FIDELITY ADVISOR SERIES VIII, N-30D, 1996-08-16

FIDELITY ADVISOR SERIES VIII
N-30D, 1996-08-16

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(2_FIDELITY_LOGOS)FIDELITY ADVISOR

STRATEGIC OPPORTUNITIES
FUND - CLASS A AND CLASS B
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on stock market
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 8 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 11 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 12 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 28 Notes to the financial statements.

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. 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,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES AND
EXPENSES,
CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE

DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term. You also can help to manage some of the risks of investing
through diversification. A stock fund is already diversified because it
invests in many issues. You can diversify even further by placing some of
your money in several different types of stock funds or in other investment
categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate 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. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). The initial offering of Class A
shares took place on August 20, 1986. Class A shares bear a .50% 12b-1 fee
(.65% prior to January 1, 1996). This fee is reflected in the returns below
for periods after August 20, 1986. Returns prior to that date are those of
Initial Class, the original class of the fund. Had Class A's 12b-1 fee been
reflected, returns prior to August 20, 1986 would have been lower.
Effective January 1, 1996, the maximum 4.75% sales charge on Class A shares
was reduced to 3.50%. If Fidelity had not reimbursed certain class
expenses, the past five year and 10 year total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Advisor Strategic Opportunities - Class A 0.01% 15.82% 87.04% 201.72%

Advisor Strategic Opportunities - Class A -3.49% 11.76% 80.49% 191.16%
(incl. max. 3.50% sales charge)

S&P 500(registered trademark) 10.10% 26.00% 107.63% 264.95%

Capital Appreciation Funds Average 11.50% 23.97% 112.76% 205.44%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you 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 Class A's returns to those of the Standard & Poor's 500 Index - a
common proxy for the U.S. stock market. To measure how Class A's
performance stacked up against its peers, you can compare it to the capital
appreciation funds average, which reflects the performance of 201 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past six months. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Strategic Opportunities - Class A 15.82% 13.34% 11.68%

Advisor Strategic Opportunities - Class A 11.76% 12.54% 11.28%
(incl. max. 3.50% sales charge)

S&P 500 26.00% 15.73% 13.79%

Capital Appreciation Funds Average 23.97% 15.67% 10.96%

AVERAGE ANNUAL TOTAL RETURNS take Class A shares' actual (or cumulative)
return and show you what would have happened if Class A shares had
performed at a constant rate each year. (Note: Lipper calculates average
annual total returns by annualizing each fund's total return, then taking
the arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960630 19960712 151231 S00000000000001
FA Strategic Opp -CL A SP Standard & Poor 500
00174 SP001
1986/06/30 9650.00 10000.00
1986/07/31 9343.21 9441.00
1986/08/31 9973.53 10141.52
1986/09/30 9320.90 9302.82
1986/10/31 9683.47 9839.59
1986/11/30 9833.54 10078.69
1986/12/31 9625.70 9821.69
1987/01/31 10415.47 11144.67
1987/02/28 10522.36 11584.88
1987/03/31 10831.14 11919.68
1987/04/30 10510.48 11813.60
1987/05/31 10611.43 11916.38
1987/06/30 10943.97 12518.16
1987/07/31 11383.39 13152.83
1987/08/31 11609.04 13643.43
1987/09/30 11318.07 13344.63
1987/10/31 9239.73 10470.20
1987/11/30 8818.12 9607.46
1987/12/31 9016.03 10338.58
1988/01/31 9722.36 10773.84
1988/02/29 10040.90 11275.90
1988/03/31 9881.63 10927.47
1988/04/30 9943.95 11048.77
1988/05/31 10117.07 11144.89
1988/06/30 10809.54 11656.44
1988/07/31 10747.22 11612.15
1988/08/31 10414.83 11217.34
1988/09/30 10754.15 11695.19
1988/10/31 10941.11 12020.32
1988/11/30 11010.36 11848.43
1988/12/31 11021.95 12055.78
1989/01/31 11646.24 12938.26
1989/02/28 11596.01 12616.10
1989/03/31 11839.99 12910.05
1989/04/30 12292.06 13580.08
1989/05/31 12858.94 14130.08
1989/06/30 12959.40 14049.54
1989/07/31 13849.20 15318.21
1989/08/31 14028.59 15618.45
1989/09/30 14028.59 15554.41
1989/10/31 13798.97 15193.55
1989/11/30 14172.11 15503.50
1989/12/31 14614.87 15875.58
1990/01/31 13648.42 14810.33
1990/02/28 13722.19 15001.38
1990/03/31 13722.19 15398.92
1990/04/30 13161.50 15013.95
1990/05/31 13589.40 16477.81
1990/06/30 13722.19 16365.76
1990/07/31 13759.08 16313.39
1990/08/31 12792.62 14838.66
1990/09/30 12696.72 14116.01
1990/10/31 12689.34 14055.32
1990/11/30 13250.03 14963.29
1990/12/31 13566.95 15380.76
1991/01/31 14005.34 16051.37
1991/02/28 14843.66 17199.04
1991/03/31 15312.81 17615.25
1991/04/30 15520.47 17657.53
1991/05/31 16074.22 18420.34
1991/06/30 15566.61 17576.69
1991/07/31 16035.77 18395.76
1991/08/31 16381.86 18831.74
1991/09/30 16443.39 18517.25
1991/10/31 16112.68 18765.38
1991/11/30 15720.43 18009.13
1991/12/31 16698.10 20069.38
1992/01/31 16725.19 19696.09
1992/02/29 17050.30 19952.14
1992/03/31 16616.82 19563.07
1992/04/30 16932.90 20138.23
1992/05/31 17483.79 20236.90
1992/06/30 17483.79 19935.37
1992/07/31 18025.64 20750.73
1992/08/31 17709.56 20325.34
1992/09/30 17637.31 20565.18
1992/10/31 17781.81 20637.16
1992/11/30 18540.40 21340.88
1992/12/31 18847.57 21603.38
1993/01/31 19203.74 21784.85
1993/02/28 19747.90 22081.12
1993/03/31 20361.31 22547.03
1993/04/30 19955.67 22001.39
1993/05/31 20420.67 22591.03
1993/06/30 20588.86 22656.54
1993/07/31 21024.19 22565.92
1993/08/31 22340.06 23421.17
1993/09/30 22280.69 23240.82
1993/10/31 22983.15 23721.91
1993/11/30 22013.56 23496.55
1993/12/31 22699.29 23780.86
1994/01/31 22895.72 24589.41
1994/02/28 22077.24 23923.03
1994/03/31 21226.02 22879.99
1994/04/30 21400.63 23172.85
1994/05/31 21444.28 23552.89
1994/06/30 21444.28 22975.84
1994/07/31 21957.20 23729.45
1994/08/31 22088.15 24702.36
1994/09/30 21782.59 24097.15
1994/10/31 21553.41 24639.34
1994/11/30 20887.71 23741.97
1994/12/31 21071.81 24094.07
1995/01/31 22007.09 24718.82
1995/02/28 22570.50 25682.12
1995/03/31 22784.60 26440.00
1995/04/30 23280.41 27218.65
1995/05/31 23888.90 28306.58
1995/06/30 25139.69 28964.15
1995/07/31 25984.81 29924.60
1995/08/31 26728.52 29999.71
1995/09/30 27641.26 31265.70
1995/10/31 27539.84 31154.08
1995/11/30 28272.29 32521.74
1995/12/31 29112.62 33148.11
1996/01/31 29124.33 34276.47
1996/02/29 28544.65 34594.21
1996/03/31 27592.77 34927.36
1996/04/30 28318.58 35442.19
1996/05/31 29151.48 36356.24
1996/06/28 29115.78 36494.76
IMATRL PRASUN SHR__CHT 19960630 19960712 151236 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Strategic Opportunities Fund - Class A on June 30,
1986, and the current maximum 3.50% sales charge was paid. As the chart
shows, by June 30, 1996, the value of the investment would have grown to
$29,116 - a 191.16% increase on the initial investment. For comparison,
look at how the S&P 500 did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would have
grown to $36,495 - a 264.95% 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 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)
ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate 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. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). The initial offering of Class B
shares took place on June 30, 1994. Class B shares bear a 1.00%
12b-1/shareholder service fee. This fee is not reflected in returns prior
to that date. Returns between August 20, 1986 and June 30, 1994 are those
of Class A, and reflect Class A's prior .65% 12b-1 fee. Returns prior to
August 20, 1986 are those of Initial Class, the original class of the fund.
Had Class B's 12b-1 fee been reflected, prior returns would have been
lower. Class B's contingent deferred sales charges included in the past six
months, past one year, past five year and past 10 year total return figures
are 4%, 4%, 1% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses, the past five year and 10 year total returns would have
been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Advisor Strategic Opportunities - Class B -0.28% 15.14% 85.31% 198.93%

Advisor Strategic Opportunities - Class B -4.20% 11.14% 84.31% 198.93%
(incl. contingent deferred sales charge)

S&P 500(registered trademark) 10.10% 26.00% 107.63% 264.95%

Capital Appreciation Funds Average 11.50% 23.97% 112.76% 205.44%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you 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 Class B's returns to those of the Standard & Poor's 500 Index - a
common proxy for the U.S. stock market. To measure how Class B's
performance stacked up against its peers, you can compare it to the capital
appreciation funds average, which reflects the performance of 201 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past six months. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Strategic Opportunities - Class B 15.14% 13.13% 11.57%

Advisor Strategic Opportunities - Class B 11.14% 13.01% 11.57%
(incl. contingent deferred sales charge)

S&P 500 26.00% 15.73% 13.79%

Capital Appreciation Funds Average 23.97% 15.67% 10.96%

AVERAGE ANNUAL TOTAL RETURNS take Class B shares' actual (or cumulative)
return and show you what would have happened if Class B shares had
performed at a constant rate each year. (Note: Lipper calculates average
annual total returns by annualizing each fund's total return, then taking
the arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960630 19960712 151825 S00000000000001
FA Strategic Opp -CL B SP Standard & Poor 500
00608 SP001
1986/06/30 10000.00 10000.00
1986/07/31 9682.08 9441.00
1986/08/31 10335.26 10141.52
1986/09/30 9658.96 9302.82
1986/10/31 10034.68 9839.59
1986/11/30 10190.20 10078.69
1986/12/31 9974.82 9821.69
1987/01/31 10793.24 11144.67
1987/02/28 10904.00 11584.88
1987/03/31 11223.98 11919.68
1987/04/30 10891.69 11813.60
1987/05/31 10996.30 11916.38
1987/06/30 11340.90 12518.16
1987/07/31 11796.26 13152.83
1987/08/31 12030.09 13643.43
1987/09/30 11728.57 13344.63
1987/10/31 9574.85 10470.20
1987/11/30 9137.95 9607.46
1987/12/31 9343.04 10338.58
1988/01/31 10074.98 10773.84
1988/02/29 10405.07 11275.90
1988/03/31 10240.03 10927.47
1988/04/30 10304.61 11048.77
1988/05/31 10484.01 11144.89
1988/06/30 11201.60 11656.44
1988/07/31 11137.02 11612.15
1988/08/31 10792.57 11217.34
1988/09/30 11144.19 11695.19
1988/10/31 11337.94 12020.32
1988/11/30 11409.70 11848.43
1988/12/31 11421.71 12055.78
1989/01/31 12068.64 12938.26
1989/02/28 12016.59 12616.10
1989/03/31 12269.42 12910.05
1989/04/30 12737.89 13580.08
1989/05/31 13325.33 14130.08
1989/06/30 13429.43 14049.54
1989/07/31 14351.50 15318.21
1989/08/31 14537.40 15618.45
1989/09/30 14537.40 15554.41
1989/10/31 14299.45 15193.55
1989/11/30 14686.12 15503.50
1989/12/31 15144.94 15875.58
1990/01/31 14143.44 14810.33
1990/02/28 14219.89 15001.38
1990/03/31 14219.89 15398.92
1990/04/30 13638.86 15013.95
1990/05/31 14082.28 16477.81
1990/06/30 14219.89 16365.76
1990/07/31 14258.11 16313.39
1990/08/31 13256.60 14838.66
1990/09/30 13157.22 14116.01
1990/10/31 13149.57 14055.32
1990/11/30 13730.60 14963.29
1990/12/31 14059.02 15380.76
1991/01/31 14513.30 16051.37
1991/02/28 15382.03 17199.04
1991/03/31 15868.20 17615.25
1991/04/30 16083.39 17657.53
1991/05/31 16657.22 18420.34
1991/06/30 16131.21 17576.69
1991/07/31 16617.37 18395.76
1991/08/31 16976.02 18831.74
1991/09/30 17039.78 18517.25
1991/10/31 16697.07 18765.38
1991/11/30 16290.60 18009.13
1991/12/31 17303.73 20069.38
1992/01/31 17331.81 19696.09
1992/02/29 17668.71 19952.14
1992/03/31 17219.51 19563.07
1992/04/30 17547.05 20138.23
1992/05/31 18117.91 20236.90
1992/06/30 18117.91 19935.37
1992/07/31 18679.42 20750.73
1992/08/31 18351.87 20325.34
1992/09/30 18277.01 20565.18
1992/10/31 18426.74 20637.16
1992/11/30 19212.85 21340.88
1992/12/31 19531.16 21603.38
1993/01/31 19900.25 21784.85
1993/02/28 20464.14 22081.12
1993/03/31 21099.80 22547.03
1993/04/30 20679.45 22001.39
1993/05/31 21161.32 22591.03
1993/06/30 21335.61 22656.54
1993/07/31 21786.72 22565.92
1993/08/31 23150.32 23421.17
1993/09/30 23088.80 23240.82
1993/10/31 23816.73 23721.91
1993/11/30 22811.98 23496.55
1993/12/31 23522.58 23780.86
1994/01/31 23726.14 24589.41
1994/02/28 22877.97 23923.03
1994/03/31 21995.87 22879.99
1994/04/30 22176.82 23172.85
1994/05/31 22222.05 23552.89
1994/06/30 22222.05 22975.84
1994/07/31 22776.19 23729.45
1994/08/31 22900.59 24702.36
1994/09/30 22595.25 24097.15
1994/10/31 22335.14 24639.34
1994/11/30 21622.68 23741.97
1994/12/31 21825.35 24094.07
1995/01/31 22753.84 24718.82
1995/02/28 23329.74 25682.12
1995/03/31 23541.29 26440.00
1995/04/30 24046.67 27218.65
1995/05/31 24669.58 28306.58
1995/06/30 25962.41 28964.15
1995/07/31 26820.38 29924.60
1995/08/31 27560.82 29999.71
1995/09/30 28489.31 31265.70
1995/10/31 28383.53 31154.08
1995/11/30 29123.97 32521.74
1995/12/31 29976.53 33148.11
1996/01/31 29976.53 34276.47
1996/02/29 29371.79 34594.21
1996/03/31 28366.25 34927.36
1996/04/30 29111.09 35442.19
1996/05/31 29955.25 36356.24
1996/06/28 29893.18 36494.76
IMATRL PRASUN SHR__CHT 19960630 19960712 151830 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Strategic Opportunities Fund - Class B on June 30,
1986. As the chart shows, by June 30, 1996, the value of the investment
would have grown to $29,893 - a 198.93% increase on the initial investment.
For comparison, look at how the S&P 500 did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $36,495 - a 264.95% 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 will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW

NOTE TO SHAREHOLDERS: On March 11, 1996, Harris Leviton became Portfolio
Manager of Fidelity Advisor Strategic Opportunities Fund
Q. HARRIS, HOW HAS THE FUND PERFORMED?
A. For the six months ended June 30, 1996, Class A and Class B had total
returns of 0.01% and -0.28%, respectively. The capital appreciation funds
average tracked by Lipper Analytical Services posted a return of 11.50%
during the same six-month period. For the 12 months ended June 30, 1996,
Class A and Class B had total returns of 15.82% and 15.14%, respectively,
while the capital appreciation funds average had a total return of 23.97%.
Q. WHY DID THE FUND'S RETURNS TRAIL THOSE OF THE AVERAGE?
A. Most of the underperformance took place in the earlier part of the
period before I took over the fund. During that time, the investments that
helped the fund post strong returns in 1995 contributed to its subpar
performance. I'm talking specifically about the fund's investments in bonds
and Baby Bells, or regional Bell operating companies. Rising interest rates
hurt both of these types of investments. Earlier in the year, the consensus
on Wall Street was that the economy was sluggish, inflation was under
control and the Federal Reserve Board would seek to avoid a recession by
continuing to lower short-term interest rates, something it had done for
most of 1995. In February, however, we started seeing signs that economic
growth - which can lead to
inflation that erodes the value of a bond's fixed payments - was much
stronger than expected. As a result, interest rates increased and bond
values fell. I've significantly reduced the fund's bond holdings since
taking over the fund. Telephone utility stocks such as the Baby Bells fell
as well because they generally trade in concert with bonds.
Q. HOW WOULD YOU DESCRIBE THE STOCK MARKET ENVIRONMENT DURING THE PERIOD?
A. I would call the market we've seen over the past six months a "churning"
market. By that I mean one characterized by sharp, short-lived swings that
result from reactions to the latest economic news, without any clear
momentum. Many investors gravitated to big, blue chip growth stocks because
they often provide steady earnings growth regardless of the economic
backdrop. More recently, small- and mid-sized company stocks saw some
gains as a reaction to renewed economic strength, and because business
valuations among large-company stocks were at or near historically high
levels. In addition, business prospects for many of the larger companies
were not that attractive.
Q. YOU'VE MADE SOME CHANGES TO THE FUND SINCE TAKING OVER, INCLUDING AN
INCREASE IN MEDIA AND LEISURE STOCKS FROM 8.8% OF INVESTMENTS AT THE END OF
DECEMBER 1995 TO 16.6% OF THE FUND AT THE END OF JUNE. WHAT WAS THE APPEAL
THERE?
A. Let me start by saying that I'm a bottom-up investor. That is, I
generally invest one stock at a time instead of concentrating on
positioning my investments as a result of my analysis of big-picture
economic trends. I look for stocks that are inexpensive relative to their
sustainable growth rates. The fund's position in the media and leisure
areas is an outgrowth of that strategy. At the same time, I'd highlight a
particular sector that has been attractive to me - casino and gaming
stocks. Business prospects there improved largely because capacity growth,
or the number of casinos, has lagged market growth, particularly in Las
Vegas. Although there is some concern because new capacity is likely to
come on later in the year, new attractions in Las Vegas tend to increase
the size of the market in the short run, just as adding a new ride at
Disneyland tends to boost attendance. During the period, I found many of
these stocks, including Circus Circus Enterprises and Harveys Casino
Resorts, to be inexpensive relative to their growth prospects.
Q. YOU'VE ALSO INCREASED THE FUND'S RETAIL AND WHOLESALE STAKE BY 7.5% OF
INVESTMENTS . . .
A. Retailing has become a very tough business over the past few years.
Square-footage growth continues to outpace sales growth. Many product
categories such as apparel actually are declining as
demographic and sociological shifts lead people to spend their money in
other areas. Bankruptcies are rising, and earnings growth in the industry
is slowing across the board. So why am I investing there? First, valuations
are at low levels. Second, the consolidation of the industry can be a
positive for companies that survive, as they frequently have attractive
acquisition opportunities or less competition in their market niches. I am
attracted to specific retailers that should benefit from many of these
trends.
Q. THE FUND ALSO INCREASED INVESTMENTS IN INSURANCE STOCKS . . .
A. That's right, particularly small- to medium-sized insurance companies.
While interest rates have risen dramatically in recent months and the
perception is that these stocks would be hurt by such interest rate
increases, many of these companies actually have benefited from the
increases. That's because they tend to have substantial investment
portfolios of short- to medium-term debt securities and have been able to
reinvest at the higher rates of return offered by the market when they
reached maturity. In addition, as the insurance industry continues to
consolidate, larger companies are exiting many niches, giving the smaller
companies lucrative acquisition opportunities and reducing competition in
their core businesses. American Bankers Insurance Group, PartnerRe Holdings
- - which is listed as a holding company - and Allstate were the insurance
companies in the fund's top 10 investments at the end of the period.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I believe the churning market I described will continue over the
foreseeable future. Even though inflation wasn't apparent at the end of the
period and the economy was doing reasonably well, I'm not sure the kinds of
things that have fueled profit growth during the market's rally - such as a
favorable currency environment and corporate restructuring - are
sustainable. Overall, the market was overpriced, and even though some
momentary corrections have shaken some of the excess out of the market, it
looks as if the market will be driven day to day by breaking economic news.
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 capital
appreciation by investing
primarily in securities of
companies believed by
Fidelity to involve a "Special
Situation"
START DATE: December 31,
1983
SIZE: as of June 30, 1996,
more than $783 million
MANAGER: Harris Leviton,
since March 1996; joined
Fidelity in 1986
(checkmark)
HARRIS LEVITON ON
"SPECIAL SITUATIONS":
"To me, a `Special Situation'
stock can be unique for any
one of a number of reasons.
It's usually a product of
some sort of misperception
on the part of Wall Street
about what's going on at the
company, or about a trend
that will help the stock. My
approach with this fund
emphasizes buying
inexpensive growth stocks
from a variety of sources that
enable me to buy growth at a
discount, including foreign
stocks - which I've
increased to 11.8% of
investments since taking over
the fund - and what I call
`broken IPOs.'
"When the public focuses on
the IPO market, it often looks
at hot deals such as
Netscape, which may double
or triple on the first trade. But
many other companies go
public and, because they are
not in `sexy' businesses, the
deals are not 50 times
oversubscribed. The stocks
do not trade up on the first day
or even during the first
month after going public.
However, they are often quite
inexpensive and, if they are
able to grow, they often
outperform the `hot'
companies that get the
media's attention. It is
important to note that, as a
rule, IPOs tend to be bad
investments, so I'm very picky
about what I buy. Libbey, a
glass maker, and
Saskatchewan Wheat Pool, a
Canadian wheat processor,
were two investments I found
in this market."
INVESTMENT CHANGES

TOP TEN STOCKS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO

Whole Foods Market, Inc. 4.8 0.0

Nintendo Co. Ltd. Ord. 4.3 0.0

American Bankers Insurance Group, 4.3 0.0
Inc.

PartnerRe Holdings Ltd. 3.5 0.0

NYNEX Corp. 3.1 4.6

Allstate Corp. 2.5 0.6

Libbey, Inc. 2.1 0.0

Baker Hughes, Inc. 1.9 0.2

Circus Circus Enterprises, Inc. 1.9 0.0

Regis Corp. 1.8 1.2

TOP FIVE MARKET SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO

Media & Leisure 16.6 8.8

Finance 13.3 14.0

Retail & Wholesale 7.5 0.0

Durables 7.2 0.1

Health 6.9 6.0

ASSET ALLOCATION
AS OF JUNE 30, 1996 * AS OF DECEMBER 31, 1995 **
Row: 1, Col: 1, Value: 3.1
Row: 1, Col: 2, Value: 2.6
Row: 1, Col: 3, Value: 47.1
Row: 1, Col: 4, Value: 47.2
Row: 1, Col: 1, Value: 5.2
Row: 1, Col: 2, Value: 26.1
Row: 1, Col: 3, Value: 34.3
Row: 1, Col: 4, Value: 34.4
Stocks 96.3%
Bonds 1.6%
Short-term
investments 2.1%
FOREIGN
INVESTMENTS 11.8%
Stocks 68.7%
Bonds 26.1%
Short-term
investments 5.2%
FOREIGN
INVESTMENTS 3.2%
*
**
INVESTMENTS JUNE 30, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 95.9%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.9%
AEROSPACE & DEFENSE - 0.7%
Lockheed Martin Corp. 62,100 $ 5,216,400
DEFENSE ELECTRONICS - 0.2%
Herley Microwave Systems, Inc. (a)(c) 200,000 1,950,000
TOTAL AEROSPACE & DEFENSE 7,166,400
BASIC INDUSTRIES - 4.9%
CHEMICALS & PLASTICS - 0.6%
ARCO Chemical Co. 94,800 4,929,600
IRON & STEEL - 0.2%
Cold Metal Products, Inc. (a) 179,900 1,191,838
METALS & MINING - 4.0%
AFC Cable Systems, Inc. (a)(c) 705,300 11,637,450
Alumax, Inc. (a) 400,000 12,150,000
Cable Design Technology Corp. 20,000 655,000
Inco Ltd. 200,000 6,446,408
Kaiser Aluminum Corp. (a) 50,000 550,000
31,438,858
PACKAGING & CONTAINERS - 0.1%
Tupperware Corp. (a) 14,200 599,950
TOTAL BASIC INDUSTRIES 38,160,246
CONSTRUCTION & REAL ESTATE - 4.5%
CONSTRUCTION - 2.7%
Lennar Corp. 459,200 11,480,000
Pulte Corp. 129,300 3,458,775
Redman Industries, Inc. (a) 293,000 6,079,750
21,018,525
ENGINEERING - 0.1%
MasTec, Inc. (a) 31,100 785,275
REAL ESTATE INVESTMENT TRUSTS - 1.7%
Equity Residential Properties Trust (SBI) 100,000 3,287,500
Jameson Co. 250,000 2,468,750
Liberty Property Trust (SBI) 123,000 2,444,625
Public Storage, Inc. 137,700 2,840,063
Sovran Self Storage, Inc. 72,000 1,908,000
12,948,938
TOTAL CONSTRUCTION & REAL ESTATE 34,752,738
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
DURABLES - 7.2%
AUTOS, TIRES, & ACCESSORIES - 2.0%
Chrysler Corp. 82,700 $ 5,127,400
Cummins Engine Co., Inc. 113,900 4,598,713
Dana Corp. 45,000 1,395,000
Modine Manufacturing Co. 56,800 1,505,200
PACCAR, Inc. 20,000 980,000
Scania AB:
Class A 12,000 332,140
Class B 12,000 333,043
Walbro Corp. 55,000 1,113,750
15,385,246
CONSUMER DURABLES - 2.1%
Libbey, Inc. 600,000 16,650,000
CONSUMER ELECTRONICS - 0.8%
Fossil, Inc. (a) 112,200 1,626,900
Movado Group, Inc. (c) 220,000 4,510,000
6,136,900
TEXTILES & APPAREL - 2.3%
Deckers Outdoor Corp. (a) 442,700 3,818,288
Galey & Lord, Inc. (a) 135,800 1,239,175
Image Industries, Inc. (a)(c) 480,000 6,840,000
Maxwell Shoe, Inc. Class A (a)(c) 758,800 5,880,700
17,778,163
TOTAL DURABLES 55,950,309
ENERGY - 5.2%
ENERGY SERVICES - 1.9%
Baker Hughes, Inc. 457,300 15,033,738
OIL & GAS - 3.3%
Atlantic Richfield Co. 100,000 11,850,000
Occidental Petroleum Corp. 318,000 7,870,500
Royal Dutch Petroleum Co. ADR 36,100 5,550,375
25,270,875
TOTAL ENERGY 40,304,613
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - 13.3%
BANKS - 0.1%
National Bank of Canada 20,000 $ 167,211
Pikeville National Corp. 22,600 491,550
658,761
FEDERAL SPONSORED CREDIT - 0.2%
Student Loan Marketing Association 20,000 1,480,000
INSURANCE - 12.9%
Allmerica Financial Corp. 8,000 238,000
Allstate Corp. 420,200 19,171,625
American Bankers Insurance Group, Inc. 762,300 33,255,338
ITT Hartford Group, Inc. 87,800 4,675,350
Old Republic International Corp. 496,500 10,674,750
Penncorp. Financial Group, Inc. 361,600 11,480,800
Reinsurance Group of America, Inc. 61,300 2,314,075
Riscorp, Inc. (a) 137,600 2,511,200
Terra Nova Holdings Ltd. 35,000 560,000
UNUM Corp. 227,400 14,155,650
US Facilities Corp. 52,700 915,663
99,952,451
SAVINGS & LOANS - 0.1%
First Financial Holdings, Inc. 20,000 360,000
York Financial Corp. 33,014 552,985
912,985
TOTAL FINANCE 103,004,197
HEALTH - 5.6%
DRUGS & PHARMACEUTICALS - 1.6%
Andrx Corp. (a) 3,000 45,375
Inhale Therapeutic Systems 65,000 1,202,500
Sepracor, Inc. (a) 749,400 11,241,000
12,488,875
MEDICAL EQUIPMENT & SUPPLIES - 3.5%
Hemasure, Inc. (a) 334,000 4,676,000
I-Stat Corp. (a)(c) 603,100 11,383,513
McKesson Corp. 209,300 9,967,913
Physiometrix, Inc. (a)(c) 165,000 1,278,750
27,306,176
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 0.5%
ARV Assisted Living, Inc. (a) 148,800 $ 2,306,400
Emeritus Corp. (a) 76,800 1,353,600
3,660,000
TOTAL HEALTH 43,455,051
HOLDING COMPANIES - 3.5%
PartnerRe Holdings Ltd. 897,600 26,815,800
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
Columbus McKinnon Corp. 106,000 1,656,250
Gardner Denver Machinery, Inc. (a) 32,500 857,188
Regal-Beloit Corp. 119,400 2,358,150
Sulzer Gebrueder PC 10,500 6,281,157
T B Wood's Corp. 164,000 1,599,000
TRINOVA Corp. 44,700 1,491,863
14,243,608
MEDIA & LEISURE - 16.3%
BROADCASTING - 5.8%
American Telecasting, Inc. (a) 500,000 6,625,000
Ascent Entertainment Group, Inc. (a) 74,500 1,881,125
CAI Wireless Systems, Inc. (a) 1,125,615 10,411,939
Heartland Wireless Communications, Inc. (a) 301,667 7,164,591
PanAmSat Corp. (a) 84,900 2,462,100
People's Choice TV Corp. (a)(c) 679,675 12,404,069
Starsight Telecast, Inc. (a) 90,800 828,550
Wireless One, Inc. (a)(c) 187,600 3,376,800
45,154,174
ENTERTAINMENT - 1.6%
Harveys Casino Resorts (c) 551,900 11,727,875
MGM Grand, Inc. (a) 19,000 757,625
12,485,500
LEISURE DURABLES & TOYS - 4.4%
Just Toys, Inc. (a)(c) 258,900 339,806
Nintendo Co. Ltd. Ord. 450,000 33,471,584
33,811,390
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 2.9%
Circus Circus Enterprises, Inc. (a) 357,600 $ 14,661,600
Millennium & Copthorne Hotels PLC sponsored ADR (a)(b) 22,000 445,500
Station Casinos, Inc. (a) 245,000 3,521,875
Sun International Hotels Ltd. Ord. (a) 22,300 1,081,550
Trump Hotels & Casino Resorts, Inc. (a) 94,000 2,679,000
22,389,525
PUBLISHING - 0.7%
Hollinger International, Inc. Class A 178,000 2,024,750
Meredith Corp. 69,600 2,905,800
4,930,550
RESTAURANTS - 0.9%
Mortons Restaurant Group, Inc. (a)(c) 414,800 7,259,000
TOTAL MEDIA & LEISURE 126,030,139
NONDURABLES - 5.2%
AGRICULTURE - 0.9%
Saskatchewan Wheat Pool Class B (non-vtg.) (a) 478,300 5,209,017
Saskatchewan Wheat Pool Class B (a)(b) 158,000 1,720,729
6,929,746
FOODS - 2.1%
Earthgrains Co. 118,000 3,864,500
Tootsie Roll Industries, Inc. 354,676 12,635,333
16,499,833
HOUSEHOLD PRODUCTS - 1.4%
Church & Dwight Co., Inc. 285,300 5,955,638
First Brands Corp. 168,400 4,546,800
Premark International, Inc. 38,200 706,700
11,209,138
TOBACCO - 0.8%
RJR Nabisco Holdings Corp. 60,000 1,860,000
UST, Inc. 115,000 3,938,750
5,798,750
TOTAL NONDURABLES 40,437,467
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
PRECIOUS METALS - 1.7%
Bre-X Minerals Ltd. (a) 200,000 $ 3,344,212
Getchell Gold Corp. 3,800 125,400
Newmont Mining Corp. 200,000 9,875,000
13,344,612
RETAIL & WHOLESALE - 7.4%
APPAREL STORES - 1.0%
Charming Shoppes, Inc. 176,900 1,249,356
Melville Corp. 153,400 6,212,700
7,462,056
GENERAL MERCHANDISE STORES - 1.1%
Freds, Inc. Class A (c) 590,300 6,493,300
Michaels Stores, Inc. (a) 125,800 2,138,600
8,631,900
GROCERY STORES - 4.8%
Whole Foods Market, Inc. (a)(c) 1,403,200 37,184,800
RETAIL & WHOLESALE, MISCELLANOUS - 0.5%
Circuit City Stores, Inc. 2,700 97,538
Toys "R" Us, Inc. 101,600 2,895,600
Zale Corp. (a) 50,000 843,750
3,836,888
TOTAL RETAIL & WHOLESALE 57,115,644
SERVICES - 2.1%
Iron Mountain, Inc. (a) 115,000 2,415,000
Regis Corp. 457,700 14,303,125
16,718,125
TECHNOLOGY - 5.6%
COMPUTER SERVICES & SOFTWARE - 4.0%
BancTec, Inc. (a) 189,700 3,841,425
Broadway & Seymour, Inc. (a) 154,400 1,852,800
CACI International, Inc. Class A (a) 116,100 1,828,575
CompUSA, Inc. (a) 128,600 4,388,475
GT Interactive Software, Inc. (a) 150,000 2,512,500
Metromail Corp. (a) 14,400 322,200
Spectrum Holobyte, Inc. (a)(c) 1,784,800 10,262,600
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
USCS International, Inc. 169,200 $ 3,257,100
Viewlogic Systems, Inc. (a) 198,300 2,751,413
Worldtalk Communications Corp. (a) 5,000 61,250
31,078,338
COMPUTERS & OFFICE EQUIPMENT - 0.9%
Performance Technologies, Inc. 110,000 1,608,750
Pitney Bowes, Inc. 100,800 4,813,200
6,421,950
ELECTRONICS - 0.7%
Augat, Inc. 294,600 5,634,225
TOTAL TECHNOLOGY 43,134,513
TRANSPORTATION - 4.2%
RAILROADS - 0.0%
Genesee & Wyoming, Inc. Class A 15,000 307,500
TRUCKING & FREIGHT - 4.2%
Airborne Freight Corp. 500,000 13,000,000
Consolidated Freightways, Inc. 292,100 6,170,613
Hunt (J.B.) Transport Services, Inc. 435,600 9,093,150
M.S. Carriers, Inc. (a) 110,300 2,261,150
USFreightways Corp. 85,000 1,657,500
32,182,413
TOTAL TRANSPORTATION 32,489,913
UTILITIES - 6.5%
TELEPHONE SERVICES - 6.5%
Ameritech Corp. 171,200 10,165,000
Bell Atlantic Corp. 90,600 5,775,750
BellSouth Corp. 80,000 3,390,000
Comsat Corp., Series 1 140,600 3,655,600
NYNEX Corp. 503,600 23,921,000
SBC Communications, Inc. 63,300 3,117,515
50,024,865
TOTAL COMMON STOCKS
(Cost $684,190,345) 743,148,240
CONVERTIBLE PREFERRED STOCKS - 0.4%
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 0.3%
BROADCASTING - 0.1%
Triathalon Broadcasting Co. $0.945 depositary share
representing 1/10 pfd. 114,080 $ 1,098,020
LEISURE DURABLES & TOYS - 0.2%
Tyco Toys, Inc. $0.4125 depositary share
representing 1/20 pfd., Series C 235,000 1,321,875
TOTAL MEDIA & LEISURE 2,419,895
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.1%
TJX Companies, Inc., Series E, $7.00 3,000 564,000
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,014,380) 2,983,895
CONVERTIBLE BONDS - 1.6%
MOODY'S PRINCIPAL
RATINGS AMOUNT
HEALTH - 1.3%
MEDICAL FACILITIES MANAGEMENT - 1.3%
ARV Assisted Living, Inc.
6 3/4%, 4/1/06 (b) - $ 5,000,000 4,850,000
Emeritus Corp. 6 1/4%, 1/1/06 (b) - 5,000,000 5,025,000
9,875,000
TECHNOLOGY - 0.3%
ELECTRONICS - 0.3%
Richardson Electronics, Ltd.
7 1/4%, 12/15/06 B3 2,382,000 2,060,430
TOTAL CONVERTIBLE BONDS
(Cost $12,485,430) 11,935,430
REPURCHASE AGREEMENTS - 2.1%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.46%, dated
6/28/96 due 7/1/96 $ 16,571,537 $ 16,564,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $716,254,155) $ 774,631,565
LEGEND
1. Non-income producing
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 $12,041,229 or 1.5% of net
assets.
3. Affiliated company (see Note 7 of Notes to Financial Statements).
OTHER INFORMATION
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 88.2%
Japan 4.3
Bermuda 3.5
Canada 2.2
Others (individually less than 1%) 1.8
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of invest- ment securities for income
tax purposes was $716,550,293. Net unrealized appreciation aggregated
$58,081,272, of which $80,030,669 related to appreciated investment
securities and $21,949,397 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS JUNE 30, 1996 (UNAUDITED)

Investment in securities, at value (including repurchase $ 774,631,565
agreements of $16,564,000) (cost $716,254,155) -
See accompanying schedule

Cash 2,273,783

Receivable for investments sold 2,704,478

Receivable for fund shares sold 12,136,831

Dividends receivable 755,717

Interest receivable 205,946

Other receivables 31,901

TOTAL ASSETS 792,740,221

LIABILITIES

Payable for investments purchased $ 6,587,575

Payable for fund shares redeemed 1,599,698

Accrued management fee 311,161

Distribution fees payable 346,494

Other payables and accrued expenses 216,404

TOTAL LIABILITIES 9,061,332

NET ASSETS $ 783,678,889

Net Assets consist of: $ 656,192,401
Paid in capital

Undistributed net investment income 4,416,761

Accumulated undistributed net realized gain (loss) on 64,692,376
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 58,377,351
investments and assets and liabilities in foreign
currencies

NET ASSETS $ 783,678,889

CALCULATION OF MAXIMUM OFFERING PRICE $24.47
CLASS A:
NET ASSET VALUE and redemption price per share
($618,878,448 (divided by) 25,293,318 shares)

Maximum offering price per share (100/96.50 of $24.47) $25.36

CLASS B: $24.08
NET ASSET VALUE and offering price per share
($105,557,205 (divided by) 4,382,713 shares) A

INSTITUTIONAL CLASS: $24.43
NET ASSET VALUE, offering price and redemption price
per share ($37,010,182 (divided by) 1,514,894 shares)

INITIAL CLASS: $24.75
NET ASSET VALUE and redemption price per share
($22,233,054 (divided by) 898,298 shares)

Maximum offering price per share (100/96.50 of $24.75) $25.65

</TABLE>

A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)

INVESTMENT INCOME $ 5,978,911
Dividends (including $40,271 received from affiliated
issuers)

Interest 3,449,663

TOTAL INCOME 9,428,574

EXPENSES $ 2,313,093
Management fee
Basic fee

Performance adjustment (425,052)

Transfer agent fees 664,411
Class A

Class B 120,828

Institutional Class 20,260

Initial Class 22,128

Distribution fees - Class A 1,530,348

Distribution fees - Class B 485,842

Accounting fees and expenses 190,422

Non-interested trustees' compensation 1,369

Custodian fees and expenses 34,520

Registration fees - Class A 37,489

Registration fees - Class B 17,903

Registration fees - Institutional Class 19,848

Registration fees - Initial Class 4,632

Audit 20,424

Legal 3,569

Miscellaneous 29,437

Total expenses before reductions 5,091,471

Expense reductions (79,658) 5,011,813

NET INVESTMENT INCOME 4,416,761

REALIZED AND UNREALIZED GAIN (LOSS) 65,580,831
Net realized gain (loss) on:
Investment securities (including realized gain of
$7,123,925 on sales of investments in affiliated issuers)

Foreign currency transactions 4,770 65,585,601

Change in net unrealized appreciation (depreciation) on:

Investment securities (70,126,074)

Assets and liabilities in foreign currencies (59) (70,126,133)

NET GAIN (LOSS) (4,540,532)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (123,771)
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE DECEMBER 31,
30,1996 1995
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 4,416,761 $ 10,587,747
Net investment income

Net realized gain (loss) 65,585,601 36,064,014

Change in net unrealized appreciation (depreciation) (70,126,133) 132,499,323

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (123,771) 179,151,084
FROM OPERATIONS

Distributions to shareholders - (9,290,408)
From net investment income
Class A

Class B - (1,281,036)

Institutional Class - (433,848)

Initial Class - (449,705)

From net realized gain (10,442,601) (13,102,251)
Class A

Class B (1,576,882) (1,854,130)

Institutional Class (375,913) (433,848)

Initial Class (381,919) (494,507)

TOTAL DISTRIBUTIONS (12,777,315) (27,339,733)

Share transactions - net increase (decrease) 45,163,973 189,241,269

TOTAL INCREASE (DECREASE) IN NET ASSETS 32,262,887 341,052,620

NET ASSETS

Beginning of period 751,416,002 410,363,382

End of period (including undistributed net investment $ 783,678,889 $ 751,416,002
income of $4,416,761 and $0, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS - CLASS A SIX MONTHS YEAR ENDED THREE MONTHS YEARS ENDED SEPTEMBER 30,

ENDED JUNE 30, DECEMBER ENDED DECEMBER

1996 31, 1995 31, 1994

(UNAUDITED)

1994 G 1993 1992 D 1991

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

Net asset value, beginning of period $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53 $ 21.38 $ 17.21

Income from Investment Operations .15 F .39 .10 F .39 F .33 .61 .66
Net investment income

Net realized and unrealized gain (loss) (.15) 6.73 (.75) (.81) 4.44 .58 4.26

Total from investment operations - 7.12 (.65) (.42) 4.77 1.19 4.92

Less Distributions - (.39) (.35) (.43) (.57) (.62) (.75)
From net investment income

From net realized gain (.41) (.55) (.26) (1.71) (1.21) (2.42) -

Total distributions (.41) (.94) (.61) (2.14) (1.78) (3.04) (.75)

Net asset value, end of period $ 24.47 $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53 $ 21.38

TOTAL RETURN B, C 0.01% 38.16% (3.26)% (2.24)% 26.33% 7.26% 29.51%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 618,878 $ 619,993 $ 375,691 $ 385,349 $ 269,833 $ 194,710 $ 199,604

Ratio of expenses to average net assets 1.29% A 1.61% 1.73% A, 1.85% 1.57% 1.46% 1.56%
H E

Ratio of expenses to average net assets
after expense 1.27% A, I 1.61% 1.73% A 1.84% I 1.57% 1.46% 1.56%
reductions

Ratio of net investment income to average
net assets 1.22% A 1.90% 2.03% A 1.89% 2.06% 3.22% 3.61%

Portfolio turnover 228% A 142% 228% A 159% 183% 211% 223%

Average commission rate J $ .0418

</TABLE>

A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
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 AS OF
OCTOBER 1, 1991 THE FUND DISCONTINUED THE USE OF EQUALIZATION ACCOUNTING. E
INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FIDELITY MANAGEMENT &
RESEARCH COMPANY FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. F NET INVESTMENT
INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING
DURING THE PERIOD. G EFFECTIVE OCTOBER 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. H FMR
AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE BEEN
HIGHER. I FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE
NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). J FOR FISCAL YEARS BEGINNING ON
OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE
COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE
CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND
DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING
PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEAR THREE YEAR
ENDED ENDED MONTHS ENDED
JUNE 30, 1996 DECEMBER ENDED SEPTEMBER
31, DECEMBER 30,
31,

(UNAUDITED) 1995 1994 1994 E

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

Net asset value, beginning of period $ 24.56 $ 18.57 $ 19.98 $ 19.65

Income from Investment Operations

Net investment income .08 D .38 .06 D .05 D

Net realized and unrealized gain (loss) (.15) 6.54 (.74) .28

Total from investment operations (.07) 6.92 (.68) .33

Less Distributions

From net investment income - (.38) (.47) -

From net realized gain (.41) (.55) (.26) -

Total distributions (.41) (.93) (.73) -

Net asset value, end of period $ 24.08 $ 24.56 $ 18.57 $ 19.98

TOTAL RETURN B, C (0.28)% 37.35% (3.41)% 1.68%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 105,557 $ 87,566 $ 17,090 $ 8,824

Ratio of expenses to average net assets 1.90% A 2.11% 2.58% A 2.63% A,
F

Ratio of expenses to average net assets 1.87% A, 2.10% 2.53% A, 2.63% A
after expense reductions G G G

Ratio of net investment income to .62% A 1.40% 1.22% A 1.11% A
average net assets

Portfolio turnover 228% A 142% 228% A 159%

Average commission rate H $ .0418

</TABLE>

A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND 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 NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
SEPTEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER
1996 31,

(UNAUDITED) 1995 D

SELECTED PER-SHARE DATA

Net asset value, beginning of period $ 24.80 $ 22.35

Income from Investment Operations

Net investment income .17 G .55

Net realized and unrealized gain (loss) (.13) 3.00

Total from investment operations .04 3.55

Less Distributions

From net investment income - (.55)

From net realized gain (.41) (.55)

Total distributions (.41) (1.10)

Net asset value, end of period $ 24.43 $ 24.80

TOTAL RETURN B, C 0.17% 15.96%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 37,010 $ 20,429

Ratio of expenses to average net assets .98% A .97% A

Ratio of expenses to average net assets after expense .95% A, .96% A,
reductions E E

Ratio of net investment income to average net assets 1.54% A 2.55% A

Portfolio turnover 228% A 142%

Average commission rate F $ .0418

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 FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
G NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS -
INITIAL CLASS SIX MONTHS YEAR ENDED THREE MONTHS YEARS ENDED SEPTEMBER 30,
ENDED JUNE 30, DECEMBER ENDED DECEMBER
1996 31, 1995 31,
(UNAUDITED) 1994

1994 G 1993 1992 D 1991

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72 $ 21.55 $ 17.37
Net asset value, beginning of period

Income from Investment Operations .21 F .50 .13 F .54 F .45 .73 .77
Net investment income

Net realized and unrealized gain (loss) (.15) 6.79 (.74) (.81) 4.46 .58 4.26

Total from investment operations .06 7.29 (.61) (.27) 4.91 1.31 5.03

Less Distributions - (.50) (.50) (.51) (.70) (.72) (.85)
From net investment income

From net realized gain (.41) (.55) (.26) (1.71) (1.21) (2.42) -

Total distributions (.41) (1.05) (.76) (2.22) (1.91) (3.14) (.85)

Net asset value, end of period $ 24.75 $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72 $ 21.55

TOTAL RETURN B, C 0.25% 38.75% (3.02)% (1.51)% 26.98% 7.89% 30.01%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 22,233 $ 23,428 $ 17,583 $ 18,850 $ 20,707 $ 17,933 $ 19,193

Ratio of expenses to average net assets .80% A 1.04% 1.14% A 1.15% .89% .87% 1.00%
E

Ratio of expenses to average net assets after expense .78% A, 1.03% H 1.11% A, 1.14% .89% .87% 1.00%
reductions H H H

Ratio of net investment income to average net assets 1.72% A 2.47% 2.65% A 2.60% 2.74% 3.78% 4.12%

Portfolio turnover 228% A 142% 228% A 159% 183% 211% 223%

Average commission rate I $ .0418

</TABLE>

A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
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 AS OF
OCTOBER 1, 1991 THE FUND DISCONTINUED THE USE OF EQUALIZATION ACCOUNTING. E
INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FIDELITY MANAGEMENT &
RESEARCH COMPANY FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. F NET INVESTMENT
INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING
DURING THE PERIOD G EFFECTIVE OCTOBER 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. H FMR
OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS). IFOR FISCAL YEARS BEGINNING ON OR AFTER
SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION
RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS
AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX
OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND
COMMISSION RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Strategic Opportunities (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.
The fund offers Class A, Class B, Institutional Class and Initial Class
shares, each of which has equal rights as to assets and voting privileges.
Each class has exclusive voting rights with respect to its distribution
plan. Investment income, realized and unrealized capital gains and losses,
and the common expenses of the fund are allocated on a pro rata basis to
each class based on the relative net assets of each class to the total net
assets of the fund. Each class of shares differs in its respective
distribution, transfer agent, registration, and certain other
class-specific fees and expenses.
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 quotations are readily available
are valued by a pricing service at their market values as determined by
their most recent bid prices (sales prices if the principal market is an
exchange) in the principal market in which such securities are normally
traded. Securities (including restricted securities) for which market
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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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 dividends are
declared separately for each class, while capital gain distributions are
declared at the fund level and allocated to each class on a pro rata basis
based on the number of shares held by each class 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 foreign
currency transactions, defaulted bonds, capital loss carryforwards and
losses deferred due to wash sales and excise tax regulations. 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 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
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
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 for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $868,188,423 and $818,017,612, respectively, of which U.S.
government and government agency obligations aggregated $4,397,300 and
$178,149,415, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic 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 and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .20%) based on the investment performance of the lowest
performing class as compared to the appropriate index over a specified
period
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
MANAGEMENT FEE - CONTINUED
of time. For the period, the management fee was equivalent to an annualized
rate of .50% of average net assets after the performance adjustment.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
the fund's Class A shares (Class A Plan), Class B shares (Class B Plan),
and Institutional Class shares (collectively referred to as "the Plans").
Under the Class A Plan and Class B Plan, the fund pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. This fee is based on annual rates of .50% and 1.00% (of which
.75% represents a distribution fee and .25% represents a shareholder
service fee) of the average net assets of the Class A and Class B shares,
respectively. For the period, the fund paid FDC $1,530,348 and $485,842
under the Class A Plan and Class B Plan, respectively, of which $1,530,348
and $121,922 were paid to securities dealers, banks and other financial
institutions for the distribution of Class A and Class B shares,
respectively, and providing shareholder support services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class A, Class B,
and Institutional Class shares. The Plans also authorize payments to third
parties that assist in the sale of the fund's shares or render shareholder
support services.
SALES LOAD. FDC receives a front-end sales charge of up to 3.50% for
selling Class A and Initial Class shares of the fund and the proceeds of a
contingent deferred sales charge levied on Class B share redemptions
occurring within five years of purchase. The Class B charge is based on
declining rates which range from 4% to 1% of the lesser of the cost of
shares at the initial date of purchase or the net asset value of the
redeemed shares, excluding any reinvested dividends and capital gains.
For the period, FDC received sales charges of $723,554 and $39,848 on sales
of Class A and Initial Class shares of the fund, respectively, of which
$607,984 and $0, respectively, was paid to securities dealers, banks, and
other financial institutions. FDC also received contingent deferred sales
charges of $94,032 on Class B share redemptions from the fund. When Class B
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent contract
with respect to its shares with the following parties (collectively
referred to as the Transfer Agents): State Street Bank and Trust Company
(State Street) - Class A shares; Fidelity Investments Institutional
Operations Company (FIIOC), an affiliate of FMR, - Class B and
Institutional Class shares; and Fidelity Service Co. (FSC), also an
affiliate
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT FEES - CONTINUED
of FMR, - Initial Class shares. The Transfer Agents receive account fees
and asset-based fees that vary according to the account size and type of
account of the shareholders of the respective classes of the fund. With
respect to the Class A shares, State Street has delegated certain transfer,
dividend paying, and shareholder services to FIIOC for which FIIOC receives
its allocable share of all such fees. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports, except proxy statements.
For the period, the transfer agent fees were equivalent to an annualized
rate of .22%, .25%, .17% and .20% of average net assets for Class A, Class
B, Institutional Class and Initial Class, respectively.
ACCOUNTING FEES. FSC 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.
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 $145,320 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$70,306 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the class' expenses. During the period, the fund's
custodian fees were reduced by $5,074 under the custodian arrangement and
Class A Institutional Class, and Initial Class expenses were reduced by
$3,658, $383, and $237, respectively, under the transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:

SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, JUNE 30, DECEMBER 31,
1996 1995 A 1996 1995 A

CLASS A
Shares sold 4,391,968 9,172,492 $ 105,784,474 $ 204,159,266
Reinvestment of distributions 360,794 758,477 8,770,899 18,559,827
Shares redeemed (4,380,313) (5,097,863) (104,953,820) (111,903,939)
Net increase (decrease) 372,449 4,833,106 $ 9,601,553 $ 110,815,154
CLASS B
Shares sold 1,309,917 2,741,552 $ 31,146,180 $ 61,331,975
Reinvestment of distributions 61,315 119,876 1,470,306 2,896,199
Shares redeemed (553,974) (216,251) (12,973,843) (4,921,449)
Net increase (decrease) 817,258 2,645,177 $ 19,642,643 $ 59,306,725
INSTITUTIONAL CLASS
Shares sold 762,557 804,353 $ 18,468,429 $ 18,524,159
Reinvestment of distributions 14,818 33,876 359,150 826,550
Shares redeemed (86,233) (14,477) (2,052,492) (346,163)
Net increase (decrease) 691,142 823,752 $ 16,775,087 $ 19,004,546
INITIAL CLASS
Shares sold 6,205 13,543 $ 149,972 $ 326,042
Reinvestment of distributions 13,952 33,960 342,391 838,428
Shares redeemed (55,087) (46,783) (1,347,673) (1,049,626)
Net increase (decrease) (34,930) 720 $ (855,310) $ 114,844
A SHARE TRANSACTIONS FOR INSTITUTIONAL CLASS ARE FOR THE PERIOD JULY 3,
1995 (COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1995.
7. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
AFC Cable Systems, Inc. $ 8,992,575 $ - $ - $ 11,637,450
Freds, Inc. Class A 4,796,188 - 29,515 6,493,300
Harveys Casino Resorts 1,195,358 - 4,156 11,727,875
Herley Microwave Systems, Inc. 1,750,000 - - 1,950,000
I-Stat Corp. - 6,879,750 - 11,383,513
Image Industries, Inc. 5,760,000 - - 6,840,000
Just Toys, Inc. 478,350 90,000 - 339,806
Maxwell Shoe, Inc. Class A 3,983,700 - - 5,880,700
Mortons Restaurant Group, Inc. 6,325,700 - - 7,259,000
Movado Group, Inc. 3,987,500 - 6,600 4,510,000
People's Choice TV Corp. 11,724,394 - - 12,404,069
Physiometrix, Inc. 2,200,000 385,000 - 1,278,750
Spectrum Holobyte, Inc. 4,107,506 - - 10,262,600
Whole Foods Market, Inc. 24,404,920 - - 37,184,800
Wireless One, Inc. 2,618,900 - - 3,376,800
TOTALS $ 82,325,091 $ 7,354,750 $ 40,271 $ 132,528,663
8. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
10% of the total outstanding shares of the fund.

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Harris Leviton, 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 *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA - Class A
Fidelity Investments Institutional
Operations Company
Boston, MA - Class B
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(registered trademark)
* INDEPENDENT TRUSTEES

(2_FIDELITY_LOGOS)FIDELITY ADVISOR

STRATEGIC OPPORTUNITIES
FUND - INITIAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on stock market
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 6 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 10 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 26 Notes to the financial statements.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Advisor Strategic Opportunities - Initial 0.25% 16.44% 92.47% 217.29%
Class

Advisor Strategic Opportunities - Initial -3.26% 12.36% 85.73% 206.19%
Class
(incl. max. 3.50% sales charge)

S&P 500(registered trademark) 10.10% 26.00% 107.63% 264.95%

Capital Appreciation Funds Average 11.50% 23.97% 112.76% 205.44%

</TABLE>

CUMULATIVE TOTAL RETURNS show Initial Class' performance in percentage
terms over a set period - in this case, six months, one year, five years,
or 10 years. 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 Initial Class' returns to those of the Standard & Poor's
500 Index - a common proxy for the U.S. stock market. To measure how
Initial Class' performance stacked up against its peers, you can compare it
to the capital appreciation funds average, which reflects the performance
of 201 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. over the past six months. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effects of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Strategic Opportunities - Initial Class 16.44% 13.99% 12.24%

Advisor Strategic Opportunities - Initial Class 12.36% 13.18% 11.84%
(incl. max. 3.50% sales charge)

S&P 500 26.00% 15.73% 13.79%

Capital Appreciation Funds Average 23.97% 15.67% 10.96%

AVERAGE ANNUAL TOTAL RETURNS take the Initial Class shares' actual (or
cumulative) return and show you what would have happened if Initial Class
shares had performed at a constant rate each year. (Note: Lipper calculates
average annual total returns by annualizing each fund's total return, then
taking the arithmetic average. This may produce a slightly different figure
than that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960630 19960712 153703 S00000000000001
FA Strategic Opp -Initial SP Standard & Poor 500
00014 SP001
1986/06/30 9650.00 10000.00
1986/07/31 9343.21 9441.00
1986/08/31 9973.53 10141.52
1986/09/30 9320.90 9302.82
1986/10/31 9683.47 9839.59
1986/11/30 9833.54 10078.69
1986/12/31 9625.70 9821.69
1987/01/31 10421.41 11144.67
1987/02/28 10528.30 11584.88
1987/03/31 10848.96 11919.68
1987/04/30 10534.24 11813.60
1987/05/31 10641.12 11916.38
1987/06/30 10979.60 12518.16
1987/07/31 11430.89 13152.83
1987/08/31 11656.54 13643.43
1987/09/30 11359.64 13344.63
1987/10/31 9293.17 10470.20
1987/11/30 8871.56 9607.46
1987/12/31 9075.39 10338.58
1988/01/31 9795.33 10773.84
1988/02/29 10120.69 11275.90
1988/03/31 9940.71 10927.47
1988/04/30 10003.01 11048.77
1988/05/31 10176.07 11144.89
1988/06/30 10875.24 11656.44
1988/07/31 10812.94 11612.15
1988/08/31 10487.58 11217.34
1988/09/30 10833.71 11695.19
1988/10/31 11027.54 12020.32
1988/11/30 11089.84 11848.43
1988/12/31 11136.17 12055.78
1989/01/31 11804.77 12938.26
1989/02/28 11754.44 12616.10
1989/03/31 11998.88 12910.05
1989/04/30 12451.80 13580.08
1989/05/31 13019.75 14130.08
1989/06/30 13127.59 14049.54
1989/07/31 14026.25 15318.21
1989/08/31 14198.79 15618.45
1989/09/30 14213.17 15554.41
1989/10/31 13983.11 15193.55
1989/11/30 14371.33 15503.50
1989/12/31 14808.93 15875.58
1990/01/31 13847.98 14810.33
1990/02/28 13929.93 15001.38
1990/03/31 13944.82 15398.92
1990/04/30 13378.69 15013.95
1990/05/31 13818.19 16477.81
1990/06/30 13952.27 16365.76
1990/07/31 14004.42 16313.39
1990/08/31 13036.03 14838.66
1990/09/30 12939.19 14116.01
1990/10/31 12939.19 14055.32
1990/11/30 13512.77 14963.29
1990/12/31 13832.37 15380.76
1991/01/31 14292.93 16051.37
1991/02/28 15143.79 17199.04
1991/03/31 15627.77 17615.25
1991/04/30 15846.34 17657.53
1991/05/31 16416.18 18420.34
1991/06/30 15908.79 17576.69
1991/07/31 16392.77 18395.76
1991/08/31 16751.85 18831.74
1991/09/30 16822.10 18517.25
1991/10/31 16494.25 18765.38
1991/11/30 16103.94 18009.13
1991/12/31 17109.34 20069.38
1992/01/31 17146.16 19696.09
1992/02/29 17486.69 19952.14
1992/03/31 17054.12 19563.07
1992/04/30 17385.45 20138.23
1992/05/31 17956.07 20236.90
1992/06/30 17965.27 19935.37
1992/07/31 18517.48 20750.73
1992/08/31 18213.76 20325.34
1992/09/30 18149.34 20565.18
1992/10/31 18296.60 20637.16
1992/11/30 19078.89 21340.88
1992/12/31 19414.77 21603.38
1993/01/31 19779.94 21784.85
1993/02/28 20347.98 22081.12
1993/03/31 20997.16 22547.03
1993/04/30 20591.42 22001.39
1993/05/31 21088.46 22591.03
1993/06/30 21281.18 22656.54
1993/07/31 21747.79 22565.92
1993/08/31 23117.17 23421.17
1993/09/30 23046.16 23240.82
1993/10/31 23786.64 23721.91
1993/11/30 22792.57 23496.55
1993/12/31 23505.85 23780.86
1994/01/31 23730.25 24589.41
1994/02/28 22911.19 23923.03
1994/03/31 22047.25 22879.99
1994/04/30 22226.77 23172.85
1994/05/31 22294.09 23552.89
1994/06/30 22294.09 22975.84
1994/07/31 22855.09 23729.45
1994/08/31 23000.95 24702.36
1994/09/30 22698.01 24097.15
1994/10/31 22473.61 24639.34
1994/11/30 21789.20 23741.97
1994/12/31 22012.69 24094.07
1995/01/31 22969.76 24718.82
1995/02/28 23576.69 25682.12
1995/03/31 23798.45 26440.00
1995/04/30 24323.67 27218.65
1995/05/31 24977.28 28306.58
1995/06/30 26296.18 28964.15
1995/07/31 27206.57 29924.60
1995/08/31 27988.57 29999.71
1995/09/30 28968.98 31265.70
1995/10/31 28863.94 31154.08
1995/11/30 29657.61 32521.74
1995/12/31 30541.66 33148.11
1996/01/31 30578.16 34276.47
1996/02/29 29975.63 34594.21
1996/03/31 28985.93 34927.36
1996/04/30 29752.95 35442.19
1996/05/31 30643.68 36356.24
1996/06/28 30618.94 36494.76
IMATRL PRASUN SHR__CHT 19960630 19960712 153707 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Strategic Opportunities Fund - Initial Class on June
30, 1986, and the current maximum 3.50% sales charge was paid. As the chart
shows, by June 30, 1996, the value of the investment would have grown to
$30,619 - a 206.19% increase on the initial investment. For comparison,
look at how the S&P 500 did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would have
grown to $36,495 - a 264.95% 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 will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW

NOTE TO SHAREHOLDERS: On March 11, 1996, Harris Leviton became Portfolio
Manager of Fidelity Advisor Strategic Opportunities Fund
Q. HARRIS, HOW HAS THE FUND PERFORMED?
A. For the six months ended June 30, 1996, Initial Class had a total return
of 0.25%. The capital appreciation funds average tracked by Lipper
Analytical Services posted a return of 11.50% during the same six-month
period. For the 12 months ended June 30, 1996, Initial Class had a total
return of 16.44%, while the capital appreciation funds average had a total
return of 23.97%.
Q. WHY DID THE FUND'S RETURNS TRAIL THOSE OF THE AVERAGE?
A. Most of the underperformance took place in the earlier part of the
period before I took over the fund. During that time, the investments that
helped the fund post strong returns in 1995 contributed to its subpar
performance. I'm talking specifically about the fund's investments in bonds
and Baby Bells, or regional Bell operating companies. Rising interest rates
hurt both of these types of investments. Earlier in the year, the consensus
on Wall Street was that the economy was sluggish, inflation was under
control and the Federal Reserve Board would seek to avoid a recession by
continuing to lower short-term interest rates, something it had done for
most of 1995. In February, however, we started seeing signs that economic
growth - which can lead to
inflation that erodes the value of a bond's fixed payments - was much
stronger than expected. As a result, interest rates increased and bond
values fell. I've significantly reduced the fund's bond holdings since
taking over the fund. Telephone utility stocks such as the Baby Bells fell
as well because they generally trade in concert with bonds.
Q. HOW WOULD YOU DESCRIBE THE STOCK MARKET ENVIRONMENT DURING THE PERIOD?
A. I would call the market we've seen over the past six months a "churning"
market. By that I mean one characterized by sharp, short-lived swings that
result from reactions to the latest economic news, without any clear
momentum. Many investors gravitated to big, blue chip growth stocks because
they often provide steady earnings growth regardless of the economic
backdrop. More recently, small- and mid-sized company stocks saw some
gains as a reaction to renewed economic strength, and because business
valuations among large-company stocks were at or near historically high
levels. In addition, business prospects for many of the larger companies
were not that attractive.
Q. YOU'VE MADE SOME CHANGES TO THE FUND SINCE TAKING OVER, INCLUDING AN
INCREASE IN MEDIA AND LEISURE STOCKS FROM 8.8% OF INVESTMENTS AT THE END OF
DECEMBER 1995 TO 16.6% OF THE FUND AT THE END OF JUNE. WHAT WAS THE APPEAL
THERE?
A. Let me start by saying that I'm a bottom-up investor. That is, I
generally invest one stock at a time instead of concentrating on
positioning my investments as a result of my analysis of big-picture
economic trends. I look for stocks that are inexpensive relative to their
sustainable growth rates. The fund's position in the media and leisure
areas is an outgrowth of that strategy. At the same time, I'd highlight a
particular sector that has been attractive to me - casino and gaming
stocks. Business prospects there improved largely because capacity growth,
or the number of casinos, has lagged market growth, particularly in Las
Vegas. Although there is some concern because new capacity is likely to
come on later in the year, new attractions in Las Vegas tend to increase
the size of the market in the short run, just as adding a new ride at
Disneyland tends to boost attendance. During the period, I found many of
these stocks, including Circus Circus Enterprises and Harveys Casino
Resorts, to be inexpensive relative to their growth prospects.
Q. YOU'VE ALSO INCREASED THE FUND'S RETAIL AND WHOLESALE STAKE BY 7.5% OF
INVESTMENTS . . .
A. Retailing has become a very tough business over the past few years.
Square-footage growth continues to outpace sales growth. Many product
categories such as
apparel actually are declining as demographic and sociological shifts lead
people to spend their money in other areas. Bankruptcies are rising, and
earnings growth in the industry is slowing across the board. So why am I
investing there? First, valuations are at low levels. Second, the
consolidation of the industry can be a positive for companies that survive,
as they frequently have attractive acquisition opportunities or less
competition in their market niches. I am attracted to specific retailers
that should benefit from many of these trends.
Q. THE FUND ALSO INCREASED INVESTMENTS IN INSURANCE STOCKS . . .
A. That's right, particularly small- to medium-sized insurance companies.
While interest rates have risen dramatically in recent months and the
perception is that these stocks would be hurt by such interest rate
increases, many of these companies actually have benefited from the
increases. That's because they tend to have substantial investment
portfolios of short- to medium-term debt securities and have been able to
reinvest at the higher rates of return offered by the market when they
reached maturity. In addition, as the insurance industry continues to
consolidate, larger companies are exiting many niches, giving the smaller
companies lucrative acquisition opportunities and reducing competition in
their core businesses. American Bankers Insurance Group, PartnerRe Holdings
- - which is listed as a holding company - and Allstate were the insurance
companies in the fund's top 10 investments at the end of the period.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I believe the churning market I described will continue over the
foreseeable future. Even though inflation wasn't apparent at the end of the
period and the economy was doing reasonably well, I'm not sure the kinds of
things that have fueled profit growth during the market's rally - such as a
favorable currency environment and corporate restructuring - are
sustainable. Overall, the market was overpriced, and even though some
momentary corrections have shaken some of the excess out of the market, it
looks as if the market will be driven day to day by breaking economic news.
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.

TOP TEN STOCKS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO

Whole Foods Market, Inc. 4.8 0.0

Nintendo Co. Ltd. Ord. 4.3 0.0

American Bankers Insurance Group, 4.3 0.0
Inc.

PartnerRe Holdings Ltd. 3.5 0.0

NYNEX Corp. 3.1 4.6

Allstate Corp. 2.5 0.6

Libbey, Inc. 2.1 0.0

Baker Hughes, Inc. 1.9 0.2

Circus Circus Enterprises, Inc. 1.9 0.0

Regis Corp. 1.8 1.2

TOP FIVE MARKET SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO

Media & Leisure 16.6 8.8

Finance 13.3 14.0

Retail & Wholesale 7.5 0.0

Durables 7.2 0.1

Health 6.9 6.0

Showing Percentage of Total Value of Investment in Securities

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS JUNE 30, 1996 (UNAUDITED)

Investment in securities, at value (including repurchase $ 774,631,565
agreements of $16,564,000) (cost $716,254,155) -
See accompanying schedule

Cash 2,273,783

Receivable for investments sold 2,704,478

Receivable for fund shares sold 12,136,831

Dividends receivable 755,717

Interest receivable 205,946

Other receivables 31,901

TOTAL ASSETS 792,740,221

LIABILITIES

Payable for investments purchased $ 6,587,575

Payable for fund shares redeemed 1,599,698

Accrued management fee 311,161

Distribution fees payable 346,494

Other payables and accrued expenses 216,404

TOTAL LIABILITIES 9,061,332

NET ASSETS $ 783,678,889

Net Assets consist of: $ 656,192,401
Paid in capital

Undistributed net investment income 4,416,761

Accumulated undistributed net realized gain (loss) on 64,692,376
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 58,377,351
investments and assets and liabilities in foreign
currencies

NET ASSETS $ 783,678,889

CALCULATION OF MAXIMUM OFFERING PRICE $24.47
CLASS A:
NET ASSET VALUE and redemption price per share
($618,878,448 (divided by) 25,293,318 shares)

Maximum offering price per share (100/96.50 of $24.47) $25.36

CLASS B: $24.08
NET ASSET VALUE and offering price per share
($105,557,205 (divided by) 4,382,713 shares) A

INSTITUTIONAL CLASS: $24.43
NET ASSET VALUE, offering price and redemption price
per share ($37,010,182 (divided by) 1,514,894 shares)

INITIAL CLASS: $24.75
NET ASSET VALUE and redemption price per share
($22,233,054 (divided by) 898,298 shares)

Maximum offering price per share (100/96.50 of $24.75) $25.65

</TABLE>

A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)

INVESTMENT INCOME $ 5,978,911
Dividends (including $40,271 received from affiliated
issuers)

Interest 3,449,663

TOTAL INCOME 9,428,574

EXPENSES $ 2,313,093
Management fee
Basic fee

Performance adjustment (425,052)

Transfer agent fees 664,411
Class A

Class B 120,828

Institutional Class 20,260

Initial Class 22,128

Distribution fees - Class A 1,530,348

Distribution fees - Class B 485,842

Accounting fees and expenses 190,422

Non-interested trustees' compensation 1,369

Custodian fees and expenses 34,520

Registration fees - Class A 37,489

Registration fees - Class B 17,903

Registration fees - Institutional Class 19,848

Registration fees - Initial Class 4,632

Audit 20,424

Legal 3,569

Miscellaneous 29,437

Total expenses before reductions 5,091,471

Expense reductions (79,658) 5,011,813

NET INVESTMENT INCOME 4,416,761

REALIZED AND UNREALIZED GAIN (LOSS) 65,580,831
Net realized gain (loss) on:
Investment securities (including realized gain of
$7,123,925 on sales of investments in affiliated issuers)

Foreign currency transactions 4,770 65,585,601

Change in net unrealized appreciation (depreciation) on:

Investment securities (70,126,074)

Assets and liabilities in foreign currencies (59) (70,126,133)

NET GAIN (LOSS) (4,540,532)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (123,771)
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE DECEMBER 31,
30,1996 1995
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 4,416,761 $ 10,587,747
Net investment income

Net realized gain (loss) 65,585,601 36,064,014

Change in net unrealized appreciation (depreciation) (70,126,133) 132,499,323

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (123,771) 179,151,084
FROM OPERATIONS

Distributions to shareholders - (9,290,408)
From net investment income
Class A

Class B - (1,281,036)

Institutional Class - (433,848)

Initial Class - (449,705)

From net realized gain (10,442,601) (13,102,251)
Class A

Class B (1,576,882) (1,854,130)

Institutional Class (375,913) (433,848)

Initial Class (381,919) (494,507)

TOTAL DISTRIBUTIONS (12,777,315) (27,339,733)

Share transactions - net increase (decrease) 45,163,973 189,241,269

TOTAL INCREASE (DECREASE) IN NET ASSETS 32,262,887 341,052,620

NET ASSETS

Beginning of period 751,416,002 410,363,382

End of period (including undistributed net investment $ 783,678,889 $ 751,416,002
income of $4,416,761 and $0, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS - CLASS A SIX MONTHS YEAR ENDED THREE MONTHS YEARS ENDED SEPTEMBER 30,

ENDED JUNE 30, DECEMBER ENDED DECEMBER

1996 31, 1995 31, 1994

(UNAUDITED)

1994 G 1993 1992 D 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA