799
Series 1993-D,
5.23%, 5/15/05 Aaa 740,000 715,488
Series 1994-C,
6.61%, 9/15/99 Aaa 254,430 257,687
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
Series 1995-A,
6.28%, 6/15/04 Aaa $ 2,510,000 $ 2,526,315
Overseas Private Investment Corp.,
Series 1994-195, 6.08%, 8/15/04
participation certificate Aaa 1,590,000 1,573,353
Private Export Funding Corp.:
5 3/4%, 4/30/98 Aaa 1,090,000 1,091,933
9 1/2%, 3/31/99 Aaa 610,000 668,310
6.90%, 1/31/03 Aaa 150,000 155,589
5.65%, 3/15/03 Aaa 1,072,500 1,064,102
8 3/4%, 6/30/03 Aaa 1,530,000 1,738,941
5.48%, 9/15/03 Aaa 200,000 196,994
5.80%, 2/1/04 Aaa 220,000 216,693
6.86%, 4/30/04 Aaa 446,250 458,919
State of Israel (guaranteed by
U.S. Government through Agency
for International Development):
5 1/4%, 3/15/98 Aaa 720,000 716,175
7 3/4%, 4/1/98 Aaa 839,321 858,140
6%, 2/15/99 Aaa 450,000 453,349
5 3/4%, 3/15/00 Aaa 940,000 935,594
8%, 11/15/01 Aaa 1,330,000 1,449,261
6 1/4%, 8/15/02 Aaa 3,549,000 3,573,293
6 5/8%, 2/15/04 Aaa 140,000 142,581
8 1/2%, 4/1/06 Aaa 2,705,000 3,018,611
Student Loan Marketing Association
8.14%, 10/15/03 Aaa 420,000 458,719
U.S. Housing & Urban
Development
8.27%, 8/1/03 Aaa 1,000,000 1,105,938
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 36,752,121
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $208,869,310) 212,503,166
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 24.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.5%
6 1/2%, 10/1/07 Aaa 953,508 943,973
8%, 7/1/16 Aaa 32,027 32,987
8 1/2%, 9/1/19 Aaa 43,247 45,079
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - CONTINUED
9%, 11/1/01 to 10/1/16 Aaa $ 1,184,508 $ 1,245,372
9 1/2%, 10/1/08 to 2/1/10 Aaa 1,448,183 1,562,237
10%, 6/1/20 Aaa 345,105 381,555
10 1/2%, 1/1/01 to 1/1/16 Aaa 1,015,998 1,105,192
11%, 1/1/06 to 9/1/20 Aaa 4,773,329 5,301,548
11 1/2%, 8/1/13 to 10/1/15 Aaa 212,891 238,108
11 3/4%, 9/1/13 Aaa 118,305 132,471
12%, 2/1/13 to 7/1/15 Aaa 105,222 119,274
12 3/4%, 8/1/12 to 3/1/14 Aaa 180,296 207,111
13 1/2%, 1/1/23 Aaa 516,178 607,753
11,922,660
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.8%
5 1/2%, 3/1/01 to 4/1/01 Aaa 498,489 483,221
5 1/2%, 1/1/09 to 3/1/11 (d) Aaa 15,874,450 15,166,824
6%, 1/1/01 to 8/1/02 Aaa 4,947,525 4,885,681
6 1/2%,11/1/08 to 1/1/26 Aaa 11,884,580 11,529,233
7%, 6/1/23 to 12/1/25 Aaa 6,846,670 6,767,989
7 1/2%, 11/1/07 to 10/1/09 Aaa 2,328,884 2,375,461
8 1/2%, 6/1/17 to 7/1/24 Aaa 4,402,554 4,588,405
10 3/4%, 8/1/10 to 5/1/14 Aaa 426,110 466,622
11 1/4%, 5/1/14 Aaa 89,435 100,332
11 1/2%, 8/1/14 Aaa 247,045 280,428
12 1/4%, 6/1/13 Aaa 44,948 51,395
12 1/2%, 1/1/15 Aaa 69,164 79,775
13%, 1/12/14 to 1/1/15 Aaa 107,113 125,556
13 1/4%, 2/1/13 Aaa 9,813 10,969
13 1/2%, 8/1/14 to 11/1/14 Aaa 75,863 89,776
14%, 3/1/12 to 10/1/14 Aaa 401,740 479,090
47,480,757
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 12.1%
6%, 2/15/11 (d) Aaa 3,500,000 3,410,330
6 1/2%, 6/15/23 to 6/15/24 Aaa 8,275,559 7,978,135
7%, 12/15/22 to 9/15/23 Aaa 3,030,299 2,995,868
7 1/2%, 2/15/17 to 9/15/25 Aaa 17,589,192 17,806,815
8%, 5/15/17 to 11/15/25 Aaa 7,531,575 7,771,931
8 1/2%, 3/15/17 to 10/15/22 Aaa 2,441,958 2,563,712
9%, 7/15/18 to 3/15/26 Aaa 7,845,733 8,271,696
9 1/2%, 1/15/19 to 11/15/24 Aaa 650,031 706,929
10%, 2/15/16 to 9/15/25 Aaa 6,040,563 6,695,342
11 1/2%, 7/15/10 to 8/15/13 Aaa 4,509 5,141
58,205,899
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $116,788,446) 117,609,316
COMMERCIAL MORTGAGE SECURITIES - 0.5%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
Oregon pass thru certificates
commercial Series 1995
Class 1-A,
7.15%, 6/25/26 (b) Aaa $ 1,121,037 $ 1,118,235
Resolution Trust Corp. Commercial:
Series 1994-C2 Class A-4,
7 1/2%, 4/25/25 Aaa 24,635 24,635
Series 1995-C2 Class A-1B,
6 1/4%, 5/25/27 Aaa 1,310,000 1,300,584
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $2,451,026) 2,443,454
FOREIGN GOVERNMENT OBLIGATIONS (C) - 0.9%
Manitoba Province CDA
7.93%, 2/15/00 A1 850,000 904,357
Ontario Province yankee
7 3/4%, 6/4/02 Aa3 2,000,000 2,148,760
Victorian Public Authorities
Finance Agency
8.45%, 10/1/01 Aa2 1,000,000 1,101,670
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $4,063,404) 4,154,787
REPURCHASE AGREEMENTS - 2.8%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.41%, dated
2/29/96 due 3/1/96 $ 13,566,038 13,564,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $477,459,762) $ 482,521,062
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
2. 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 $17,045,116 or 3.6% of net
assets.
3. Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
4. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
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 RATINGS S&P RATINGS
Aaa, Aa, A 85.2% AAA, AA, A 81.4%
Baa 11.8% BBB 14.5%
Ba 0.0% BB 0.5%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 0.0%.
INCOME TAX INFORMATION
At February 29,1996, the aggregate cost of investment securities for income
tax purposes was $477,683,240. Net unrealized appreciation aggregated
$4,837,822, of which $8,827,811 related to appreciated investment
securities and $3,989,989 related to depreciated investment securities.
At February 29, 1996, the fund had a capital loss carryforward of
approximately $9,428,000 of which $5,486,000 and $3,942,000 will expire on
February 28, 2003 and February 29, 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 29, 1996
ASSETS 5. 6.
7.Investment in securities, at value (including repurchase agreements of $13,564,000) 8. $ 482,521,062
(cost $477,459,762) - See accompanying schedule
9.Cash 10. 91,279
11.Receivable for investments sold 12. 17,835,289
13.Interest receivable 14. 5,829,057
15. 16.TOTAL ASSETS 17. 506,276,687
LIABILITIES 18. 19.
20.Payable for investments purchased $ 2,115,728 21.
Regular delivery
22. Delayed delivery 11,831,816 23.
24.Payable for fund shares redeemed 16,147,508 25.
26.Distributions payable 326,399 27.
28.Accrued management fee 22,125 29.
30.Other payables and accrued expenses 187,454 31.
32. 33.TOTAL LIABILITIES 34. 30,631,030
35.NET ASSETS 36. $ 475,645,657
37.Net Assets consist of: 38. 39.
40.Paid in capital 41. $ 480,605,448
42.Distributions in excess of net investment income 43. (369,965)
44.Accumulated undistributed net realized gain (loss) on investments 45. (9,651,126)
46.Net unrealized appreciation (depreciation) on investments 47. 5,061,300
48.NET ASSETS, for 44,416,419 shares outstanding 49. $ 475,645,657
50.NET ASSET VALUE, offering price and redemption price per share ($475,645,657 (divided by)
44,416,419 51. $10.71
shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED FEBRUARY 29, 1996
INVESTMENT INCOME 53. $ 31,260,208
52.Interest
EXPENSES 54. 55.
56.Management fee $ 1,349,820 57.
58.Transfer agent fees 1,028,174 59.
60.Accounting fees and expenses 170,395 61.
62.Non-interested trustees' compensation 1,854 63.
64.Custodian fees and expenses 37,484 65.
66.Registration fees 61,419 67.
68.Audit 59,129 69.
70.Legal 2,651 71.
72.Miscellaneous 1,157 73.
74. Total expenses before reductions 2,712,083 75.
76. Expense reductions (1,425,291) 1,286,792
77.78.NET INVESTMENT INCOME 79. 29,973,416
REALIZED AND UNREALIZED GAIN (LOSS) 81. 62,718
80.Net realized gain (loss) on investment securities
82.Change in net unrealized appreciation (depreciation) on investment securities 83. 15,922,876
84.85.NET GAIN (LOSS) 86. 15,985,594
87.88.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 89. $ 45,959,010
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
90.Operations $ 29,973,416 $ 25,192,907
Net investment income
91. Net realized gain (loss) 62,718 (10,706,754)
92. Change in net unrealized appreciation (depreciation) 15,922,876 (7,806,576)
93. 94.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 45,959,010 6,679,577
95.Distributions to shareholders from net investment income (29,821,179) (24,634,207)
96.Share transactions 210,548,939 148,587,282
Net proceeds from sales of shares
97. Reinvestment of distributions 26,920,819 22,389,755
98. Cost of shares redeemed (132,643,614) (86,844,254)
99.100. 104,826,144 84,132,783
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
101. 120,963,975 66,178,153
102.TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS 103. 104.
105. Beginning of period 354,681,682 288,503,529
106. $ 475,645,657 $ 354,681,682
End of period (including distributions in excess of net investment income of $369,965
and $275,574, respectively)
OTHER INFORMATION 108. 109.
107.Shares
110. Sold 19,606,989 14,168,508
111. Issued in reinvestment of distributions 2,521,506 2,193,629
112. Redeemed (12,324,143) (8,384,945)
113. Net increase (decrease) 9,804,352 7,977,192
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
114. YEAR ENDED YEARS ENDED FEBRUARY 28, FOUR MONTHS YEARS ENDED OCTOBER MARCH 8, 1990
FEBRUARY 29, ENDED 31, (COMMENCEMENT
FEBRUARY 28, OF OPERATIONS) TO
OCTOBER 31,
115. 1996 1995 1994 D 1993 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
116.SELECTED PER-SHARE DATA
117.Net asset value, beginning $ 10.250 $ 10.830 $ 11.070 $ 10.910 $ 10.710 $ 10.040 $ 10.000
of period
118.Income from Investment .755 .718 .697 .260 .839 .863 .559
Operations
Net investment income
119. Net realized and unrealized .460 (.542) (.110) .324 .277 .668 .040
gain (loss)
120. Total from investment 1.215 .176 .587 .584 1.116 1.531 .599
operations
121.Less Distributions (.755) (.756) (.727) (.254) (.836) (.861) (.559)
From net investment income
122. From net realized gain - - (.070) (.170) (.080) - -
123. In excess of net realized - - (.030) - - - -
gain
124. Total distributions (.755) (.756) (.827) (.424) (.916) (.861) (.559)
125.Net asset value, end of $ 10.710 $ 10.250 $ 10.830 $ 11.070 $ 10.910 $ 10.710 $ 10.040
period
126.TOTAL RETURN B, C 12.13% 1.90% 5.38% 5.50% 10.84% 15.86% 6.14%
127.RATIOS AND SUPPLEMENTAL DATA
128.Net assets, end of period $ 475,646 $ 354,682 $ 288,504 $ 123,351 $ 86,149 $ 39,144 $ 25,600
(000 omitted)
129.Ratio of expenses to .32% .32% .32% .32% A .32% .32% .32% A
average
net assets E
130.Ratio of expenses to .31% F .32% .32% .32% A .32% .32% .32% A
average net assets after
expense reductions
131.Ratio of net investment 7.11% 7.58% 6.93% 7.34% A 7.70% 8.33% 8.62% A
income to average net assets
132.Portfolio turnover rate 128% 73% 160% 89% A 113% 50% 62% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended February 29, 1996
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 financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities 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 of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted 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.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
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. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains, market discount, capital loss carryforwards and losses deferred due
to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments may include temporary book and tax basis differences that will
reverse in a subsequent period. Any taxable income or gain remaining at
fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $632,563,492 and $528,705,354, respectively, of which U.S.
government and government agency obligations aggregated $525,692,134 and
$472,168,027, 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 FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives account fees and
asset-based fees that vary according to account size and type of account.
FIIOC pays for typesetting, printing and mailing of all shareholder
reports, except proxy statements. For the period, the transfer agent fees
were equivalent to an annual rate of .24% of average net assets.
ACCOUNTING FEES. Fidelity Service Co. 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 $1,363,001.
In addition, the fund has entered into an arrangement with its transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
transfer agent fees were reduced by $62,290 under this arrangement.
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 29, 1996, the results of
its operations for the year then ended, and 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 at February 29, 1996
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 LLP
Boston, Massachusetts
April 8, 1996
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Christine Thompson, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
(registered trademark)
UBI-ANN-0496
0000
FIDELITY
U.S. EQUITY INDEX
PORTFOLIO
ANNUAL REPORT
FEBRUARY 29, 1996
UBI-ANN-0496
0000
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PERFORMANCE A-1 How the fund has done over time.
FUND TALK A-3 The manager's review of fund performance,
strategy and outlook.
INVESTMENT CHANGES A-5 A summary of major shifts in the fund's
investments
over the past six months.
INVESTMENTS A-6 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS A-14 Statements of assets and liabilities, operations,
and
changes in net assets, as well as financial
highlights.
NOTES A-18 Notes to the financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS A-21 The auditors' opinion.
DISTRIBUTIONS A-22
</TABLE>
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $100,000 investment. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells stocks that have grown in value). If Fidelity
had not reimbursed certain expenses during the periods shown, the total
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 29, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity U.S. Equity Index 34.37% 98.66% 209.74%
S&P 500 34.70% 101.14% 216.88%
S&P 500 Index Objective Funds Average 33.94% 96.32% 209.61%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on February 17, 1988. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, you would have $1,050. For
comparison, you can look at the performance of the Standard & Poor's
Composite Index of 500 Stocks (S&P 500(registered trademark)), a widely
recognized, unmanaged index of common stock prices. To measure how the
fund's performance stacked up against its peers, you can compare it to the
S&P 500 index objective funds average, which reflects the performance of 43
S&P 500 index objective funds with similar objectives tracked by Lipper
Analytical Services over the past 12 months. These benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 29, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity U.S. Equity Index 34.37% 14.72% 15.10%
S&P 500 34.70% 14.99% 15.42%
S&P 500 Index Objective Funds Average 33.94% 14.44% 15.10%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$100,000 OVER LIFE OF FUND
U.S. EquityStandard & Poor's 500 Stock In
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 106727.95 107127.95
10/31/88 109774.42 110106.11
11/30/88 108149.64 108531.59
12/31/88 110097.82 110430.89
01/31/89 118116.15 118514.43
02/28/89 115237.77 115563.42
03/31/89 117909.83 118256.05
04/30/89 124121.06 124393.54
05/31/89 129090.04 129431.48
06/30/89 128241.53 128693.72
07/31/89 139909.33 140314.76
08/31/89 142513.74 143064.93
09/30/89 141893.01 142478.36
10/31/89 138644.36 139172.87
11/30/89 141473.83 142011.99
12/31/89 144725.54 145420.28
01/31/90 134955.49 135662.58
02/28/90 136673.30 137412.63
03/31/90 140223.80 141054.06
04/30/90 136761.48 137527.71
05/31/90 150069.76 150936.66
06/30/90 148986.99 149910.29
07/31/90 148442.05 149430.58
08/31/90 134818.51 135922.05
09/30/90 128134.08 129302.65
10/31/90 127584.62 128746.65
11/30/90 135826.52 137063.68
12/31/90 139466.56 140887.76
01/31/91 145578.64 147030.47
02/28/91 155913.61 157543.14
03/31/91 159698.26 161355.69
04/30/91 160033.99 161742.94
05/31/91 166860.62 168730.24
06/30/91 159228.10 161002.39
07/31/91 166552.82 168505.10
08/31/91 170496.90 172498.67
09/30/91 167580.91 169617.95
10/31/91 169850.12 171890.83
11/30/91 162929.04 164963.63
12/31/91 181531.43 183835.47
01/31/92 178058.25 180416.13
02/29/92 180373.71 182761.54
03/31/92 176779.44 179197.69
04/30/92 181906.86 184466.10
05/31/92 182839.12 185369.98
06/30/92 180038.56 182607.97
07/31/92 187427.76 190076.64
08/31/92 183557.23 186180.06
09/30/92 185665.45 188376.99
10/31/92 186137.58 189036.31
11/30/92 192511.35 195482.45
12/31/92 194881.43 197886.88
01/31/93 196428.11 199549.13
02/28/93 199045.56 202263.00
03/31/93 203226.03 206530.75
04/30/93 198196.34 201532.70
05/31/93 203494.42 206933.78
06/30/93 203983.98 207533.89
07/31/93 203136.06 206703.75
08/31/93 210888.42 214537.82
09/30/93 209194.01 212885.88
10/31/93 213458.30 217292.62
11/30/93 211387.07 215228.34
12/31/93 213970.37 217832.60
01/31/94 221156.41 225238.91
02/28/94 215085.45 219134.94
03/31/94 205615.39 209580.65
04/30/94 208239.11 212263.29
05/31/94 211615.97 215744.41
06/30/94 206450.46 210458.67
07/31/94 213244.07 217361.71
08/31/94 221799.00 226273.54
09/30/94 216368.29 220729.84
10/31/94 221176.47 225696.26
11/30/94 213078.48 217476.40
12/31/94 216308.29 220701.58
01/31/95 221808.74 226424.37
02/28/95 230507.12 235248.13
03/31/95 237188.64 242190.30
04/30/95 244138.93 249322.80
05/31/95 253796.32 259288.24
06/30/95 259633.20 265311.50
07/31/95 268175.46 274109.23
08/31/95 268822.61 274797.25
09/30/95 280085.88 286393.69
10/31/95 279045.64 285371.27
11/30/95 291268.51 297899.06
12/31/95 296728.36 303636.60
01/31/96 306851.56 313972.39
02/29/96 309612.44 316882.91
$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. As
the chart shows, by February 29, 1996, the value of your investment would
have grown to $309,744 - a 209.74% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $100,000 investment in the S&P 500 would
have grown to $316,883 - a 216.88% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. The stock market, for
example, has a history of growth in the long
run and volatility in the short run. In turn, the
share price and return of a fund that invests
in stocks or bonds will vary. That means if you
sell your shares during a market downturn, you
might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Christine
Thompson,
Portfolio Manager
of Fidelity U.S.
Bond Index
Portfolio
Q. HOW DID THE FUND PERFORM, JENNIFER?
A. U.S. stocks continued to build on their strong performance in 1995 as
large-capitalization issuers led the way for most of the fund's reporting
period. For the 12-month period ended February 29, 1996, the fund had a
total return of 34.37%. That compares with the 34.70% return of the
Standard & Poor's Composite Index of 500 Stocks. Of course, the fund's
total return is slightly lower than the index due to management expenses.
Additionally, the S&P 500 index objective funds average, as tracked by
Lipper Analytical Services, was 33.94%.
Q. IN YOUR OPINION, WHAT WERE THE MOST IMPORTANT FACTORS IN THE U.S. STOCK
MARKET RALLY?
A. Falling interest rates and growing corporate profits played a big part
in the stock market's rally. The Federal Reserve Board eased short-term
interest rates three times during the period - in July 1995, December 1995
and January 1996. These actions confirmed that the economy was growing at a
slow but steady pace with relatively low inflation. Lower interest rates
were important to the equity market because they indicated corporate
borrowing costs would be less of a burden on profits.
Q. WAS THERE ANYTHING ELSE THAT ADDED TO THE OPTIMISTIC SENTIMENT OF THE
MARKET?
A. The flurry of initial public offerings - particularly the eye-popping
leaps in the prices of technology-related issues - helped to confirm the
market's strong demand for equities. It also was a record year for mergers
and acquisitions, as more than $400 billion in deals were announced. I
should point out that much of this year's M&A activity involved S&P 500
companies. These included Walt Disney's purchase of Capital Cities/ABC,
Westinghouse's acquisition of CBS, the merger of money-center banks Chase
Manhattan and Chemical, regional bank Fleet Financial's acquisition of
rival Shawmut, and Kimberly Clark's acquisition of rival Scott Paper - to
name a few.
Q. CORPORATE SPIN-OFFS HAD A BIG IMPACT ON THE S&P 500 AS WELL . . .
A. They certainly did. Like M&A activity, it was also a record year for
corporate spin-offs and restructuring. AT&T broke off into three units
during the year, while ITT Corp. and Minnesota Mining & Manufacturing made
similar announcements. Additionally, in a long anticipated move, General
Motors announced it would spin off its computer subsidiary, Electronic Data
Systems.
Q. WHAT HAPPENED IN THE TECHNOLOGY SECTOR THIS PAST YEAR?
A. Stocks of large semiconductor firms held the spotlight for much of the
year and really seemed to drive the performance of other technology-related
stocks. However, beginning in the second quarter of 1995, some
semiconductor and software firms began reporting earnings below analyst
estimates. By the fourth quarter, some semiconductor companies showed
continued weakness in earnings. I should point out, however, that many
software and personal computer firms were able to perform well despite
weakness in the technology sector.
Q. ASIDE FROM TECHNOLOGY, WHAT WERE SOME OTHER SECTORS THAT PERFORMED WELL?
A. Demand was high for consumer nondurables - or less economically
sensitive stocks. This benefited health care stocks and pharmaceutical
companies as well as beverage and tobacco companies. Following the trend
toward consumer nondurables was a resurgence in biotechnology and medical
device companies. These stocks - which were generally trading at depressed
valuations - were also helped by a large number of approvals from the Food
and Drug Administration. Additionally, the financial sector - particularly
money-center banks - was the beneficiary of the increased loan activity and
investing that goes along with lower interest rates.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. Cyclical - or economically sensitive - stocks underperformed as the
economy slowed this year. These stocks generally do well in the first
stages of a recovery. Another widely publicized underperforming sector was
retail. The combination of consumers keeping a tight rein on their purse
strings and intense competition, as well as several high-profile
bankruptcies, hurt retail stocks.
Q. WHAT DOES THE PASSAGE OF THE NEW TELECOMMUNICATIONS LAW MEAN FOR THE
TELECOMMUNICATIONS COMPANIES LISTED IN THE S&P 500?
A. The long-term effects are innumerable. The telecommunications law gave
the local and long-distance phone service, broadcast and cable industries
the regulatory freedom necessary to blur the traditional lines of their
respective businesses through mergers and acquisitions. While it may be too
early to determine any concrete results, it's no coincidence that U.S. West
recently announced its intention to acquire Continental Cablevision, or
that NYNEX and Bell Atlantic confirmed that they are holding merger talks.
Q. WHAT'S YOUR OUTLOOK?
A. History has shown that the stock market generally has not been able to
sustain this level of growth for two years in a row. That said, however,
should the economy continue to grow at a sustainable pace and corporate
earnings remain fairly strong, I believe the equity markets should continue
to show some positive returns.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks to provide investment results
that correspond to the aggregate price and
interest performance of the debt securities in
the Aggregate Bond Index
START DATE: March 8, 1990
SIZE: as of February 29, 1996, more than
$475 million
MANAGER: Christine Thompson, since 1990;
co-manager, Fidelity Global Bond Fund, since
March 1996; manager, Fidelity Target Timeline
Funds, since February 1996; manager, Fidelity
Intermediate Bond Fund, since October 1995;
joined Fidelity in 1985 as a senior bond analyst
(checkmark)
CHRISTINE THOMPSON ON HER OUTLOOK FOR THE FUND
AND INVESTMENT STRATEGY:
The fund's returns will be determined primarily
by the direction of interest rates. Unless there is
some major market event - which will have a
varying impact on different sectors of the
taxable fixed-income market - duration will
continue to overwhelm other factors that
determine bond prices. Credit-related yield
spreads currently are extremely compressed.
Under these conditions, it is more difficult for
the fund to outpace the index. My goal will be
to structure the portfolio so that it mimics the
index's performance, as it is designed to do.
"In choosing the fund's investments, I use a
technique known as stratified sampling. This
process entails dividing the benchmark index
into subsectors, or cells, and assembling a
portfolio which replicates the characteristics of
each subsector. One example is duration, which
is a measure of a security's price sensitivity to
changes in interest rates. The duration of the
fund and the distribution of duration are always
set to approximate the index. I determine what
percent of the index falls within a duration of
zero- to one-year, one- to two-years, and so on.
The next step is to identify securities that will
give the fund the same duration breakdown as
the index. I follow the same procedure for other
security characteristics including, but not
limited to, sector, maturity and credit quality.
"The next step is to pick individual securities,
using Fidelity's research resources. I choose
securities that have the characteristics I need,
and also offer the potential for performing better
than other securities with similar characteristics.
Usually I look at more than one parameter at a
time. For example, I may need a Treasury
security, and at the same time, a security with a
10-year duration. I also consider relative prices
in a historical context and how valuations have
differed at various points in the economic
cycle."
DISTRIBUTIONS
A total of 40.56% of the dividends distributed
during the fiscal year was derived from interest
on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January
1997 of the applicable percentage for use in
preparing 1996 income tax returns.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF FEBRUARY 29, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 2.5 2.3
Coca-Cola Company (The) 2.0 1.9
AT&T Corp. 2.0 2.1
Exxon Corp. 2.0 2.0
Philip Morris Companies, Inc. 1.7 1.5
Merck & Co., Inc. 1.6 1.4
Royal Dutch Petroleum Co. 1.5 1.5
International Business Machines Corp. 1.4 1.4
Johnson & Johnson 1.2 1.0
Microsoft Corp. 1.2 1.2
TOP TEN MARKET SECTORS AS OF FEBRUARY 29, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
Finance 13.1 12.0
Utilities 11.8 12.1
Nondurables 11.1 10.6
Technology 11.1 11.6
Health 10.4 9.2
Energy 8.3 8.6
Basic Industries 6.4 7.1
Industrial Machinery & Equipment 5.2 5.1
Media & Leisure 4.6 4.7
Retail & Wholesale 4.3 4.8
</TABLE>
INVESTMENTS FEBRUARY 29, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.9%
AEROSPACE & DEFENSE - 1.4%
Boeing Co. 284,006 $ 23,040
Lockheed Martin Corp. 165,666 12,632
McDonnell Douglas Corp. 92,755 8,186
Northrop Grumman Corp. 40,969 2,530
Rockwell International Corp. 179,748 10,246
56,634
DEFENSE ELECTRONICS - 0.4%
Loral Corp. 142,526 6,716
Raytheon Co. 200,652 10,058
16,774
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 52,179 3,111
TOTAL AEROSPACE & DEFENSE 76,519
BASIC INDUSTRIES - 6.4%
CHEMICALS & PLASTICS - 3.6%
Air Products & Chemicals, Inc. 92,543 4,928
Avery Dennison Corp. 44,101 2,375
Dow Chemical Co. 216,680 17,389
du Pont (E.I.) de Nemours & Co. 459,590 35,159
Eastman Chemical Co. 66,371 4,779
Engelhard Corp. 119,249 2,430
FMC Corp.(a) 30,270 2,210
Goodrich (B.F.) Co. 21,545 1,640
Grace (W.R.) & Co. 80,580 5,560
Great Lakes Chemical Corp. 53,504 3,825
Hercules, Inc. 92,337 5,540
Minnesota Mining & Manufacturing Co. 347,177 22,610
Monsanto Co. 95,302 12,830
Morton International, Inc. 122,670 4,646
Nalco Chemical Co. 55,757 1,770
PPG Industries, Inc. 162,307 7,527
Praxair, Inc. 115,681 3,991
Raychem Corp. 36,268 2,353
Rohm & Haas Co. 55,931 3,894
Union Carbide Corp. 109,129 4,911
150,367
IRON & STEEL - 0.2%
Armco, Inc. (a) 87,905 494
Bethlehem Steel Corp. (a) 93,209 1,282
Inland Steel Industries, Inc. 40,287 982
Nucor Corp. 72,427 3,902
USX-U.S. Steel Group 68,371 2,239
Worthington Industries, Inc. 75,003 1,613
10,512
SHARES VALUE (NOTE 1)
(000S)
METALS & MINING - 0.8%
Alcan Aluminium Ltd. 186,474 $ 5,698
Aluminum Co. of America 146,566 8,318
ASARCO, Inc. 35,243 1,053
Cyprus Amax Minerals Co. 76,811 1,987
Freeport-McMoRan Copper &
Gold, Inc. Class B 167,086 5,452
Inco Ltd. 85,917 2,727
Phelps Dodge Corp. 57,410 3,509
Reynolds Metals Co. 52,439 2,707
31,451
PACKAGING & CONTAINERS - 0.3%
Ball Corp. 25,059 752
Bemis Co., Inc. 43,820 1,341
Corning, Inc. 189,776 6,168
Crown Cork & Seal Co., Inc. (a) 102,490 4,830
13,091
PAPER & FOREST PRODUCTS - 1.5%
Boise Cascade Corp. 39,777 1,402
Champion International Corp. 79,953 3,198
Federal Paper Board Co., Inc. 39,133 2,089
Georgia-Pacific Corp. 75,877 4,790
International Paper Co. 210,727 7,507
James River Corp. of Virginia 68,219 1,799
Kimberly-Clark Corp. 230,520 17,606
Louisiana-Pacific Corp. 89,312 2,065
Mead Corp. 44,418 2,221
Potlatch Corp. 24,027 988
Stone Container Corp. 79,280 1,090
Temple-Inland, Inc. 46,503 1,872
Union Camp Corp. 57,989 2,704
Westvaco Corp. 84,047 2,437
Weyerhaeuser Co. 168,279 7,131
Willamette Industries, Inc. 45,802 2,405
61,304
TOTAL BASIC INDUSTRIES 266,725
CONGLOMERATES - 1.1%
Allied-Signal, Inc. 233,958 13,014
Crane Co. 24,870 1,007
Dial Corp. (The) 77,751 2,333
Harris Corp. 32,354 2,152
ITT Industries, Inc. 96,489 2,533
Teledyne, Inc. 46,079 1,296
Textron, Inc. 69,933 5,507
Tyco International Ltd. 126,286 4,562
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - CONTINUED
United Technologies Corp. 100,903 $ 10,847
Whitman Corp. 86,802 2,018
45,269
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.3%
Armstrong World Industries, Inc. 30,558 1,791
Masco Corp. 132,829 3,786
Owens Corning (a) 42,156 1,713
Sherwin-Williams Co. 70,622 2,992
10,282
CONSTRUCTION - 0.0%
Centex Corp. 22,638 651
Kaufman & Broad Home Corp. 26,854 413
Pulte Corp. 22,228 664
1,728
ENGINEERING - 0.2%
EG & G, Inc. 40,842 975
Fluor Corp. 68,798 4,618
Foster Wheeler Corp. 33,239 1,463
7,056
TOTAL CONSTRUCTION & REAL ESTATE 19,066
DURABLES - 3.4%
AUTOS, TIRES, & ACCESSORIES - 2.7%
Chrysler Corp. 316,620 17,849
Cooper Tire & Rubber Co. 69,143 1,755
Cummins Engine Co., Inc. 33,110 1,395
Dana Corp. 83,818 2,535
Eaton Corp. 64,122 3,711
Echlin, Inc. 49,311 1,670
Ford Motor Co. 888,841 27,776
General Motors Corp. 618,561 31,701
Genuine Parts Co. 101,556 4,342
Goodyear Tire & Rubber Co. 126,191 5,994
Johnson Controls, Inc. 33,970 2,437
NACCO Industries, Inc. Class A 7,504 418
Navistar International Corp. (a) 62,273 631
PACCAR, Inc. 32,249 1,524
Pep Boys - Manny, Moe & Jack 51,248 1,537
Snap-on Tools Corp. 32,311 1,447
TRW, Inc. 54,176 4,693
111,415
CONSUMER ELECTRONICS - 0.3%
Black & Decker Corp. 71,080 2,399
Maytag Co. 89,129 1,749
SHARES VALUE (NOTE 1)
(000S)
Newell Co. 131,130 $ 3,639
Whirlpool Corp. 61,033 3,395
11,182
TEXTILES & APPAREL - 0.4%
Fruit of the Loom, Inc. Class A (a) 62,860 1,595
Liz Claiborne, Inc. 61,182 1,920
NIKE, Inc. Class B 118,224 7,670
Reebok International Ltd. 62,470 1,648
Russell Corp. 32,142 900
Springs Industries, Inc. Class A 16,759 725
Stride Rite Corp. 40,948 332
VF Corp. 52,731 2,834
17,624
TOTAL DURABLES 140,221
ENERGY - 8.3%
COAL - 0.0%
Eastern Enterprises Co. 16,760 593
ENERGY SERVICES - 0.7%
Baker Hughes, Inc. 116,923 3,084
Dresser Industries, Inc. 150,960 4,246
Halliburton Co. 94,722 5,198
Helmerich & Payne, Inc. 20,424 684
McDermott International, Inc. 45,027 867
Rowan Companies, Inc. (a) 70,153 762
Schlumberger Ltd. 200,215 14,591
29,432
OIL & GAS - 7.6%
Amerada Hess Corp. 74,531 3,838
Amoco Corp. 410,999 28,564
Ashland, Inc. 52,818 1,934
Atlantic Richfield Co. 133,121 14,577
Burlington Resources, Inc. 104,692 3,808
Chevron Corp. 539,794 30,026
Coastal Corp. (The) 86,986 3,197
Exxon Corp. 1,027,623 81,696
Kerr-McGee Corp. 42,767 2,550
Louisiana Land & Exploration Co. 27,461 1,146
Mobil Corp. 327,278 35,878
Occidental Petroleum Corp. 263,378 6,058
Oryx Energy Co. (a) 86,509 1,114
Pennzoil Co. 38,403 1,469
Phillips Petroleum Co. 217,011 7,595
Royal Dutch Petroleum Co. 443,512 61,094
Santa Fe Energy Resources, Inc. (a) 74,632 690
Sun Co., Inc. 62,573 1,822
Texaco, Inc. 218,591 17,433
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
USX-Marathon Group 237,905 $ 4,402
Unocal Corp. 205,895 6,177
315,068
TOTAL ENERGY 345,093
FINANCE - 13.1%
BANKS - 6.4%
Banc One Corp. 375,853 13,390
Bank of Boston Corp. 92,925 4,518
Bank of New York Co., Inc. 165,583 8,590
BankAmerica Corp. 306,228 21,819
Bankers Trust New York Corp. 65,196 4,213
Barnett Banks, Inc. 80,335 5,021
Boatmen's Bancshares, Inc. 130,212 5,111
Chase Manhattan Corp. 148,010 11,027
Chemical Banking Corp. 206,983 14,825
Citicorp 399,233 31,140
Comerica, Inc. 94,700 3,681
CoreStates Financial Corp. 115,455 4,965
First Bank System, Inc. 107,500 6,195
First Interstate Bancorp 62,816 10,263
First Union Corp. 232,291 14,054
Fleet Financial Group, Inc. 203,170 8,355
KeyCorp 195,831 7,368
Mellon Bank Corp. 117,027 6,539
Morgan (J.P.) & Co., Inc. 155,379 12,722
National City Corp. 123,154 4,280
NationsBank Corp. 244,800 18,054
Norwest Corp. 292,077 10,661
PNC Financial Corp. 283,278 8,675
Republic New York Corp. 46,425 2,780
SunTrust Banks, Inc. 94,425 6,786
U.S. Bancorp 125,381 3,871
Wachovia Corp. 140,886 6,551
Wells Fargo & Co. 39,854 9,828
265,282
CREDIT & OTHER FINANCE - 1.3%
American Express Co. 400,903 18,442
Beneficial Corp. 43,950 2,284
Dean Witter Discover & Co. 139,661 7,507
First Chicago NBD Corp. 265,380 11,511
Household International, Inc. 80,913 5,441
MBNA Corp. 184,420 5,210
Transamerica Corp. 56,617 4,268
54,663
SHARES VALUE (NOTE 1)
(000S)
FEDERAL SPONSORED CREDIT - 1.0%
Federal Home Loan Mortgage
Corporation 149,628 $ 12,344
Federal National Mortgage Association 903,040 28,559
40,903
INSURANCE - 3.8%
Aetna Life & Casualty Co. 94,513 7,148
Alexander & Alexander Services, Inc. 36,823 686
Allstate Corp. 359,660 15,420
American General Corp. 169,388 6,161
American International Group, Inc. 392,378 37,914
CIGNA Corp. 62,764 7,438
Chubb Corp. (The) 71,926 6,986
General Re Corp. 67,954 9,777
ITT Hartford Group, Inc. 96,489 4,969
Jefferson Pilot Corp. 58,819 3,272
Lincoln National Corp. 85,939 4,727
Loews Corp. 97,560 8,293
Marsh & McLennan Companies, Inc. 60,473 5,873
Providian Corp. 78,707 3,640
SAFECO Corp. 104,306 3,781
St. Paul Companies, Inc. (The) 69,852 3,955
Torchmark Corp. 59,306 2,750
Travelers, Inc. (The) 264,130 17,664
UNUM Corp. 60,276 3,549
USF&G Corp. 93,021 1,395
USLIFE Corp. 28,427 860
156,258
SAVINGS & LOANS - 0.2%
Ahmanson (H.F.) & Co. 97,137 2,210
Golden West Financial Corp. 48,614 2,461
Great Western Financial Corp. 113,131 2,588
7,259
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 145,310 8,373
Morgan Stanley Group, Inc. 128,600 6,028
Salomon, Inc. 88,093 3,359
17,760
TOTAL FINANCE 542,125
HEALTH - 10.4%
DRUGS & PHARMACEUTICALS - 6.2%
Allergan, Inc. 53,403 1,989
ALZA Corp. Class A (a) 68,306 2,271
American Home Products Corp. 258,815 25,493
Amgen, Inc. (a) 220,174 13,155
Bristol-Myers Squibb Co. 419,758 35,732
Lilly (Eli) & Co. 456,432 27,614
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Merck & Co., Inc. 1,022,423 $ 67,736
Pharmacia & Upjohn, Inc. 416,735 17,451
Pfizer, Inc. 524,716 34,566
Schering-Plough Corp. 304,066 17,066
Sigma Aldrich Corp. 41,332 2,366
Warner-Lambert Co. 111,715 11,046
256,485
MEDICAL EQUIPMENT & SUPPLIES - 3.1%
Abbott Laboratories 654,152 27,311
Bard (C.R.), Inc. 47,001 1,686
Bausch & Lomb, Inc. 47,422 1,844
Baxter International, Inc. 228,946 10,475
Becton, Dickinson & Co. 54,505 4,469
Biomet, Inc. (a) 95,332 1,811
Boston Scientific Corp. (a) 143,749 6,900
Johnson & Johnson 536,046 50,120
Mallinckrodt Group, Inc. 63,422 2,489
Medtronic, Inc. 191,224 10,971
Millipore Corp. 37,157 1,649
Pall Corp. 94,599 2,578
St. Jude Medical, Inc. (a) 57,972 2,188
U.S. Surgical Corp. 47,319 1,343
125,834
MEDICAL FACILITIES MANAGEMENT - 1.1%
Beverly Enterprises, Inc. (a) 81,339 986
Columbia/HCA Healthcare Corp. 368,448 20,173
Community Psychiatric Centers 35,793 331
Humana, Inc. 134,000 3,283
Manor Care, Inc. 51,739 1,985
Tenet Healthcare Corp. 165,468 3,702
United HealthCare Corp. 144,494 9,428
U.S. Healthcare, Inc. 126,979 6,191
46,079
TOTAL HEALTH 428,398
HOLDING COMPANIES - 0.3%
CINergy Corp. 129,527 3,870
Norfolk Southern Corp. 107,281 8,743
12,613
INDUSTRIAL MACHINERY & EQUIPMENT - 5.2%
ELECTRICAL EQUIPMENT - 3.3%
Emerson Electric Co. 185,845 14,473
General Electric Co. 1,382,169 104,354
General Signal Corp. 39,196 1,426
Grainger (W.W.), Inc. 42,005 2,872
SHARES VALUE (NOTE 1)
(000S)
Honeywell, Inc. 105,170 $ 5,573
Scientific-Atlanta, Inc. 63,678 1,066
Westinghouse Electric Corp. 324,355 6,001
135,765
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
Briggs & Stratton Corp. 24,005 1,029
Case Corp. 58,900 3,129
Caterpillar, Inc. 163,442 10,930
Cincinnati Milacron, Inc. 28,433 817
Cooper Industries, Inc. 89,322 3,450
Deere & Co. 216,637 8,476
Dover Corp. 93,904 4,179
Giddings & Lewis, Inc. 28,512 478
Harnischfeger Industries, Inc. 40,302 1,526
Illinois Tool Works, Inc. 97,199 6,403
Ingersoll-Rand Co. 90,212 3,687
Parker-Hannifin Corp. 61,178 2,149
Stanley Works 36,693 2,073
Tenneco, Inc. 147,487 8,241
Timken Co. 25,734 1,159
TRINOVA Corp. 24,054 725
Varity Corp. (a) 33,959 1,282
59,733
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 176,022 5,215
Laidlaw, Inc. Class B 243,466 2,421
Ogden Corp. 40,526 866
Safety Kleen Corp. 47,955 695
WMX Technologies, Inc. 401,152 11,433
20,630
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 216,128
MEDIA & LEISURE - 4.6%
BROADCASTING - 1.4%
Capital Cities/ABC, Inc. 123,393 16,552
Comcast Corp. Class A special 198,619 3,898
TCI Group Class A 540,125 11,343
Time Warner, Inc. 319,629 13,664
Viacom, Inc. Class B (non-vtg.) (a) 298,779 11,727
57,184
ENTERTAINMENT - 0.7%
Disney (Walt) Co. 432,504 28,329
King World Productions, Inc. (a) 30,488 1,277
29,606
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 79,478 1,818
Fleetwood Enterprises, Inc. 34,968 940
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - CONTINUED
Hasbro, Inc. 72,642 $ 2,507
Mattel, Inc. 182,653 6,073
Outboard Marine Corp. 16,659 337
11,675
LODGING & GAMING - 0.4%
Bally Entertainment Corp. 38,987 604
Harrah's Entertainment, Inc. 85,010 2,306
Hilton Hotels Corp. 40,058 3,755
ITT Corp. 96,489 5,826
Marriott International, Inc. 103,665 5,093
17,584
PUBLISHING - 1.0%
American Greetings Corp. Class A 61,821 1,692
Dow Jones & Co., Inc. 80,257 3,130
Dun & Bradstreet Corp. 140,201 8,868
Gannett Co., Inc. 116,111 7,896
Harcourt General, Inc. 60,330 2,617
Knight-Ridder, Inc. 40,733 2,821
McGraw-Hill, Inc. 41,465 3,623
Meredith Corp. 22,164 972
New York Times Co. (The) Class A 79,700 2,192
Times Mirror Co. Class A 93,020 3,162
Tribune Co. 52,692 3,517
40,490
RESTAURANTS - 0.8%
Darden Restaurants, Inc. 131,134 1,606
Luby's Cafeterias, Inc. 19,215 399
McDonald's Corp. 574,312 28,716
Ryan's Family Steak Houses, Inc. (a) 44,142 292
Shoney's, Inc. (a) 34,239 287
Wendy's International, Inc. 98,207 1,780
33,080
TOTAL MEDIA & LEISURE 189,619
NONDURABLES - 11.1%
AGRICULTURE - 0.1%
Pioneer Hi-Bred International, Inc. 69,161 3,725
BEVERAGES - 3.7%
Anheuser-Busch Companies, Inc. 210,374 14,174
Brown-Forman Corp. Class B 57,022 2,231
Coca-Cola Company (The) 1,037,900 83,810
Coors (Adolph) Co. Class B 31,281 606
PepsiCo, Inc. 651,916 41,234
Seagram Co. Ltd. 308,828 10,508
152,563
SHARES VALUE (NOTE 1)
(000S)
FOODS - 2.6%
Archer-Daniels-Midland Co. 438,798 $ 8,447
CPC International, Inc. 120,515 8,346
Campbell Soup Co. 206,138 12,729
ConAgra, Inc. 197,409 8,316
General Mills, Inc. 131,334 7,552
Heinz (H.J.) Co. 305,708 10,394
Hershey Foods Corp. 63,973 4,822
Kellogg Co. 179,843 13,578
Quaker Oats Co. 111,120 3,820
Ralston Purina Co. 87,574 5,867
Sara Lee Corp. 400,673 12,972
Sysco Corp. 150,698 4,954
Wrigley (Wm.) Jr. Company 96,054 5,643
107,440
HOUSEHOLD PRODUCTS - 2.7%
Alberto Culver Co. Class B 22,878 809
Avon Products, Inc. 56,236 4,520
Clorox Co. 43,349 3,674
Colgate-Palmolive Co. 120,560 9,434
Gillette Co. 367,282 19,879
International Flavors & Fragrances, Inc. 91,767 4,600
Premark International, Inc. 50,557 2,648
Procter & Gamble Co. 567,851 46,564
Rubbermaid, Inc. 130,219 3,662
Unilever NV ADR 132,347 17,801
113,591
TOBACCO - 2.0%
American Brands, Inc. 150,081 6,810
Philip Morris Companies, Inc. 695,001 68,805
UST, Inc. 159,867 5,675
81,290
TOTAL NONDURABLES 458,609
PRECIOUS METALS - 0.6%
Barrick Gold Corp. 292,428 8,856
Echo Bay Mines Ltd. 104,488 1,449
Homestake Mining Co. 114,064 2,210
Newmont Mining Corp. 77,814 4,426
Placer Dome, Inc. 197,846 5,612
Santa Fe Pacific Gold Corp. 108,746 1,699
24,252
RETAIL & WHOLESALE - 4.3%
APPAREL STORES - 0.4%
Brown Group, Inc. 14,924 185
Charming Shoppes, Inc. 85,309 357
Gap, Inc. 119,362 6,401
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
APPAREL STORES - CONTINUED
Limited, Inc. (The) 296,250 $ 5,184
Melville Corp. 86,981 2,773
TJX Companies, Inc. 58,183 1,294
16,194
DRUG STORES - 0.2%
Long Drug Stores, Inc. 16,626 748
Rite Aid Corp. 69,392 2,186
Walgreen Co. 203,748 6,724
9,658
GENERAL MERCHANDISE STORES - 2.3%
Dayton Hudson Corp. 59,355 4,414
Dillard Department Stores, Inc. Class A 93,594 2,924
Federated Department Stores, Inc. (a) 167,300 5,060
K mart Corp. 380,194 2,661
May Department Stores Co. (The) 206,446 9,626
Mercantile Stores Co., Inc. 30,408 1,593
Nordstrom, Inc. 67,890 3,064
Penney (J.C.) Co., Inc. 186,756 8,871
Price/Costco, Inc. (a) 161,253 2,782
Sears, Roebuck & Co. 322,688 14,642
Wal-Mart Stores, Inc. 1,899,601 40,367
Woolworth Corp. 110,165 1,322
97,326
GROCERY STORES - 0.6%
Albertson's, Inc. 209,013 7,733
American Stores Co. 122,115 3,557
Fleming Cos., Inc. 31,215 624
Giant Food, Inc. Class A 49,153 1,616
Great Atlantic & Pacific Tea Co., Inc. 31,530 709
Kroger Co. (The) (a) 102,233 3,795
Supervalu, Inc. 56,311 1,817
Winn-Dixie Stores, Inc. 124,552 4,266
24,117
RETAIL & WHOLESALE, MISCELLANEOUS - 0.8%
Circuit City Stores, Inc. 80,500 2,385
Handleman Co. 27,731 139
Home Depot, Inc. (The) 394,642 17,068
Lowe's Companies, Inc. 132,968 4,122
Tandy Corp. 53,744 2,351
Toys "R" Us, Inc. (a) 225,928 5,394
31,459
TOTAL RETAIL & WHOLESALE 178,754
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 0.7%
ADVERTISING - 0.1%
Interpublic Group of Companies, Inc. 64,808 $ 2,731
LEASING & RENTAL - 0.0%
Ryder Systems, Inc. 65,450 1,644
PRINTING - 0.3%
Alco Standard Corp. 92,922 4,402
Deluxe Corp. 68,315 2,195
Donnelley (R.R.) & Sons Co. 127,054 4,574
Harland (John H.) Co. 25,228 564
Moore Corporation Ltd. 82,662 1,621
13,356
SERVICES - 0.3%
Block (H & R), Inc. 86,381 3,056
Ecolab, Inc. 53,527 1,626
Jostens, Inc. 33,097 753
National Service Industries, Inc. 40,013 1,395
Service Corp. International 94,226 4,276
Western Atlas, Inc. (a) 44,015 2,316
13,422
TOTAL SERVICES 31,153
TECHNOLOGY - 11.1%
COMMUNICATIONS EQUIPMENT - 1.2%
Andrew Corp. (a) 32,252 1,676
Cabletron Systems, Inc. (a) 59,631 4,480
Cisco Systems, Inc. (a) 452,982 21,517
DSC Communications Corp. (a) 95,507 2,913
Northern Telecom Ltd. 210,191 9,970
Tellabs, Inc. (a) 73,201 3,459
3Com Corp. (a) 134,300 6,564
50,579
COMPUTER SERVICES & SOFTWARE - 2.9%
Autodesk, Inc. 38,955 1,378
Automatic Data Processing, Inc. 238,394 9,238
CUC International, Inc. (a) 147,827 4,786
Ceridian Corp. (a) 54,632 2,349
Computer Associates International, Inc. 199,894 13,743
Computer Sciences Corp. (a) 45,949 3,354
First Data Corp. 184,429 12,772
Microsoft Corp. (a) 490,187 48,375
Novell, Inc. (a) 306,573 3,736
Oracle Systems Corp. (a) 359,718 18,706
Shared Medical Systems Corp. 19,252 1,073
119,510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Amdahl Corp. (a) 98,623 $ 826
Apple Computer, Inc. 101,453 2,790
Bay Networks, Inc. (a) 150,700 6,122
Compaq Computer Corp. (a) 220,022 11,139
Cray Research, Inc. (a) 21,185 601
Data General Corp. (a) 30,943 522
Digital Equipment Corp. (a) 121,602 8,755
Hewlett-Packard Co. 423,583 42,676
Intergraph Corp. (a) 38,051 704
International Business Machines Corp. 470,662 57,715
Pitney Bowes, Inc. 125,277 6,045
Silicon Graphics, Inc. (a) 133,270 3,332
Sun Microsystems, Inc. (a) 157,130 8,249
Tandem Computers, Inc. (a) 96,490 929
Unisys Corp. (a) 141,853 868
Xerox Corp. 89,148 11,612
162,885
ELECTRONIC INSTRUMENTS - 0.2%
Applied Materials, Inc. (a) 147,626 5,278
Perkin-Elmer Corp. 34,758 1,599
Tektronix, Inc. 27,795 1,261
8,138
ELECTRONICS - 2.3%
Advanced Micro Devices, Inc. 108,202 2,096
AMP, Inc. 179,987 7,672
Intel Corp. 681,349 40,072
LSI Logic Corp. (a) 106,000 2,928
Micron Technology, Inc. 170,725 5,463
Motorola, Inc. 488,106 26,480
National Semiconductor Corp. (a) 112,120 1,753
Texas Instruments, Inc. 156,172 7,789
Thomas & Betts Corp. 16,629 1,197
95,450
PHOTOGRAPHIC EQUIPMENT - 0.6%
Eastman Kodak Co. 282,762 20,217
Polaroid Corp. 37,339 1,643
21,860
TOTAL TECHNOLOGY 458,422
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.3%
AMR Corp. (a) 63,104 5,537
Delta Air Lines, Inc. 42,430 3,310
Southwest Airlines Co. 118,981 3,659
USAir Group, Inc. (a) 51,626 871
13,377
SHARES VALUE (NOTE 1)
(000S)
RAILROADS - 0.8%
Burlington Northern Santa Fe Corp. 117,442 $ 9,395
CSX Corp. 128,490 5,766
Conrail, Inc. 64,726 4,668
Union Pacific Corp. 170,022 11,222
31,051
TRUCKING & FREIGHT - 0.1%
Caliber System, Inc. 32,232 1,362
Consolidated Freightways, Inc. 35,952 881
Federal Express Corp. (a) 46,822 3,464
Yellow Corp. 23,201 257
5,964
TOTAL TRANSPORTATION 50,392
UTILITIES - 11.8%
CELLULAR - 0.3%
AirTouch Communications, Inc. (a) 409,472 12,694
ELECTRIC UTILITY - 3.3%
American Electric Power Co., Inc. 154,146 6,609
Baltimore Gas & Electric Co. 121,999 3,462
Carolina Power & Light Co. 127,389 4,650
Central & South West Corp. 159,134 4,416
Consolidated Edison Co. of
New York, Inc. 194,469 6,345
DTE Energy Co. 120,156 4,281
Dominion Resources, Inc. 143,631 5,673
Duke Power Co. 169,448 8,282
Edison International 368,382 6,447
Entergy Corp. 188,390 5,346
FPL Group, Inc. 153,077 6,831
General Public Utilities Corp. 99,243 3,312
Houston Industries, Inc. 217,274 4,916
Niagara Mohawk Power Corp. 119,454 896
Northern States Power Co. 55,963 2,756
Ohio Edison Co. 126,173 2,997
PECO Energy Co. 183,758 5,191
P P & L Resources, Inc. 131,700 3,276
Pacific Gas & Electric Co. 351,238 9,000
PacifiCorp. 235,301 4,882
Public Service Enterprise Group, Inc. 202,396 5,692
Southern Co. 551,142 13,159
Texas Utilities Co. 186,944 7,547
Unicom Corp. 177,800 5,690
Union Electric Co. 84,448 3,567
135,223
GAS - 0.7%
Columbia Gas System, Inc. (The) 41,755 1,827
Consolidated Natural Gas Co. 77,318 3,325
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - CONTINUED
Enron Corp. 208,305 $ 7,629
ENSERCH Corp. 56,525 855
NICOR, Inc. 41,553 1,117
Noram Energy Corp. 103,048 927
ONEOK, Inc. 22,455 488
Pacific Enterprises 69,976 1,872
Panhandle Eastern Corp. 123,809 3,544
Peoples Energy Corp. 28,809 886
Sonat, Inc. 71,320 2,389
Williams Companies, Inc. 83,940 3,987
28,846
TELEPHONE SERVICES - 7.5%
AT&T Corp. 1,317,166 83,805
ALLTEL Corp. 156,488 5,203
Ameritech Corp. 458,399 26,415
Bell Atlantic Corp. 361,807 23,924
BellSouth Corp. 822,142 32,783
GTE Corp. 801,565 34,367
MCI Communications Corp. 560,924 16,407
NYNEX Corp. 353,489 18,205
Pacific Telesis Group 354,450 10,013
SBC Communications, Inc. 504,326 27,675
Sprint Corp. 288,676 12,413
U.S. West, Inc. 389,679 12,762
U.S. West Media Group, Inc. 389,979 8,141
312,113
TOTAL UTILITIES 488,876
TOTAL COMMON STOCKS
(Cost $2,879,606) 3,972,234
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
CONGLOMERATES - 0.0%
Teledyne, Inc., Series E, 8% (cost $6) 460 7
U.S. TREASURY OBLIGATIONS (B) - 0.2%
PRINCIPAL AMOUNT
(000S)
U.S. Treasury Bills, yield at date of
purchase 4.68% to 5.39%, 3/7/96
to 7/18/96 (Cost $7,845) $ 7,870 7,845
REPURCHASE AGREEMENTS - 3.8%
MATURITY VALUE
AMOUNT (NOTE 1)
(000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.41%, dated
2/29/96 due 3/1/96 $ 155,575 $ 155,552
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,043,009) $ 4,135,638
FUTURES CONTRACTS
DOLLAR AMOUNTS IN EXPIRATION UNDERLYING FACE UNREALIZED
THOUSANDS DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
432 S&P 500 Stock
Index Futures March, 1996 $ 137,862 $ (1,850)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.3%
LEGEND
1. Non-income producing
2. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $7,795,000.
INCOME TAX INFORMATION
At February 29, 1996, the aggregate cost of investment securities for
income tax purposes was $3,047,192,000. Net unrealized appreciation
aggregated $1,088,446,000, of which $1,160,659,000 related to appreciated
investment securities and $72,213,000 related to depreciated investment
securities.
The fund hereby designates approximately $4,407,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
(EXCEPT PER-SHARE AMOUNT) FEBRUARY 29, 1996
ASSETS 3. 4.
5.Investment in securities, at value (including repurchase agreements of $155,552) (cost $3,043,009) 6. $ 4,135,638
- -
See accompanying schedule
7.Receivable for fund shares sold 8. 11,255
9.Dividends receivable 10. 9,671
11.Other receivables 12. 38
13. 14.TOTAL ASSETS 15. 4,156,602
LIABILITIES 16. 17.
18.Payable for investments purchased $ 7 19.
20.Payable for fund shares redeemed 40,659 21.
22.Accrued management fee 110 23.
24.Payable for daily variation on futures contracts 1,330 25.
26.Other payables and accrued expenses 1,331 27.
28. 29.TOTAL LIABILITIES 30. 43,437
31.NET ASSETS 32. $ 4,113,165
33.Net Assets consist of: 34. 35.
36.Paid in capital 37. $ 2,992,916
38.Undistributed net investment income 39. 14,381
40.Accumulated undistributed net realized gain (loss) on investments and foreign currency 41. 15,089
transactions
42.Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign 43. 1,090,779
currencies
44.NET ASSETS, for 174,596 shares outstanding 45. $ 4,113,165
46.NET ASSET VALUE, offering price and redemption price per share ($4,113,165 (divided by) 174,596 shares) 47. $23.56
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED FEBRUARY 29, 1996
INVESTMENT INCOME 49. $ 72,829
48.Dividends
50.Interest (including income on securities loaned of $108) 51. 7,206
52. 53.TOTAL INCOME 54. 80,035
EXPENSES 55. 56.
57.Management fee $ 8,642 58.
59.Transfer agent fees 7,768 60.
61.Accounting and security lending fees 766 62.
63.Non-interested trustees' compensation 12 64.
65.Custodian fees and expenses 111 66.
67.Registration fees 458 68.
69.Audit 70 70.
71.Legal 17 72.
73.Miscellaneous 5 74.
75. Total expenses before reductions 17,849 76.
77. Expense reductions (10,007) 7,842
78.79.NET INVESTMENT INCOME 80. 72,193
REALIZED AND UNREALIZED GAIN (LOSS) 82. 83.
81.Net realized gain (loss) on:
84. Investment securities 4,718 85.
86. Foreign currency transactions 1 87.
88. Futures contracts 34,228 38,947
89.Change in net unrealized appreciation (depreciation) on: 90. 91.
92. Investment securities 781,356 93.
94. Futures contracts (6,039) 775,317
95.96.NET GAIN (LOSS) 97. 814,264
98.99.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 100. $ 886,457
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
101.Operations $ 72,193 $ 51,880
Net investment income
102. Net realized gain (loss) 38,947 2,043
103. Change in net unrealized appreciation (depreciation) 775,317 95,982
104. 886,457 149,905
105.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
106.Distributions to shareholders (65,604) (48,368)
From net investment income
107. From net realized gain (16,889) (8,480)
108. In excess of net realized gain - (4,020)
109. 110.TOTAL DISTRIBUTIONS (82,493) (60,868)
111.Share transactions 1,958,707 944,087
Net proceeds from sales of shares
112. Reinvestment of distributions 79,457 58,211
113. Cost of shares redeemed (963,855) (748,697)
114.115. 1,074,309 253,601
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
116. 1,878,273 342,638
117.TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS 118. 119.
120. Beginning of period 2,234,892 1,892,254
121. $ 4,113,165 $ 2,234,892
End of period (including undistributed net investment income of $14,381 and $7,791,
respectively)
OTHER INFORMATION 123. 124.
122.Shares
125. Sold 92,972 55,584
126. Issued in reinvestment of distributions 3,799 3,459
127. Redeemed (46,224) (44,005)
128. Net increase (decrease) 50,547 15,038
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
129. YEAR ENDED YEARS ENDED FOUR MONTHS YEARS ENDED
FEBRUARY 29, FEBRUARY 28, ENDED OCTOBER 31,
FEBRUARY 28,
130. 1996 1995 1994 F 1993 1992 1991
131. 132. 133. 134. 135. 136.
137.SELECTED PER-SHARE DATA
138.Net asset value, beginning of period $ 18.02 $ 17.36 $ 16.73 $ 15.77 $ 14.97 $ 11.61
139.Income from Investment Operations
140. Net investment income .48 .43 .44 .15 .42 .42
141. Net realized and unrealized gain 5.63 .77 .88 .94 .97 3.38
(loss)
142. Total from investment operations 6.11 1.20 1.32 1.09 1.39 3.80
143.Less Distributions (.46) (.43) (.44) (.13) (.43) (.44)
From net investment income
144. From net realized gain (.11) (.07) (.25) - (.16) -
145. In excess of net realized gain - (.04) - - - -
146. Total distributions (.57) (.54) (.69) (.13) (.59) (.44)
147.Net asset value, end of period $ 23.56 $ 18.02 $ 17.36 $ 16.73 $ 15.77 $ 14.97
148.TOTAL RETURN B, C 34.37% 7.17% 8.06% 6.93% 9.59% 33.13%
149.RATIOS AND SUPPLEMENTAL DATA
150.Net assets, end of period (000 $ 4,113,165 $ 2,234,892 $ 1,892,254 $ 1,472,102 $ 1,454,684 $ 960,442
omitted)
151.Ratio of expenses to average net .28% .28% .28% .28% A .28% .28%
assets D
152.Ratio of expenses to average net .25% .28% .28% .28% A .28% .28%
assets after expense reductions E
153.Ratio of net investment income to 2.34% 2.65% 2.59% 2.95% A 2.78% 3.14%
average
net assets
154.Portfolio turnover rate 1% 11% 4% 28% A 6% 4%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
F 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 29, 1996
1. 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 financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an exchange)
are valued primarily using dealer-supplied valuations or at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees. Short-term
securities maturing within sixty days of their purchase date are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in
securities are included with the net realized and unrealized gain or loss
on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, foreign currency transactions and losses deferred
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 and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock market. Buying futures,
writing puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Futures contracts and written options involve, to
varying degrees, risk of loss in excess of the futures variation margin or
the option value reflected in the Statement of Assets and Liabilities. The
underlying face amount at value is shown in the schedule of investments
under the caption "Futures Contracts." This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise from
changes in the value of the underlying instruments, if there is an illiquid
secondary market for the contracts, or if the counterparties do not perform
under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases of securities, other than short-term securities, aggregated
$1,078,206,000, of which $247,695,000 represents the current value of
securities delivered in exchange for fund shares.
Sales of securities, other than short-term securities, aggregated
$34,334,000, of which U.S. government obligations aggregated $3,500,000.
The market value of futures contracts opened and closed during the period
amounted to $1,171,902,000 and $1,157,983,000, 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 .28% of the fund's average net
assets.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives account fees and
asset-based fees that vary according to account size and type of account.
FIIOC pays for typesetting, printing and mailing of all shareholder
reports, except proxy statements. For the period, the transfer agent fees
were equivalent to an annual rate of .25%of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Co., 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.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $7,000 for the period.
5. 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, there were no
loans outstanding.
6. 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 $9,226,000.
In addition, the fund has entered into an arrangement with its transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
transfer agent fees were reduced by $781,000 under this arrangement.
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 29, 1996, the results of its operations for the year
then ended, and 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 at February 29, 1996 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 LLP
Boston, Massachusetts
April 8, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity U.S. Equity Index Portfolio voted to pay
on April 8, 1996, to shareholders of record at the opening of business on
April 4, 1996, a distribution of $.08 derived from capital gains realized
from sales of portfolio securities.
A total of 90% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
* INDEPENDENT TRUSTEES
