(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
EMERGING MARKETS INCOME
FUND
REPORT TO SHAREHOLDERS
MAY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on bond market
strategies.
PERFORMANCE 4 How the fund has done.
FUND TALK 5 The manager's review of fund
performance, strategy and outlook.
INVESTMENT SUMMARY 8 A summary of the fund's
investments.
INVESTMENTS 9 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 13 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 17 Footnotes to the financial
statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The past few months have been an unsettling time for bond investors. The
bond market declined after the Federal Reserve Board raised short-term
interest rates in February through May. These rate hikes caused bond yields
to rise and bond prices to fall. While nobody knows whether rates will
continue to go up, this may be a good time to review the effect rising
rates have on your bond fund investment, and consider how well your current
bond fund holdings match your original investment goals.
Most investors choose bond funds to generate income and to help diversify
their investment portfolios. Despite the recent market downturn, bond
mutual funds still satisfy these needs. Where investors have felt the
negative effect of rising rates is in the market value of their investment,
which has eroded as bond prices have fallen. It's important
to remember, however, that this loss in principal is only "on paper" until
you choose to sell your shares. That's why your investing time horizon is
key.
If your time horizon is short - one year or less - you may want to consider
shifting all or part of your bond fund investment into short-term
investments.
If you don't need your money within the next year, staying in your bond
fund may be the appropriate strategy for you. The longer your investing
time frame, the better your chances of retaining your principal investment
through periods of rising AND falling rates. For example, if you plan to
use your money in one to two years, a short-term bond fund may be the right
choice. If your time frame is two to four years, a fund with an
intermediate length average maturity may be best. If you have a longer-term
goal - say a child's college education that's 10 years away - you may be
willing to ride out the bond market's peaks and valleys in exchange for the
higher potential returns of a longer-term fund.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each
performance figure includes changes in a fund's share price, 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.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED MAY 31, 1994 LIFE OF
FUND
Advisor Emerging Markets
Income 3.36%
Advisor Emerging Markets Income
(incl. 4.75% sales charge) -1.55%
Consumer Price Index 0.55%
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance in
percentage terms over a set period - in this case, since the fund began on
March 9, 1994. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, you would end up with $1,050. Comparing the
fund's performance to the consumer price index helps show how your
investment did compared to inflation. (The CPI returns begin on the month
end closest to the fund's start date.) If the adviser had not reimbursed
certain expenses during the period shown, total returns would have been
lower.
AVERAGE ANNUAL RETURNS and the growth of a hypothetical $10,000
INVESTMENT in the fund will appear once the fund is a year old.
DIVIDENDS
PERIOD ENDED MAY 31, 1994 LIFE OF
FUND
Dividends per share 8.28(cents)
Annualized dividend rate 3.67%
Dividends per share show the actual income paid by the fund for a set
period. You can annualize this number, based on an average share price of
$9.81 since the fund started.
YIELD
PERIOD ENDED MAY 31, 1994 PAST 30
DAYS
30-day annualized yield 6.58%
The 30-day annualized yield is a standard formula for all funds based on
the yield 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. If the adviser had not reimbursed certain portfolio
expenses during the period shown, the yield would have been 4.17%.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, 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)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Robert Citrone, Portfolio Manager of Fidelity Advisor
Emerging Markets Income Fund
Q. ROB, HOW HAS THE FUND PERFORMED?
A. I'm pleased with the fund's performance so far, considering the
difficult investing environment in which it was launched. From the fund's
inception on March 9, 1994, through May 31, 1994, its total return was
3.36%. For the best available comparison to its peers and to its benchmark
- - - the JP Morgan Emerging Market Bond Index - we can look at the period from
March 31, 1994, through May 31, 1994. During that time, the fund returned
7.85%. The average general world income fund tracked by Lipper Analytical
Services returned -0.92% during the same period, while the JP Morgan
Emerging Bond Index rose 6.95%.
Q. GRANTED, TWO AND A HALF MONTHS IS A VERY SHORT PERIOD IN WHICH TO JUDGE
PERFORMANCE, BUT HOW DID THE FUND TOP THE AVERAGE?
A. By being defensive right off the bat. In hindsight, it's clear that the
fund got off the ground about midstream in a severe worldwide bond market
downturn. The sell-off began in early February - when the Federal Reserve
Board raised short-term interest rates in the United States for the first
time in five years - and bottomed in early April. The Fed's move was
designed to curb future inflation resulting from a strengthening U.S.
economy. But bond investors hate any mention of inflation because inflation
can erode the value of their bonds' income payments, which are paid at a
fixed rate. The correction accelerated in the emerging markets, in part,
because so many investors in these markets had highly leveraged positions,
meaning they were investing mostly with borrowed money. When bond yields
rose - and prices fell - many of these investors couldn't put up the
collateral to hold onto their positions, and had to sell. By the time the
fund was launched on March 9, it was obvious that emerging market bonds
were in a free fall. So instead of diving right in, I kept anywhere from
40% to 60% of the fund's investments in cash and other short-term
instruments in the early weeks.
Q. WHAT WERE YOU BUYING?
A. Mostly floating-rate bonds in what I considered to be the
highest-quality emerging markets - places like Argentina. The stated
interest rates on these bonds are reset at pre-stated fixed intervals,
ranging from 30 days to six months. When rates are rising - as they were in
March - the fund can obtain a higher interest rate on these bonds at their
reset intervals. That helps reduce the fund's interest rate risk - or the
risk that rising rates will negatively impact the fund's total return.
Q. THERE MUST BE OTHER RISKS TO EMERGING MARKET INVESTING. WHICH ARE THE
BIGGEST, AND HOW DO YOU MANAGE THEM?
A. Any time you invest overseas, currency risk can play a role. That's the
risk that movements in the currency of the nation in which you're invested
can hurt the returns on those investments. I can reduce currency risk by
buying dollar-denominated bonds - those whose returns are directly tied to
the U.S. dollar. Going forward, I expect to keep roughly two-thirds of the
fund's investments in dollar-denominated bonds. In addition, political risk
is a concern. Governments in some countries in which the fund invests can
be prone to sudden changes, which can disturb financial markets very
quickly.
Q. HOW DO YOU CONTROL THAT?
A. I can't really control political risk. But by doing my homework on the
countries in which the fund is invested, I can try to limit it. The fund
invests mostly in government rather than corporate bonds. Fidelity has a
staff of researchers who help me learn everything I can about the stability
of governments in these countries. By limiting investments in areas where
political risk appears high, I can focus my energies on managing credit
risk - or the risk that a bond's issuer won't be able to meet interest and
principal payments. Again, information is key. Researchers help me find
those investments where the credit risk appears to be more favorable than
the market price indicates. In addition, when an issuer's credit rating is
upgraded - as I believe will soon happen with some emerging markets issuers
- - - its bonds become more valuable.
Q. YOU MUST BE FINDING INVESTING OPPORTUNITIES. BY MAY 31, YOU HAD REDUCED
THE FUND'S CASH POSITION TO 19.3% . . .
A. That's true. By mid-April, many emerging markets had begun to turn the
corner. The fund had a 25.5% stake in Argentina by the end of May, mostly
in floating-rate, dollar-denominated government bonds known as BOCONs. Once
the sell-off eased, these bonds offered yields that were up to 6% higher
than comparable Treasury bonds in the U.S. In addition, Argentina has
successfully reduced inflation and has a budget surplus. And it looks like
the country's current leader, President Menem - whose administration has
launched effective economic programs - is a likely candidate for
re-election next year.
Q. WHERE ELSE DID YOU INVEST?
A. I increased the fund's stake in Mexico to 16.5% by the end of May. An
already shaky Mexican bond market was rocked further by the assassination
of the country's leading presidential candidate on March 23. Again,
however, sliding bond prices created exceptional value in the marketplace.
In addition, I've met with the PRI party's new candidate, Ernesto Zedillo.
I believe his economic policies are solid, and I think he stands an
excellent chance of winning the upcoming election. Mexican bond prices
already reflect a level of political uncertainty, and I feel that as a PRI
victory becomes more likely, bond investors will be rewarded appropriately.
Q. LET'S TALK ABOUT THE NEXT SIX MONTHS. WHAT'S YOUR OUTLOOK?
A. I'm positive. The underlying political and economic stories in many
emerging market nations continue to improve. Although yields have fallen -
and prices have risen - since the correction bottomed in early April, I
think there's potential for further price gains. But events in one emerging
market can affect many. Key elections in Mexico and Brazil later this year
bear watching. If the reform-minded candidate can win in Brazil, I think it
could boost all Latin American markets, and I'll look to increase the
fund's investments there. However, if the leftist candidate - who wants to
slow reform - wins, it could create even more volatility in these markets
through the end of the year. Finally, U.S. interest rates are also a
factor. If they stabilize over the next several months, I think it will
help calm jittery emerging markets investors.
FUND FACTS
GOAL: high current income,
followed by share price
gains; by investing largely in
bonds and other
fixed-income securities from
countries with emerging
markets
START DATE: March 9, 1994
SIZE: as of May 31, 1994,
more than $7 million
MANAGER: Robert Citrone,
since March 1994; joined
Fidelity in 1990
(checkmark)
ROB CITRONE ON HIS INVESTING
STRATEGY:
"I invest using a `top-down'
approach. That means I first
analyze the investing climate
within a given country. I look
for strong governmental
leadership. I also examine the
latest numbers on the nation's
budget deficit, inflation,
interest rates and more. Only
then do I look at the individual
securities available in the
marketplace. Imagine a sheet
of paper with a line down the
middle. On one side, I list the
risks. On the other, the
potential rewards of the
available securities. Through
careful research, I try to find
investments that I feel are
under priced in the
marketplace, given their
risk/reward trade-offs."
(bullet) As of May 31, the fund had
no investments in derivatives
- - - financial arrangements
whose prices are derived from
other securities, currencies or
indices. The fund has the
flexibility to use forward
currency contracts and
currency options to manage -
increase or decrease - its
exposure to various foreign
currencies. The fund also may
purchase indexed securities, or
structured notes, linked mainly
to foreign interest rates. These
securities are like customized
bonds, and allow the manager
to design investments that
target the specific currency
exposure he believes the fund
needs.
INVESTMENT SUMMARY
TOP COUNTRIES AS OF MAY 31, 1994
(BY LOCATION OF ISSUER) % OF FUND'S INVESTMENTS
Argentina 25.5
United States 19.3
Mexico 16.5
Nigeria 10.9
Ecuador 6.4
TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY,
INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS. THE
FUND'S LARGEST POSITION AS OF MAY 31 WAS IN SECURITIES OF ARGENTINIAN
ISSUERS.
AVERAGE MATURITY AS OF MAY 31, 1994
Years 12.8
THIS IS THE AVERAGE MATURITY OF THE BONDS IN THE FUND'S PORTFOLIO, WEIGHTED
BY DOLLAR AMOUNT.
ASSET ALLOCATION AS OF MAY 31, 1994
Corporate bonds 15.5%
Government obligations 51.0%
Common stocks 3.1%
Short-term and
other investments 30.4%
Row: 1, Col: 1, Value: 30.4
Row: 1, Col: 2, Value: 3.1
Row: 1, Col: 3, Value: 51.0
Row: 1, Col: 4, Value: 15.5
QUALITY DIVERSIFICATION AS OF MAY 31, 1994
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS
Aaa, Aa, A -
Baa -
Ba 19.6
B 9.2
Caa, Ca, C -
Nonrated 33.3
THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT
ARE EQUIVALENT TO BA AND BELOW AT MAY 31, 1994 ACCOUNT FOR 33.3% OF THE
FUND'S INVESTMENTS.
INVESTMENTS MAY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 15.5%
MOODY'S RATINGS (A) PRINCIPAL VALUE (NOTE 1)
AMOUNT
ARGENTINA - 2.0%
Alpargatas SA:
euro 9% 3/15/98 - $ 50,000 $ 45,500
9%, 3/15/98 (c) - 20,000 18,200
Brid Sapic euro 11 3/4%, 2/24/97 - 100,000 99,000
162,700
INDONESIA - 4.4%
Indorayon Yankee 9 1/8%, 10/15/00 BB 400,000 351,040
MEXICO - 6.0%
Bancomext euro 8%, 8/5/03 Ba2 250,000 219,375
Nacional Financiera SNC euro 10 5/8%,
11/22/01 Ba2 250,000 259,687
479,062
PHILIPPINES - 3.1%
Philippine Long Distance Telephone Co. 10 5/8%,
6/2/04 Ba3 250,000 253,437
TOTAL NONCONVERTIBLE BONDS
(Cost $1,234,815) 1,246,239
GOVERNMENT OBLIGATIONS (B) - 51.0%
ARGENTINA - 20.4%
Argentina Republic:
BOCON:
3 1/4%, 4/1/01 (d) B1 283,224 214,676
3.1875%, 9/1/02 (d) - 1,319,548 901,508
Brady:
euro 4%, 3/31/23 B1 250,000 140,326
euro 4 1/4% 3/31/23 B1 500,000 382,500
1,639,010
BRAZIL - 1.3%
Brazil C Bond 8%, 4/15/14 - 250,000 112,020
JORDAN - 3.2%
Jordan 4% 12/23/23 (c)(d) - 500,000 251,250
GOVERNMENT OBLIGATIONS (B) - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE (NOTE 1)
AMOUNT
MEXICO - 10.5%
Mexican Government Brady 6 1/4%, 12/31/19 Ba3 $ 1,250,000 $ 845,312
MOROCCO - 4.7%
Morocco Trust 4 1/2%, 1/3/09 (c)(d) - 500,000 375,625
NIGERIA - 10.9%
Central Bank of Nigeria Promissory Note 5.092%
1/5/10 - 1,000,000 311,456
Nigeria Brady 5 1/2%, 11/15/20 - 1,250,000 567,187
878,643
TOTAL GOVERNMENT OBLIGATIONS
(Cost $3,941,373) 4,101,860
COMMON STOCKS - 3.1%
SHARES
ARGENTINA - 3.1%
Banco de Galicia Y Buenos Aires SA sponsored ADR
representing class B shares 2,000 75,500
Banco Frances Del Rio PL (Reg.) 7,000 73,153
Transportadora de Gas del Sur Class B 35,000 99,244
TOTAL COMMON STOCKS
(Cost $253,864) 247,897
OTHER SECURITIES - 11.1%
PRINCIPAL
AMOUNT
ECUADOR - 6.4%
Republic of Ecuador:
loan participation thru Kidder Peabody
Emerging Markets Inc. 0% (e) $ 500,000 260,000
loan participation 0% (e) 500,000 257,500
517,500
PANAMA - 3.4%
Republic of Panama loan participation 0% (e) 500,000 275,000
OTHER SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
PERU - 1.3%
Empressa de Electricidad del Peru SA loan
participation 0% (e) $ 250,000 $ 103,750
TOTAL OTHER SECURITIES
(Cost $841,785) 896,250
REPURCHASE AGREEMENT - 19.3%
MATURITY
AMOUNT
UNITED STATES - 19.3%
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.26%
dated 5/31/94 due 6/1/94 $ 1,552,184 1,552,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $7,823,837) $ 8,044,246
LEGEND
(a) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(b) Most 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.
(c) 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 $645,075 or 9.1% of net
assets.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Non-income producing
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 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 19.6% BB 7.4%
B 9.2% 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 33.3% including long-term debt
categorized as other securities. FMR has determined that unrated debt
securities that are lower quality account for 33.3% of the total value of
investment in securities.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investment in Securities
Basic Industries - 4.4%
Paper and Forest Products 4.4%
Durables - 0.8%
Textiles and Apparel 0.8
Energy -1.2 %
Oil and Gas 1.2
Finance - 18.8%
Banks 15.5
Credit and Other Finance 3.3
Government Obligations 51.0
Repurchase Agreements 19.3
Utilities - 4.5%
Gas 1.2
Telephone Services 3.3
100.0%
INCOME TAX INFORMATION
At May 31, 1994, the aggregate cost of investment securities for income tax
purposes was $7,823,837. Net unrealized appreciation aggregated $220,409,
of which $278,329 related to appreciated investment securities and $57,920
related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 8,044,246
agreements of $1,552,000) (cost $7,823,837) (Notes 1
and 2) - See accompanying schedule
Cash 538,752
Receivable for investments sold 862,188
Receivable for fund shares sold 154,247
Interest receivable 120,128
Receivable from investment adviser for expense 11,367
reductions (Note 5)
TOTAL ASSETS 9,730,928
LIABILITIES
Payable for investments purchased $ 2,565,380
Payable for fund shares redeemed 10,600
Dividends payable 645
Accrued management fee 3,761
Other payables and accrued expenses 31,050
TOTAL LIABILITIES 2,611,436
NET ASSETS $ 7,119,492
Net Assets consist of:
Paid in capital $ 6,906,441
Undistributed net investment income 2,047
Accumulated undistributed net realized gain (loss) on (9,405)
investments
Net unrealized appreciation (depreciation) on investment 220,409
securities
NET ASSETS, for 694,269 shares outstanding $ 7,119,492
NET ASSET VALUE and redemption price per share $10.25
($7,119,492 (divided by) 694,269 shares)
Maximum offering price per share (100/95.25 of $10.25) $10.76
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 9, 1994
(COMMENCEMENT
OF
OPERATIONS) TO
MAY 31, 1994
(UNAUDITED)
INVESTMENT INCOME $ 67,356
Interest
EXPENSES
Management fee (Note 4) $ 8,990
Transfer agent fees (Note 4) 1,697
Distribution fees (Note 4) 3,165
Accounting fees and expenses (Note 4) 10,161
Non-interested trustees' compensation 5
Custodian fees and expenses 8,100
Registration fees 9,877
Audit 7,374
Total expenses before reductions 49,369
Expense reductions (Note 5) (30,418) 18,951
NET INVESTMENT INCOME 48,405
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (9,405)
(NOTES 1 AND 3)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 220,409
investment securities
NET GAIN (LOSS) 211,004
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 259,409
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
MARCH 9, 1994
(COMMENCEMENT
OF
OPERATIONS) TO
MAY 31, 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 48,405
Net investment income
Net realized gain (loss) on investments (9,405)
Change in net unrealized appreciation (depreciation) on investments 220,409
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 259,409
Distributions to shareholders from net investment income (46,358)
Share transactions 6,903,927
Net proceeds from sales of shares
Reinvestment of distributions 45,420
Cost of shares redeemed (42,906)
Net increase (decrease) in net assets resulting from share transactions 6,906,441
TOTAL INCREASE (DECREASE) IN NET ASSETS 7,119,492
NET ASSETS
Beginning of period -
End of period (including undistributed net investment income of $2,047) $ 7,119,492
OTHER INFORMATION
Shares
Sold 694,084
Issued in reinvestment of distributions 4,558
Redeemed (4,373)
Net increase (decrease) 694,269
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C>
MARCH 9, 1994
(COMMENCEMENT
OF
OPERATIONS) TO
MAY 31, 1994
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.000
Income from Investment Operations .086
Net investment income
Net realized and unrealized gain (loss) on investments .247
Total from investment operations .333
Less Distributions (.083)
From net investment income
Net asset value, end of period $ 10.250
TOTAL RETURN (dagger)(double dagger)# 3.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 7,119
Ratio of expenses to average net assets # 1.50%*
Ratio of expenses to average net assets before expense reductions 2.60%*
(diamond)#
Ratio of net investment income to average net assets 3.83%*
Portfolio turnover rate 107%
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURN DOES NOT INCLUDE ONE TIME SALES CHARGE AND IS NOT
ANNUALIZED.
(double dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIOD SHOWN.
(diamond) LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
# SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Emerging Markets Income Fund (the fund) is a fund of
Fidelity Advisor Series VIII (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.
On February 17, 1994, creation of an additional class of shares (Class B)
was approved by the Board of Trustees. Offering of the new class commences
on June 30, 1994. Class B shares are subject to an annual distribution fee
of .75%, an annual service fee of .25%, and a contingent deferred sales
charge upon redemption within five years of purchase which decreases from a
maximum of 4% to 0%. At the end of six years, Class B shares of a fund
automatically convert to the original class of shares.
The following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily available
are valued at the last sale price, or if no sale price, at the closing bid
price in the principal market in which such securities are normally traded.
Securities for which quotations are not readily available are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practicable to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates.
INCOME TAXES. The fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, the fund is not subject to
U.S. federal income taxes to the extent that it distributes all of its
taxable income for the year. By so qualifying, the fund may be subject to
foreign taxes on income, gains on investments or currency repatriation.
The fund accrues such taxes as applicable. The schedule of investments
includes information regarding income taxes under the caption "Income Tax
Information."
INVESTMENT INCOME. Dividend income, if any, 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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, if any, 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 declared daily and paid
monthly from net investment income. Distributions from realized gains, 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 are primarily due to differing treatments for
foreign currency transactions and market discount.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars reflects the total exposure the
fund has in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $10,367,416 and $4,133,497, respectively.
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates ranging from .1325% to .3700% and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
annual individual fund fee rate is .55%. For the period, the management fee
was equivalent to an annualized rate of .71% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with affiliates of FMR. In addition, one of the sub-advisers,
Fidelity International Investment Advisors (FIIA), entered into a
sub-advisory agreement with its subsidiary, Fidelity International
Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory
arrangements, FMR may receive investment advice and research services and
may grant the sub-advisers investment management authority to buy and sell
securities. FMR pays its sub-advisers either a portion of its management
fee or a fee based on costs incurred for these services. FIIA pays FIIAL
U.K. a fee based on costs incurred for either service.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, the
fund pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee that is based on an annual rate of .25% of its
average net assets. For the period, the fund paid FDC $3,165 of which
$2,434 was paid to securities dealers, banks and other financial
institutions for selling shares of the fund and providing shareholder
support services.
In addition, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that no
payments were made to third parties under the Plan.
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEE. State Street Bank and Trust Company (SSB) is the
transfer, dividend disbursing and shareholder servicing agent for the fund.
SSB has an arrangement for certain transfer, dividend disbursing and
shareholder servicing to be performed by Fidelity Investments Institutional
Operations Company (FIIOC), an affiliate of FMR. The fund pays fees based
on the type, size, number of accounts and the number of transactions made
by shareholders.
ACCOUNTING FEE. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
SALES LOAD. Fidelity Distributors Corporation (FDC) received sales charges
for selling shares of the fund. The sales charge rates ranged from 2.00% to
4.75% based on purchase amounts of less than $1,000,000. Purchase amounts
of $1,000,000 or more are not charged a sales load. For the period, FDC
received $38,711 of which $33,912 was paid to securities dealers, banks and
other financial institutions.
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 1.5% of average net assets. In addition,
FMR has agreed to reimburse the fund's expenses in accordance with a state
expense limitation if, and to the extent that, the total operating expenses
of the fund, excluding interest, taxes, brokerage commissions and
extraordinary expenses, are in excess of specified percentages of the
average net assets of the fund for its fiscal year. The lowest limitation
applicable to the fund is 2.5% of the first $30 million of average net
assets, 2% of the next $70 million and 1.5% of the excess. The fund may
exclude a portion of the custodian expenses in calculating the expense
limitation. FMR retains the ability to be repaid by the fund for these
expense reductions in the event that expenses fall below the limit prior to
the end of the fiscal year. For the period, the reimbursement reduced the
fund's expenses by $30,418 or 2.41% of average net assets under this
arrangement.
6. CREDIT RISK
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments in
more developed markets and the prices of such investments may be volatile.
The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The consequences of political, social or economic
changes in these markets may have disruptive effects on the market prices
of the fund's investments and the income they generate.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
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
State Street Bank and Trust Company
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
EQUITY FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
Fidelity Advisor Global Resources Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
FIXED-INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
