(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
STRATEGIC INCOME
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The managers' review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 32 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 40 Notes to the financial statements.
PROXY VOTING RESULTS 49
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR STRATEGIC INCOME FUND - INSTITUTIONAL CLASS
PERFORMANCE: THE BOTTOM LINE(dagger)
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. Initial offering
of Institutional Class shares took place on July 3, 1995. Institutional
Class shares are sold to eligible investors without a sales load or 12b-1
fee. Returns prior to July 3, 1995 are those of Class T, and reflect Class
T's 0.25% 12b-1 fee. If Fidelity had not reimbursed certain class expenses,
the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Strategic Income - Institutional Class 4.54% 13.97% 44.87%
Merrill Lynch High Yield Master Index 5.84% 14.30% 41.49%
Fidelity Strategic Income Composite 4.36% 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 4.28% 12.85% n/a
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one year or
since the fund started on October 31, 1994. For example, if you had
invested $1,000 in a fund that had a 5% return over the past year, the
value of your investment would be $1,050. You can compare Institutional
Class' returns to those of the Merrill Lynch High Yield Master Index - a
market capitalization weighted index of all domestic and yankee high-yield
bonds. Issues included in the index have maturities of at least one year
and have a credit rating lower than BBB-/Baa3, but are not in default. You
can also compare Institutional Class' returns to those of the Fidelity
Strategic Income Composite Benchmark - a broad measure of the world fixed
income markets. To measure how Institutional Class' performance stacked up
against its peers, you can compare it to the multi-sector income funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past six months
average represents a peer group of 81 mutual funds. These benchmarks
reflect reinvestments of dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Strategic Income - Institutional Class 13.97% 14.90%
Merrill Lynch High Yield Master Index 14.30% 13.89%
Fidelity Strategic Income Composite 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 12.85% n/a
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative return
and show you what would have happened if Institutional Class had performed
at a constant rate each year.
$10,000 OVER LIFE OF FUND
1994/10/31 10000.00 10000.00
10000.00
1994/11/30 10050.16 9926.77
9921.26
1994/12/31 10017.44 10037.19
9887.56
1995/01/31 10129.20 10179.02
9962.57
1995/02/28 10368.45 10496.62
10125.61
1995/03/31 10518.89 10642.70
10301.07
1995/04/30 10913.50 10891.88
10634.09
1995/05/31 11324.23 11232.17
11037.19
1995/06/30 11382.14 11317.96
11135.32
1995/07/31 11493.76 11447.35
11192.91
1995/08/31 11513.63 11516.82
11198.60
1995/09/30 11719.90 11648.59
11390.44
1995/10/31 11856.52 11731.16
11444.44
1995/11/30 11989.37 11845.67
11595.55
1995/12/31 12259.67 12035.82
11847.24
1996/01/31 12533.28 12225.90
12046.81
1996/02/29 12432.43 12244.31
11927.06
1996/03/31 12404.15 12211.05
11944.14
1996/04/30 12520.67 12216.59
12025.48
1996/05/31 12605.37 12304.69
12090.46
1996/06/30 12711.84 12378.60
12234.53
1996/07/31 12788.72 12462.64
12369.42
1996/08/31 12935.81 12591.35
12504.03
1996/09/30 13339.06 12861.50
12784.11
1996/10/31 13512.61 13002.45
12956.74
1996/11/30 13776.79 13265.33
13230.23
1996/12/31 13857.85 13367.40
13261.40
1997/01/31 13939.84 13470.13
13301.40
1997/02/28 14073.62 13659.09
13391.81
1997/03/31 13765.07 13507.38
13220.01
1997/04/30 13919.24 13661.12
13350.18
1997/05/30 14280.02 13936.43
13643.22
1997/06/30 14487.16 14132.00
13839.71
$10,000 OVER LIFE OF FUND(dagger): Let's say hypothetically that $10,000
was invested in Fidelity Advisor Strategic Income Fund - Institutional
Class on October 31, 1994, when the fund started. As the chart shows, by
June 30, 1997, the value of the investment would have grown to $14,487 - a
44.87% increase on the initial investment. For comparison, look at how the
Merrill Lynch High Yield Master Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $14,132 - a 41.32% increase. You also can
look at how the Fidelity Strategic Income Composite Benchmark - a
hypothetical combination of unmanaged indices that is more representative
of the fund's investable universe - did over the same period. This index
combines returns from the J.P. Morgan Emerging Markets Bond Index Plus
(15%), Merrill Lynch High Yield Master Index (40%), Salomon Brothers
Mortgage Index (15%), Salomon Brothers Treasury 1-10 Year Index (15%), and
Salomon Brothers Non-U.S. Dollar World Government Bond Index (15%). With
distributions, if any, reinvested, a $10,000 investment in the index would
have grown to $13,840 - an 38.40% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you
can ride out the market's ups
and downs, you may have a
gain. Investing in foreign
markets means assuming
greater risks than investing in
the United States.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER OCTOBER 31,
MONTHS 31, 1994
ENDED (COMMENCEMEN
JUNE 30, T
OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.47% 7.70% 8.74% 0.97%
Capital appreciation return 1.07% 5.34% 13.67% -0.80%
Total return 4.54% 13.04% 22.41% 0.17%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class' are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIOD ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 6.33(cents) 37.99(cents) 80.37(cents)
Annualized dividend rate 6.77% 6.83% 7.15%
30-day annualized yield 6.53% - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number based on an average share price of $11.38 over
the past one month, $11.21 over the past six months, and $11.24 over the
past one year, you can compare the class' income over these three periods.
The 30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's investments
at the end of the period. It also helps you to compare funds from different
companies on an equal basis. If the fund had not been in reimbursement, the
yield may have been lower.
(dagger) THE DATA USED TO CREATE THE MERRILL LYNCH HIGH YIELD MASTER INDEX
AND THE FIDELITY STRATEGIC INCOME COMPOSITE BENCHMARK ON THE LINE GRAPH, ON
PAGE 5, IS FROM THE CLOSE OF BUSINESS ON OCTOBER 31, 1994. THE TOTAL RETURN
OF THE MERRILL LYNCH HIGH YIELD MASTER INDEX FOR THE LIFE OF FUND
CALCULATIONS ON PAGE 4 IS FROM THE OPENING OF BUSINESS ON OCTOBER 31, 1994,
COMMENCEMENT OF OPERATIONS OF THE FUND. DATA FOR THE FIDELITY STRATEGIC
INCOME COMPOSITE BENCHMARK IS ONLY AVAILABLE AT THE CLOSE OF BUSINESS EACH
MONTH.
FUND TALK: THE MANAGERS' OVERVIEW
The following is an interview with John Carlson (top left), lead Portfolio
Manager of Fidelity Advisor Strategic Income Fund and manager of the fund's
investments in emerging markets, with additional comments from co-managers
Curt Hollingsworth (bottom left) on U.S. government securities, Margaret
Eagle (top right) on high-yield securities and Jonathan Kelly (bottom
right) on foreign developed-market securities.
Q. HOW DID THE FUND PERFORM, JOHN?
J.C. For the six months that ended June 30, 1997, the fund's Institutional
Class shares returned 4.54%. The multi-sector income funds average, as
tracked by Lipper Analytical Services, returned 4.28% over the same period,
while the Merrill Lynch High Yield Master Index returned 5.84%. From a
12-month perspective, the fund's Institutional Class shares returned 13.97%
as of June 30, while the peer group and index returned 12.85% and 14.30%,
respectively.
Q. WHAT WAS BEHIND THE CONTINUED STRENGTH OF EMERGING MARKET SECURITIES?
J.C. Among other factors, the favorable backdrop of low interest rate
levels and increased economic reform in emerging market countries remained
in place. The market started off strong in early 1997. When Federal Reserve
Board chairman Alan Greenspan made his warning remarks in late December
concerning "irrational exuberance" in the U.S. equity markets, emerging
markets debt seemed to be one of the few asset groups that actually took
heed. Credit spreads - or the risk/reward tradeoff - between emerging
market bonds and the 30-year Treasury bond widened significantly. After the
Fed raised interest rates in early March, credit spreads tightened. As the
period closed, we had pretty much gone back to where we started the year in
terms of interest rate levels. In terms of the fund itself, countries such
as Bulgaria and Russia turned in strong performances. Since the Mexican
crisis, emerging market debt securities have achieved equity-like returns
while treading in volatile waters. I think it's going to be very difficult
to top the returns we've seen over the last year or so and that we may move
to more of a credit-driven type of market.
Q. CURT, HOW WOULD YOU CHARACTERIZE THE PERFORMANCE OF THE U.S. BOND MARKET
OVER THE PAST SIX MONTHS?
C.H. The market continued to pay close attention to Fed monetary policy, as
interest rates rose overall during the period. Bond market yields started
off the year at lower levels, moved up throughout the springtime and
eventually peaked out in mid-April, when the 30-year Treasury bond reached
7.17%. The rate hike in March didn't have as much of an effect on the
market as it could have, due to the fact that the market had already priced
in an upward move. As the period progressed, and it became apparent that
the Fed wouldn't make additional moves unless completely necessary, the
market rallied. In terms of the fund, my overweighting in mortgage-backed
bonds proved beneficial as low yield volatility, tightening spreads and
generally low prepayment activity helped. Going forward, I'll most likely
reduce my mortgage weighting, taking profits in some of those bonds that
have performed exceptionally well. As far as potential interest rate
direction, it's really anyone's guess as to what will happen next.
Q. HOW DID THE HIGH-YIELD MARKET FARE, MARGARET?
M.E. The high-yield market fluctuated during the period, triggered mostly
by interest rate speculation. The market began the year strongly, but
cooled off when the Fed hiked interest rates. In April, we began to see
signs of stabilization and performance took an upturn. Many of the fund's
zero coupon bond holdings - which by nature are more susceptible to market
volatility - felt the brunt of this interest rate increase during the first
quarter. Specifically, the fund's telecommunications positions, many of
which are zero coupon bonds, detracted from first quarter performance but
rebounded toward the end of the period. On a positive note, the fund
realized some appreciation from its food industry positions, particularly
Smith's Foods and Fresh Del Monte. Going forward, I'm optimistic on the
prospects for the high-yield market. Default rates are at historic lows,
and, if the economy continues to be stable and inflation remains in check,
investors should continue to find the high-yield market an appealing
investment option.
Q. JONATHAN, WHAT WAS THE STORY WITH THE DEVELOPED, GLOBAL BOND MARKETS?
J.K. In general, bond markets throughout the developed world performed a
bit better than the U.S., but mostly in local currency terms. Because the
U.S. dollar has been so strong, particularly against many of the European
currencies, investments converted back into dollars lost much of their
luster. In addition, there is a good amount of uncertainty concerning
potential weakness in the European Monetary Union and its proposed single
currency, the `euro.' Conversely, the "Anglo-Saxon" economies - those of
the U.S., United Kingdom and Canada - performed well as their respective
currencies were strong. Japan, which constitutes the largest regional
exposure within this portion of the fund, was an interesting story. Though
the Japanese economy continued to falter, there's a general feeling among
investors that the yen may have fallen far enough. As a result, Japanese
bonds provided a positive return in dollar terms and outperformed the U.S.
bond market.
Q. TURNING BACK TO YOU, JOHN, WHAT'S YOUR OUTLOOK FOR EMERGING MARKETS?
J.C. I know it's a clich<UNDEF>, but I'm cautiously optimistic. U.S.
interest rate policy will be closely watched, as will the state of the U.S.
equity market, but I think it will take a rather significant interest rate
change to have an overall impact on our markets. Regardless, we'll continue
to look for good credit stories and do our homework.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks a high level of
current income by investing
primarily in debt securities;
as a secondary objective, the
fund may also seek capital
appreciation
START DATE: October 31,
1994
SIZE: as of June 30, 1997,
more than $165 million
MANAGERS: John Carlson,
lead manager, since 1996;
Curtis Hollingsworth,
manager of the fund's U.S.
government investments,
since February 1997;
Margaret Eagle, manager of
the fund's high-yield
investments, since 1996; and
Jonathan Kelly, manager
of the fund's investments in
developed foreign markets,
since 1996; Effective
September 1, 1997, Brian
Hogan will become manager
of the fund's emerging
market investments
(checkmark)
JOHN CARLSON DISCUSSES
EMERGING MARKET RESEARCH:
"When considering a potential
investment, we typically begin
with a research trip. From
that, we'll obtain local
contacts who can aid our
assessment of the current
economic, political and
investment climate within a
particular region. Depending on
the country, we may identify
which development `models'
are being pursued in that
region and which can help us
compare countries to one
another.
"If an investment is
dollar-denominated, we
assess a country's
foreign-exchange earnings
capability and its international
liquidity position. Local
currency investing demands
knowledge of investment
instruments available, having
a view of the currency,
monitoring foreign reserves,
understanding the depth and
liquidity of the market and
being aware of relevant
foreign investment laws. In
some cases, the necessary
infrastructure for us to invest
- - including adequate
custody and settlement
operations - may not yet
exist. We put those countries
on our radar screen for the
future."
INVESTMENT CHANGES
TOP FIVE HOLDINGS AS OF JUNE 30, 1997
(BY ISSUER, EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE HOLDINGS
6 MONTHS AGO
U.S. Treasury 11.7 12.9
Government National Mortgage Association 7.5 7.8
Federal National Mortgage Association 5.4 5.8
Time Warner, Inc. 2.4 2.1
Brazilian Federative Republic 2.1 2.1
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Media & Leisure 12.3 9.9
Utilities 6.1 4.6
Finance 4.9 5.5
Retail & Wholesale 4.0 3.6
Basic Industries 3.6 2.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1997
(MOODY'S RATINGS) % % OF FUND'S
O INVESTMENTS
F 6 MONTHS AGO
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S
Aaa, Aa, A 4 42.5
0
.
8
Baa 0 0.7
.
0
Ba 7 8.9
.
3
B 2 27.8
7
.
9
Caa, Ca, C 3 3.3
.
9
Not Rated 7 6.8
.
1
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1997 AND DECEMBER 31, 1996 ACCOUNT
FOR 7.1% AND 6.8%, RESPECTIVELY, OF THE FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 * AS OF DECEMBER 31, 1996 **
Corporate bonds 35.2%
U.S. government
and agency
obligations 26.7%
Foreign government
obligations 21.6%
Stocks 5.6%
Other 3.5%
Short-term
investments 7.4%
Corporate bonds 36.5%
U.S. government
and agency
obligations 28.4%
Foreign government
obligations 21.5%
Stocks 6.1%
Other 3.5%
Short-term
investments 4.0%
Row: 1, Col: 1, Value: 7.4
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 5.6
Row: 1, Col: 4, Value: 21.6
Row: 1, Col: 5, Value: 26.7
Row: 1, Col: 6, Value: 35.2
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 6.1
Row: 1, Col: 4, Value: 21.5
Row: 1, Col: 5, Value: 28.4
Row: 1, Col: 6, Value: 36.5
* FOREIGN
INVESTMENTS 29.9%
** FOREIGN
INVESTMENTS 28.7%
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 35.2%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
CONVERTIBLE BONDS - 0.2%
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
BPH Finance BV 3%, 5/22/02 (g) - $ 160,000 $ 168,800
UTILITIES - 0.1%
ELECTRIC UTILITY - 0.1%
Huaneng Power International, Inc.
1 3/4%, 5/21/04 - 225,000 230,345
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc.
0%, 12/15/05 (e)(g) - 10,000 6,500
TOTAL utilities 236,845
TOTAL CONVERTIBLE BONDS 405,645
NONCONVERTIBLE BONDS - 35.0%
AEROSPACE & DEFENSE - 1.5%
AEROSPACE & DEFENSE - 1.3%
Alliant Techsystems, Inc. 11 3/4%, 3/1/03 B2 530,000 584,325
RHI Holdings, Inc. 11 7/8%, 3/1/99 B2 1,000,000 1,000,000
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 130,000 144,625
Wyman-Gordon Co. 10 3/4%, 3/15/03 Ba3 490,000 524,300
2,253,250
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 8 1/2%, 3/1/07 B1 90,000 90,900
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, Inc.
9 1/4%, 12/1/06 B1 180,000 187,650
TOTAL AEROSPACE & DEFENSE 2,531,800
BASIC INDUSTRIES - 3.2%
CHEMICALS & PLASTICS - 0.8%
Astor Corp. 10 1/2%, 10/15/06 B3 230,000 242,650
BPC Holdings Corp. 12 1/2%, 6/15/06 Caa 140,000 152,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
Foamex LP/Foamex Capital Corp.
9 7/8%, 6/15/07 (g) B3 $ 90,000 $ 91,125
Freedom Chemical Co. 10 5/8%, 10/15/06 B3 130,000 132,600
NL Industries, Inc. 11 3/4%, 10/15/03 B1 20,000 21,700
Plastic Specialties & Technologies, Inc.
11 1/4%, 12/1/03 B3 20,000 21,400
Sterling Chemicals Holdings, Inc.:
11 3/4%, 8/15/06 B3 400,000 431,000
0%, 8/15/08 (e) Caa 500,000 330,000
1,423,075
METALS & MINING - 0.3%
Kaiser Aluminum & Chemical Corp.
12 3/4%, 2/1/03 B2 420,000 454,650
Well Aluminum Corp.
10 1/8%, 6/1/05 (g) B2 60,000 61,800
516,450
PACKAGING & CONTAINERS - 0.2%
Fonda Group, Inc. 9 1/2%, 3/1/07 (g) B3 60,000 57,450
Gaylord Container Corp. 12 3/4%, 5/15/05 Caa 280,000 308,000
365,450
PAPER & FOREST PRODUCTS - 1.9%
Asia Pulp & Paper Finance II Mauritius Ltd.
12%, 3/15/04 (g) B3 125,000 128,125
American Pad & Paper Co., Inc.
13%, 11/15/05 B3 180,000 210,600
Container Corp. of America:
10 3/4%, 5/1/02 B1 70,000 76,563
gtd.:
9 3/4%, 4/1/03 B1 400,000 423,000
11 1/4%, 5/1/04 B1 150,000 164,250
Florida Coast Paper Co. LLC/Florida Coast Paper
Finance Corp., Series B, 12 3/4%, 6/1/03 Caa 80,000 82,600
Pen-Tab Industries, Inc.
10 7/8%, 2/1/07 (g) B3 500,000 506,250
Repap New Brunswick, Inc. yankee:
9 7/8%, 7/15/00 B2 100,000 100,250
10 5/8%, 4/15/05 Caa 730,000 688,025
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Repap Wisconsin, Inc.:
9 1/4%, 2/1/02 B2 $ 210,000 $ 211,050
9 7/8%, 5/1/06 Caa 180,000 181,350
Riverwood International 10 7/8%, 4/1/08 Caa 70,000 63,525
SD Warren Co., Series B, 12%, 12/15/04 B1 70,000 78,400
Stone Container Corp.:
12 1/4%, 4/1/02 unit B3 130,000 132,600
11 7/8%, 8/1/16 B2 110,000 118,800
3,165,388
TOTAL BASIC INDUSTRIES 5,470,363
CONSTRUCTION & REAL ESTATE - 0.1%
CONSTRUCTION - 0.1%
Compania Latinoamericana de Infraestructura
& Servicios SA 11 5/8%, 6/1/04 (g) BB- 125,000 131,250
DURABLES - 0.8%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Safelite Glass Corp. 9 7/8%, 12/15/06 (g) B3 150,000 158,625
HOME FURNISHINGS - 0.1%
Guitar Center Management Co., Inc.
11%, 7/1/06 B2 49,000 53,655
TEXTILES & APPAREL - 0.6%
Consoltex Group, Inc./Consoltex USA, Inc. gtd.
11%, 10/1/03 B3 500,000 512,500
Dan River, Inc. 10 1/8%, 12/15/03 B3 40,000 42,400
GFSI, Inc. 9 5/8%, 3/1/07 (g) B3 50,000 50,500
Polymer Group, Inc. 9%, 7/1/07 (g) - 470,000 462,438
1,067,838
TOTAL DURABLES 1,280,118
ENERGY - 1.5%
ENERGY SERVICES - 0.2%
DI Industries, Inc. 8 7/8%, 7/1/07 B1 250,000 246,250
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - 1.3%
Flores & Rucks, Inc.:
13 1/2%, 12/1/04 B1 $ 100,000 $ 120,250
9 3/4%, 10/1/06 B3 340,000 355,300
KCS Energy, Inc. 11%, 1/15/03 B1 270,000 290,925
Mesa Operating Co. 10 5/8%, 7/1/06 Ba2 210,000 238,350
Ocean Energy, Inc. 8 7/8%, 7/15/07 (g) B3 200,000 200,000
Petsec Energy, Inc. 9 1/2%, 6/15/07 (g) B3 80,000 80,000
Pogo Producing Co. 8 3/4%, 5/15/07 (g) B1 110,000 110,550
United Meridian Corp. 10 3/8%, 10/15/05 B2 300,000 325,500
Vintage Petroleum, Inc. 9%, 12/15/05 B1 500,000 510,000
2,230,875
TOTAL ENERGY 2,477,125
FINANCE - 4.4%
ASSET-BACKED SECURITIES - 1.0%
Airplanes Pass Through Trust
10 7/8%, 3/15/19 Ba2 1,280,000 1,478,400
Premier Auto Trust 4.90%, 12/15/98 Aaa 34,571 34,442
Sears Credit Account Master Trust II
7%, 1/15/04 Aaa 200,000 202,500
Standard Credit Card Master Trust I
7.65%, 2/15/00 A2 30,000 30,272
1,745,614
BANKS - 1.8%
Deutsche Bank Finance NV
4 1/8%, 11/15/99 (c) Aa1 JPY 100,000 928,955
Export-Import Bank of Japan euro
4 3/8%, 10/1/03 (c) Aaa JPY 205,000 2,015,221
Lloyds Bank PLC 7 3/8%, 3/11/04 Aa2 GBP 75,000 123,067
3,067,243
CREDIT & OTHER FINANCE - 0.5%
GST Equipment Funding, Inc.
13 1/4%, 5/1/07 (g) - 240,000 256,800
General Electric Capital Corp.
6 1/2%, 2/8/99 Aaa SEK 500,000 66,423
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Homeside, Inc. 11 1/8%, 5/15/03 Ba1 $ 55,000 $ 63,800
Indah Kiat Finance Mauritius Ltd.
10%, 7/1/07 (g) Ba3 250,000 249,375
Matahari International Finance Co. BV
11 1/4%, 3/15/01 (g) BB 125,000 133,750
PTC International Finance BV
0%, 7/1/07 (e)(g) B3 50,000 30,313
Polytama International Finance BV
11 1/4%, 6/15/07 B2 125,000 129,063
929,524
SAVINGS & LOANS - 1.1%
First Nationwide Holdings, Inc.:
12 1/4%, 5/15/01 Ba2 100,000 110,250
10 5/8%, 10/1/03 Ba3 1,480,000 1,605,800
First Nationwide Parent Holdings Ltd.
12 1/2%, 4/15/03 B3 70,000 78,050
1,794,100
TOTAL FINANCE 7,536,481
HEALTH - 0.7%
DRUGS & PHARMACEUTICALS - 0.1%
Glaxo Wellcome PLC euro 8 3/4%, 12/1/05 Aa3 GBP 25,000 44,479
Leiner Health Products, Inc.
9 5/8%, 7/1/07 (g) B3 50,000 50,625
95,104
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
IMED Corp. 9 3/4%, 12/1/06 (g) B3 70,000 71,050
MEDICAL FACILITIES MANAGEMENT - 0.6%
Dynacare, Inc. yankee 10 3/4%, 1/15/06 B2 360,000 374,400
Mariner Health Group, Inc. 9 1/2%, 4/1/06 B2 50,000 51,500
Paracelsus Healthcare Corp. 10%, 8/15/06 B3 120,000 121,500
Tenet Healthcare Corp. 8 5/8%, 1/15/07 Ba3 510,000 517,650
1,065,050
TOTAL HEALTH 1,231,204
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
ELECTRICAL EQUIPMENT - 0.2%
Amphenol Corp. 9 7/8%, 5/15/07 B2 $ 80,000 $ 82,400
L-3 Communications Corp.
10 3/8%, 5/1/07 (g) B2 80,000 84,600
Motors & Gears, Inc. 10 3/4%, 11/15/06 B3 150,000 154,500
321,500
INDUSTRIAL MACHINERY & EQUIPMENT -1.2%
Continental Global Group, Inc.
11%, 4/1/07 (g) B2 400,000 420,000
Goss Graphic System, Inc. 12%, 10/15/06 B2 340,000 374,000
International Knife & Saw, Inc.
11 3/8%, 11/15/06 B3 100,000 106,750
Roller Bearing Co. America, Inc.
9 5/8%, 6/15/07 (g) B3 550,000 556,875
Specialty Equipment Companies, Inc.
11 3/8%, 12/1/03 B3 500,000 545,000
2,002,625
POLLUTION CONTROL - 0.3%
Allied Waste of North America, Inc.
10 1/4%, 12/1/06 (g) B3 590,000 631,300
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,955,425
MEDIA & LEISURE - 8.0%
BROADCASTING - 5.1%
Adelphia Communications Corp.:
12 1/2%, 5/15/02 B3 1,060,000 1,123,600
9 1/2%, 2/15/04 B3 1,000,000 950,000
9 7/8%, 3/1/07 (g) B3 200,000 193,000
Capstar Radio Broadcasting Partners, Inc.
9 1/4%, 7/1/07 (g) - 120,000 116,100
Chancellor Radio Broadcasting Co.
8 3/4%, 6/15/07 (g) B3 160,000 158,000
Diamond Cable Communications PLC yankee (e):
0%, 9/30/04 B3 630,000 508,725
0%, 12/15/05 B3 10,000 6,613
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Echostar Communications Corp. secured discount
0%, 6/1/04 (e) B2 $ 1,000,000 $ 840,000
Echostar DBS Corp. 12 1/2%, 7/1/02 (g) Caa 340,000 337,025
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (e) Caa 1,100,000 781,000
Grupo Televisa SA de CV yankee
0%, 5/15/08 (e) Ba3 300,000 208,500
Innova S De R.L. 12 7/8%, 4/1/07 (g) B- 120,000 125,700
Intermedia Capital Partners IV LP/Intermedia
Partners IV Capital Corp. 11 1/4%, 8/1/06 B2 520,000 559,650
International Cabletel, Inc.:
0%, 2/1/06 (e) B3 280,000 193,200
10%, 2/15/07 (g) - 700,000 707,000
Jacor Communications Co.:
9 3/4%, 12/15/06 B2 370,000 384,800
8 3/4%, 6/15/07 (g) B2 570,000 562,875
Spanish Broadcasting System, Inc.
7 1/2%, 6/15/02 B3 700,000 770,000
Telewest PLC 0%, 10/1/07 (e) B1 370,000 267,325
8,793,113
ENTERTAINMENT - 1.3%
AMF Group, Inc., Series B, 10 7/8%, 3/15/06 B2 260,000 280,150
Cobblestone Golf Group, Inc. 11 1/2%, 6/1/03 B2 500,000 520,000
Showboat Marina Casino Partnership/Showboat
Marina Finance Corp. 13 1/2%, 3/15/03 B2 700,000 794,500
Viacom, Inc. 8%, 7/7/06 B1 640,000 620,800
2,215,450
LEISURE DURABLES & TOYS - 0.1%
Leslie's Poolmart, Inc. 10 3/8%, 7/15/04 (g) B2 90,000 92,250
LODGING & GAMING - 0.6%
Hollywood Casino Corp. 12 3/4%, 11/1/03 B2 110,000 116,600
Horseshoe Gaming LLC:
12 3/4%, 9/30/00 B1 290,000 324,075
9 3/8%, 6/15/07 (g) B3 190,000 191,188
KSL Recreation Group, Inc.
10 1/4%, 5/1/07 (g) B3 410,000 426,400
Sun International Hotels Ltd./Sun International
North America, Inc. yankee 9%, 3/15/07 Ba3 30,000 30,450
1,088,713
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
Sun Media Corp.:
9 1/2%, 5/15/07 (g) B3 $ 40,000 $ 40,400
yankee 9 1/2%, 2/15/07 (g) B3 70,000 70,700
111,100
RESTAURANTS - 0.8%
SC International Services, Inc. 13%, 10/1/05 B3 1,190,000 1,362,550
TOTAL MEDIA & LEISURE 13,663,176
NONDURABLES - 1.1%
FOODS - 0.9%
Fresh Del Monte Produce NV 10%, 5/1/03 Caa 260,000 265,850
Gorges/Quik-To-Fix Foods, Inc.
11 1/2%, 12/1/06 B3 1,300,000 1,332,500
1,598,350
HOUSEHOLD PRODUCTS - 0.1%
French Fragrances, Inc.
10 3/8%, 5/15/07 (g) B2 90,000 91,800
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 60,000 63,900
155,700
TOBACCO - 0.1%
North Atlantic Trading, Inc.
11%, 6/15/04 (g) B3 70,000 71,050
TOTAL NONDURABLES 1,825,100
RETAIL & WHOLESALE - 3.8%
APPAREL STORES - 0.0%
Specialty Retailers, Inc. 9%, 7/15/07 (g) B2 80,000 79,600
GENERAL MERCHANDISE STORES - 0.2%
K mart Corp. 8.70%, 8/1/97 Ba2 250,000 250,625
GROCERY STORES - 3.5%
Di Giorgio Corp. 10%, 6/15/07 (g) - 120,000 117,000
Food 4 Less Holdings, Inc. 13 5/8%, 6/15/07 - 851,093 994,945
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Grand Union Co. 12%, 9/1/04 Caa $ 290,000 $ 214,600
Pathmark Stores, Inc.:
11 5/8%, 6/15/02 Caa 890,000 901,125
12 5/8%, 6/15/02 Caa 30,000 30,750
9 5/8%, 5/1/03 B3 240,000 231,600
Ralph's Grocery Co.:
10.45%, 6/15/04 B1 260,000 279,500
11%, 6/15/05 B3 1,210,000 1,312,850
Randalls Food Markets, Inc.
9 3/8%, 7/1/07 (g) B2 180,000 179,325
Smith's Food & Drug Centers, Inc.
11 1/4%, 5/15/07 B3 1,120,000 1,316,000
Star Markets, Inc. 13%, 11/1/04 B3 320,000 363,200
5,940,895
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Cole National Group, Inc. 9 7/8%, 12/31/06 B2 120,000 126,600
TOTAL RETAIL & WHOLESALE 6,397,720
SERVICES - 1.0%
GOVERNMENT SERVICES - 0.2%
Queensland Treasury Corp.:
8%, 8/14/01 Aaa AUD 250,000 200,139
8%, 5/14/03 Aaa AUD 200,000 160,308
360,447
PRINTING - 0.4%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa 710,000 729,525
SERVICES - 0.4%
Orion Network System, Inc.:
0%, 1/15/07 unit (e) B2 140,000 79,800
11 1/4%, 1/15/07 unit B2 480,000 490,800
Pierce Leahy Corp. 11 1/8%, 7/15/06 B3 60,000 65,700
636,300
TOTAL SERVICES 1,726,272
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 1.4%
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Dictaphone Corp. 11 3/4%, 8/1/05 B3 $ 190,000 $ 174,800
Exide Electronics Group, Inc.
11 1/2%, 5/15/06 B3 290,000 311,025
485,825
ELECTRONIC INSTRUMENTS - 0.6%
Packard Bioscience, Inc. 9 3/8%, 3/1/07 (g) B3 630,000 630,000
Therma-Wave, Inc. 10 5/8%, 5/15/04 (g) B2 300,000 318,750
948,750
ELECTRONICS - 0.5%
Viasystems, Inc. 9 3/4%, 6/1/07 (g) B3 840,000 854,700
TOTAL TECHNOLOGY 2,289,275
TRANSPORTATION - 0.0%
RAILROADS - 0.0%
TFM SA de CV 0%, 6/15/09 (e)(g) B2 130,000 75,075
UTILITIES - 5.8%
CELLULAR - 3.3%
Dial Call Communications, Inc.
0%, 4/15/04 (e) B3 100,000 82,125
Fonorola, Inc. 12 1/2%, 8/15/02 B2 1,020,000 1,122,000
Microcell Telecommunications, Inc.
0%, 6/1/06 (e) B3 630,000 352,800
Millicom International Cellular SA
0%, 6/1/06 (e) B3 890,000 636,350
McCaw International Ltd.
0%, 4/15/07 unit (e)(g) CCC 3,353,000 1,609,440
Nextel Communications, Inc.
0%, 9/1/03 (e) B3 1,190,000 1,032,325
Omnipoint Corp.:
11 5/8%, 8/15/06 B2 30,000 28,350
Series A, 11 5/8%, 8/15/06 B3 550,000 519,750
Pagemart Nationwide, Inc. 0%, 2/1/05 (e) - 130,000 96,850
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Telesystem International Wireless, Inc.
0%, 6/30/07 (e)(g) B- $ 430,000 $ 228,975
USA Mobile Communications, Inc. II
9 1/2%, 2/1/04 B2 30,000 27,900
5,736,865
TELEPHONE SERVICES - 2.5%
Brooks Fiber Properties, Inc.
11 7/8%, 11/1/06 - 310,000 199,950
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (e) B2 630,000 541,013
ITC Deltacom, Inc. 11%, 6/1/07 (g) B3 240,000 241,200
McleodUSA, Inc. 0%, 3/1/07 (e)(g) B3 90,000 57,375
Nextlink Communications, Inc.
12 1/2%, 4/15/06 - 1,210,000 1,285,625
Qwest Communications, International, Inc.
10 7/8%, 4/1/07 (g) B2 370,000 402,375
RSL Communications Ltd./RSL Communications PLC
12 1/4%, 11/15/06 - 480,000 488,400
Teleport Communications Group, Inc.:
0%, 7/1/07 (e) B1 1,210,000 872,713
9 7/8%, 7/1/06 B1 110,000 117,425
4,206,076
TOTAL UTILITIES 9,942,941
TOTAL NONCONVERTIBLE BONDS 59,533,325
TOTAL CORPORATE BONDS
(Cost $58,230,675) 59,938,970
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 13.4%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
U.S. TREASURY OBLIGATIONS - 11.7%
8 7/8%, 2/15/99 Aaa $ 2,530,000 $ 2,639,903
9 1/8%, 5/15/99 Aaa 5,647,000 5,946,122
8%, 8/15/99 Aaa 5,600,000 5,806,472
6 7/8%, 3/31/00 Aaa 2,112,000 2,146,320
12 3/8%, 5/15/04 Aaa 80,000 105,687
7 7/8%, 11/15/04 Aaa 700,000 755,454
7%, 7/15/06 Aaa 2,500,000 2,571,875
19,971,833
U.S. GOVERNMENT AGENCY OBLIGATIONS - 1.7%
Government Loan Trusts (assets of Trust
guaranteed by U.S. Government through
Agency for International Development)
8 1/2%, 4/1/06 Aaa 200,000 215,682
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class 1-C, 9 1/4%, 11/15/01 Aaa 48,594 51,596
Class 2-E, 9.40%, 5/15/02 Aaa 210,254 223,103
Class 3-T, 9 5/8%, 5/15/02 Aaa 92,626 98,408
Private Export Funding Corp. secured
6.86%, 4/30/04 Aaa 798,000 803,411
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
7 1/8%, 8/15/99 Aaa 151,000 153,613
7 3/4%, 11/15/99 Aaa 33,000 33,997
0%, 11/15/01 Aaa 1,335,000 1,010,502
U.S. Department of Housing and Urban
Development Government guaranteed
participation certificates Series 1995-A,
8.27%, 8/1/03 Aaa 210,000 226,804
2,817,116
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $23,407,470) 22,788,949
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 13.3%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.4%
6%, 12/1/07 Aaa $ 119,735 $ 117,918
8 1/2%, 3/1/20 Aaa 527,579 554,201
672,119
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.4%
5 1/2%, 5/1/11 Aaa 647,319 594,659
5 1/2%, 7/1/27 (h) Aaa 320,503 321,194
6%, 4/1/01 to 1/1/26 Aaa 3,887,848 3,766,711
6 1/2%, 5/1/08 to 2/1/26 Aaa 2,541,356 2,443,328
7 1/2%, 5/1/26 to 6/1/26 Aaa 974,606 978,260
8%, 7/1/27 (h) Aaa 1,000,000 1,022,810
9,126,962
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 7.5%
6%, 1/15/09 to 5/15/09 Aaa 1,307,060 1,271,926
6 1/2%, 4/15/26 to 5/15/26 Aaa 971,593 929,388
7%, 9/15/25 to 12/15/25 Aaa 116,065 77,257
7%, 8/15/27 (h) Aaa 1,862,594 1,869,719
7 1/2%, 2/15/22 to 2/15/27 Aaa 4,607,656 4,627,168
8%, 3/15/27 Aaa 1,008,234 1,031,544
8 1/2%, 4/15/26 to 12/15/26 Aaa 2,719,890 2,826,129
11 1/2%, 3/15/10 Aaa 116,804 131,392
12,764,523
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $22,425,569) 22,563,604
COMMERCIAL MORTGAGE SECURITIES - 0.0%
Meritor Mortgage Security Corp. Series 1987-1
Class A-3, 9.40%, 6/1/99 (Cost $4,532) Baa3 4,498 4,492
FOREIGN GOVERNMENT OBLIGATIONS (J) - 21.6%
Argentinian Republic:
11 3/4%, 2/12/07 B1 ARS 130,000 144,646
11 3/4%, 2/12/07 (g) B1 ARS 1,000,000 1,112,661
BOCON 3.29%, 9/1/02 (i) B1 ARS 797 676
Bote 2.22%, 4/3/00 (i) B1 2,145 924
Brady par euro 5 1/2%, 3/31/23 (f) B1 2,040,000 1,414,618
global bond 11 3/8%, 1/30/17 B1 470,000 523,463
Austrian Republic euro 4 1/2%, 9/28/05 (c) Aaa JPY 120,000 1,206,333
FOREIGN GOVERNMENT OBLIGATIONS (J) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
Belgian Kingdom:
8 3/4%, 6/25/02 Aa1 BEF 22,000,000 $ 718,241
7 1/2%, 7/29/08 Aa1 BEF 3,000,000 93,901
Brazilian Federative Republic:
Brady:
capitalization bond 8%, 4/15/14 B1 2,090,009 1,681,151
debt conversion bond euro
6.9375%, 4/15/12 (i) B1 1,550,000 1,280,688
global bond 10 1/8%, 5/15/27 B1 702,000 676,728
Bulgarian Republic (i):
6.0625%, 7/28/11 B3 575,000 414,359
FLIRB A 2 1/4%, 7/28/12 B3 1,775,000 1,010,641
Canadian Government:
8 1/2%, 4/1/02 Aa1 CAD 400,000 323,587
10 1/4%, 2/1/04 Aa1 CAD 1,150,000 1,020,769
City of Buenos Aires 11 1/4%, 4/11/07 (g) B1 500,000 542,500
City of St. Petersburg Russia
9 1/2%, 6/18/02 (g) - 250,000 249,688
Danish Kingdom Bullet:
6%, 12/10/99 Aaa DKK 700,000 109,791
9%, 11/15/00 Aaa DKK 400,000 68,490
8%, 5/15/03 Aaa DKK 2,200,000 374,241
Dutch Government:
8 3/4%, 5/1/00 AAA NLG 800,000 458,103
5 3/4%, 1/15/04 AAA NLG 1,100,000 578,983
7%, 6/15/05 AAA NLG 260,000 145,892
Ecuador Republic:
11 1/4%, 4/25/02 (g) - 455,000 478,888
Brady past due interest euro
6.4375%, 2/28/15 (bearer) (i) - 1,140,890 736,946
French Government:
OAT 9 1/2%, 1/25/01 Aaa FRF 9,000,000 1,794,582
8 1/2%, 12/26/12 Aaa FRF 3,100,000 659,729
German Federal Republic:
7 3/4%, 2/21/00 Aaa DEM 1,050,000 659,416
8 3/8%, 5/21/01 Aaa DEM 1,900,000 1,243,626
Italian Republic (c):
12 1/2%, 1/1/98 Aa3 ITL 1,500,000 901,361
12%, 1/1/03 Aa3 ITL 850,000 623,263
9 1/2%, 1/1/05 Aa3 ITL 1,100,000 746,350
Jamaica Government 9 5/8%, 7/2/02 (g) - 125,000 125,625
Mexico Value recovery rights 6/30/03:
discount A - 1,114,000 -
discount B - 537,000 -
discount C - 384,000 -
FOREIGN GOVERNMENT OBLIGATIONS (J) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
Panamanian Republic Brady (i):
interest reduction bond euro
3 1/2%, 7/17/14 Ba1 $ 250,000 $ 192,813
past due interest euro 6.5625%, 7/17/16 Ba1 253,514 222,934
Peruvian Republic Brady (i):
FLIRB:
3 1/4%, 3/7/17 - 1,090,000 652,638
3 1/4%, 3/7/17 (g) - 700,000 419,125
past due interest 4%, 3/7/17 (g) - 490,000 318,500
Russian Government:
10%, 6/26/07 (g) BB- 125,000 124,563
interest notes 0%, 12/31/16 (g)(h) Ba2 1,825,000 1,393,844
principal loans 0%, 8/12/21 (h) - 1,240,000 826,150
Spanish Kingdom:
11.45%, 8/30/98 Aa2 ESP 15,000,000 108,643
10 1/4%, 11/30/98 Aa2 ESP 40,000,000 289,605
10.90%, 8/30/03 Aa2 ESP 65,000,000 553,530
Swedish Kingdom 10 1/4%, 5/5/03 Aa1 SEK 4,200,000 655,164
Treuhandstalt 7 3/8%, 12/2/02 Aaa DEM 2,700,000 1,729,825
United Kingdom, Great Britain & Northern Ireland:
10%, 2/26/01 Aaa GBP 400,000 726,329
9 3/4%, 8/27/02 Aaa GBP 100,000 184,860
9%, 10/13/08 Aaa GBP 650,000 1,235,910
United Mexican States:
Brady (i):
discount A, 6.8672%, 12/31/19 Ba2 725,000 673,797
discount B, 6.4531%, 12/31/19 Ba2 350,000 325,301
discount C, 6.8203%, 12/31/19 Ba2 250,000 232,344
global bond 11 1/2%, 5/15/26 Ba2 980,000 1,119,895
Venezuelan Republic:
9 1/8%, 6/18/07 (g) - 130,000 130,163
Brady (i):
debt conversion bond
6 3/4%, 12/18/07 Ba2 500,000 463,438
discount A, 6.8125%, 3/31/20 Ba2 1,050,000 928,594
discount B, 6.8125%, 3/31/20 Ba2 550,000 486,406
par A euro 6 3/4%, 3/31/20 Ba2 500,000 393,750
par B euro 6 3/4%, 3/31/20 Ba2 250,000 196,875
Oil recovery rights 3/31/20 - 15,174 -
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $36,550,292) 36,705,856
SUPRANATIONAL OBLIGATIONS - 1.8%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
European Investment Bank euro
6 3/4%, 5/10/01 (c) Aaa JPY 55,000 $ 571,612
InterAmerica Development Bank euro
6%, 10/30/01 (c) Aaa JPY 235,000 2,421,846
TOTAL SUPRANATIONAL OBLIGATIONS
(Cost $3,204,641) 2,993,458
COMMON STOCKS - 0.1%
SHARES
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Foamex-JPS Automotive LP/Foamex JPS Capital
Corp. warrants 7/1/99 (a) 260 7,280
Sterling Chemical Holdings warrants 8/15/08 (a) 120 4,200
11,480
PAPER & FOREST PRODUCTS - 0.1%
SDW Holdings Corp. (a):
warrants 12/15/06 16,500 82,500
Series B warrants 12/16/06 1,300 22,100
104,600
TOTAL basic industries 116,080
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
CS Wireless Systems, Inc. (a)(g) 10 -
LEISURE DURABLES & TOYS - 0.0%
IHF Capital, Inc., Series I
warrants 11/14/99 (a)(g) 270 14,850
TOTAL MEDIA & LEISURE 14,850
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Exide Electronics Group, Inc.
warrants 3/15/06 (a)(g) 200 5,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - 0.0%
CELLULAR - 0.0%
Intercel, Inc. warrants 2/1/06 (a) 3,328 $ 16,640
Microcell Telecommunications, Inc. (a):
warrants 6/1/06 2,520 31,500
conditional warrants 6/1/06 2,520 1,575
Pagemart Nationwide, Inc. (non-vtg.) (a) 2,100 16,800
RSL Communications Ltd./RSL Communications
PLC warrants 11/15/06 (a) 600 18,000
84,515
TELEPHONE SERVICES - 0.0%
NextLink Communications, Inc.
warrants 2/1/09 (a) 8,158 82
TOTAL UTILITIES 84,597
TOTAL COMMON STOCKS
(Cost $133,878) 220,527
PREFERRED STOCKS - 5.5%
CONVERTIBLE PREFERRED STOCKS - 0.2%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
$3.52 pay-in-kind (a) 12,725 257,681
NONCONVERTIBLE PREFERRED STOCKS - 5.3%
BASIC INDUSTRIES - 0.3%
PAPER & FOREST PRODUCTS - 0.3%
SDW Holdings Corp. 15% (g) 13,000 466,375
FINANCE - 0.4%
SAVINGS & LOANS - 0.4%
California Federal Bank FSB:
11 1/2% 1,730 193,760
California Federal Preferred Capital Corp.
9 1/8% 20,080 512,040
705,800
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Fresenius Medical Care Capital Trust 9% 82 $ 84,296
MEDIA & LEISURE - 4.3%
BROADCASTING - 3.8%
American Radio Systems Corp.
11 3/8% pay-in-kind 1,683 179,240
Chancellor Radio Broadcasting Co.
12% pay-in-kind (g) 5,510 595,080
Cablevision System Corp.:
11 1/8% depositary shares pay-in-kind 2,412 242,406
Series H, $11.75 pay-in-kind 3,998 413,793
Capstar Broadcasting Partners, Inc. 12% (g) 2,676 270,945
PanAmSat Corp. 12 3/4% pay-in-kind 417 508,740
SFX Broadcasting, Inc. 12 5/8% 1,830 197,183
Time Warner, Inc., Series M, 10 1/4%
pay-in-kind 3,619 3,998,995
6,406,382
PUBLISHING - 0.5%
K-III Communications Corp.:
Series B, $11.625 pay-in-kind 2,334 254,698
Series D, $10 5,733 577,600
832,298
TOTAL MEDIA & LEISURE 7,238,680
TECHNOLOGY - 0.1%
COMMUNICATIONS EQUIPMENT - 0.1%
Intermedia Communications, Inc.
13 1/2% pay-in-kind 135 139,388
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
NextLink Communications, Inc.
14% pay-in-kind 8,361 432,682
TOTAL NONCONVERTIBLE PREFERRED STOCKS 9,067,221
TOTAL PREFERRED STOCKS
(Cost $8,806,818) 9,324,902
PURCHASED BANK DEBT - 0.0%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
Socialist Republic of Vietnam loans restructured
under 1985 agreement (a)
(Cost $25,680) - DEM 50,000 $ 30,077
SOVEREIGN LOAN PARTICIPATIONS - 1.7%
Algerian Republic loan participation - The Chase
Manhattan Bank 7.3125%, 9/4/06 (i) - 360,000 314,100
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) final loan (a):
- The Chase Manhattan Bank - 1,000,000 915,000
- ING Baring Securities, Inc. - 250,000 228,750
- Morgan (J.P.) Securities, Inc. - 250,000 228,750
Ivory Coast restructured loan (a):
- - Morgan (J.P.) Securities, Inc. - 500,000 207,500
- Paribas Capital Markets - 1,000,000 415,000
Moroccan Kingdom loan participation (i):
- - The Chase Manhattan Bank
6.8125%, 1/1/09 - 190,000 173,019
- ING Bank NV 6.8125%, 1/1/09 - 250,000 227,656
Socialist Republic of Vietnam loan restructured
under 1985 agreement - ING
Baring Securities, Inc. - DEM 400,000 240,619
TOTAL SOVEREIGN LOAN PARTICIPATIONS
(Cost $2,420,937) 2,950,394
CASH EQUIVALENTS - 7.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 (Cost $12,566,000) $ 12,568,070 12,566,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $167,776,492) $ 170,087,229
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest Reduction
Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
AUD - Australian dollar
BEF - Belgian franc
CAD - Canadian dollar
DEM - German deutsche mark
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
GBP - British pound
ITL - Italian lira
JPY - Japanese yen
NLG - Dutch guilder
SEK - Swedish krona
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Principal amount in thousands.
4. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
5. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
6. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
7. 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 $18,923,211 or 11.4% of net
assets.
8. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
9. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
10. For foreign government obligations not individually rated by S&P or
Moody's, the ratings listed are assigned to securities by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of the
sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 40.1% AAA, AA, A 40.6%
Baa 0.0% BBB 0.7%
Ba 7.1% BB 8.2%
B 27.7% B 25.9%
Caa 3.0% CCC 2.6%
Ca, C 0.0% CC, C 0.5%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 7.1%. FMR has determined that unrated debt
securities that are lower quality account for 7.1% of the total value of
investment in securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 70.1%
Germany 2.7
Russia 2.3
Argentina 2.3
Brazil 2.1
Canada 2.0
United Kingdom 1.8
Supranational 1.8
Mexico 1.6
Venezuela 1.5
France 1.4
Italy 1.3
Japan 1.2
Others (individually less than 1%) 7.9
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $167,784,604. Net unrealized appreciation aggregated
$2,302,625, of which $5,090,157 related to appreciated investment
securities and $2,787,532 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 170,087,229
agreements of $12,566,000) (cost $167,776,492) -
See accompanying schedule
Cash 125,096
Receivable for investments sold 508,586
Regular delivery
Delayed delivery 1,572,706
Dividends receivable 67,885
Interest receivable 2,643,605
Other receivables 1,960
Prepaid expenses 3,354
TOTAL ASSETS 175,010,421
LIABILITIES
Payable for investments purchased $ 1,853,547
Regular delivery
Delayed delivery 6,673,475
Payable for fund shares redeemed 141,475
Distributions payable 182,107
Accrued management fee 77,854
Distribution fees payable 57,266
Other payables and accrued expenses 58,797
TOTAL LIABILITIES 9,044,521
NET ASSETS $ 165,965,900
Net Assets consist of:
Paid in capital $ 159,425,124
Undistributed net investment income 522,571
Accumulated undistributed net realized gain (loss) on 3,712,940
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 2,305,265
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 165,965,900
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $11.31
CLASS A:
NET ASSET VALUE and redemption price per share
($1,651,514 (divided by) 145,990 shares)
Maximum offering price per share (100/95.75 of $11.31) $11.81
CLASS T: $11.31
NET ASSET VALUE and redemption price per share
($112,284,661 (divided by) 9,929,208 shares)
Maximum offering price per share (100/96.50 of $11.31) $11.72
CLASS B: $11.33
NET ASSET VALUE and offering price per share
($45,711,605 (divided by) 4,036,272 shares) A
INSTITUTIONAL CLASS: $11.36
NET ASSET VALUE, offering price and redemption price
per share ($6,318,120 (divided by) 556,056 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 410,160
Dividends
Interest 6,220,100
TOTAL INCOME 6,630,260
EXPENSES
Management fee $ 459,102
Transfer agent fees 158,018
Distribution fees 319,431
Accounting fees and expenses 31,655
Non-interested trustees' compensation 317
Custodian fees and expenses 12,534
Registration fees 48,929
Audit 15,852
Legal 691
Reports to shareholders 16,111
Miscellaneous 121
Total expenses before reductions 1,062,761
Expense reductions (29,248) 1,033,513
NET INVESTMENT INCOME 5,596,747
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 3,520,995
Foreign currency transactions 20,956 3,541,951
Change in net unrealized appreciation (depreciation) on:
Investment securities (2,192,157)
Assets and liabilities in foreign currencies (2,189) (2,194,346)
NET GAIN (LOSS) 1,347,605
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,944,352
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 5,596,747 $ 7,731,150
Net investment income
Net realized gain (loss) 3,541,951 4,348,998
Change in net unrealized appreciation (depreciation) (2,194,346) 1,497,971
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,944,352 13,578,119
FROM OPERATIONS
Distributions to shareholders (5,113,889) (7,701,001)
From net investment income
From net realized gain (803,187) (3,422,517)
TOTAL DISTRIBUTIONS (5,917,076) (11,123,518)
Share transactions - net increase (decrease) 21,515,102 61,581,370
TOTAL INCREASE (DECREASE) IN NET ASSETS 22,542,378 64,035,971
NET ASSETS
Beginning of period 143,423,522 79,387,551
End of period (including undistributed net investment $ 165,965,900 $ 143,423,522
income of $522,571 and $39,713, respectively)
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.250 $ 11.010
Income from Investment Operations
Net investment income D .413 .267
Net realized and unrealized gain (loss) .079 .493
Total from investment operations .492 .760
Less Distributions
From net investment income (.372) (.280)
From net realized gain (.060) (.240)
Total distributions (.432) (.520)
Net asset value, end of period $ 11.310 $ 11.250
TOTAL RETURN B, C 4.49% 6.95%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,652 $ 587
Ratio of expenses to average net assets 1.25% A, 1.25% A,
F F
Ratio of expenses to average net assets after 1.24% A, 1.25% A
expense reductions G
Ratio of net investment income to average net assets 7.52% A 7.32% A
Portfolio turnover rate 139% A 119%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO DECEMBER 31, 1996.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.250 $ 11.000 $ 9.920 $ 10.000
Income from Investment Operations
Net investment income .411 D .813 D .885 .064 D
Net realized and unrealized .086 .542 1.231 (.046)
gain (loss)
Total from investment operations .497 1.355 2.116 .018
Less Distributions
From net investment income (.377) (.805) (.806) (.098)
From net realized gain (.060) (.300) (.230) -
Total distributions (.437) (1.105) (1.036) (.098)
Net asset value, end of period $ 11.310 $ 11.250 $ 11.000 $ 9.920
TOTAL RETURN B, C 4.53% 12.89% 22.02% .17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 112,285 $ 99,327 $ 52,626 $ 10,687
Ratio of expenses to average net assets 1.18% A 1.23% 1.35% 1.35% A,
F F
Ratio of expenses to average net assets 1.17% A, 1.22% 1.35% 1.35% A
after expense reductions G G
Ratio of net investment income to 7.44% A 7.34% 7.28% 5.80% A
average net assets
Portfolio turnover rate 139% A 119% 193% 104% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD OCTOBER 31, 1994 (COMMENCEMENT OF SALE OF CLASS T SHARES)
TO DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A 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).
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.260 $ 11.010 $ 9.910 $ 10.000
Income from Investment Operations
Net investment income .376 D .743 D .820 .072 D
Net realized and unrealized .094 .538 1.237 (.078)
gain (loss)
Total from investment operations .470 1.281 2.057 (.006)
Less Distributions
From net investment income (.340) (.731) (.727) (.084)
From net realized gain (.060) (.300) (.230) -
Total distributions (.400) (1.031) (.957) (.084)
Net asset value, end of period $ 11.330 $ 11.260 $ 11.010 $ 9.910
TOTAL RETURN B, C 4.28% 12.14% 21.35% (.06)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 45,712 $ 37,403 $ 26,654 $ 9,379
Ratio of expenses to average net assets 1.84% A 1.88% 2.10% 2.10% A,
F F
Ratio of expenses to average net assets 1.83% A, 1.87% 2.10% 2.10% A
after expense reductions G G
Ratio of net investment income to 6.79% A 6.69% 6.53% 5.06% A
average net assets
Portfolio turnover rate 139% A 119% 193% 104% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD OCTOBER 31, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A 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).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.300 $ 11.030 $ 10.890
Income from Investment Operations
Net investment income .417 D .826 D .456
Net realized and unrealized gain (loss) .083 .548 .340
Total from investment operations .500 1.374 .796
Less Distributions
From net investment income (.380) (.804) (.426)
From net realized gain (.060) (.300) (.230)
Total distributions (.440) (1.104) (.656)
Net asset value, end of period $ 11.360 $ 11.300 $ 11.030
TOTAL RETURN B, C 4.54% 13.04% 7.47%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 6,318 $ 6,107 $ 107
Ratio of expenses to average net assets 1.10% A, F 1.10% 1.10% A,
F F
Ratio of expenses to average net assets after 1.09% A, G 1.10% 1.10% A
expense reductions
Ratio of net investment income to average net 7.49% A 7.47% 7.53% A
assets
Portfolio turnover rate 139% A 119% 193%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Strategic Income Fund (the fund) is a fund of Fidelity
Advisor Series VIII(the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, and Institutional 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, the
common expenses of the fund, and certain fund-level expense reductions 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, expenses, and expense
reductions.
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 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 with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net investment income accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
and the U.S. dollar amount actually received. The effects of changes in
foreign currency exchange rates on investments in securities are included
with the net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to U.S. federal
income taxes to the extent that it distributes substantially all of its
taxable income for its fiscal year. The fund may be subject to foreign
taxes on income and gains on investments which are accrued based upon the
fund's understanding of the tax rules and regulations that exist in the
markets in which it invests. The fund accrues such taxes as applicable. The
schedule of investments includes information regarding income taxes under
the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. Interest
income, 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends and capital
gain distributions are declared separately for each class.
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 the
recognition of gains/ losses on certain securities, foreign currency
transactions, market discount and losses deferred due to wash sales. The
fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a delayed delivery basis. Payment and delivery may take place a month or
more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. The market values of
the securities purchased or sold on a delayed delivery basis are identified
as such in the fund's schedule of investments. The fund may receive
compensation for interest forgone in the purchase of a delayed delivery
security. With respect to purchase commitments, the fund identifies
securities as segregated in its
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under the
contract.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased on a when-issued or forward commitment basis are
identified as such in the fund's schedule of investments. The fund may
receive compensation for interest forgone in the purchase of a when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes in
the market value of the underlying securities, if the counterparty does not
perform under the contract, or if the issuer does not issue the securities
due to political, economic, or other factors.
OPTIONS. The fund may use options to manage its exposure to the bond
markets and to fluctuations in interest rates. Writing puts and buying
calls tend to increase the fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms. Gains and losses are realized upon
the expiration or closing of the options. Realized gains (losses) on
purchased options are included in realized gains (losses) on investments
securities.
Exchange-traded options are valued using the last sale price or, in the
absence of a sale, the last offering price. Options traded over-the-counter
are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
2. OPERATING POLICIES - CONTINUED
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to invest in
loans and loan participations, trade claims or other receivables. These
investments may include standby financing commitments that obligate the
fund to supply additional cash to the borrower on demand. Loan
participations involve a risk of insolvency of the lending bank or other
financial intermediary. At the end of the period, these investments
amounted to $2,950,394 or 1.8% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $118,690,284 and $101,643,563, respectively, of which U.S.
government and government agency obligations aggregated $19,353,345 and
$15,357,721, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .45%. 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.
For the period, the management fee was equivalent to an annualized rate of
.60% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research Far East Inc., Fidelity International Investment
Advisors (FIIA), and Fidelity Investments Japan Ltd. In addition, FIIA
entered into a sub-advisory agreement with its subsidiary, Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the
sub-advisory arrangements, FMR may receive investment advice and research
services and may grant the sub-advisers investment management authority to
buy and sell securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services. FIIA
pays FIIAL U.K. a fee based on costs incurred for either service.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 771 $ 771
CLASS T 133,475 133,475
CLASS B 185,185 51,442
$ 319,431 $ 185,688
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.25% and 3.50%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within six years of purchase (five years prior to
January 2, 1997). The Class B charge is based on declining rates which
range from 5% to 1%(4% to 1% prior to January 2, 1997) 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.
Effective August 1, 1997, Class A's maximum sales charge was increased to
4.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 27,900 $ 25,768
CLASS T 158,792 117,200
CLASS B 43,163 0*
$ 229,855 $ 142,968
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS
OWN RESOURCES TO DEALERS THROUGH WHICH THE SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 2,232 .44% ***
CLASS T ** FIIOC * 109,620 .21% ***
CLASS B FIIOC * 40,742 .20% ***
INSTITUTIONAL CLASS FIIOC * 5,424 .18% ***
$ 158,018
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AN
AFFILIATE OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED CERTAIN
TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES TO FIIOC FOR
WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH FEES.
*** ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level of
average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A 1.25% $ 18,913
INSTITUTIONAL CLASS 1.10% 6,113
$ 25,026
In addition, the fund has entered into an arrangement with its custodian
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of expenses. During the period, the fund's custodian
fees were reduced by $4,222 under the custodian arrangement.
6. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
11% of the total outstanding shares of the fund.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 A
1997
CLASS A
From net investment income $ 35,294 $ 8,336
From net realized gain 2,690 11,477
Total $ 37,984 $ 19,813
CLASS T
From net investment income $ 3,611,902 $ 5,439,021
From net realized gain 560,899 2,365,241
Total $ 4,172,801 $ 7,804,262
CLASS B
From net investment income $ 1,254,866 $ 2,018,483
From net realized gain 205,619 918,814
Total $ 1,460,485 $ 2,937,297
INSTITUTIONAL CLASS
From net investment income $ 211,827 $ 235,161
From net realized gain 33,979 126,985
Total $ 245,806 $ 362,146
$ 5,917,076 $ 11,123,518
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
8. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1997 1996 A 1997 1996 A
CLASS A 98,744 50,970 $ 1,102,101 $ 576,976
Shares sold
Reinvestment of distributions 2,775 1,518 30,977 17,135
Shares redeemed (7,720) (297) (85,638) (3,402)
Net increase (decrease) 93,799 52,191 $ 1,047,440 $ 590,709
CLASS T 2,948,996 5,716,371 $ 32,959,765 $ 63,555,043
Shares sold
Reinvestment of distributions 295,548 576,193 3,299,162 6,422,573
Shares redeemed (2,146,332) (2,244,243) (23,969,391) (24,923,904)
Net increase (decrease) 1,098,212 4,048,321 $ 12,289,536 $ 45,053,712
CLASS B 861,304 1,224,871 $ 9,633,561 $ 13,679,656
Shares sold
Reinvestment of distributions 105,310 224,151 1,177,286 2,516,519
Shares redeemed (251,609) (548,526) (2,806,371) (6,111,458)
Net increase (decrease) 715,005 900,496 $ 8,004,476 $ 10,084,717
INSTITUTIONAL CLASS 79,045 525,446 $ 887,776 $ 5,792,940
Shares sold
Reinvestment of distributions 21,379 31,439 239,728 353,974
Shares redeemed (84,872) (26,121) (953,854) (294,682)
Net increase (decrease) 15,552 530,764 $ 173,650 $ 5,852,232
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
9. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 18,753
CLASS T 10,639
CLASS B 6,333
INSTITUTIONAL CLASS 13,204
$ 48,929
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on June 18, 1997. The
results of votes taken among shareholders on proposals before them are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 32,670,431.969 97.30
Withheld 905,735.323 2.70
TOTAL 33,576,167.292 100.00
RALPH F. COX
Affirmative 32,661,943.620 97.28
Withheld 914,223.672 2.72
TOTAL 33,576,167.292 100.00
PHYLLIS BURKE DAVIS
Affirmative 32,639,275.890 97.21
Withheld 936,891.402 2.79
TOTAL 33,576,167.292 100.00
ROBERT M. GATES
Affirmative 32,647,573.114 97.23
Withheld 928,594.178 2.77
TOTAL 33,576,167.292 100.00
EDWARD C. JOHNSON 3RD
Affirmative 32,653,017.035 97.25
Withheld 923,150.257 2.75
TOTAL 33,576,167.292 100.00
E. BRADLEY JONES
Affirmative 32,635,245.079 97.20
Withheld 940,922.213 2.80
TOTAL 33,576,167.292 100.00
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 32,673,572.230 97.31
Withheld 902,595.062 2.69
TOTAL 33,576,167.292 100.00
PETER S. LYNCH
Affirmative 32,665,741.087 97.29
Withheld 910,426.205 2.71
TOTAL 33,576,167.292 100.00
WILLIAM O. MCCOY
Affirmative 32,665,426.588 97.29
Withheld 910,740.704 2.71
TOTAL 33,576,167.292 100.00
GERALD C. MCDONOUGH
Affirmative 32,645,173.119 97.23
Withheld 930,994.173 2.77
TOTAL 33,576,167.292 100.00
MARVIN L. MANN
Affirmative 32,667,258.985 97.29
Withheld 908,908.307 2.71
TOTAL 33,576,167.292 100.00
THOMAS R. WILLIAMS
Affirmative 32,646,425.418 97.23
Withheld 929,741.874 2.77
TOTAL 33,576,167.292 100.00
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 31,181,969.270 92.87
Against 265,724.175 .79
Abstain 2,128,473.847 6.34
TOTAL 33,576,167.292 100.00
PROPOSAL 3
To amend the Declaration of Trust to provide dollar-based voting rights for
shareholders of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,126,370.108 87.12
Against 1,000,318.214 3.77
Abstain 2,419,170.970 9.11
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 4
To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,207,061.951 87.42
Against 870,816.482 3.28
Abstain 2,467,980.859 9.30
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 5
To amend the Declaration of Trust to provide each fund with the ability to
invest all of its assets in another open-ended investment company with
substantially the same investment objective and policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 22,687,221.159 85.46
Against 1,327,189.441 5.00
Abstain 2,531,448.692 9.54
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 8
To approve an amended management contract for Strategic Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 9,352,881.560 90.11
Against 249,792.898 2.41
Abstain 777,018.612 7.48
TOTAL 10,379,693.070 100.00
PROPOSAL 15
To approve an agreement and plan providing for the reorgranization of
Strategic Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 7,007,514.817 87.42
Against 228,389.724 2.85
Abstain 780,027.529 9.73
TOTAL 8,015,932.070 100.00
Not Voting 2,363,761.000
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
Fidelity International Investment Advisors, Pembroke Bermuda
Fidelity International Investment Advisors (U.K.) Limited
Pembroke, Bermuda
Fidelity Investments Japan Limited,
Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Vice President
Robert A. Lawrence, Vice President
John H. Carlson, Vice President
Curt Hollingsworth, Vice President
Margaret L. Eagle, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
STRATEGIC INCOME
FUND - CLASS A, CLASS T AND CLASS B
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 15 The managers' review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 18 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 19 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 40 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 48 Notes to the financial statements.
PROXY VOTING RESULTS 57
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR STRATEGIC INCOME FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE(dagger)
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The initial
offering of Class A shares took place on September 3, 1996. Class A shares
bear a 0.15% 12b-1 fee that is reflected in returns after September 3,
1996. Returns prior to that date are those of Class T, and reflect Class
T's 0.25% 12b-1 fee. Effective August 1, 1997, the maximum 4.25% sales
charge on Class A shares was increased to 4.75%. If Fidelity had not
reimbursed certain Class A expenses, the total returns and dividends would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Strategic Income - Class A 4.49% 13.73% 44.08%
Advisor Strategic Income - Class A -0.48% 8.33% 37.23%
(incl. max. 4.75% sales charge) 1
Merrill Lynch High Yield Master Index 5.84% 14.30% 41.49%
Fidelity Strategic Income Composite 4.36% 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 4.28% 12.85% n/a
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, one year or since the fund
started on October 31, 1994. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the Merrill
Lynch High Yield Master Index - a market capitalization weighted index of
all domestic and yankee high-yield bonds. Issues included in the index have
maturities of at least one year and have a credit rating lower than
BBB-/Baa3, but are not in default. You can also compare Class A's returns
to those of the Fidelity Strategic Income Composite Benchmark - a broad
measure of the world fixed income markets. To measure how Class A's
performance stacked up against its peers, you can compare it to the
multi-sector income funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
The past six months average represents a peer group of 81 mutual funds.
These benchmarks reflect reinvestment of dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Strategic Income - Class A 13.73% 14.67%
Advisor Strategic Income - Class A 8.33% 12.60%
(incl. max. 4.75% sales charge) 1
Merrill Lynch High Yield Master Index 14.30% 13.89%
Fidelity Strategic Income Composite 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 12.85% n/a
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show you
what would have happened if Class A had performed at a constant rate each
year.
1 HAD THE FORMER 4.25% SALES CHARGE BEEN REFLECTED, THE PAST SIX MONTHS
CUMULATIVE TOTAL RETURN WOULD HAVE BEEN 0.05%, THE CUMULATIVE AND AVERAGE
ANNUAL RETURNS WOULD HAVE BEEN 8.90% AND 8.90% FOR THE PAST ONE YEAR, AND
37.95% AND 12.82% FOR THE LIFE OF FUND.
$10,000 OVER LIFE OF FUND
1994/10/31 9525.00 10000.00
10000.00
1994/11/30 9572.77 9926.77
9921.26
1994/12/31 9541.61 10037.19
9887.56
1995/01/31 9648.07 10179.02
9962.57
1995/02/28 9875.95 10496.62
10125.61
1995/03/31 10019.24 10642.70
10301.07
1995/04/30 10395.11 10891.88
10634.09
1995/05/31 10786.33 11232.17
11037.19
1995/06/30 10841.49 11317.96
11135.32
1995/07/31 10928.59 11447.35
11192.91
1995/08/31 10945.88 11516.82
11198.60
1995/09/30 11140.78 11648.59
11390.44
1995/10/31 11270.10 11731.16
11444.44
1995/11/30 11395.97 11845.67
11595.55
1995/12/31 11643.10 12035.82
11847.24
1996/01/31 11903.52 12225.90
12046.81
1996/02/29 11807.14 12244.31
11927.06
1996/03/31 11769.08 12211.05
11944.14
1996/04/30 11882.44 12216.59
12025.48
1996/05/31 11965.00 12304.69
12090.46
1996/06/30 12066.53 12378.60
12234.53
1996/07/31 12139.29 12462.64
12369.42
1996/08/31 12280.23 12591.35
12504.03
1996/09/30 12655.98 12861.50
12784.11
1996/10/31 12820.34 13002.45
12956.74
1996/11/30 13070.06 13265.33
13230.23
1996/12/31 13134.12 13367.40
13261.40
1997/01/31 13219.11 13470.13
13301.40
1997/02/28 13332.25 13659.09
13391.81
1997/03/31 13039.49 13507.38
13220.01
1997/04/30 13185.41 13661.12
13350.18
1997/05/31 13527.89 13936.43
13643.22
1997/06/30 13723.41 14132.00
13839.71
$10,000 OVER LIFE OF FUND(dagger): Let's say hypothetically that $10,000
was invested in Fidelity Advisor Strategic Income Fund - Class A on October
31, 1994, when the fund started, and the current maximum 4.75% sales charge
was paid. As the chart shows, by June 30, 1997, the value of the investment
would have grown to $13,723 - a 37.23% increase on the initial investment.
For comparison, look at how the Merrill Lynch High Yield Master Index did
over the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 investment would have grown to $14,132 - a 41.32%
increase. You also can look at how the Fidelity Strategic Income Composite
Benchmark - a hypothetical combination of unmanaged indices that is more
representative of the fund's investable universe - did over the same
period. This index combines returns from the J.P. Morgan Emerging Markets
Bond Index Plus (15%), Merrill Lynch High Yield Master Index (40%), Salomon
Brothers Mortgage Index (15%), Salomon Brothers Treasury 1-10 Year Index
(15%), and Salomon Brothers Non-U.S. Dollar World Government Bond Index
(15%). With distributions, if any, reinvested, a $10,000 investment in the
index would have grown to $13,840 - a 38.40% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
Investing in foreign markets
means assuming greater risks
than investing in the United
States.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER OCTOBER 31,
MONTHS 31, 1994
ENDED (COMMENCEMEN
JUNE 30, T
OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.42% 7.65% 8.65% 0.97%
Capital appreciation return 1.07% 5.16% 13.37% -0.80%
Total return 4.49% 12.81% 22.02% 0.17%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 6.20(cents) 37.18(cents) 65.15(cents)
Annualized dividend rate 6.66% 6.71% 7.05%
30-day annualized yield n/a - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number, based on an average share price of $11.33 over
the past one month, $11.17 over the past six months and $11.20 over the
life of the class, you can compare the class' income over these three
periods. The 30-day annualized YIELD is a standard formula for all bond
funds based on the yields of the bonds in the fund, averaged over the past
30 days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you to compare funds
from different companies on an equal basis. Yield information will be
reported once the class has a longer, more stable operating history.
(dagger) THE DATA USED TO CREATE THE MERRILL LYNCH HIGH YIELD MASTER INDEX
AND THE FIDELITY STRATEGIC INCOME COMPOSITE BENCHMARK ON THE LINE GRAPH, ON
PAGE 5, IS FROM THE CLOSE OF BUSINESS ON OCTOBER 31, 1994. THE TOTAL RETURN
OF THE MERRILL LYNCH HIGH YIELD MASTER INDEX FOR THE LIFE OF FUND
CALCULATIONS ON PAGE 4 IS FROM THE OPENING OF BUSINESS ON OCTOBER 31, 1994,
COMMENCEMENT OF OPERATIONS OF THE FUND. DATA FOR THE FIDELITY STRATEGIC
INCOME COMPOSITE BENCHMARK IS ONLY AVAILABLE AT THE CLOSE OF BUSINESS EACH
MONTH.
ADVISOR STRATEGIC INCOME FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE(dagger)
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. If Fidelity had
not reimbursed certain Class T expenses, the life of fund total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Strategic Income - Class T 4.53% 13.86% 44.24%
Advisor Strategic Income - Class T 0.88% 9.88% 39.20%
(incl. max. 3.50% sales charge)
Merrill Lynch High Yield Master Index 5.84% 14.30% 41.49%
Fidelity Strategic Income Composite 4.36% 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 4.28% 12.85% n/a
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage terms
over a set period - in this case, six months, one year or since the fund
started on October 31, 1994. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the Merrill
Lynch High Yield Master Index - a market capitalization weighted index of
all domestic and yankee high-yield bonds. Issues included in the index have
maturities of at least one year and have a credit rating lower than
BBB-/Baa3, but are not in default. You can also compare Class T's returns
to those of the Fidelity Strategic Income Composite Benchmark - a broad
measure of the world fixed income markets. To measure how Class T's
performance stacked up against its peers, you can compare it to the
multi-sector income funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
The past six months average represents a peer group of 81 mutual funds.
These benchmarks reflect reinvestment of dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Strategic Income - Class T 13.86% 14.72%
Advisor Strategic Income - Class T 9.88% 13.20%
(incl. max. 3.50% sales charge)
Merrill Lynch High Yield Master Index 14.30% 13.89%
Fidelity Strategic Income Composite 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 12.85% n/a
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show you
what would have happened if Class T had performed at a constant rate each
year.
$10,000 OVER LIFE OF FUND
1994/10/31 9650.00 10000.00
10000.00
1994/11/30 9698.40 9926.77
9921.26
1994/12/31 9666.83 10037.19
9887.56
1995/01/31 9774.68 10179.02
9962.57
1995/02/28 10005.55 10496.62
10125.61
1995/03/31 10150.73 10642.70
10301.07
1995/04/30 10531.53 10891.88
10634.09
1995/05/31 10927.88 11232.17
11037.19
1995/06/30 10983.77 11317.96
11135.32
1995/07/31 11072.01 11447.35
11192.91
1995/08/31 11089.52 11516.82
11198.60
1995/09/30 11286.98 11648.59
11390.44
1995/10/31 11418.00 11731.16
11444.44
1995/11/30 11545.52 11845.67
11595.55
1995/12/31 11795.90 12035.82
11847.24
1996/01/31 12059.74 12225.90
12046.81
1996/02/29 11962.09 12244.31
11927.06
1996/03/31 11923.53 12211.05
11944.14
1996/04/30 12038.38 12216.59
12025.48
1996/05/31 12122.02 12304.69
12090.46
1996/06/30 12224.89 12378.60
12234.53
1996/07/31 12298.60 12462.64
12369.42
1996/08/31 12441.38 12591.35
12504.03
1996/09/30 12830.13 12861.50
12784.11
1996/10/31 12997.13 13002.45
12956.74
1996/11/30 13251.26 13265.33
13230.23
1996/12/31 13315.91 13367.40
13261.40
1997/01/31 13391.70 13470.13
13301.40
1997/02/28 13518.64 13659.09
13391.81
1997/03/31 13222.75 13507.38
13220.01
1997/04/30 13371.63 13661.12
13350.18
1997/05/31 13720.32 13936.43
13643.22
1997/06/30 13920.00 14132.00
13839.71
$10,000 OVER LIFE OF FUND(dagger): Let's say hypothetically that $10,000
was invested in Fidelity Advisor Strategic Income Fund - Class T on October
31, 1994, when the fund started, and the current maximum 3.50% sales charge
was paid. As the chart shows, by June 30, 1997, the value of the investment
would have grown to $13,920 - a 39.20% increase on the initial investment.
For comparison, look at how the Merrill Lynch High Yield Master Index did
over the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 investment would have grown to $14,132 - a 41.32%
increase. You also can look at how the Fidelity Strategic Income Composite
Benchmark - a hypothetical combination of unmanaged indices that is more
representative of the fund's investable universe - did over the same
period. This index combines returns from the J.P. Morgan Emerging Markets
Bond Index Plus (15%), Merrill Lynch High Yield Master Index (40%), Salomon
Brothers Mortgage Index (15%), Salomon Brothers Treasury 1-10 Year Index
(15%), and Salomon Brothers Non-U.S. Dollar World Government Bond Index
(15%). With distributions, if any, reinvested, a $10,000 investment in the
index would have grown to $13,840 - a 38.40% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
Investing in foreign markets
means assuming greater risks
than investing in the United
States.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER OCTOBER 31,
MONTHS 31, 1994
ENDED (COMMENCEMEN
JUNE 30, T
OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.46% 7.73% 8.65% 0.97%
Capital appreciation return 1.07% 5.16% 13.37% -0.80%
Total return 4.53% 12.89% 22.02% 0.17%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 6.28(cents) 37.68(cents) 79.77(cents)
Annualized dividend rate 6.74% 6.81% 7.13%
30-day annualized yield 6.26% - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number, based on an average share price of $11.33 over
the past one month, $11.16 over the past six months, and $11.19 over the
past one year, you can compare the class' income over these three periods.
The 30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's investments
at the end of the period. It also helps you to compare funds from different
companies on an equal basis. The offering share price used in the
calculation of the yield includes the effect of Class T's maximum 3.50%
sales charge.
(dagger) THE DATA USED TO CREATE THE MERRILL LYNCH HIGH YIELD MASTER INDEX
AND THE FIDELITY STRATEGIC INCOME COMPOSITE BENCHMARK ON THE LINE GRAPH, ON
PAGE 9, IS FROM THE CLOSE OF BUSINESS ON OCTOBER 31, 1994. THE TOTAL RETURN
OF THE MERRILL LYNCH HIGH YIELD MASTER INDEX FOR THE LIFE OF FUND
CALCULATIONS ON PAGES 7 AND 8 IS FROM THE OPENING OF BUSINESS ON OCTOBER
31, 1994, COMMENCEMENT OF OPERATIONS OF THE FUND. DATA FOR THE FIDELITY
STRATEGIC INCOME COMPOSITE BENCHMARK IS ONLY AVAILABLE AT THE CLOSE OF
BUSINESS EACH MONTH.
ADVISOR STRATEGIC INCOME FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE(dagger)
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. Effective
January 2, 1997, Class B's contingent deferred sales charge is based on a
declining scale that ranges from 5% to 1% on Class B shares redeemed within
six years of purchase. This scale is revised from the previous scale of 4%
to 1% on shares redeemed within five years of purchase. Class B's
contingent deferred sales charge included in the past six months, past one
year and life of fund total return figures are 5%, 5% and 3%, respectively.
If Fidelity had not reimbursed certain Class B expenses, the life of fund
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Strategic Income - Class B 4.28% 13.22% 41.82%
Advisor Strategic Income - Class B -0.72% 8.22% 38.82%
(incl. contingent deferred sales charge)
Merrill Lynch High Yield Master Index 5.84% 14.30% 41.49%
Fidelity Strategic Income Composite 4.36% 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 4.28% 12.85% n/a
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, one year or since the fund
started on October 31, 1994. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the Merrill
Lynch High Yield Master Index - a market capitalization weighted index of
all domestic and yankee high-yield bonds. Issues included in the index have
maturities of at least one year and have a credit rating lower than
BBB-/Baa3, but are not in default. You can also compare Class B's returns
to those of the Fidelity Strategic Income Composite Benchmark - a broad
measure of the world fixed income markets. To measure how Class B's
performance stacked up against its peers, you can compare it to the
multi-sector income funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
The past six months average represents a peer group of 81 mutual funds.
These benchmarks reflect reinvestment of dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Strategic Income - Class B 13.22% 13.99%
Advisor Strategic Income - Class B 8.22% 13.08%
(incl. contingent deferred sales charge)
Merrill Lynch High Yield Master Index 14.30% 13.89%
Fidelity Strategic Income Composite 13.12% n/a
Benchmark
Multi-Sector Income Funds Average 12.85% n/a
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and show you
what would have happened if Class B had performed at a constant rate each
year.
$10,000 OVER LIFE OF FUND
1994/10/31 10000.00 10000.00
10000.00
1994/11/30 10045.19 9926.77
9921.26
1994/12/31 9993.77 10037.19
9887.56
1995/01/31 10109.93 10179.02
9962.57
1995/02/28 10342.97 10496.62
10125.61
1995/03/31 10496.27 10642.70
10301.07
1995/04/30 10883.14 10891.88
10634.09
1995/05/31 11285.68 11232.17
11037.19
1995/06/30 11326.35 11317.96
11135.32
1995/07/31 11420.96 11447.35
11192.91
1995/08/31 11431.98 11516.82
11198.60
1995/09/30 11617.60 11648.59
11390.44
1995/10/31 11755.36 11731.16
11444.44
1995/11/30 11878.64 11845.67
11595.55
1995/12/31 12127.76 12035.82
11847.24
1996/01/31 12391.44 12225.90
12046.81
1996/02/29 12283.74 12244.31
11927.06
1996/03/31 12237.32 12211.05
11944.14
1996/04/30 12347.83 12216.59
12025.48
1996/05/31 12426.63 12304.69
12090.46
1996/06/30 12525.39 12378.60
12234.53
1996/07/31 12594.31 12462.64
12369.42
1996/08/31 12733.18 12591.35
12504.03
1996/09/30 13123.27 12861.50
12784.11
1996/10/31 13286.86 13002.45
12956.74
1996/11/30 13539.79 13265.33
13230.23
1996/12/31 13599.52 13367.40
13261.40
1997/01/31 13681.65 13470.13
13301.40
1997/02/28 13803.67 13659.09
13391.81
1997/03/31 13482.16 13507.38
13220.01
1997/04/30 13638.86 13661.12
13350.18
1997/05/31 13973.99 13936.43
13643.22
1997/06/30 13881.74 14132.00
13839.71
$10,000 OVER LIFE OF FUND(dagger): Let's say hypothetically that $10,000
was invested in Fidelity Advisor Strategic Income Fund - Class B on October
31, 1994, when the fund started. As the chart shows, by June 30, 1997, the
value of the investment, including the effect of the contingent deferred
sales charge, would have grown to $13,882 - a 38.82% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master Index did over the same period. With dividends reinvested,
the same $10,000 investment would have grown to $14,132 - a 41.32%
increase. You also can look at how the Fidelity Strategic Income Composite
Benchmark - a hypothetical combination of unmanaged indices that is more
representative of the fund's investable universe - did over the same
period. This index combines returns from the J.P. Morgan Emerging Markets
Bond Index Plus (15%), Merrill Lynch High Yield Master Index (40%), Salomon
Brothers Mortgage Index (15%), Salomon Brothers Treasury 1-10 Year Index
(15%), and Salomon Brothers Non-U.S. Dollar World Government Bond Index
(15%). With distributions, if any, reinvested, a $10,000 investment in the
index would have grown to $13,840 - a 38.40% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you
can ride out the market's ups
and downs, you may have a
gain. Investing in foreign
markets means assuming
greater risks than investing in
the United States.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER OCTOBER 31,
MONTHS 31, 1994
ENDED (COMMENCEMEN
JUNE 30, T
OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.12% 7.00% 7.78% 0.84%
Capital appreciation return 1.16% 5.14% 13.57% -0.90%
Total return 4.28% 12.14% 21.35% -0.06%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.68(cents) 34.04(cents) 72.58(cents)
Annualized dividend rate 6.09% 6.14% 6.47%
30-day annualized yield 5.82% - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number based on an average share price of $11.35 over
the past one month, $11.18 over the past six months, and $11.21 over the
past one year, you can compare the class' income over these three periods.
The 30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's investments
at the end of the period. It also helps you to compare funds from different
companies on an equal basis. The offering share price used in the
calculation of the yield excludes the effect of Class B's contingent
deferred sales charge.
(dagger) THE DATA USED TO CREATE THE MERRILL LYNCH HIGH YIELD MASTER INDEX
AND THE FIDELITY STRATEGIC INCOME COMPOSITE BENCHMARK ON THE LINE GRAPH, ON
PAGE 13, IS FROM THE CLOSE OF BUSINESS ON OCTOBER 31, 1994. THE TOTAL
RETURN OF THE MERRILL LYNCH HIGH YIELD MASTER INDEX FOR THE LIFE OF FUND
CALCULATIONS ON PAGES 11 AND 12 IS FROM THE OPENING OF BUSINESS ON OCTOBER
31, 1994, COMMENCEMENT OF OPERATIONS OF THE FUND. DATA FOR THE FIDELITY
STRATEGIC INCOME COMPOSITE BENCHMARK IS ONLY AVAILABLE AT THE CLOSE OF
BUSINESS EACH MONTH.
FUND TALK: THE MANAGERS' OVERVIEW
The following is an interview with John Carlson (top left), lead Portfolio
Manager of Fidelity Advisor Strategic Income Fund and manager of the fund's
investments in emerging markets, with additional comments from co-managers
Curt Hollingsworth (bottom left) on U.S. government securities, Margaret
Eagle (top right) on high-yield securities and Jonathan Kelly (bottom
right) on foreign developed-market securities.
Q. HOW DID THE FUND PERFORM, JOHN?
J.C. For the six months that ended June 30, 1997, the fund's Class A, Class
T and Class B shares returned 4.49%, 4.53% and 4.28%, respectively. The
multi-sector income funds average, as tracked by Lipper Analytical
Services, returned 4.28% over the same period, while the Merrill Lynch High
Yield Master Index returned 5.84%. From a 12-month perspective, the fund's
Class A, T and B shares returned 13.73%, 13.86% and 13.22%, respectively as
of June 30, while the peer group and index returned 12.85% and 14.30%,
respectively.
Q. WHAT WAS BEHIND THE CONTINUED STRENGTH OF EMERGING MARKET SECURITIES?
J.C. Among other factors, the favorable backdrop of low interest rate
levels and increased economic reform in emerging market countries remained
in place. The market started off strong in early 1997. When Federal Reserve
Board chairman Alan Greenspan made his warning remarks in late December
concerning "irrational exuberance" in the U.S. equity markets, emerging
markets debt seemed to be one of the few asset groups that actually took
heed. Credit spreads - or the risk/reward tradeoff - between emerging
market bonds and the 30-year Treasury bond widened significantly. After the
Fed raised interest rates in early March, credit spreads tightened. As the
period closed, we had pretty much gone back to where we started the year in
terms of interest rate levels. In terms of the fund itself, countries such
as Bulgaria and Russia turned in strong performances. Since the Mexican
crisis, emerging market debt securities have achieved equity-like returns
while treading in volatile waters. I think it's going to be very difficult
to top the returns we've seen over the last year or so and that we may move
to more of a credit-driven type of market.
Q. CURT, HOW WOULD YOU CHARACTERIZE THE PERFORMANCE OF THE U.S. BOND MARKET
OVER THE PAST SIX MONTHS?
C.H. The market continued to pay close attention to Fed monetary policy, as
interest rates rose overall during the period. Bond market yields started
off the year at lower levels, moved up throughout the springtime and
eventually peaked out in mid-April, when the 30-year Treasury bond reached
7.17%. The rate hike in March didn't have as much of an effect on the
market as it could have, due to the fact that the market had already priced
in an upward move. As the period progressed, and it became apparent that
the Fed wouldn't make additional moves unless completely necessary, the
market rallied. In terms of the fund, my overweighting in mortgage-backed
bonds proved beneficial as low yield volatility, tightening spreads and
generally low prepayment activity helped. Going forward, I'll most likely
reduce my mortgage weighting, taking profits in some of those bonds that
have performed exceptionally well. As far as potential interest rate
direction, it's really anyone's guess as to what will happen next.
Q. HOW DID THE HIGH-YIELD MARKET FARE, MARGARET?
M.E. The high-yield market fluctuated during the period, triggered mostly
by interest rate speculation. The market began the year strongly, but
cooled off when the Fed hiked interest rates. In April, we began to see
signs of stabilization and performance took an upturn. Many of the fund's
zero coupon bond holdings - which by nature are more susceptible to market
volatility - felt the brunt of this interest rate increase during the first
quarter. Specifically, the fund's telecommunications positions, many of
which are zero coupon bonds, detracted from first quarter performance but
rebounded toward the end of the period. On a positive note, the fund
realized some appreciation from its food industry positions, particularly
Smith's Foods and Fresh Del Monte. Going forward, I'm optimistic on the
prospects for the high-yield market. Default rates are at historic lows,
and, if the economy continues to be stable and inflation remains in check,
investors should continue to find the high-yield market an appealing
investment option.
Q. JONATHAN, WHAT WAS THE STORY WITH THE DEVELOPED, GLOBAL BOND MARKETS?
J.K. In general, bond markets throughout the developed world performed a
bit better than the U.S., but mostly in local currency terms. Because the
U.S. dollar has been so strong, particularly against many of the European
currencies, investments converted back into dollars lost much of their
luster. In addition, there is a good amount of uncertainty concerning
potential weakness in the European Monetary Union and its proposed single
currency, the `euro.' Conversely, the "Anglo-Saxon" economies - those of
the U.S., United Kingdom and Canada - performed well as their respective
currencies were strong. Japan, which constitutes the largest regional
exposure within this portion of the fund, was an interesting story. Though
the Japanese economy continued to falter, there's a general feeling among
investors that the yen may have fallen far enough. As a result, Japanese
bonds provided a positive return in dollar terms and outperformed the U.S.
bond market.
Q. TURNING BACK TO YOU, JOHN, WHAT'S YOUR OUTLOOK FOR EMERGING MARKETS?
J.C. I know it's a clich<UNDEF>, but I'm cautiously optimistic. U.S.
interest rate policy will be closely watched, as will the state of the U.S.
equity market, but I think it will take a rather significant interest rate
change to have an overall impact on our markets. Regardless, we'll continue
to look for good credit stories and do our homework.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks a high level of
current income by investing
primarily in debt securities;
as a secondary objective, the
fund may also seek capital
appreciation
START DATE: October 31,
1994
SIZE: as of June 30, 1997,
more than $165 million
MANAGERS: John Carlson,
lead manager, since 1996;
Curtis Hollingsworth,
manager of the fund's U.S.
government investments,
since February 1997;
Margaret Eagle, manager of
the fund's high-yield
investments, since 1996; and
Jonathan Kelly, manager
of the fund's investments in
developed foreign markets,
since 1996; Effective
September 1, 1997, Brian
Hogan will become manager
of the fund's emerging
market investments
(checkmark)
JOHN CARLSON DISCUSSES
EMERGING MARKET RESEARCH:
"When considering a potential
investment, we typically begin
with a research trip. From
that, we'll obtain local
contacts who can aid our
assessment of the current
economic, political and
investment climate within a
particular region. Depending on
the country, we may identify
which development `models'
are being pursued in that
region and which can help us
compare countries to one
another.
"If an investment is
dollar-denominated, we
assess a country's
foreign-exchange earnings
capability and its international
liquidity position. Local
currency investing demands
knowledge of investment
instruments available, having
a view of the currency,
monitoring foreign reserves,
understanding the depth and
liquidity of the market and
being aware of relevant
foreign investment laws. In
some cases, the necessary
infrastructure for us to invest
- - including adequate
custody and settlement
operations - may not yet
exist. We put those countries
on our radar screen for the
future."
INVESTMENT CHANGES
TOP FIVE HOLDINGS AS OF JUNE 30, 1997
(BY ISSUER, EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE HOLDINGS
6 MONTHS AGO
U.S. Treasury 11.7 12.9
Government National Mortgage Association 7.5 7.8
Federal National Mortgage Association 5.4 5.8
Time Warner, Inc. 2.4 2.1
Brazilian Federative Republic 2.1 2.1
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Media & Leisure 12.3 9.9
Utilities 6.1 4.6
Finance 4.9 5.5
Retail & Wholesale 4.0 3.6
Basic Industries 3.6 2.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1997
(MOODY'S RATINGS) % % OF FUND'S
O INVESTMENTS
F 6 MONTHS AGO
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S
Aaa, Aa, A 4 42.5
0
.
8
Baa 0 0.7
.
0
Ba 7 8.9
.
3
B 2 27.8
7
.
9
Caa, Ca, C 3 3.3
.
9
Not Rated 7 6.8
.
1
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1997 AND DECEMBER 31, 1996 ACCOUNT
FOR 7.1% AND 6.8%, RESPECTIVELY, OF THE FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 * AS OF DECEMBER 31, 1996 **
Corporate bonds 35.2%
U.S. government
and agency
obligations 26.7%
Foreign government
obligations 21.6%
Stocks 5.6%
Other 3.5%
Short-term
investments 7.4%
Corporate bonds 36.5%
U.S. government
and agency
obligations 28.4%
Foreign government
obligations 21.5%
Stocks 6.1%
Other 3.5%
Short-term
investments 4.0%
Row: 1, Col: 1, Value: 7.4
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 5.6
Row: 1, Col: 4, Value: 21.6
Row: 1, Col: 5, Value: 26.7
Row: 1, Col: 6, Value: 35.2
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 6.1
Row: 1, Col: 4, Value: 21.5
Row: 1, Col: 5, Value: 28.4
Row: 1, Col: 6, Value: 36.5
* FOREIGN
INVESTMENTS 29.9%
** FOREIGN
INVESTMENTS 28.7%
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 35.2%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
CONVERTIBLE BONDS - 0.2%
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
BPH Finance BV 3%, 5/22/02 (g) - $ 160,000 $ 168,800
UTILITIES - 0.1%
ELECTRIC UTILITY - 0.1%
Huaneng Power International, Inc.
1 3/4%, 5/21/04 - 225,000 230,345
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc.
0%, 12/15/05 (e)(g) - 10,000 6,500
TOTAL utilities 236,845
TOTAL CONVERTIBLE BONDS 405,645
NONCONVERTIBLE BONDS - 35.0%
AEROSPACE & DEFENSE - 1.5%
AEROSPACE & DEFENSE - 1.3%
Alliant Techsystems, Inc. 11 3/4%, 3/1/03 B2 530,000 584,325
RHI Holdings, Inc. 11 7/8%, 3/1/99 B2 1,000,000 1,000,000
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 130,000 144,625
Wyman-Gordon Co. 10 3/4%, 3/15/03 Ba3 490,000 524,300
2,253,250
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 8 1/2%, 3/1/07 B1 90,000 90,900
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, Inc.
9 1/4%, 12/1/06 B1 180,000 187,650
TOTAL AEROSPACE & DEFENSE 2,531,800
BASIC INDUSTRIES - 3.2%
CHEMICALS & PLASTICS - 0.8%
Astor Corp. 10 1/2%, 10/15/06 B3 230,000 242,650
BPC Holdings Corp. 12 1/2%, 6/15/06 Caa 140,000 152,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
Foamex LP/Foamex Capital Corp.
9 7/8%, 6/15/07 (g) B3 $ 90,000 $ 91,125
Freedom Chemical Co. 10 5/8%, 10/15/06 B3 130,000 132,600
NL Industries, Inc. 11 3/4%, 10/15/03 B1 20,000 21,700
Plastic Specialties & Technologies, Inc.
11 1/4%, 12/1/03 B3 20,000 21,400
Sterling Chemicals Holdings, Inc.:
11 3/4%, 8/15/06 B3 400,000 431,000
0%, 8/15/08 (e) Caa 500,000 330,000
1,423,075
METALS & MINING - 0.3%
Kaiser Aluminum & Chemical Corp.
12 3/4%, 2/1/03 B2 420,000 454,650
Well Aluminum Corp.
10 1/8%, 6/1/05 (g) B2 60,000 61,800
516,450
PACKAGING & CONTAINERS - 0.2%
Fonda Group, Inc. 9 1/2%, 3/1/07 (g) B3 60,000 57,450
Gaylord Container Corp. 12 3/4%, 5/15/05 Caa 280,000 308,000
365,450
PAPER & FOREST PRODUCTS - 1.9%
Asia Pulp & Paper Finance II Mauritius Ltd.
12%, 3/15/04 (g) B3 125,000 128,125
American Pad & Paper Co., Inc.
13%, 11/15/05 B3 180,000 210,600
Container Corp. of America:
10 3/4%, 5/1/02 B1 70,000 76,563
gtd.:
9 3/4%, 4/1/03 B1 400,000 423,000
11 1/4%, 5/1/04 B1 150,000 164,250
Florida Coast Paper Co. LLC/Florida Coast Paper
Finance Corp., Series B, 12 3/4%, 6/1/03 Caa 80,000 82,600
Pen-Tab Industries, Inc.
10 7/8%, 2/1/07 (g) B3 500,000 506,250
Repap New Brunswick, Inc. yankee:
9 7/8%, 7/15/00 B2 100,000 100,250
10 5/8%, 4/15/05 Caa 730,000 688,025
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Repap Wisconsin, Inc.:
9 1/4%, 2/1/02 B2 $ 210,000 $ 211,050
9 7/8%, 5/1/06 Caa 180,000 181,350
Riverwood International 10 7/8%, 4/1/08 Caa 70,000 63,525
SD Warren Co., Series B, 12%, 12/15/04 B1 70,000 78,400
Stone Container Corp.:
12 1/4%, 4/1/02 unit B3 130,000 132,600
11 7/8%, 8/1/16 B2 110,000 118,800
3,165,388
TOTAL BASIC INDUSTRIES 5,470,363
CONSTRUCTION & REAL ESTATE - 0.1%
CONSTRUCTION - 0.1%
Compania Latinoamericana de Infraestructura
& Servicios SA 11 5/8%, 6/1/04 (g) BB- 125,000 131,250
DURABLES - 0.8%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Safelite Glass Corp. 9 7/8%, 12/15/06 (g) B3 150,000 158,625
HOME FURNISHINGS - 0.1%
Guitar Center Management Co., Inc.
11%, 7/1/06 B2 49,000 53,655
TEXTILES & APPAREL - 0.6%
Consoltex Group, Inc./Consoltex USA, Inc. gtd.
11%, 10/1/03 B3 500,000 512,500
Dan River, Inc. 10 1/8%, 12/15/03 B3 40,000 42,400
GFSI, Inc. 9 5/8%, 3/1/07 (g) B3 50,000 50,500
Polymer Group, Inc. 9%, 7/1/07 (g) - 470,000 462,438
1,067,838
TOTAL DURABLES 1,280,118
ENERGY - 1.5%
ENERGY SERVICES - 0.2%
DI Industries, Inc. 8 7/8%, 7/1/07 B1 250,000 246,250
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - 1.3%
Flores & Rucks, Inc.:
13 1/2%, 12/1/04 B1 $ 100,000 $ 120,250
9 3/4%, 10/1/06 B3 340,000 355,300
KCS Energy, Inc. 11%, 1/15/03 B1 270,000 290,925
Mesa Operating Co. 10 5/8%, 7/1/06 Ba2 210,000 238,350
Ocean Energy, Inc. 8 7/8%, 7/15/07 (g) B3 200,000 200,000
Petsec Energy, Inc. 9 1/2%, 6/15/07 (g) B3 80,000 80,000
Pogo Producing Co. 8 3/4%, 5/15/07 (g) B1 110,000 110,550
United Meridian Corp. 10 3/8%, 10/15/05 B2 300,000 325,500
Vintage Petroleum, Inc. 9%, 12/15/05 B1 500,000 510,000
2,230,875
TOTAL ENERGY 2,477,125
FINANCE - 4.4%
ASSET-BACKED SECURITIES - 1.0%
Airplanes Pass Through Trust
10 7/8%, 3/15/19 Ba2 1,280,000 1,478,400
Premier Auto Trust 4.90%, 12/15/98 Aaa 34,571 34,442
Sears Credit Account Master Trust II
7%, 1/15/04 Aaa 200,000 202,500
Standard Credit Card Master Trust I
7.65%, 2/15/00 A2 30,000 30,272
1,745,614
BANKS - 1.8%
Deutsche Bank Finance NV
4 1/8%, 11/15/99 (c) Aa1 JPY 100,000 928,955
Export-Import Bank of Japan euro
4 3/8%, 10/1/03 (c) Aaa JPY 205,000 2,015,221
Lloyds Bank PLC 7 3/8%, 3/11/04 Aa2 GBP 75,000 123,067
3,067,243
CREDIT & OTHER FINANCE - 0.5%
GST Equipment Funding, Inc.
13 1/4%, 5/1/07 (g) - 240,000 256,800
General Electric Capital Corp.
6 1/2%, 2/8/99 Aaa SEK 500,000 66,423
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Homeside, Inc. 11 1/8%, 5/15/03 Ba1 $ 55,000 $ 63,800
Indah Kiat Finance Mauritius Ltd.
10%, 7/1/07 (g) Ba3 250,000 249,375
Matahari International Finance Co. BV
11 1/4%, 3/15/01 (g) BB 125,000 133,750
PTC International Finance BV
0%, 7/1/07 (e)(g) B3 50,000 30,313
Polytama International Finance BV
11 1/4%, 6/15/07 B2 125,000 129,063
929,524
SAVINGS & LOANS - 1.1%
First Nationwide Holdings, Inc.:
12 1/4%, 5/15/01 Ba2 100,000 110,250
10 5/8%, 10/1/03 Ba3 1,480,000 1,605,800
First Nationwide Parent Holdings Ltd.
12 1/2%, 4/15/03 B3 70,000 78,050
1,794,100
TOTAL FINANCE 7,536,481
HEALTH - 0.7%
DRUGS & PHARMACEUTICALS - 0.1%
Glaxo Wellcome PLC euro 8 3/4%, 12/1/05 Aa3 GBP 25,000 44,479
Leiner Health Products, Inc.
9 5/8%, 7/1/07 (g) B3 50,000 50,625
95,104
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
IMED Corp. 9 3/4%, 12/1/06 (g) B3 70,000 71,050
MEDICAL FACILITIES MANAGEMENT - 0.6%
Dynacare, Inc. yankee 10 3/4%, 1/15/06 B2 360,000 374,400
Mariner Health Group, Inc. 9 1/2%, 4/1/06 B2 50,000 51,500
Paracelsus Healthcare Corp. 10%, 8/15/06 B3 120,000 121,500
Tenet Healthcare Corp. 8 5/8%, 1/15/07 Ba3 510,000 517,650
1,065,050
TOTAL HEALTH 1,231,204
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
ELECTRICAL EQUIPMENT - 0.2%
Amphenol Corp. 9 7/8%, 5/15/07 B2 $ 80,000 $ 82,400
L-3 Communications Corp.
10 3/8%, 5/1/07 (g) B2 80,000 84,600
Motors & Gears, Inc. 10 3/4%, 11/15/06 B3 150,000 154,500
321,500
INDUSTRIAL MACHINERY & EQUIPMENT -1.2%
Continental Global Group, Inc.
11%, 4/1/07 (g) B2 400,000 420,000
Goss Graphic System, Inc. 12%, 10/15/06 B2 340,000 374,000
International Knife & Saw, Inc.
11 3/8%, 11/15/06 B3 100,000 106,750
Roller Bearing Co. America, Inc.
9 5/8%, 6/15/07 (g) B3 550,000 556,875
Specialty Equipment Companies, Inc.
11 3/8%, 12/1/03 B3 500,000 545,000
2,002,625
POLLUTION CONTROL - 0.3%
Allied Waste of North America, Inc.
10 1/4%, 12/1/06 (g) B3 590,000 631,300
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,955,425
MEDIA & LEISURE - 8.0%
BROADCASTING - 5.1%
Adelphia Communications Corp.:
12 1/2%, 5/15/02 B3 1,060,000 1,123,600
9 1/2%, 2/15/04 B3 1,000,000 950,000
9 7/8%, 3/1/07 (g) B3 200,000 193,000
Capstar Radio Broadcasting Partners, Inc.
9 1/4%, 7/1/07 (g) - 120,000 116,100
Chancellor Radio Broadcasting Co.
8 3/4%, 6/15/07 (g) B3 160,000 158,000
Diamond Cable Communications PLC yankee (e):
0%, 9/30/04 B3 630,000 508,725
0%, 12/15/05 B3 10,000 6,613
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Echostar Communications Corp. secured discount
0%, 6/1/04 (e) B2 $ 1,000,000 $ 840,000
Echostar DBS Corp. 12 1/2%, 7/1/02 (g) Caa 340,000 337,025
Echostar Satellite Broadcasting Corp.
0%, 3/15/04 (e) Caa 1,100,000 781,000
Grupo Televisa SA de CV yankee
0%, 5/15/08 (e) Ba3 300,000 208,500
Innova S De R.L. 12 7/8%, 4/1/07 (g) B- 120,000 125,700
Intermedia Capital Partners IV LP/Intermedia
Partners IV Capital Corp. 11 1/4%, 8/1/06 B2 520,000 559,650
International Cabletel, Inc.:
0%, 2/1/06 (e) B3 280,000 193,200
10%, 2/15/07 (g) - 700,000 707,000
Jacor Communications Co.:
9 3/4%, 12/15/06 B2 370,000 384,800
8 3/4%, 6/15/07 (g) B2 570,000 562,875
Spanish Broadcasting System, Inc.
7 1/2%, 6/15/02 B3 700,000 770,000
Telewest PLC 0%, 10/1/07 (e) B1 370,000 267,325
8,793,113
ENTERTAINMENT - 1.3%
AMF Group, Inc., Series B, 10 7/8%, 3/15/06 B2 260,000 280,150
Cobblestone Golf Group, Inc. 11 1/2%, 6/1/03 B2 500,000 520,000
Showboat Marina Casino Partnership/Showboat
Marina Finance Corp. 13 1/2%, 3/15/03 B2 700,000 794,500
Viacom, Inc. 8%, 7/7/06 B1 640,000 620,800
2,215,450
LEISURE DURABLES & TOYS - 0.1%
Leslie's Poolmart, Inc. 10 3/8%, 7/15/04 (g) B2 90,000 92,250
LODGING & GAMING - 0.6%
Hollywood Casino Corp. 12 3/4%, 11/1/03 B2 110,000 116,600
Horseshoe Gaming LLC:
12 3/4%, 9/30/00 B1 290,000 324,075
9 3/8%, 6/15/07 (g) B3 190,000 191,188
KSL Recreation Group, Inc.
10 1/4%, 5/1/07 (g) B3 410,000 426,400
Sun International Hotels Ltd./Sun International
North America, Inc. yankee 9%, 3/15/07 Ba3 30,000 30,450
1,088,713
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
Sun Media Corp.:
9 1/2%, 5/15/07 (g) B3 $ 40,000 $ 40,400
yankee 9 1/2%, 2/15/07 (g) B3 70,000 70,700
111,100
RESTAURANTS - 0.8%
SC International Services, Inc. 13%, 10/1/05 B3 1,190,000 1,362,550
TOTAL MEDIA & LEISURE 13,663,176
NONDURABLES - 1.1%
FOODS - 0.9%
Fresh Del Monte Produce NV 10%, 5/1/03 Caa 260,000 265,850
Gorges/Quik-To-Fix Foods, Inc.
11 1/2%, 12/1/06 B3 1,300,000 1,332,500
1,598,350
HOUSEHOLD PRODUCTS - 0.1%
French Fragrances, Inc.
10 3/8%, 5/15/07 (g) B2 90,000 91,800
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 60,000 63,900
155,700
TOBACCO - 0.1%
North Atlantic Trading, Inc.
11%, 6/15/04 (g) B3 70,000 71,050
TOTAL NONDURABLES 1,825,100
RETAIL & WHOLESALE - 3.8%
APPAREL STORES - 0.0%
Specialty Retailers, Inc. 9%, 7/15/07 (g) B2 80,000 79,600
GENERAL MERCHANDISE STORES - 0.2%
K mart Corp. 8.70%, 8/1/97 Ba2 250,000 250,625
GROCERY STORES - 3.5%
Di Giorgio Corp. 10%, 6/15/07 (g) - 120,000 117,000
Food 4 Less Holdings, Inc. 13 5/8%, 6/15/07 - 851,093 994,945
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Grand Union Co. 12%, 9/1/04 Caa $ 290,000 $ 214,600
Pathmark Stores, Inc.:
11 5/8%, 6/15/02 Caa 890,000 901,125
12 5/8%, 6/15/02 Caa 30,000 30,750
9 5/8%, 5/1/03 B3 240,000 231,600
Ralph's Grocery Co.:
10.45%, 6/15/04 B1 260,000 279,500
11%, 6/15/05 B3 1,210,000 1,312,850
Randalls Food Markets, Inc.
9 3/8%, 7/1/07 (g) B2 180,000 179,325
Smith's Food & Drug Centers, Inc.
11 1/4%, 5/15/07 B3 1,120,000 1,316,000
Star Markets, Inc. 13%, 11/1/04 B3 320,000 363,200
5,940,895
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Cole National Group, Inc. 9 7/8%, 12/31/06 B2 120,000 126,600
TOTAL RETAIL & WHOLESALE 6,397,720
SERVICES - 1.0%
GOVERNMENT SERVICES - 0.2%
Queensland Treasury Corp.:
8%, 8/14/01 Aaa AUD 250,000 200,139
8%, 5/14/03 Aaa AUD 200,000 160,308
360,447
PRINTING - 0.4%
Sullivan Graphics, Inc. 12 3/4%, 8/1/05 Caa 710,000 729,525
SERVICES - 0.4%
Orion Network System, Inc.:
0%, 1/15/07 unit (e) B2 140,000 79,800
11 1/4%, 1/15/07 unit B2 480,000 490,800
Pierce Leahy Corp. 11 1/8%, 7/15/06 B3 60,000 65,700
636,300
TOTAL SERVICES 1,726,272
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 1.4%
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Dictaphone Corp. 11 3/4%, 8/1/05 B3 $ 190,000 $ 174,800
Exide Electronics Group, Inc.
11 1/2%, 5/15/06 B3 290,000 311,025
485,825
ELECTRONIC INSTRUMENTS - 0.6%
Packard Bioscience, Inc. 9 3/8%, 3/1/07 (g) B3 630,000 630,000
Therma-Wave, Inc. 10 5/8%, 5/15/04 (g) B2 300,000 318,750
948,750
ELECTRONICS - 0.5%
Viasystems, Inc. 9 3/4%, 6/1/07 (g) B3 840,000 854,700
TOTAL TECHNOLOGY 2,289,275
TRANSPORTATION - 0.0%
RAILROADS - 0.0%
TFM SA de CV 0%, 6/15/09 (e)(g) B2 130,000 75,075
UTILITIES - 5.8%
CELLULAR - 3.3%
Dial Call Communications, Inc.
0%, 4/15/04 (e) B3 100,000 82,125
Fonorola, Inc. 12 1/2%, 8/15/02 B2 1,020,000 1,122,000
Microcell Telecommunications, Inc.
0%, 6/1/06 (e) B3 630,000 352,800
Millicom International Cellular SA
0%, 6/1/06 (e) B3 890,000 636,350
McCaw International Ltd.
0%, 4/15/07 unit (e)(g) CCC 3,353,000 1,609,440
Nextel Communications, Inc.
0%, 9/1/03 (e) B3 1,190,000 1,032,325
Omnipoint Corp.:
11 5/8%, 8/15/06 B2 30,000 28,350
Series A, 11 5/8%, 8/15/06 B3 550,000 519,750
Pagemart Nationwide, Inc. 0%, 2/1/05 (e) - 130,000 96,850
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Telesystem International Wireless, Inc.
0%, 6/30/07 (e)(g) B- $ 430,000 $ 228,975
USA Mobile Communications, Inc. II
9 1/2%, 2/1/04 B2 30,000 27,900
5,736,865
TELEPHONE SERVICES - 2.5%
Brooks Fiber Properties, Inc.
11 7/8%, 11/1/06 - 310,000 199,950
Call-Net Enterprises, Inc. yankee
0%, 12/1/04 (e) B2 630,000 541,013
ITC Deltacom, Inc. 11%, 6/1/07 (g) B3 240,000 241,200
McleodUSA, Inc. 0%, 3/1/07 (e)(g) B3 90,000 57,375
Nextlink Communications, Inc.
12 1/2%, 4/15/06 - 1,210,000 1,285,625
Qwest Communications, International, Inc.
10 7/8%, 4/1/07 (g) B2 370,000 402,375
RSL Communications Ltd./RSL Communications PLC
12 1/4%, 11/15/06 - 480,000 488,400
Teleport Communications Group, Inc.:
0%, 7/1/07 (e) B1 1,210,000 872,713
9 7/8%, 7/1/06 B1 110,000 117,425
4,206,076
TOTAL UTILITIES 9,942,941
TOTAL NONCONVERTIBLE BONDS 59,533,325
TOTAL CORPORATE BONDS
(Cost $58,230,675) 59,938,970
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 13.4%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
U.S. TREASURY OBLIGATIONS - 11.7%
8 7/8%, 2/15/99 Aaa $ 2,530,000 $ 2,639,903
9 1/8%, 5/15/99 Aaa 5,647,000 5,946,122
8%, 8/15/99 Aaa 5,600,000 5,806,472
6 7/8%, 3/31/00 Aaa 2,112,000 2,146,320
12 3/8%, 5/15/04 Aaa 80,000 105,687
7 7/8%, 11/15/04 Aaa 700,000 755,454
7%, 7/15/06 Aaa 2,500,000 2,571,875
19,971,833
U.S. GOVERNMENT AGENCY OBLIGATIONS - 1.7%
Government Loan Trusts (assets of Trust
guaranteed by U.S. Government through
Agency for International Development)
8 1/2%, 4/1/06 Aaa 200,000 215,682
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class 1-C, 9 1/4%, 11/15/01 Aaa 48,594 51,596
Class 2-E, 9.40%, 5/15/02 Aaa 210,254 223,103
Class 3-T, 9 5/8%, 5/15/02 Aaa 92,626 98,408
Private Export Funding Corp. secured
6.86%, 4/30/04 Aaa 798,000 803,411
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
7 1/8%, 8/15/99 Aaa 151,000 153,613
7 3/4%, 11/15/99 Aaa 33,000 33,997
0%, 11/15/01 Aaa 1,335,000 1,010,502
U.S. Department of Housing and Urban
Development Government guaranteed
participation certificates Series 1995-A,
8.27%, 8/1/03 Aaa 210,000 226,804
2,817,116
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $23,407,470) 22,788,949
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 13.3%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.4%
6%, 12/1/07 Aaa $ 119,735 $ 117,918
8 1/2%, 3/1/20 Aaa 527,579 554,201
672,119
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.4%
5 1/2%, 5/1/11 Aaa 647,319 594,659
5 1/2%, 7/1/27 (h) Aaa 320,503 321,194
6%, 4/1/01 to 1/1/26 Aaa 3,887,848 3,766,711
6 1/2%, 5/1/08 to 2/1/26 Aaa 2,541,356 2,443,328
7 1/2%, 5/1/26 to 6/1/26 Aaa 974,606 978,260
8%, 7/1/27 (h) Aaa 1,000,000 1,022,810
9,126,962
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 7.5%
6%, 1/15/09 to 5/15/09 Aaa 1,307,060 1,271,926
6 1/2%, 4/15/26 to 5/15/26 Aaa 971,593 929,388
7%, 9/15/25 to 12/15/25 Aaa 116,065 77,257
7%, 8/15/27 (h) Aaa 1,862,594 1,869,719
7 1/2%, 2/15/22 to 2/15/27 Aaa 4,607,656 4,627,168
8%, 3/15/27 Aaa 1,008,234 1,031,544
8 1/2%, 4/15/26 to 12/15/26 Aaa 2,719,890 2,826,129
11 1/2%, 3/15/10 Aaa 116,804 131,392
12,764,523
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $22,425,569) 22,563,604
COMMERCIAL MORTGAGE SECURITIES - 0.0%
Meritor Mortgage Security Corp. Series 1987-1
Class A-3, 9.40%, 6/1/99 (Cost $4,532) Baa3 4,498 4,492
FOREIGN GOVERNMENT OBLIGATIONS (J) - 21.6%
Argentinian Republic:
11 3/4%, 2/12/07 B1 ARS 130,000 144,646
11 3/4%, 2/12/07 (g) B1 ARS 1,000,000 1,112,661
BOCON 3.29%, 9/1/02 (i) B1 ARS 797 676
Bote 2.22%, 4/3/00 (i) B1 2,145 924
Brady par euro 5 1/2%, 3/31/23 (f) B1 2,040,000 1,414,618
global bond 11 3/8%, 1/30/17 B1 470,000 523,463
Austrian Republic euro 4 1/2%, 9/28/05 (c) Aaa JPY 120,000 1,206,333
FOREIGN GOVERNMENT OBLIGATIONS (J) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
Belgian Kingdom:
8 3/4%, 6/25/02 Aa1 BEF 22,000,000 $ 718,241
7 1/2%, 7/29/08 Aa1 BEF 3,000,000 93,901
Brazilian Federative Republic:
Brady:
capitalization bond 8%, 4/15/14 B1 2,090,009 1,681,151
debt conversion bond euro
6.9375%, 4/15/12 (i) B1 1,550,000 1,280,688
global bond 10 1/8%, 5/15/27 B1 702,000 676,728
Bulgarian Republic (i):
6.0625%, 7/28/11 B3 575,000 414,359
FLIRB A 2 1/4%, 7/28/12 B3 1,775,000 1,010,641
Canadian Government:
8 1/2%, 4/1/02 Aa1 CAD 400,000 323,587
10 1/4%, 2/1/04 Aa1 CAD 1,150,000 1,020,769
City of Buenos Aires 11 1/4%, 4/11/07 (g) B1 500,000 542,500
City of St. Petersburg Russia
9 1/2%, 6/18/02 (g) - 250,000 249,688
Danish Kingdom Bullet:
6%, 12/10/99 Aaa DKK 700,000 109,791
9%, 11/15/00 Aaa DKK 400,000 68,490
8%, 5/15/03 Aaa DKK 2,200,000 374,241
Dutch Government:
8 3/4%, 5/1/00 AAA NLG 800,000 458,103
5 3/4%, 1/15/04 AAA NLG 1,100,000 578,983
7%, 6/15/05 AAA NLG 260,000 145,892
Ecuador Republic:
11 1/4%, 4/25/02 (g) - 455,000 478,888
Brady past due interest euro
6.4375%, 2/28/15 (bearer) (i) - 1,140,890 736,946
French Government:
OAT 9 1/2%, 1/25/01 Aaa FRF 9,000,000 1,794,582
8 1/2%, 12/26/12 Aaa FRF 3,100,000 659,729
German Federal Republic:
7 3/4%, 2/21/00 Aaa DEM 1,050,000 659,416
8 3/8%, 5/21/01 Aaa DEM 1,900,000 1,243,626
Italian Republic (c):
12 1/2%, 1/1/98 Aa3 ITL 1,500,000 901,361
12%, 1/1/03 Aa3 ITL 850,000 623,263
9 1/2%, 1/1/05 Aa3 ITL 1,100,000 746,350
Jamaica Government 9 5/8%, 7/2/02 (g) - 125,000 125,625
Mexico Value recovery rights 6/30/03:
discount A - 1,114,000 -
discount B - 537,000 -
discount C - 384,000 -
FOREIGN GOVERNMENT OBLIGATIONS (J) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
Panamanian Republic Brady (i):
interest reduction bond euro
3 1/2%, 7/17/14 Ba1 $ 250,000 $ 192,813
past due interest euro 6.5625%, 7/17/16 Ba1 253,514 222,934
Peruvian Republic Brady (i):
FLIRB:
3 1/4%, 3/7/17 - 1,090,000 652,638
3 1/4%, 3/7/17 (g) - 700,000 419,125
past due interest 4%, 3/7/17 (g) - 490,000 318,500
Russian Government:
10%, 6/26/07 (g) BB- 125,000 124,563
interest notes 0%, 12/31/16 (g)(h) Ba2 1,825,000 1,393,844
principal loans 0%, 8/12/21 (h) - 1,240,000 826,150
Spanish Kingdom:
11.45%, 8/30/98 Aa2 ESP 15,000,000 108,643
10 1/4%, 11/30/98 Aa2 ESP 40,000,000 289,605
10.90%, 8/30/03 Aa2 ESP 65,000,000 553,530
Swedish Kingdom 10 1/4%, 5/5/03 Aa1 SEK 4,200,000 655,164
Treuhandstalt 7 3/8%, 12/2/02 Aaa DEM 2,700,000 1,729,825
United Kingdom, Great Britain & Northern Ireland:
10%, 2/26/01 Aaa GBP 400,000 726,329
9 3/4%, 8/27/02 Aaa GBP 100,000 184,860
9%, 10/13/08 Aaa GBP 650,000 1,235,910
United Mexican States:
Brady (i):
discount A, 6.8672%, 12/31/19 Ba2 725,000 673,797
discount B, 6.4531%, 12/31/19 Ba2 350,000 325,301
discount C, 6.8203%, 12/31/19 Ba2 250,000 232,344
global bond 11 1/2%, 5/15/26 Ba2 980,000 1,119,895
Venezuelan Republic:
9 1/8%, 6/18/07 (g) - 130,000 130,163
Brady (i):
debt conversion bond
6 3/4%, 12/18/07 Ba2 500,000 463,438
discount A, 6.8125%, 3/31/20 Ba2 1,050,000 928,594
discount B, 6.8125%, 3/31/20 Ba2 550,000 486,406
par A euro 6 3/4%, 3/31/20 Ba2 500,000 393,750
par B euro 6 3/4%, 3/31/20 Ba2 250,000 196,875
Oil recovery rights 3/31/20 - 15,174 -
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $36,550,292) 36,705,856
SUPRANATIONAL OBLIGATIONS - 1.8%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
European Investment Bank euro
6 3/4%, 5/10/01 (c) Aaa JPY 55,000 $ 571,612
InterAmerica Development Bank euro
6%, 10/30/01 (c) Aaa JPY 235,000 2,421,846
TOTAL SUPRANATIONAL OBLIGATIONS
(Cost $3,204,641) 2,993,458
COMMON STOCKS - 0.1%
SHARES
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Foamex-JPS Automotive LP/Foamex JPS Capital
Corp. warrants 7/1/99 (a) 260 7,280
Sterling Chemical Holdings warrants 8/15/08 (a) 120 4,200
11,480
PAPER & FOREST PRODUCTS - 0.1%
SDW Holdings Corp. (a):
warrants 12/15/06 16,500 82,500
Series B warrants 12/16/06 1,300 22,100
104,600
TOTAL basic industries 116,080
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
CS Wireless Systems, Inc. (a)(g) 10 -
LEISURE DURABLES & TOYS - 0.0%
IHF Capital, Inc., Series I
warrants 11/14/99 (a)(g) 270 14,850
TOTAL MEDIA & LEISURE 14,850
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Exide Electronics Group, Inc.
warrants 3/15/06 (a)(g) 200 5,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - 0.0%
CELLULAR - 0.0%
Intercel, Inc. warrants 2/1/06 (a) 3,328 $ 16,640
Microcell Telecommunications, Inc. (a):
warrants 6/1/06 2,520 31,500
conditional warrants 6/1/06 2,520 1,575
Pagemart Nationwide, Inc. (non-vtg.) (a) 2,100 16,800
RSL Communications Ltd./RSL Communications
PLC warrants 11/15/06 (a) 600 18,000
84,515
TELEPHONE SERVICES - 0.0%
NextLink Communications, Inc.
warrants 2/1/09 (a) 8,158 82
TOTAL UTILITIES 84,597
TOTAL COMMON STOCKS
(Cost $133,878) 220,527
PREFERRED STOCKS - 5.5%
CONVERTIBLE PREFERRED STOCKS - 0.2%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
$3.52 pay-in-kind (a) 12,725 257,681
NONCONVERTIBLE PREFERRED STOCKS - 5.3%
BASIC INDUSTRIES - 0.3%
PAPER & FOREST PRODUCTS - 0.3%
SDW Holdings Corp. 15% (g) 13,000 466,375
FINANCE - 0.4%
SAVINGS & LOANS - 0.4%
California Federal Bank FSB:
11 1/2% 1,730 193,760
California Federal Preferred Capital Corp.
9 1/8% 20,080 512,040
705,800
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Fresenius Medical Care Capital Trust 9% 82 $ 84,296
MEDIA & LEISURE - 4.3%
BROADCASTING - 3.8%
American Radio Systems Corp.
11 3/8% pay-in-kind 1,683 179,240
Chancellor Radio Broadcasting Co.
12% pay-in-kind (g) 5,510 595,080
Cablevision System Corp.:
11 1/8% depositary shares pay-in-kind 2,412 242,406
Series H, $11.75 pay-in-kind 3,998 413,793
Capstar Broadcasting Partners, Inc. 12% (g) 2,676 270,945
PanAmSat Corp. 12 3/4% pay-in-kind 417 508,740
SFX Broadcasting, Inc. 12 5/8% 1,830 197,183
Time Warner, Inc., Series M, 10 1/4%
pay-in-kind 3,619 3,998,995
6,406,382
PUBLISHING - 0.5%
K-III Communications Corp.:
Series B, $11.625 pay-in-kind 2,334 254,698
Series D, $10 5,733 577,600
832,298
TOTAL MEDIA & LEISURE 7,238,680
TECHNOLOGY - 0.1%
COMMUNICATIONS EQUIPMENT - 0.1%
Intermedia Communications, Inc.
13 1/2% pay-in-kind 135 139,388
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
NextLink Communications, Inc.
14% pay-in-kind 8,361 432,682
TOTAL NONCONVERTIBLE PREFERRED STOCKS 9,067,221
TOTAL PREFERRED STOCKS
(Cost $8,806,818) 9,324,902
PURCHASED BANK DEBT - 0.0%
MOODY'S PRINCIPAL VALUE
RATINGS (D) AMOUNT (B) (NOTE 1)
Socialist Republic of Vietnam loans restructured
under 1985 agreement (a)
(Cost $25,680) - DEM 50,000 $ 30,077
SOVEREIGN LOAN PARTICIPATIONS - 1.7%
Algerian Republic loan participation - The Chase
Manhattan Bank 7.3125%, 9/4/06 (i) - 360,000 314,100
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) final loan (a):
- The Chase Manhattan Bank - 1,000,000 915,000
- ING Baring Securities, Inc. - 250,000 228,750
- Morgan (J.P.) Securities, Inc. - 250,000 228,750
Ivory Coast restructured loan (a):
- - Morgan (J.P.) Securities, Inc. - 500,000 207,500
- Paribas Capital Markets - 1,000,000 415,000
Moroccan Kingdom loan participation (i):
- - The Chase Manhattan Bank
6.8125%, 1/1/09 - 190,000 173,019
- ING Bank NV 6.8125%, 1/1/09 - 250,000 227,656
Socialist Republic of Vietnam loan restructured
under 1985 agreement - ING
Baring Securities, Inc. - DEM 400,000 240,619
TOTAL SOVEREIGN LOAN PARTICIPATIONS
(Cost $2,420,937) 2,950,394
CASH EQUIVALENTS - 7.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 (Cost $12,566,000) $ 12,568,070 12,566,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $167,776,492) $ 170,087,229
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest Reduction
Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
AUD - Australian dollar
BEF - Belgian franc
CAD - Canadian dollar
DEM - German deutsche mark
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
GBP - British pound
ITL - Italian lira
JPY - Japanese yen
NLG - Dutch guilder
SEK - Swedish krona
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Principal amount in thousands.
4. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
5. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
6. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
7. 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 $18,923,211 or 11.4% of net
assets.
8. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
9. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
10. For foreign government obligations not individually rated by S&P or
Moody's, the ratings listed are assigned to securities by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of the
sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 40.1% AAA, AA, A 40.6%
Baa 0.0% BBB 0.7%
Ba 7.1% BB 8.2%
B 27.7% B 25.9%
Caa 3.0% CCC 2.6%
Ca, C 0.0% CC, C 0.5%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 7.1%. FMR has determined that unrated debt
securities that are lower quality account for 7.1% of the total value of
investment in securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 70.1%
Germany 2.7
Russia 2.3
Argentina 2.3
Brazil 2.1
Canada 2.0
United Kingdom 1.8
Supranational 1.8
Mexico 1.6
Venezuela 1.5
France 1.4
Italy 1.3
Japan 1.2
Others (individually less than 1%) 7.9
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $167,784,604. Net unrealized appreciation aggregated
$2,302,625, of which $5,090,157 related to appreciated investment
securities and $2,787,532 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 170,087,229
agreements of $12,566,000) (cost $167,776,492) -
See accompanying schedule
Cash 125,096
Receivable for investments sold 508,586
Regular delivery
Delayed delivery 1,572,706
Dividends receivable 67,885
Interest receivable 2,643,605
Other receivables 1,960
Prepaid expenses 3,354
TOTAL ASSETS 175,010,421
LIABILITIES
Payable for investments purchased $ 1,853,547
Regular delivery
Delayed delivery 6,673,475
Payable for fund shares redeemed 141,475
Distributions payable 182,107
Accrued management fee 77,854
Distribution fees payable 57,266
Other payables and accrued expenses 58,797
TOTAL LIABILITIES 9,044,521
NET ASSETS $ 165,965,900
Net Assets consist of:
Paid in capital $ 159,425,124
Undistributed net investment income 522,571
Accumulated undistributed net realized gain (loss) on 3,712,940
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 2,305,265
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 165,965,900
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $11.31
CLASS A:
NET ASSET VALUE and redemption price per share
($1,651,514 (divided by) 145,990 shares)
Maximum offering price per share (100/95.75 of $11.31) $11.81
CLASS T: $11.31
NET ASSET VALUE and redemption price per share
($112,284,661 (divided by) 9,929,208 shares)
Maximum offering price per share (100/96.50 of $11.31) $11.72
CLASS B: $11.33
NET ASSET VALUE and offering price per share
($45,711,605 (divided by) 4,036,272 shares) A
INSTITUTIONAL CLASS: $11.36
NET ASSET VALUE, offering price and redemption price
per share ($6,318,120 (divided by) 556,056 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 410,160
Dividends
Interest 6,220,100
TOTAL INCOME 6,630,260
EXPENSES
Management fee $ 459,102
Transfer agent fees 158,018
Distribution fees 319,431
Accounting fees and expenses 31,655
Non-interested trustees' compensation 317
Custodian fees and expenses 12,534
Registration fees 48,929
Audit 15,852
Legal 691
Reports to shareholders 16,111
Miscellaneous 121
Total expenses before reductions 1,062,761
Expense reductions (29,248) 1,033,513
NET INVESTMENT INCOME 5,596,747
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 3,520,995
Foreign currency transactions 20,956 3,541,951
Change in net unrealized appreciation (depreciation) on:
Investment securities (2,192,157)
Assets and liabilities in foreign currencies (2,189) (2,194,346)
NET GAIN (LOSS) 1,347,605
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,944,352
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 5,596,747 $ 7,731,150
Net investment income
Net realized gain (loss) 3,541,951 4,348,998
Change in net unrealized appreciation (depreciation) (2,194,346) 1,497,971
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,944,352 13,578,119
FROM OPERATIONS
Distributions to shareholders (5,113,889) (7,701,001)
From net investment income
From net realized gain (803,187) (3,422,517)
TOTAL DISTRIBUTIONS (5,917,076) (11,123,518)
Share transactions - net increase (decrease) 21,515,102 61,581,370
TOTAL INCREASE (DECREASE) IN NET ASSETS 22,542,378 64,035,971
NET ASSETS
Beginning of period 143,423,522 79,387,551
End of period (including undistributed net investment $ 165,965,900 $ 143,423,522
income of $522,571 and $39,713, respectively)
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.250 $ 11.010
Income from Investment Operations
Net investment income D .413 .267
Net realized and unrealized gain (loss) .079 .493
Total from investment operations .492 .760
Less Distributions
From net investment income (.372) (.280)
From net realized gain (.060) (.240)
Total distributions (.432) (.520)
Net asset value, end of period $ 11.310 $ 11.250
TOTAL RETURN B, C 4.49% 6.95%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,652 $ 587
Ratio of expenses to average net assets 1.25% A, 1.25% A,
F F
Ratio of expenses to average net assets after 1.24% A, 1.25% A
expense reductions G
Ratio of net investment income to average net assets 7.52% A 7.32% A
Portfolio turnover rate 139% A 119%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO DECEMBER 31, 1996.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.250 $ 11.000 $ 9.920 $ 10.000
Income from Investment Operations
Net investment income .411 D .813 D .885 .064 D
Net realized and unrealized .086 .542 1.231 (.046)
gain (loss)
Total from investment operations .497 1.355 2.116 .018
Less Distributions
From net investment income (.377) (.805) (.806) (.098)
From net realized gain (.060) (.300) (.230) -
Total distributions (.437) (1.105) (1.036) (.098)
Net asset value, end of period $ 11.310 $ 11.250 $ 11.000 $ 9.920
TOTAL RETURN B, C 4.53% 12.89% 22.02% .17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 112,285 $ 99,327 $ 52,626 $ 10,687
Ratio of expenses to average net assets 1.18% A 1.23% 1.35% 1.35% A,
F F
Ratio of expenses to average net assets 1.17% A, 1.22% 1.35% 1.35% A
after expense reductions G G
Ratio of net investment income to 7.44% A 7.34% 7.28% 5.80% A
average net assets
Portfolio turnover rate 139% A 119% 193% 104% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD OCTOBER 31, 1994 (COMMENCEMENT OF SALE OF CLASS T SHARES)
TO DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A 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).
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.260 $ 11.010 $ 9.910 $ 10.000
Income from Investment Operations
Net investment income .376 D .743 D .820 .072 D
Net realized and unrealized .094 .538 1.237 (.078)
gain (loss)
Total from investment operations .470 1.281 2.057 (.006)
Less Distributions
From net investment income (.340) (.731) (.727) (.084)
From net realized gain (.060) (.300) (.230) -
Total distributions (.400) (1.031) (.957) (.084)
Net asset value, end of period $ 11.330 $ 11.260 $ 11.010 $ 9.910
TOTAL RETURN B, C 4.28% 12.14% 21.35% (.06)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 45,712 $ 37,403 $ 26,654 $ 9,379
Ratio of expenses to average net assets 1.84% A 1.88% 2.10% 2.10% A,
F F
Ratio of expenses to average net assets 1.83% A, 1.87% 2.10% 2.10% A
after expense reductions G G
Ratio of net investment income to 6.79% A 6.69% 6.53% 5.06% A
average net assets
Portfolio turnover rate 139% A 119% 193% 104% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD OCTOBER 31, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES)
TO DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A 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).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.300 $ 11.030 $ 10.890
Income from Investment Operations
Net investment income .417 D .826 D .456
Net realized and unrealized gain (loss) .083 .548 .340
Total from investment operations .500 1.374 .796
Less Distributions
From net investment income (.380) (.804) (.426)
From net realized gain (.060) (.300) (.230)
Total distributions (.440) (1.104) (.656)
Net asset value, end of period $ 11.360 $ 11.300 $ 11.030
TOTAL RETURN B, C 4.54% 13.04% 7.47%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 6,318 $ 6,107 $ 107
Ratio of expenses to average net assets 1.10% A, F 1.10% 1.10% A,
F F
Ratio of expenses to average net assets after 1.09% A, G 1.10% 1.10% A
expense reductions
Ratio of net investment income to average net 7.49% A 7.47% 7.53% A
assets
Portfolio turnover rate 139% A 119% 193%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Strategic Income Fund (the fund) is a fund of Fidelity
Advisor Series VIII(the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, and Institutional 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, the
common expenses of the fund, and certain fund-level expense reductions 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, expenses, and expense
reductions.
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 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 with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net investment income accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
and the U.S. dollar amount actually received. The effects of changes in
foreign currency exchange rates on investments in securities are included
with the net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to U.S. federal
income taxes to the extent that it distributes substantially all of its
taxable income for its fiscal year. The fund may be subject to foreign
taxes on income and gains on investments which are accrued based upon the
fund's understanding of the tax rules and regulations that exist in the
markets in which it invests. The fund accrues such taxes as applicable. The
schedule of investments includes information regarding income taxes under
the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. Interest
income, 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends and capital
gain distributions are declared separately for each class.
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 the
recognition of gains/ losses on certain securities, foreign currency
transactions, market discount and losses deferred due to wash sales. The
fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a delayed delivery basis. Payment and delivery may take place a month or
more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. The market values of
the securities purchased or sold on a delayed delivery basis are identified
as such in the fund's schedule of investments. The fund may receive
compensation for interest forgone in the purchase of a delayed delivery
security. With respect to purchase commitments, the fund identifies
securities as segregated in its
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under the
contract.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased on a when-issued or forward commitment basis are
identified as such in the fund's schedule of investments. The fund may
receive compensation for interest forgone in the purchase of a when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes in
the market value of the underlying securities, if the counterparty does not
perform under the contract, or if the issuer does not issue the securities
due to political, economic, or other factors.
OPTIONS. The fund may use options to manage its exposure to the bond
markets and to fluctuations in interest rates. Writing puts and buying
calls tend to increase the fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms. Gains and losses are realized upon
the expiration or closing of the options. Realized gains (losses) on
purchased options are included in realized gains (losses) on investments
securities.
Exchange-traded options are valued using the last sale price or, in the
absence of a sale, the last offering price. Options traded over-the-counter
are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
2. OPERATING POLICIES - CONTINUED
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to invest in
loans and loan participations, trade claims or other receivables. These
investments may include standby financing commitments that obligate the
fund to supply additional cash to the borrower on demand. Loan
participations involve a risk of insolvency of the lending bank or other
financial intermediary. At the end of the period, these investments
amounted to $2,950,394 or 1.8% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $118,690,284 and $101,643,563, respectively, of which U.S.
government and government agency obligations aggregated $19,353,345 and
$15,357,721, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .45%. 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.
For the period, the management fee was equivalent to an annualized rate of
.60% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research Far East Inc., Fidelity International Investment
Advisors (FIIA), and Fidelity Investments Japan Ltd. In addition, FIIA
entered into a sub-advisory agreement with its subsidiary, Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the
sub-advisory arrangements, FMR may receive investment advice and research
services and may grant the sub-advisers investment management authority to
buy and sell securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services. FIIA
pays FIIAL U.K. a fee based on costs incurred for either service.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 771 $ 771
CLASS T 133,475 133,475
CLASS B 185,185 51,442
$ 319,431 $ 185,688
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.25% and 3.50%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within six years of purchase (five years prior to
January 2, 1997). The Class B charge is based on declining rates which
range from 5% to 1%(4% to 1% prior to January 2, 1997) 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.
Effective August 1, 1997, Class A's maximum sales charge was increased to
4.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 27,900 $ 25,768
CLASS T 158,792 117,200
CLASS B 43,163 0*
$ 229,855 $ 142,968
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS
OWN RESOURCES TO DEALERS THROUGH WHICH THE SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 2,232 .44% ***
CLASS T ** FIIOC * 109,620 .21% ***
CLASS B FIIOC * 40,742 .20% ***
INSTITUTIONAL CLASS FIIOC * 5,424 .18% ***
$ 158,018
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AN
AFFILIATE OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED CERTAIN
TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES TO FIIOC FOR
WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH FEES.
*** ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level of
average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A 1.25% $ 18,913
INSTITUTIONAL CLASS 1.10% 6,113
$ 25,026
In addition, the fund has entered into an arrangement with its custodian
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of expenses. During the period, the fund's custodian
fees were reduced by $4,222 under the custodian arrangement.
6. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
11% of the total outstanding shares of the fund.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 A
1997
CLASS A
From net investment income $ 35,294 $ 8,336
From net realized gain 2,690 11,477
Total $ 37,984 $ 19,813
CLASS T
From net investment income $ 3,611,902 $ 5,439,021
From net realized gain 560,899 2,365,241
Total $ 4,172,801 $ 7,804,262
CLASS B
From net investment income $ 1,254,866 $ 2,018,483
From net realized gain 205,619 918,814
Total $ 1,460,485 $ 2,937,297
INSTITUTIONAL CLASS
From net investment income $ 211,827 $ 235,161
From net realized gain 33,979 126,985
Total $ 245,806 $ 362,146
$ 5,917,076 $ 11,123,518
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
8. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1997 1996 A 1997 1996 A
CLASS A 98,744 50,970 $ 1,102,101 $ 576,976
Shares sold
Reinvestment of distributions 2,775 1,518 30,977 17,135
Shares redeemed (7,720) (297) (85,638) (3,402)
Net increase (decrease) 93,799 52,191 $ 1,047,440 $ 590,709
CLASS T 2,948,996 5,716,371 $ 32,959,765 $ 63,555,043
Shares sold
Reinvestment of distributions 295,548 576,193 3,299,162 6,422,573
Shares redeemed (2,146,332) (2,244,243) (23,969,391) (24,923,904)
Net increase (decrease) 1,098,212 4,048,321 $ 12,289,536 $ 45,053,712
CLASS B 861,304 1,224,871 $ 9,633,561 $ 13,679,656
Shares sold
Reinvestment of distributions 105,310 224,151 1,177,286 2,516,519
Shares redeemed (251,609) (548,526) (2,806,371) (6,111,458)
Net increase (decrease) 715,005 900,496 $ 8,004,476 $ 10,084,717
INSTITUTIONAL CLASS 79,045 525,446 $ 887,776 $ 5,792,940
Shares sold
Reinvestment of distributions 21,379 31,439 239,728 353,974
Shares redeemed (84,872) (26,121) (953,854) (294,682)
Net increase (decrease) 15,552 530,764 $ 173,650 $ 5,852,232
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
9. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 18,753
CLASS T 10,639
CLASS B 6,333
INSTITUTIONAL CLASS 13,204
$ 48,929
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on June 18, 1997. The
results of votes taken among shareholders on proposals before them are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 32,670,431.969 97.30
Withheld 905,735.323 2.70
TOTAL 33,576,167.292 100.00
RALPH F. COX
Affirmative 32,661,943.620 97.28
Withheld 914,223.672 2.72
TOTAL 33,576,167.292 100.00
PHYLLIS BURKE DAVIS
Affirmative 32,639,275.890 97.21
Withheld 936,891.402 2.79
TOTAL 33,576,167.292 100.00
ROBERT M. GATES
Affirmative 32,647,573.114 97.23
Withheld 928,594.178 2.77
TOTAL 33,576,167.292 100.00
EDWARD C. JOHNSON 3RD
Affirmative 32,653,017.035 97.25
Withheld 923,150.257 2.75
TOTAL 33,576,167.292 100.00
E. BRADLEY JONES
Affirmative 32,635,245.079 97.20
Withheld 940,922.213 2.80
TOTAL 33,576,167.292 100.00
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 32,673,572.230 97.31
Withheld 902,595.062 2.69
TOTAL 33,576,167.292 100.00
PETER S. LYNCH
Affirmative 32,665,741.087 97.29
Withheld 910,426.205 2.71
TOTAL 33,576,167.292 100.00
WILLIAM O. MCCOY
Affirmative 32,665,426.588 97.29
Withheld 910,740.704 2.71
TOTAL 33,576,167.292 100.00
GERALD C. MCDONOUGH
Affirmative 32,645,173.119 97.23
Withheld 930,994.173 2.77
TOTAL 33,576,167.292 100.00
MARVIN L. MANN
Affirmative 32,667,258.985 97.29
Withheld 908,908.307 2.71
TOTAL 33,576,167.292 100.00
THOMAS R. WILLIAMS
Affirmative 32,646,425.418 97.23
Withheld 929,741.874 2.77
TOTAL 33,576,167.292 100.00
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 31,181,969.270 92.87
Against 265,724.175 .79
Abstain 2,128,473.847 6.34
TOTAL 33,576,167.292 100.00
PROPOSAL 3
To amend the Declaration of Trust to provide dollar-based voting rights for
shareholders of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,126,370.108 87.12
Against 1,000,318.214 3.77
Abstain 2,419,170.970 9.11
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 4
To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,207,061.951 87.42
Against 870,816.482 3.28
Abstain 2,467,980.859 9.30
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 5
To amend the Declaration of Trust to provide each fund with the ability to
invest all of its assets in another open-ended investment company with
substantially the same investment objective and policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 22,687,221.159 85.46
Against 1,327,189.441 5.00
Abstain 2,531,448.692 9.54
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 8
To approve an amended management contract for Strategic Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 9,352,881.560 90.11
Against 249,792.898 2.41
Abstain 777,018.612 7.48
TOTAL 10,379,693.070 100.00
PROPOSAL 15
To approve an agreement and plan providing for the reorgranization of
Strategic Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 7,007,514.817 87.42
Against 228,389.724 2.85
Abstain 780,027.529 9.73
TOTAL 8,015,932.070 100.00
Not Voting 2,363,761.000
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
Fidelity International Investment Advisors, Pembroke Bermuda
Fidelity International Investment Advisors (U.K.) Limited
Pembroke, Bermuda
Fidelity Investments Japan Limited,
Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Vice President
Robert A. Lawrence, Vice President
John H. Carlson, Vice President
Curt Hollingsworth, Vice President
Margaret L. Eagle, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
EMERGING MARKETS INCOME
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to financial statements.
PROXY VOTING RESULTS 35
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR EMERGING MARKETS INCOME FUND - INSTITUTIONAL CLASS
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The offering of
Institutional Class shares took place on July 3, 1995. Institutional Class
shares are sold to eligible investors without a sales load or 12b-1 fee.
Returns prior to July 3, 1995 are those of Class T, the original class of
the fund, and reflect Class T's 0.25% 12b-1 fee. If Fidelity had not
reimbursed certain Institutional Class expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Emerging Markets Income - 13.19% 40.37% 74.14%
Institutional Class
J.P. Morgan Emerging Markets Bond Index Plus 10.27% 33.04% 74.50%
Emerging Markets Debt Funds Average 12.12% 38.65% n/a
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one year or
since the fund started on March 10, 1994. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class' returns to
those of the J.P. Morgan Emerging Markets Bond Index Plus - a market
capitalization weighted total return index of U.S. dollar- and other
external currency-denominated Brady bonds, loans, Eurobonds, and local
market debt instruments traded in emerging markets. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the emerging markets debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 23 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Emerging Markets Income - 40.37% 18.23%
Institutional Class
J.P. Morgan Emerging Markets Bond Index Plus 33.04% 18.30%
Emerging Markets Debt Funds Average 38.65% n/a
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative return
and show you what would have happened if Institutional Class had performed
at a constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an arithmetic
average. This may produce a slightly different figure than that obtained by
averaging the cumulative total returns and annualizing the result.)
$10,000 OVER LIFE OF FUND
1994/03/10 10000.00 10000.00
1994/03/31 9583.54 8710.62
1994/04/30 9709.65 8547.86
1994/05/31 10335.54 9179.71
1994/06/30 9835.28 8713.44
1994/07/31 10055.96 8872.50
1994/08/31 11267.52 9606.91
1994/09/30 11589.24 9903.80
1994/10/31 11290.55 9590.79
1994/11/30 11055.90 9580.60
1994/12/31 10246.94 8960.01
1995/01/31 9070.51 8528.44
1995/02/28 8422.24 8131.77
1995/03/31 8175.93 7967.86
1995/04/30 8877.85 8820.45
1995/05/31 9407.49 9588.08
1995/06/30 9460.49 9799.71
1995/07/31 9475.87 9761.06
1995/08/31 9680.80 10028.23
1995/09/30 10067.96 10420.27
1995/10/31 10006.53 10307.15
1995/11/30 10342.00 10606.50
1995/12/31 10973.18 11358.60
1996/01/31 11783.93 12221.80
1996/02/29 11129.68 11547.60
1996/03/31 11236.56 11810.65
1996/04/30 11814.51 12455.00
1996/05/31 12138.03 12670.53
1996/06/30 12405.84 13115.94
1996/07/31 12548.91 13390.04
1996/08/31 13004.74 13881.87
1996/09/30 14072.63 14777.12
1996/10/31 14437.84 14877.70
1996/11/30 15247.88 15635.90
1996/12/31 15385.48 15823.79
1997/01/31 16041.23 16261.47
1997/02/28 16314.63 16544.41
1997/03/31 15662.08 15945.37
1997/04/30 16190.90 16419.52
1997/05/31 16888.76 17057.24
1997/06/30 17414.21 17449.60
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Emerging Markets Income Fund - Institutional
Class on March 10, 1994, when the fund started. As the chart shows, by June
30, 1997, the value of the investment would have grown to $17,414 - a
74.14% increase on the initial investment. For comparison, look at how the
J.P. Morgan Emerging Markets Bond Index Plus did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $17,450 - a 74.50% increase.
UNDERSTANDING
PERFORMANCE
Many markets around the globe
offer the potential for significant
growth over time; however,
investing in foreign markets
means assuming greater risks
than investing in the United
States. Factors like changes in a
country's financial markets, its
local political and economic
climate, and the fluctuating value
of its currency create these risks.
For these reasons an
international fund's performance
may be more volatile than a fund
that invests exclusively in the
United States. Past performance
is no guarantee of future results
and you may have a gain or loss
when you sell your shares.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER MARCH 10, 1994
MONTHS 31, (COMMENCEMEN
ENDED T
JUNE 30, OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.49% 9.89% 9.61% 4.80%
Capital appreciation return 9.70% 30.32% -2.52% -2.33%
Total return 13.19% 40.21% 7.09% 2.47%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 6.14(cents) 37.85(cents) 76.37(cents)
Annualized dividend rate 5.97% 6.37% 6.62%
30-day annualized yield 7.26% - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number, based on an average net asset value of $12.52
over the past one month, $11.99 over the past six months, and $11.53 over
the past one year, you can compare the class' income distributions over
these three periods. The 30-day annualized YIELD is a standard formula for
all bond funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you to compare
funds from different companies on an equal basis. If Fidelity had not
reimbursed certain class expenses, the yield may have been lower.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Carlson, Portfolio Manager of Fidelity Advisor
Emerging Markets Income Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. Very well. For the six months that ended June 30, 1997, the fund's
Institutional Class shares returned 13.19%. The emerging markets debt funds
average, as tracked by Lipper Analytical Services, returned 12.12% over the
same period, while the J.P. Morgan Emerging Markets Bond Index Plus
returned 10.27%. For the 12 months that ended June 30, 1997, the fund's
Institutional Class shares returned 40.37%, while the peer group and index
returned 38.65% and 33.04%, respectively.
Q. WHAT WAS BEHIND THE CONTINUED STRENGTH OF EMERGING MARKET SECURITIES?
A. Among other factors, the favorable backdrop of low interest rate levels
and increased economic reform in emerging market countries remained in
place. The market started off strongly in early 1997. In fact, after
Federal Reserve Board chairman Alan Greenspan made his warning remarks in
late December concerning "irrational exuberance" in the U.S. equity
markets, emerging markets seemed to be one of the few asset groups that
actually took heed. Credit spreads - or the risk/reward tradeoff - between
emerging market bonds and the 30-year Treasury bond widened significantly.
After the Fed raised interest rates in early March, credit spreads
tightened. As the period closed, we had pretty much gone back to where we
started the year in terms of interest rate levels. In terms of the fund
itself, countries such as Bulgaria and Russia turned in strong
performances. I'd also tip my cap to our research team, which did a
tremendous job identifying opportunities and managing the higher risks
inherent in emerging market bonds.
Q. WHAT HAPPENED IN BULGARIA? DID YOU REDUCE HOLDINGS IN OTHER REGIONS IN
ORDER TO ADD TO THE FUND'S BULGARIAN POSITIONS?
A. Bulgaria was just a surprisingly great story. After some periods of
economic difficulty, the country elected a new government and adopted a
currency board. The new government came in and immediately closed a number
of inefficient state agencies, and the currency board has been instrumental
in bringing Bulgaria's inflation levels back down. As a result, Bulgarian
credits were viewed favorably by the market, returning approximately 44%
during the period. While I was adding positions in Bulgaria and Russia,
political turmoil in Ecuador prompted a reduction there. At one point
during the period, Ecuador had three "presidents" claiming power. The
situation has been peacefully resolved, but continued economic reform and
privatization in Ecuador may be put on hold for awhile.
Q. WERE THERE ANY OTHER REGIONAL DEVELOPMENTS THAT INFLUENCED PERFORMANCE?
A. There were. The fund's Ivory Coast positions, which made up
approximately 2% of the fund's investments as of the period's end, enjoyed
a continued bull run. The Ivory Coast is one of the last major
restructurings, in terms of going from defaulted loans to Brady bonds,
which are bonds issued by sovereign governments but denominated in U.S.
dollars. Interest was high in this area of the world and the fund's stake
appreciated. In Latin America, the fallout from the 1994 Mexican crisis
pretty much has subsided. In Brazil, economic reform continued to be stuck
in Congress, but the country did execute a "debt exchange," retiring
expensive Brady bond debt and issuing cheaper bonds.
Q. YOU MENTIONED RUSSIA EARLIER. WHAT HAPPENED THERE TO ATTRACT YOUR
INTEREST?
A. President Yeltsin has done a number of things to improve investing
prospects in Russia. His main accomplishment was appointing a new cabinet
whose members were intent on improving the country's tax collection
problems. With tax evasion a concern, many Russian workers have been
working without a paycheck. The new cabinet hopes to have all wage arrears
eradicated by the end of the year and, if it can pull it off, it will
create better social stability in Russia. Reflecting my optimism, the
fund's Russian positions rose from around 5% to approximately 10% at the
end of the period. The fund's Russian exposure - including options - was
approximately 16% at the end of the period.
Q. IN THE LAST REPORT, YOU MENTIONED THE IMPORTANCE OF CRUDE OIL PRICES TO
EMERGING MARKETS PERFORMANCE. WHAT WAS THE STORY WITH CRUDE?
A. Crude oil actually weakened during the period, with prices starting the
year at around $22 per barrel and ending the period at approximately $19.
This decline was significant, but not enough to be a huge performance
detriment. Crude oil prices are particularly important to the well-being of
Latin American countries such as Venezuela, Argentina and Ecuador, each of
which is a heavy producer of crude.
Q. WHAT'S YOUR OUTLOOK?
A. I know it's a clich<UNDEF>, but I'm cautiously optimistic. Since the
Mexican crisis, emerging market debt securities have achieved equity-like
returns while treading in volatile waters. I think it's going to be very
difficult to top the returns we've seen over the last year or so and that
we may move to more of a credit-driven type of market. U.S. interest rate
policy will be closely watched, as will the state of the U.S. equity
market, but I think it will take a rather significant interest rate change
to have an overall impact on our market. Regardless, we'll
continue to search the globe for good credit stories and do our homework.
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: a high level of current
income by investing primarily
in debt securities and other
instruments of issuers in
emerging markets; as a
secondary objective, the
fund may seek capital
appreciation
START DATE: March 10, 1994
SIZE: as of June 30, 1997,
more than $126 million
MANAGER: John Carlson,
since 1995; joined Fidelity in
1995
(checkmark)
JOHN CARLSON DISCUSSES HIS
TEAM'S INVESTMENT PROCESS:
"When considering a potential
investment, we typically begin
with a research trip. From
that, we'll obtain local
contacts who can aid our
assessment of the current
economic, political and
investment climate in a
particular region. Depending
on the country, we may
identify which development
`models' are being pursued in
that region and which can
help us compare countries to
one another.
"If an investment is
dollar-denominated, we assess
a country's foreign-exchange
earnings capability and its
international liquidity position.
Local currency investing
demands knowledge of
investment instruments
available, having a view of the
currency, monitoring foreign
reserves, understanding the
depth and liquidity of the
market and being aware of
relevant foreign investment
laws. In some cases,
necessary infrastructure for
us to invest - including
adequate custody and
settlement operations - may
not yet exist. We put those
countries on our radar screen
for the future."
INVESTMENT CHANGES
TOP FIVE COUNTRIES AS OF JUNE 30, 1997
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE COUNTRIES
6 MONTHS AGO
Argentina 14.2 13.0
Brazil 13.3 13.7
Venezuela 10.6 12.5
Russia 9.8 4.5
Mexico 8.8 5.1
TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURITY, INCLUDING
WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT RISKS.
TOP FIVE HOLDINGS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER, EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE HOLDINGS
6 MONTHS AGO
Argentinian Republic 12.4 12.9
Brazilian Federative Republic 11.6 12.1
Venezuelan Republic 10.6 12.5
United Mexican States 8.8 5.1
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) 5.4 2.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 14.4 14.0
</TABLE>
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Corporate bonds 4.8%
Foreign government
obligations 68.2%
Other 12.5%
Short-term
investments 14.5%
Corporate bonds 3.2%
Foreign government
obligations 67.3%
Other 8.7%
Short-term
investments 20.8%
Row: 1, Col: 1, Value: 14.5
Row: 1, Col: 2, Value: 12.5
Row: 1, Col: 3, Value: 68.2
Row: 1, Col: 4, Value: 4.8
Row: 1, Col: 1, Value: 20.8
Row: 1, Col: 2, Value: 8.699999999999999
Row: 1, Col: 3, Value: 67.3
Row: 1, Col: 4, Value: 3.2
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 4.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
CONVERTIBLE BONDS - 2.8%
CHINA (PEOPLES REPUBLIC) - 0.9%
Huaneng Power International, Inc.
1 3/4%, 5/21/04 - $ 1,125,000 $ 1,153,125
POLAND - 0.9%
BPH Finance BV 3%, 5/22/02 (f) - 1,165,000 1,229,075
RUSSIA - 1.0%
Lukinter Finance BV 3 1/2%, 5/6/02 (f) - 1,015,000 1,258,600
TOTAL CONVERTIBLE BONDS 3,640,800
NONCONVERTIBLE BONDS - 2.0%
BRAZIL - 1.7%
Cia Egy Sao Paulo 9 1/8%, 6/26/07 (f) - 890,000 876,650
Tevecap SA 12 5/8%, 11/26/04 (Reg.) B2 1,225,000 1,321,468
2,198,118
CANADA - 0.2%
Telesystem International Wireless, Inc.
0%, 6/30/07 (d)(f) B- 330,000 175,725
NETHERLANDS - 0.1%
PTC International Finance BV
0%, 7/1/07 (d)(f) B3 230,000 139,438
TOTAL NONCONVERTIBLE BONDS 2,513,281
TOTAL CORPORATE BONDS
(Cost $5,947,899) 6,154,081
FOREIGN GOVERNMENT OBLIGATIONS (I) - 68.2%
ARGENTINA - 14.2%
Argentinian Republic:
8 3/4%, 5/9/02 - 1,220,000 1,220,610
11 3/4%, 2/12/07 B1 ARS 650,000 723,230
11 3/4%, 2/12/07 (f) B1 ARS 4,330,000 4,817,824
FOREIGN GOVERNMENT OBLIGATIONS (I) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
ARGENTINA - CONTINUED
Argentinian Republic: - continued
Brady par euro 5 1/2%, 3/31/23 (e) B1 $ 9,845,000 $ 6,826,916
global bond 11 3/8%, 1/30/17 B1 2,185,000 2,433,544
City of Buenos Aires 11 1/4%, 4/11/07 (f) B1 2,100,000 2,278,500
18,300,624
BRAZIL - 11.6%
Brazilian Federative Republic:
Brady:
capitalization bond 8%, 4/15/14 B1 6,432,533 5,174,168
debt conversion bond euro
6.9375%, 4/15/12 (h) B1 7,225,000 5,969,656
global bond 10 1/8%, 5/15/27 B1 3,925,000 3,783,700
14,927,524
BULGARIA - 5.0%
Bulgarian Republic (h):
6.0625%, 7/28/11 B3 1,025,000 738,641
FLIRB A 2 1/4%, 7/28/12 B3 10,065,000 5,730,759
6,469,400
ECUADOR - 3.7%
Ecuador Republic:
11 1/4%, 4/25/02 (f) - 2,905,000 3,057,513
Brady:
par euro 3 1/4%, 2/28/25 (e) - 2,135,000 1,009,449
past due interest euro
6.4375%, 2/28/15 (bearer) (h) - 1,108,600 716,089
4,783,051
JAMAICA - 1.0%
Jamaica Government 9 5/8%, 7/2/02 (f) - 1,280,000 1,286,400
MEXICO - 8.8%
Mexico Value recovery rights 6/30/03:
discount A - 4,170,000 -
discount C - 1,923,000 -
discount D - 3,693,000 -
FOREIGN GOVERNMENT OBLIGATIONS (I) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
MEXICO - CONTINUED
United Mexican States:
Brady (h):
discount A, 6.8672%, 12/31/19 Ba2 $ 2,710,000 $ 2,518,648
discount C, 6.8203%, 12/31/19 Ba2 1,250,000 1,161,738
discount D, 6.4531%, 12/31/19 Ba2 2,400,000 2,230,500
global bond 11 1/2%, 5/15/26 Ba2 4,791,000 5,474,952
11,385,838
PANAMA - 3.9%
Panamanian Republic Brady (h):
interest reduction bond euro
3 1/2%, 7/17/14 Ba1 4,250,000 3,277,813
past due interest euro
6.5625%, 7/17/16 Ba1 2,028,119 1,783,477
5,061,290
PERU - 5.1%
Peruvian Republic Brady (h):
FLIRB:
3 1/4%, 3/7/17 (f) - 1,350,000 808,312
3 1/4%, 3/7/17 - 8,635,000 5,170,206
past due interest 4%, 3/7/17 (f) - 855,000 555,750
6,534,268
RUSSIA - 3.0%
City of St. Petersburg Russia
9 1/2%, 6/18/02 (f) - 620,000 619,225
Russian Government interest notes
0%, 12/31/16 (f)(g) Ba2 4,150,000 3,169,563
3,788,788
URUGUAY - 1.3%
Banco Central Del Uruguay:
Brady:
6 3/4%, 2/19/21 Ba1 1,000,000 897,500
debt conversion note
6.8125%, 2/18/07 (h) Baa 750,000 740,625
recovery rights 2/18/21 (a) - 1,000,000 10
1,638,135
FOREIGN GOVERNMENT OBLIGATIONS (I) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
VENEZUELA - 10.6%
Venezuelan Republic:
Brady (h):
debt conversion bond
6 3/4%, 12/18/07 Ba2 $ 2,750,000 $ 2,548,907
discount A, 6.8125%, 3/31/20 Ba2 2,025,000 1,790,858
discount B, 6.8125%, 3/31/20 Ba2 4,800,000 4,245,000
par A euro 6 3/4%, 3/31/20 Ba2 3,110,000 2,449,125
par B euro 6 3/4%, 3/31/20 Ba2 3,250,000 2,559,375
Oil recovery rights 3/31/20 - 80,533 -
13,593,265
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $82,907,898) 87,768,583
PURCHASED BANK DEBT - 0.1%
VIETNAM - 0.1%
Socialist Republic of Vietnam loans restructured
under 1985 agreement (a)
(Cost $149,286) - DEM 250,000 150,387
SOVEREIGN LOAN PARTICIPATIONS - 12.0%
ALGERIA - 2.0%
Algerian Republic loan participation (h):
- - The Chase Manhattan Bank
7.3125%, 9/4/06 - 1,990,000 1,736,275
- Morgan Guaranty Trust Company of
New York 7.3125%, 9/4/06 - 1,000,000 872,500
2,608,775
IVORY COAST - 2.0%
Ivory Coast restructured loan (a):
- - Morgan (J.P.) Securities, Inc. - 2,750,000 1,141,250
- Paribas Capital Markets - 3,250,000 1,348,750
2,490,000
SOVEREIGN LOAN PARTICIPATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
MOROCCO - 1.9%
Moroccan Kingdom loan participation (h):
- The Chase Manhattan Bank
6.8125%, 1/1/09 - $ 930,000 $ 846,881
- ING Bank NV 6.8125%, 1/1/09 - 750,000 682,970
- Merrill Lynch, Pierce, Fenner & Smith, Inc.
6.8125%, 1/1/09 - 1,000,000 915,625
2,445,476
RUSSIA - 5.4%
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) final loan (a):
- The Chase Manhattan Bank - 3,600,000 3,294,000
- Morgan (J.P.) Securities, Inc. - 4,000,000 3,660,000
6,954,000
VIETNAM - 0.7%
Socialist Republic of Vietnam loan restructured
under 1985 agreement - ING Baring
Securities, Inc. - DEM 1,550,000 932,398
TOTAL SOVEREIGN LOAN PARTICIPATIONS
(Cost $13,815,304) 15,430,649
CASH EQUIVALENTS - 14.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 (Cost $18,639,000) $ 18,642,070 18,639,000
PURCHASED OPTIONS - 0.4%
EXPIRATION DATE/ UNDERLYING FACE VALUE
STRIKE PRICE AMOUNT AT VALUE (NOTE 1)
RUSSIA - 0.4%
The Chase Manhattan Bank Call Option
on $6,125,000 notional amount of
Russian Government interest notes
0%, 12/31/16 July 97/69 $ 4,677,969 459,375
Merrill Lynch International Call Option
on $6,000,000 notional amount of
Russian Government principal loans
0%, 8/12/21 Oct. 97/66 3/8 3,997,500 144,000
TOTAL PURCHASED OPTIONS
(Cost $285,663) 603,375
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $121,745,050) $ 128,746,075
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest Reduction
Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
DEM - German deutsche mark
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
6. 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 $20,272,575 or 16.1% of net
assets.
7. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
8. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
9. For foreign government obligations not individually rated by S&P or
Moody's, the ratings listed are assigned to securities by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of the
sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.6% BBB 4.3%
Ba 26.5% BB 36.4%
B 31.0% B 11.8%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 26.8%. FMR has determined that unrated
debt securities that are lower quality account for 26.8% of the total value
of investment in securities.
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $121,744,994. Net unrealized appreciation aggregated
$7,001,081, of which $7,077,898 related to appreciated investment
securities and $76,817 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 128,746,075
agreements of $18,639,000) (cost $121,745,050) -
See accompanying schedule
Cash 346,596
Receivable for investments sold 12,885,145
Regular delivery
Delayed delivery 9,941,678
Interest receivable 1,455,262
Other receivables 23,741
Prepaid expenses 3,408
TOTAL ASSETS 153,401,905
LIABILITIES
Payable for investments purchased $ 14,862,985
Regular delivery
Delayed delivery 11,750,703
Payable for fund shares redeemed 523,299
Distributions payable 46,407
Accrued management fee 68,406
Distribution fees payable 37,019
Other payables and accrued expenses 65,646
TOTAL LIABILITIES 27,354,465
NET ASSETS $ 126,047,440
Net Assets consist of:
Paid in capital $ 107,373,270
Undistributed net investment income 427,615
Accumulated undistributed net realized gain (loss) on 11,244,359
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 7,002,196
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 126,047,440
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $12.64
CLASS A:
NET ASSET VALUE and redemption price per share
($1,171,812 (divided by) 92,682 shares)
Maximum offering price per share (100/95.75 of $12.64) $13.20
CLASS T: $12.64
NET ASSET VALUE and redemption price per share
($96,483,723 (divided by) 7,634,754 shares)
Maximum offering price per share (100/96.50 of $12.64) $13.10
CLASS B: $12.68
NET ASSET VALUE and offering price per share
($23,168,663 (divided by) 1,827,341 shares) A
INSTITUTIONAL CLASS: $12.58
NET ASSET VALUE, offering price and redemption price
per share ($5,223,242 (divided by) 415,157 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 4,444,158
Interest
EXPENSES
Management fee $ 392,534
Transfer agent fees 143,955
Distribution fees 202,690
Accounting fees and expenses 44,493
Non-interested trustees' compensation 230
Custodian fees and expenses 27,877
Registration fees 56,249
Audit 37,398
Legal 481
Reports to shareholders 17,734
Miscellaneous 79
Total expenses before reductions 923,720
Expense reductions (41,389) 882,331
NET INVESTMENT INCOME 3,561,827
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 10,711,908
Foreign currency transactions 2,793 10,714,701
Change in net unrealized appreciation (depreciation) on:
Investment securities (979,324)
Assets and liabilities in foreign currencies 1,040 (978,284)
NET GAIN (LOSS) 9,736,417
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 13,298,244
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 3,561,827 $ 5,003,629
Net investment income
Net realized gain (loss) 10,714,701 14,771,228
Change in net unrealized appreciation (depreciation) (978,284) 4,852,770
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 13,298,244 24,627,627
FROM OPERATIONS
Distributions to shareholders (3,440,491) (4,919,274)
From net investment income
From net realized gain (1,815,220) (3,337,616)
TOTAL DISTRIBUTIONS (5,255,711) (8,256,890)
Share transactions - net increase (decrease) 18,281,126 37,461,113
TOTAL INCREASE (DECREASE) IN NET ASSETS 26,323,659 53,831,850
NET ASSETS
Beginning of period 99,723,781 45,891,931
End of period (including undistributed net investment $ 126,047,440 $ 99,723,781
income of $427,615 and $306,279, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.720 $ 10.520
Income from Investment Operations
Net investment income D .569 .274
Net realized and unrealized gain (loss) .914 1.574
Total from investment operations 1.483 1.848
Less Distributions
From net investment income (.373) (.238)
From net realized gain (.190) (.410)
Total distributions (.563) (.648)
Net asset value, end of period $ 12.640 $ 11.720
TOTAL RETURN B, C 12.97% 17.71%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,172 $ 478
Ratio of expenses to average net assets 1.40% A, 1.40% A,
F F
Ratio of expenses to average net assets after 1.38% A, 1.40% A
expense reductions G
Ratio of net investment income to average net assets 9.54% A 7.31% A
Portfolio turnover rate 482% A 410%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO DECEMBER 31, 1996.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.710 $ 9.280 $ 9.520 $ 10.000
Income from Investment Operations
Net investment income .374 D .758 D .860 .356
Net realized and unrealized gain (loss) 1.119 2.832 (.323) (.073)
Total from investment operations 1.493 3.590 .537 .283
Less Distributions
From net investment income (.373) (.750) (.777) (.503)
From net realized gain (.190) (.410) - (.260)
Total distributions (.563) (1.160) (.777) (.763)
Net asset value, end of period $ 12.640 $ 11.710 $ 9.280 $ 9.520
TOTAL RETURN B, C 13.07% 40.41% 6.99% 2.47%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 96,484 $ 78,861 $ 36,205 $ 30,029
Ratio of expenses to average net assets 1.47% A 1.49% 1.50% 1.50% A,
F F
Ratio of expenses to average net assets 1.45% A, 1.48% 1.50% 1.50% A
G G
after expense reductions
Ratio of net investment income to 6.27% A 7.23% 9.32% 6.60% A
average
net assets
Portfolio turnover rate 482% A 410% 305% 354% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD MARCH 10, 1994 (COMMENCEMENT OF SALE OF CLASS T SHARES) TO
DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A 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).
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.750 $ 9.300 $ 9.520 $ 9.700
Income from Investment Operations
Net investment income .359 D .686 D .835 .167
Net realized and unrealized gain (loss) 1.092 2.853 (.342) .227
Total from investment operations 1.451 3.539 .493 .394
Less Distributions
From net investment income (.331) (.679) (.713) (.314)
From net realized gain (.190) (.410) - (.260)
Total distributions (.521) (1.089) (.713) (.574)
Net asset value, end of period $ 12.680 $ 11.750 $ 9.300 $ 9.520
TOTAL RETURN B, C 12.63% 39.61% 6.38% 3.67%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 23,169 $ 17,746 $ 9,486 $ 5,034
Ratio of expenses to average net assets 2.15% A, F 2.15% 2.25% 2.25% A,
F F F
Ratio of expenses to average net assets 2.14% A, 2.15% 2.25% 2.25% A
after expense reductions G
Ratio of net investment income to 5.99% A 6.56% 8.48% 5.86% A
average net assets
Portfolio turnover rate 482% A 410% 305% 354% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.650 $ 9.280 $ 8.400
Income from Investment Operations
Net investment income .552 D .786 D .393
Net realized and unrealized gain (loss) .947 2.779 .876
Total from investment operations 1.499 3.565 1.269
Less Distributions
From net investment income (.379) (.785) (.389)
From net realized gain (.190) (.410) -
Total distributions (.569) (1.195) (.389)
Net asset value, end of period $ 12.580 $ 11.650 $ 9.280
TOTAL RETURN B, C 13.19% 40.21% 15.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 5,223 $ 2,639 $ 201
Ratio of expenses to average net assets 1.25% A, 1.25% 1.25% A,
F F F
Ratio of expenses to average net assets after 1.23% A, 1.25% 1.25% A
expense reductions G
Ratio of net investment income to average net assets 9.18% A 7.46% 9.09% A
Portfolio turnover rate 482% A 410% 305%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Emerging Markets Income Fund(the fund) is a fund of
Fidelity Advisor Series VIII(the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, and Institutional 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, the
common expenses of the fund, and certain fund-level expense reductions 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, expenses, and expense
reductions.
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 at the last sale price, or if no sale price, at the closing bid
price in the principal market in which such securities are normally traded.
Securities (including restricted securities) for which quotations are not
readily available are valued primarily using dealer-supplied valuations or
at their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less for
which quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
exchange rates on investments in securities are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to U.S. federal
income taxes to the extent that it distributes substantially all of its
taxable income for its fiscal year. The fund may be subject to foreign
taxes on income and gains on investments which are accrued based upon the
fund's understanding of the tax rules and regulations that exist in the
markets in which it invests. The fund accrues such taxes as applicable. The
schedule of investments includes information regarding income taxes under
the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned. Interest 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends and capital
gain distributions are declared separately for each class.
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 the
recognition of gains/losses on certain securities, foreign currency
transactions, market discount and losses deferred due to wash sales. The
fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased on a when-issued or forward commitment basis are
identified as such in the fund's schedule of investments. The fund may
receive compensation for interest forgone in the purchase of a when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery."
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
Losses may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract, or if
the issuer does not issue the securities due to political, economic, or
other factors.
OPTIONS. The fund may use options to manage its exposure to the bond
markets and to fluctuations in interest rates. Writing puts and buying
calls tend to increase the fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. The underlying face
amount at value of any open options at period end is shown in the schedule
of investments under the caption "Purchased Options." This amount reflects
each contract's exposure to the underlying instrument at period end. Losses
may arise from changes in the value of the underlying instruments, if there
is an illiquid secondary market for the contracts, or if the counterparties
do not perform under the contracts' terms. Gains and losses are realized
upon the expiration or closing of the options. Realized gains (losses) on
purchased options are included in realized gains (losses) on investment
securities.
Exchange-traded options are valued using the last sale price or, in the
absence of a sale, the last offering price. Options traded over-the-counter
are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to invest in
loans and loan participations, trade claims or other receivables. These
investments may include standby financing commitments that obligate the
fund to supply additional cash to the borrower on demand. Loan
participations involve a risk of insolvency of the lending bank or other
financial intermediary. At the end of the period, these investments
amounted to $15,430,649 or 12.2% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $260,954,104 and $242,367,779, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .55%. 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.
For the period, the management fee was equivalent to an annualized rate of
.70% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research Far East Inc., Fidelity International Investment
Advisors (FIIA), and Fidelity Investments Japan Ltd. In addition, FIIA
entered into a sub-advisory agreement with its subsidiary, Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the
sub-advisory arrangements, FMR may receive investment advice and research
services and may grant the sub-advisers investment management authority to
buy and sell securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services. FIIA
pays FIIAL U.K. a fee based on costs incurred for either service.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 571 $ 571
CLASS T 111,316 111,316
CLASS B 90,803 25,222
$ 202,690 $ 137,109
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.25% and 3.50%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within six years of purchase (five years prior to
January 2, 1997). The Class B charge is based on declining rates which
range from 5% to 1% (4% to 1% prior to January 2, 1997) 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. Effective August 1, 1997, Class A's maximum sales charge was
increased to 4.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 8,896 $ 8,275
CLASS T 68,428 59,004
CLASS B 35,241 0*
$ 112,565 $ 67,279
* WHEN CLASS B SHARES ARE INITIALLY 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
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 1,693 .45%***
CLASS T ** FIIOC * 110,488 .25%***
CLASS B FIIOC * 27,403 .27%***
INSTITUTIONAL CLASS FIIOC * 4,371 .25%***
$ 143,955
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AN
AFFILIATE OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED CERTAIN
TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES TO FIIOC FOR WHICH
FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH FEES.
*** ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level of
average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A 1.40% $ 16,886
CLASS B 2.15% 5,763
INSTITUTIONAL CLASS 1.25% 12,116
$ 34,765
In addition, the fund has entered into an arrangement with its custodian
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of expenses. During the period, the fund's custodian
fees were reduced by $6,624 under the custodian arrangement.
6. CREDIT RISK.
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments in
more developed markets and the prices of such investments may be volatile.
The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The consequences of political, social or economic
changes in these markets may have disruptive effects on the market prices
of the fund's investments and the income they generate, as well as the
fund's ability to repatriate such amounts.
7. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of approximately 7% of the
total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 A
1997
CLASS A
From net investment income $ 23,550 $ 5,916
From net realized gain 9,178 15,462
Total $ 32,728 $ 21,378
CLASS T
From net investment income $ 2,753,706 $ 3,931,995
From net realized gain 1,434,255 2,638,864
Total $ 4,187,961 $ 6,570,859
CLASS B
From net investment income $ 552,626 $ 844,871
From net realized gain 294,087 595,454
Total $ 846,713 $ 1,440,325
INSTITUTIONAL CLASS
From net investment income $ 110,609 $ 136,492
From net realized gain 77,700 87,836
Total $ 188,309 $ 224,328
$ 5,255,711 $ 8,256,890
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
9. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1997 1996 A 1997 1996 A
CLASS A 54,608 45,480 $ 656,904 $ 518,247
Shares sold
Reinvestment of distributions 2,325 1,560 28,180 18,190
Shares redeemed (5,043) (6,248) (59,826) (75,540)
Net increase (decrease) 51,890 40,792 $ 625,258 $ 460,897
CLASS T 3,420,554 8,120,736 $ 41,461,705 $ 85,014,110
Shares sold
Reinvestment of distributions 303,027 523,792 3,660,055 5,729,874
Shares redeemed (2,821,773) (5,813,045) (33,558,011) (60,826,882)
Net increase (decrease) 901,808 2,831,483 $ 11,563,749 $ 29,917,102
CLASS B 442,243 657,075 $ 5,353,912 $ 6,890,016
Shares sold
Reinvestment of distributions 59,717 116,167 723,547 1,270,300
Shares redeemed (185,303) (282,713) (2,229,279) (2,964,969)
Net increase (decrease) 316,657 490,529 $ 3,848,180 $ 5,195,347
INSTITUTIONAL CLASS 612,829 1,151,436 $ 7,305,255 $ 12,012,762
Shares sold
Reinvestment of distributions 15,308 19,417 185,158 214,294
Shares redeemed (439,482) (966,036) (5,246,474) (10,339,289)
Net increase (decrease) 188,655 204,817 $ 2,243,939 $ 1,887,767
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
10. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 16,305
CLASS T 16,615
CLASS B 9,944
INSTITUTIONAL CLASS 13,385
$ 56,249
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on June 18, 1997. The
results of votes taken among shareholders on proposals before them are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 32,670,431.969 97.30
Withheld 905,735.323 2.70
TOTAL 33,576,167.292 100.00
RALPH F. COX
Affirmative 32,661,943.620 97.28
Withheld 914,223.672 2.72
TOTAL 33,576,167.292 100.00
PHYLLIS BURKE DAVIS
Affirmative 32,639,275.890 97.21
Withheld 936,891.402 2.79
TOTAL 33,576,167.292 100.00
ROBERT M. GATES
Affirmative 32,647,573.114 97.23
Withheld 928,594.178 2.77
TOTAL 33,576,167.292 100.00
EDWARD C. JOHNSON 3RD
Affirmative 32,653,017.035 97.25
Withheld 923,150.257 2.75
TOTAL 33,576,167.292 100.00
E. BRADLEY JONES
Affirmative 32,635,245.079 97.20
Withheld 940,922.213 2.80
TOTAL 33,576,167.292 100.00
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 32,673,572.230 97.31
Withheld 902,595.062 2.69
TOTAL 33,576,167.292 100.00
PETER S. LYNCH
Affirmative 32,665,741.087 97.29
Withheld 910,426.205 2.71
TOTAL 33,576,167.292 100.00
WILLIAM O. MCCOY
Affirmative 32,665,426.588 97.29
Withheld 910,740.704 2.71
TOTAL 33,576,167.292 100.00
GERALD C. MCDONOUGH
Affirmative 32,645,173.119 97.23
Withheld 930,994.173 2.77
TOTAL 33,576,167.292 100.00
MARVIN L. MANN
Affirmative 32,667,258.985 97.29
Withheld 908,908.307 2.71
TOTAL 33,576,167.292 100.00
THOMAS R. WILLIAMS
Affirmative 32,646,425.418 97.23
Withheld 929,741.874 2.77
TOTAL 33,576,167.292 100.00
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 31,181,969.270 92.87
Against 265,724.175 .79
Abstain 2,128,473.847 6.34
TOTAL 33,576,167.292 100.00
PROPOSAL 3
To amend the Declaration of Trust to provide dollar-based voting rights for
shareholders of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,126,370.108 87.12
Against 1,000,318.214 3.77
Abstain 2,419,170.970 9.11
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 4
To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,207,061.951 87.42
Against 870,816.482 3.28
Abstain 2,467,980.859 9.30
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 5
To amend the Declaration of Trust to provide each fund with the ability to
invest all of its assets in another open-ended investment company with
substantially the same investment objectives and policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 22,687,221.159 85.46
Against 1,327,189.441 5.00
Abstain 2,531,448.692 9.54
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 9
To approve an amended management contract for Emerging Markets Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 5,564,683.602 91.19
Against 144,043.111 2.36
Abstain 393,547.007 6.45
TOTAL 6,102,273.720 100.00
Not Voting 216,332.000
PROPOSAL 12
To amend the Class B Distribution and Service Plan for Emerging Markets
Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 775,134.658 82.14
Against 53,437.126 5.67
Abstain 115,065.137 12.19
TOTAL 943,636.921 100.00
Not Voting 275,500.000
PROPOSAL 13
To amend the Class T Distribution and Service Plan for Emerging Markets
Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 3,425,570.978 88.70
Against 122,865.968 3.18
Abstain 313,579.683 8.12
TOTAL 3,862,016.629 100.00
Not Voting 1,119,001.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment
Advisors (U.K.) Limited
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
John H. Carlson, Vice President
Robert A. Lawrence, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
Brooklyn, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
EMERGING MARKETS INCOME
FUND - CLASS A, CLASS T AND CLASS B
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 15 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 18 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 19 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 26 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 34 Notes to financial statements.
PROXY VOTING RESULTS 43
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR EMERGING MARKETS INCOME 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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The initial
offering of Class A shares took place on September 3, 1996. Class A shares
bear a 0.15% 12b-1 fee. Returns prior to September 3, 1996 are those of
Class T, the original class of the fund, and reflect Class T's 0.25% 12b-1
fee. Effective August 1, 1997, the maximum 4.25% sales charge on Class A
shares was increased to 4.75%. If Fidelity had not reimbursed certain Class
A expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Emerging Markets Income - Class A 12.97% 40.11% 73.92%
Advisor Emerging Markets Income - Class A 7.61% 33.45% 65.66%
(incl. max. 4.75% sales charge) 1
J.P. Morgan Emerging Markets Bond Index Plus 10.27% 33.04% 74.50%
Emerging Markets Debt Funds Average 12.12% 38.65% n/a
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, one year or since the fund
started on March 10, 1994. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the J.P.
Morgan Emerging Markets Bond Index Plus - a market capitalization weighted
total return index of U.S. dollar- and other external currency-denominated
Brady bonds, loans, Eurobonds, and local market debt instruments traded in
emerging markets. To measure how Class A's performance stacked up against
its peers, you can compare it to the emerging markets debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months average
represents a peer group of 23 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Emerging Markets Income - Class A 40.11% 18.19%
Advisor Emerging Markets Income - Class A 33.45% 16.46%
(incl. max. 4.75% sales charge) 1
J.P. Morgan Emerging Markets Bond Index Plus 33.04% 18.30%
Emerging Markets Debt Funds Average 38.65% n/a
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show you
what would have happened if Class A shares had performed at a constant rate
each year.
1 HAD THE FORMER 4.25% SALES CHARGE BEEN REFLECTED, THE PAST SIX MONTHS
CUMULATIVE TOTAL RETURN WOULD HAVE BEEN 8.17%, THE CUMULATIVE AND AVERAGE
ANNUAL RETURNS WOULD HAVE BEEN 34.15% AND 34.15% FOR THE PAST ONE YEAR, AND
66.53% AND 16.65% FOR THE LIFE OF FUND.
$10,000 OVER LIFE OF FUND
1994/03/10 9525.00 10000.00
1994/03/31 9128.32 8710.62
1994/04/30 9248.44 8547.86
1994/05/31 9844.60 9179.71
1994/06/30 9368.11 8713.44
1994/07/31 9578.30 8872.50
1994/08/31 10732.31 9606.91
1994/09/30 11038.76 9903.80
1994/10/31 10754.24 9590.79
1994/11/30 10530.74 9580.60
1994/12/31 9760.21 8960.01
1995/01/31 8639.66 8528.44
1995/02/28 8022.18 8131.77
1995/03/31 7787.58 7967.86
1995/04/30 8456.16 8820.45
1995/05/31 8960.63 9588.08
1995/06/30 9011.12 9799.71
1995/07/31 9026.46 9761.06
1995/08/31 9219.78 10028.23
1995/09/30 9586.60 10420.27
1995/10/31 9514.14 10307.15
1995/11/30 9831.92 10606.50
1995/12/31 10442.10 11358.60
1996/01/31 11211.15 12221.80
1996/02/29 10586.42 11547.60
1996/03/31 10686.18
11810.65
1996/04/30 11237.32 12455.00
1996/05/31 11532.65 12670.53
1996/06/30 11823.71 13115.94
1996/07/31 11956.95 13390.04
1996/08/31 12386.31 13881.87
1996/09/31 13388.33 14777.12
1996/10/31 13770.24 14877.70
1996/11/30 14535.78 15635.90
1996/12/31 14663.83 15823.79
1997/01/31 15280.06 16261.47
1997/02/28 15536.21 16544.41
1997/03/31 14899.95 15945.37
1997/04/30 15411.66 16419.52
1997/05/30 16070.48 17057.24
1997/06/30 16565.95 17449.60
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Emerging Markets Income Fund - Class A on
March 10, 1994, when the fund started, and the current maximum 4.75% sales
charge was paid. As the chart shows, by June 30, 1997, the value of the
investment would have grown to $16,566 - a 65.66% increase on the initial
investment. For comparison, look at how the J.P. Morgan Emerging Markets
Bond Index Plus did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would have grown to $17,450
- - a 74.50% increase.
UNDERSTANDING
PERFORMANCE
Many markets around the globe
offer the potential for significant
growth over time; however,
investing in foreign markets means
assuming greater risks than
investing in the United States.
Factors like changes in a
country's financial markets, its
local political and economic
climate, and the fluctuating value
of its currency create these risks.
For these reasons an international
fund's performance may be more
volatile than a fund that invests
exclusively in the United States.
Past performance is no
guarantee of future results and
you may have a gain or loss
when you sell your shares.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER MARCH 10, 1994
MONTHS 31, (COMMENCEMEN
ENDED T
JUNE 30, OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.41% 9.38% 9.51% 4.80%
Capital appreciation return 9.56% 31.05% -2.52% -2.33%
Total return 12.97% 40.43% 6.99% 2.47%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 5.98(cents) 37.31(cents) 61.13(cents)
Annualized dividend rate 5.78% 6.24% 6.40%
30-day annualized yield n/a - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number, based on an average net asset value of $12.58
over the past one month, $12.05 over the past six months, and $11.58 over
the life of the class, you can compare the class' income distributions over
these three periods. The 30-day annualized YIELD is a standard formula for
all bond funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you to compare
funds from different companies on an equal basis. Yield information will be
reported once Class A has a longer, more stable operating history.
ADVISOR EMERGING MARKETS INCOME FUND - CLASS T
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. If Fidelity had
not reimbursed certain Class T expenses, the life of fund total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Emerging Markets Income - Class T 13.07% 40.21% 74.05%
Advisor Emerging Markets Income - Class T 9.11% 35.31% 67.96%
(incl. max. 3.50% sales charge)
J.P. Morgan Emerging Markets Bond Index Plus 10.27% 33.04% 74.50%
Emerging Markets Debt Funds Average 12.12% 38.65% n/a
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage terms
over a set period - in this case, six months, one year or since the fund
started on March 10, 1994. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the J.P.
Morgan Emerging Markets Bond Index Plus - a market capitalization weighted
total return index of U.S. dollar- and other external currency-denominated
Brady bonds, loans, Eurobonds, and local market debt instruments traded in
emerging markets. To measure how Class T's performance stacked up against
its peers, you can compare it to the emerging markets debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months average
represents a peer group of 23 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Emerging Markets Income - Class T 40.21% 18.21%
Advisor Emerging Markets Income - Class T 35.31% 16.95%
(incl. max. 3.50% sales charge)
J.P. Morgan Emerging Markets Bond Index Plus 33.04% 18.30%
Emerging Markets Debt Funds Average 38.65% n/a
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show you
what would have happened if Class T had performed at a constant rate each
year.
$10,000 OVER LIFE OF FUND
1994/03/10 9650.00 10000.00
1994/03/31 9248.12 8710.62
1994/04/30 9369.81 8547.86
1994/05/31 9973.79 9179.71
1994/06/30 9491.05 8713.44
1994/07/31 9704.00 8872.50
1994/08/31 10873.16 9606.91
1994/09/30 11183.62 9903.80
1994/10/31 10895.38 9590.79
1994/11/30 10668.94 9580.60
1994/12/31 9888.29 8960.01
1995/01/31 8753.04 8528.44
1995/02/28 8127.46 8131.77
1995/03/31 7889.78 7967.86
1995/04/30 8567.13 8820.45
1995/05/31 9078.23 9588.08
1995/06/30 9129.37 9799.71
1995/07/31 9144.92 9761.06
1995/08/31 9340.78 10028.23
1995/09/30 9712.41 10420.27
1995/10/31 9639.00 10307.15
1995/11/30 9960.95 10606.50
1995/12/31 10579.14 11358.60
1996/01/31 11358.28 12221.80
1996/02/29 10725.35 11547.60
1996/03/31 10826.42 11810.65
1996/04/30 11384.79 12455.00
1996/05/31 11684.00 12670.53
1996/06/30 11978.87 13115.94
1996/07/31 12113.86 13390.04
1996/08/31 12548.86 13881.87
1996/09/30 13572.33 14777.12
1996/10/31 13947.71 14877.70
1996/11/30 14723.78 15635.90
1996/12/31 14854.44 15823.79
1997/01/31 15480.72 16261.47
1997/02/28 15740.89 16544.41
1997/03/31 15095.79 15945.37
1997/04/30 15612.28 16419.52
1997/05/31 16280.02 17057.24
1997/06/30 16795.95 17449.60
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Emerging Markets Income Fund - Class T on
March 10, 1994, when the fund started, and the current maximum 3.50% sales
charge was paid. As the chart shows, by June 30, 1997, the value of your
investment would have grown to $16,796 - a 67.96% increase on the initial
investment. For comparison, look at how the J.P. Morgan Emerging Markets
Bond Index Plus did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would have grown to $17,450
- - a 74.50% increase.
UNDERSTANDING
PERFORMANCE
Many markets around the globe
offer the potential for significant
growth over time; however,
investing in foreign markets means
assuming greater risks than
investing in the United States.
Factors like changes in a
country's financial markets, its
local political and economic
climate, and the fluctuating value
of its currency create these risks.
For these reasons an international
fund's performance may be more
volatile than a fund that invests
exclusively in the United States.
Past performance is no
guarantee of future results and
you may have a gain or loss
when you sell your shares.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER MARCH 10, 1994
MONTHS 31, (COMMENCEMEN
ENDED T
JUNE 30, OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.42% 9.46% 9.51% 4.80%
Capital appreciation return 9.65% 30.95% -2.52% -2.33%
Total return 13.07% 40.41% 6.99% 2.47%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 6.01(cents) 37.30(cents) 74.77(cents)
Annualized dividend rate 5.81% 6.25% 6.46%
30-day annualized yield 6.85% - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number, based on an average net asset value of $12.58
over the past one month, $12.04 over the past six months and $11.58 over
the past one year, you can compare the class' income distributions over
these three periods. The 30-day annualized YIELD is a standard formula for
all bond funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you to compare
funds from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
maximum 3.50% sales charge.
ADVISOR EMERGING MARKETS INCOME 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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at income, as
reflected in its yield, to measure performance.
The initial offering of Class B shares took place on June 30, 1994. Class B
shares bear a 0.90% 12b-1/shareholder service fee (1.00% prior to January
1, 1996). Returns prior to June 30, 1994 are those of Class T, the original
class of the fund, and reflect Class T's 0.25% 12b-1 fee. Had Class B's
12b-1 fee been reflected, returns prior to June 30, 1994 would have been
lower. Effective January 2, 1997, Class B's contingent deferred sales
charge is based on a declining scale that ranges from 5% to 1% on Class B
shares redeemed within six years of purchase. This scale is revised from
the previous scale of 4% to 1% on shares redeemed within five years of
purchase. Class B's contingent deferred sales charge included in the past
six months, past one year and life of fund total return figures are 5%, 5%,
and 3%, respectively. If Fidelity had not reimbursed certain Class B
expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Advisor Emerging Markets Income - Class B 12.63% 39.36% 70.53%
Advisor Emerging Markets Income - Class B 7.63% 34.36% 67.53%
(incl. contingent deferred sales charge)
J.P. Morgan Emerging Markets Bond Index Plus 10.27% 33.04% 74.50%
Emerging Markets Debt Funds Average 12.12% 38.65% n/a
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, one year or since the fund
started on March 10, 1994. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the J.P.
Morgan Emerging Markets Bond Index Plus - a market capitalization weighted
total return index of U.S. dollar- and other external currency-denominated
Brady bonds, loans, Eurobonds, and local market debt instruments traded in
emerging markets. To measure how Class B's performance stacked up against
its peers, you can compare it to the emerging markets debt funds average,
which reflects the performance of mutual funds tracked by Lipper Analytical
Services, Inc. The past six months average represents a peer group of 23
mutual funds. These benchmarks reflect reinvestment of dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
YEAR FUND
Advisor Emerging Markets Income - Class B 39.36% 17.49%
Advisor Emerging Markets Income - Class B 34.36% 16.86%
(incl. contingent deferred sales charge)
J.P. Morgan Emerging Markets Bond Index Plus 33.04% 18.30%
Emerging Markets Debt Funds Average 38.65% n/a
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and show you
what would have happened if Class B had performed at a constant rate each
year.
$10,000 OVER LIFE OF FUND
1994/03/10 10000.00 10000.00
1994/03/31 9583.54 8710.62
1994/04/30 9709.65 8547.86
1994/05/31 10335.54 9179.71
1994/06/30 9833.49 8713.44
1994/07/31 10040.95 8872.50
1994/08/31 11241.32 9606.91
1994/09/30 11564.08 9903.80
1994/10/31 11268.61 9590.79
1994/11/30 11017.23 9580.60
1994/12/31 10193.95 8960.01
1995/01/31 9038.73 8528.44
1995/02/28 8378.26 8131.77
1995/03/31 8128.48 7967.86
1995/04/30 8820.18 8820.45
1995/05/31 9339.33 9588.08
1995/06/30 9396.83 9799.71
1995/07/31 9406.70 9761.06
1995/08/31 9601.70 10028.23
1995/09/30 9965.41 10420.27
1995/10/31 9895.07 10307.15
1995/11/30 10218.26 10606.50
1995/12/31 10844.25 11358.60
1996/01/31 11634.97 12221.80
1996/02/29 10982.00 11547.60
1996/03/31 11079.09 11810.65
1996/04/30 11643.23 12455.00
1996/05/31 11954.38 12670.53
1996/06/30 12236.78 13115.94
1996/07/31 12367.99 13390.04
1996/08/31 12816.56 13881.87
1996/09/30 13838.82 14777.12
1996/10/31 14224.26 14877.70
1996/11/30 15017.11 15635.90
1996/12/31 15140.08 15823.79
1997/01/31 15767.56 16261.47
1997/02/28 16021.82 16544.41
1997/03/31 15358.01 15945.37
1997/04/30 15874.05 16419.52
1997/05/31 16540.59 17057.24
1997/06/30 16753.00 17449.60
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Emerging Markets Income Fund - Class B on
March 10, 1994, when the fund started. As the chart shows, by June 30,
1997, the value of the investment including the effect of the applicable
contingent deferred sales charge, would have been $16,753 - a 67.53%
increase on the initial investment. For comparison, look at how the J.P.
Morgan Emerging Markets Bond Index Plus did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $17,450 - a 74.50% increase.
UNDERSTANDING
PERFORMANCE
Many markets around the globe
offer the potential for significant
growth over time; however,
investing in foreign markets
means assuming greater risks
than investing in the United
States. Factors like changes in a
country's financial markets, its
local political and economic
climate, and the fluctuating value
of its currency create these risks.
For these reasons an
international fund's performance
may be more volatile than a fund
that invests exclusively in the
United States. Past performance
is no guarantee of future results
and you may have a gain or loss
when you sell your shares.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER MARCH 10, 1994
MONTHS 31, (COMMENCEMEN
ENDED T
JUNE 30, OF OPERATIONS)
TO
DECEMBER 31,
1997 1996 1995 1994
Dividend return 3.02% 8.54% 8.69% 4.30%
Capital appreciation return 9.61% 31.07% -2.31% -2.34%
Total return 12.63% 39.61% 6.38% 1.96%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.24(cents) 33.07(cents) 66.56(cents)
Annualized dividend rate 5.05% 5.52% 5.73%
30-day annualized yield 6.33% - -
DIVIDENDS per share show the income paid by the class for a set period. If
you annualize this number, based on an average net asset value of $12.62
over the past one month, $12.08 over the past six months, and $11.61 over
the past one year, you can compare the class' income distributions over
these three periods. The 30-day annualized YIELD is a standard formula for
all bond funds based on the yields of the bonds in the fund, averaged over
the past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you compare
funds from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge. If Fidelity had not reimbursed certain
class expenses, the yield may have been lower.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Carlson, Portfolio Manager of Fidelity Advisor
Emerging Markets Income Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. Very well. For the six months that ended June 30, 1997, the fund's Class
A, Class T and Class B shares provided returns of 12.97%, 13.07% and
12.63%, respectively. The emerging markets debt funds average, as tracked
by Lipper Analytical Services, returned 12.12% over the same period, while
the J.P. Morgan Emerging Markets Bond Index Plus returned 10.27%. For the
12 months that ended June 30, 1997, the fund's Class A, T and B shares
returned 40.11%, 40.21% and 39.36%. The peer group and index returned
38.65% and 33.04%, respectively.
Q. WHAT WAS BEHIND THE CONTINUED STRENGTH OF EMERGING MARKET SECURITIES?
A. Among other factors, the favorable backdrop of low interest rate levels
and increased economic reform in emerging market countries remained in
place. The market started off strongly in early 1997. In fact, after
Federal Reserve Board chairman Alan Greenspan made his warning remarks in
late December concerning "irrational exuberance" in the U.S. equity
markets, emerging markets seemed to be one of the few asset groups that
actually took heed. Credit spreads - or the risk/reward tradeoff - between
emerging market bonds and the 30-year Treasury bond widened significantly.
After the Fed raised interest rates in early March, credit spreads
tightened. As the period closed, we had pretty much gone back to where we
started the year in terms of interest rate levels. In terms of the fund
itself, countries such as Bulgaria and Russia turned in strong
performances. I'd also tip my cap to our research team, which did a
tremendous job identifying opportunities and managing the higher risks
inherent in emerging market bonds.
Q. WHAT HAPPENED IN BULGARIA? DID YOU REDUCE HOLDINGS IN OTHER REGIONS IN
ORDER TO ADD TO THE FUND'S BULGARIAN POSITIONS?
A. Bulgaria was just a surprisingly great story. After some periods of
economic difficulty, the country elected a new government and adopted a
currency board. The new government came in and immediately closed a number
of inefficient state agencies, and the currency board has been instrumental
in bringing Bulgaria's inflation levels back down. As a result, Bulgarian
credits were viewed favorably by the market, returning approximately 44%
during the period. While I was adding positions in Bulgaria and Russia,
political turmoil in Ecuador prompted a reduction there. At one point
during the period, Ecuador had three "presidents" claiming power. The
situation has been peacefully resolved, but continued economic reform and
privatization in Ecuador may be put on hold for awhile.
Q. WERE THERE ANY OTHER REGIONAL DEVELOPMENTS THAT INFLUENCED PERFORMANCE?
A. There were. The fund's Ivory Coast positions, which made up
approximately 2% of the fund's investments as of the period's end, enjoyed
a continued bull run. The Ivory Coast is one of the last major
restructurings, in terms of going from defaulted loans to Brady bonds,
which are bonds issued by sovereign governments but denominated in U.S.
dollars. Interest was high in this area of the world and the fund's stake
appreciated. In Latin America, the fallout from the 1994 Mexican crisis
pretty much has subsided. In Brazil, economic reform continued to be stuck
in Congress, but the country did execute a "debt exchange," retiring
expensive Brady bond debt and issuing cheaper bonds.
Q. YOU MENTIONED RUSSIA EARLIER. WHAT HAPPENED THERE TO ATTRACT YOUR
INTEREST?
A. President Yeltsin has done a number of things to improve investing
prospects in Russia. His main accomplishment was appointing a new cabinet
whose members were intent on improving the country's tax collection
problems. With tax evasion a concern, many Russian workers have been
working without a paycheck. The new cabinet hopes to have all wage arrears
eradicated by the end of the year and, if it can pull it off, it will
create better social stability in Russia. Reflecting my optimism, the
fund's Russian positions rose from around 5% to approximately 10% at the
end of the period. The fund's Russian exposure - including options - was
approximately 16% at the end of the period.
Q. IN THE LAST REPORT, YOU MENTIONED THE IMPORTANCE OF CRUDE OIL PRICES TO
EMERGING MARKETS PERFORMANCE. WHAT WAS THE STORY WITH CRUDE?
A. Crude oil actually weakened during the period, with prices starting the
year at around $22 per barrel and ending the period at approximately $19.
This decline was significant, but not enough to be a huge performance
detriment. Crude oil prices are particularly important to the well-being of
Latin American countries such as Venezuela, Argentina and Ecuador, each of
which is a heavy producer of crude.
Q. WHAT'S YOUR OUTLOOK?
A. I know it's a clich<UNDEF>, but I'm cautiously optimistic. Since the
Mexican crisis, emerging market debt securities have achieved equity-like
returns while treading in volatile waters. I think it's going to be very
difficult to top the returns we've seen over the last year or so and that
we may move to more of a credit-driven type of market. U.S. interest rate
policy will be closely watched, as will the state of the U.S. equity
market, but I think it will take a rather significant interest rate change
to have an overall impact on our market. Regardless, we'll
continue to search the globe for good credit stories and do our homework.
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: a high level of current
income by investing primarily
in debt securities and other
instruments of issuers in
emerging markets; as a
secondary objective, the
fund may seek capital
appreciation
START DATE: March 10, 1994
SIZE: as of June 30, 1997,
more than $126 million
MANAGER: John Carlson,
since 1995; joined Fidelity in
1995
(checkmark)
JOHN CARLSON DISCUSSES HIS
TEAM'S INVESTMENT PROCESS:
"When considering a potential
investment, we typically begin
with a research trip. From
that, we'll obtain local
contacts who can aid our
assessment of the current
economic, political and
investment climate in a
particular region. Depending
on the country, we may
identify which development
`models' are being pursued in
that region and which can
help us compare countries to
one another.
"If an investment is
dollar-denominated, we assess
a country's foreign-exchange
earnings capability and its
international liquidity position.
Local currency investing
demands knowledge of
investment instruments
available, having a view of the
currency, monitoring foreign
reserves, understanding the
depth and liquidity of the
market and being aware of
relevant foreign investment
laws. In some cases,
necessary infrastructure for
us to invest - including
adequate custody and
settlement operations - may
not yet exist. We put those
countries on our radar screen
for the future."
INVESTMENT CHANGES
TOP FIVE COUNTRIES AS OF JUNE 30, 1997
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE COUNTRIES
6 MONTHS AGO
Argentina 14.2 13.0
Brazil 13.3 13.7
Venezuela 10.6 12.5
Russia 9.8 4.5
Mexico 8.8 5.1
TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURITY, INCLUDING
WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT RISKS.
TOP FIVE HOLDINGS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER, EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE HOLDINGS
6 MONTHS AGO
Argentinian Republic 12.4 12.9
Brazilian Federative Republic 11.6 12.1
Venezuelan Republic 10.6 12.5
United Mexican States 8.8 5.1
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) 5.4 2.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 14.4 14.0
</TABLE>
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Corporate bonds 4.8%
Foreign government
obligations 68.2%
Other 12.5%
Short-term
investments 14.5%
Corporate bonds 3.2%
Foreign government
obligations 67.3%
Other 8.7%
Short-term
investments 20.8%
Row: 1, Col: 1, Value: 14.5
Row: 1, Col: 2, Value: 12.5
Row: 1, Col: 3, Value: 68.2
Row: 1, Col: 4, Value: 4.8
Row: 1, Col: 1, Value: 20.8
Row: 1, Col: 2, Value: 8.699999999999999
Row: 1, Col: 3, Value: 67.3
Row: 1, Col: 4, Value: 3.2
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 4.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
CONVERTIBLE BONDS - 2.8%
CHINA (PEOPLES REPUBLIC) - 0.9%
Huaneng Power International, Inc.
1 3/4%, 5/21/04 - $ 1,125,000 $ 1,153,125
POLAND - 0.9%
BPH Finance BV 3%, 5/22/02 (f) - 1,165,000 1,229,075
RUSSIA - 1.0%
Lukinter Finance BV 3 1/2%, 5/6/02 (f) - 1,015,000 1,258,600
TOTAL CONVERTIBLE BONDS 3,640,800
NONCONVERTIBLE BONDS - 2.0%
BRAZIL - 1.7%
Cia Egy Sao Paulo 9 1/8%, 6/26/07 (f) - 890,000 876,650
Tevecap SA 12 5/8%, 11/26/04 (Reg.) B2 1,225,000 1,321,468
2,198,118
CANADA - 0.2%
Telesystem International Wireless, Inc.
0%, 6/30/07 (d)(f) B- 330,000 175,725
NETHERLANDS - 0.1%
PTC International Finance BV
0%, 7/1/07 (d)(f) B3 230,000 139,438
TOTAL NONCONVERTIBLE BONDS 2,513,281
TOTAL CORPORATE BONDS
(Cost $5,947,899) 6,154,081
FOREIGN GOVERNMENT OBLIGATIONS (I) - 68.2%
ARGENTINA - 14.2%
Argentinian Republic:
8 3/4%, 5/9/02 - 1,220,000 1,220,610
11 3/4%, 2/12/07 B1 ARS 650,000 723,230
11 3/4%, 2/12/07 (f) B1 ARS 4,330,000 4,817,824
FOREIGN GOVERNMENT OBLIGATIONS (I) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
ARGENTINA - CONTINUED
Argentinian Republic: - continued
Brady par euro 5 1/2%, 3/31/23 (e) B1 $ 9,845,000 $ 6,826,916
global bond 11 3/8%, 1/30/17 B1 2,185,000 2,433,544
City of Buenos Aires 11 1/4%, 4/11/07 (f) B1 2,100,000 2,278,500
18,300,624
BRAZIL - 11.6%
Brazilian Federative Republic:
Brady:
capitalization bond 8%, 4/15/14 B1 6,432,533 5,174,168
debt conversion bond euro
6.9375%, 4/15/12 (h) B1 7,225,000 5,969,656
global bond 10 1/8%, 5/15/27 B1 3,925,000 3,783,700
14,927,524
BULGARIA - 5.0%
Bulgarian Republic (h):
6.0625%, 7/28/11 B3 1,025,000 738,641
FLIRB A 2 1/4%, 7/28/12 B3 10,065,000 5,730,759
6,469,400
ECUADOR - 3.7%
Ecuador Republic:
11 1/4%, 4/25/02 (f) - 2,905,000 3,057,513
Brady:
par euro 3 1/4%, 2/28/25 (e) - 2,135,000 1,009,449
past due interest euro
6.4375%, 2/28/15 (bearer) (h) - 1,108,600 716,089
4,783,051
JAMAICA - 1.0%
Jamaica Government 9 5/8%, 7/2/02 (f) - 1,280,000 1,286,400
MEXICO - 8.8%
Mexico Value recovery rights 6/30/03:
discount A - 4,170,000 -
discount C - 1,923,000 -
discount D - 3,693,000 -
FOREIGN GOVERNMENT OBLIGATIONS (I) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
MEXICO - CONTINUED
United Mexican States:
Brady (h):
discount A, 6.8672%, 12/31/19 Ba2 $ 2,710,000 $ 2,518,648
discount C, 6.8203%, 12/31/19 Ba2 1,250,000 1,161,738
discount D, 6.4531%, 12/31/19 Ba2 2,400,000 2,230,500
global bond 11 1/2%, 5/15/26 Ba2 4,791,000 5,474,952
11,385,838
PANAMA - 3.9%
Panamanian Republic Brady (h):
interest reduction bond euro
3 1/2%, 7/17/14 Ba1 4,250,000 3,277,813
past due interest euro
6.5625%, 7/17/16 Ba1 2,028,119 1,783,477
5,061,290
PERU - 5.1%
Peruvian Republic Brady (h):
FLIRB:
3 1/4%, 3/7/17 (f) - 1,350,000 808,312
3 1/4%, 3/7/17 - 8,635,000 5,170,206
past due interest 4%, 3/7/17 (f) - 855,000 555,750
6,534,268
RUSSIA - 3.0%
City of St. Petersburg Russia
9 1/2%, 6/18/02 (f) - 620,000 619,225
Russian Government interest notes
0%, 12/31/16 (f)(g) Ba2 4,150,000 3,169,563
3,788,788
URUGUAY - 1.3%
Banco Central Del Uruguay:
Brady:
6 3/4%, 2/19/21 Ba1 1,000,000 897,500
debt conversion note
6.8125%, 2/18/07 (h) Baa 750,000 740,625
recovery rights 2/18/21 (a) - 1,000,000 10
1,638,135
FOREIGN GOVERNMENT OBLIGATIONS (I) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
VENEZUELA - 10.6%
Venezuelan Republic:
Brady (h):
debt conversion bond
6 3/4%, 12/18/07 Ba2 $ 2,750,000 $ 2,548,907
discount A, 6.8125%, 3/31/20 Ba2 2,025,000 1,790,858
discount B, 6.8125%, 3/31/20 Ba2 4,800,000 4,245,000
par A euro 6 3/4%, 3/31/20 Ba2 3,110,000 2,449,125
par B euro 6 3/4%, 3/31/20 Ba2 3,250,000 2,559,375
Oil recovery rights 3/31/20 - 80,533 -
13,593,265
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $82,907,898) 87,768,583
PURCHASED BANK DEBT - 0.1%
VIETNAM - 0.1%
Socialist Republic of Vietnam loans restructured
under 1985 agreement (a)
(Cost $149,286) - DEM 250,000 150,387
SOVEREIGN LOAN PARTICIPATIONS - 12.0%
ALGERIA - 2.0%
Algerian Republic loan participation (h):
- - The Chase Manhattan Bank
7.3125%, 9/4/06 - 1,990,000 1,736,275
- Morgan Guaranty Trust Company of
New York 7.3125%, 9/4/06 - 1,000,000 872,500
2,608,775
IVORY COAST - 2.0%
Ivory Coast restructured loan (a):
- - Morgan (J.P.) Securities, Inc. - 2,750,000 1,141,250
- Paribas Capital Markets - 3,250,000 1,348,750
2,490,000
SOVEREIGN LOAN PARTICIPATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
MOROCCO - 1.9%
Moroccan Kingdom loan participation (h):
- The Chase Manhattan Bank
6.8125%, 1/1/09 - $ 930,000 $ 846,881
- ING Bank NV 6.8125%, 1/1/09 - 750,000 682,970
- Merrill Lynch, Pierce, Fenner & Smith, Inc.
6.8125%, 1/1/09 - 1,000,000 915,625
2,445,476
RUSSIA - 5.4%
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) final loan (a):
- The Chase Manhattan Bank - 3,600,000 3,294,000
- Morgan (J.P.) Securities, Inc. - 4,000,000 3,660,000
6,954,000
VIETNAM - 0.7%
Socialist Republic of Vietnam loan restructured
under 1985 agreement - ING Baring
Securities, Inc. - DEM 1,550,000 932,398
TOTAL SOVEREIGN LOAN PARTICIPATIONS
(Cost $13,815,304) 15,430,649
CASH EQUIVALENTS - 14.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 (Cost $18,639,000) $ 18,642,070 18,639,000
PURCHASED OPTIONS - 0.4%
EXPIRATION DATE/ UNDERLYING FACE VALUE
STRIKE PRICE AMOUNT AT VALUE (NOTE 1)
RUSSIA - 0.4%
The Chase Manhattan Bank Call Option
on $6,125,000 notional amount of
Russian Government interest notes
0%, 12/31/16 July 97/69 $ 4,677,969 459,375
Merrill Lynch International Call Option
on $6,000,000 notional amount of
Russian Government principal loans
0%, 8/12/21 Oct. 97/66 3/8 3,997,500 144,000
TOTAL PURCHASED OPTIONS
(Cost $285,663) 603,375
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $121,745,050) $ 128,746,075
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest Reduction
Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
DEM - German deutsche mark
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
6. 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 $20,272,575 or 16.1% of net
assets.
7. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
8. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
9. For foreign government obligations not individually rated by S&P or
Moody's, the ratings listed are assigned to securities by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of the
sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.6% BBB 4.3%
Ba 26.5% BB 36.4%
B 31.0% B 11.8%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
both S&P and Moody's amounted to 26.8%. FMR has determined that unrated
debt securities that are lower quality account for 26.8% of the total value
of investment in securities.
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $121,744,994. Net unrealized appreciation aggregated
$7,001,081, of which $7,077,898 related to appreciated investment
securities and $76,817 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 128,746,075
agreements of $18,639,000) (cost $121,745,050) -
See accompanying schedule
Cash 346,596
Receivable for investments sold 12,885,145
Regular delivery
Delayed delivery 9,941,678
Interest receivable 1,455,262
Other receivables 23,741
Prepaid expenses 3,408
TOTAL ASSETS 153,401,905
LIABILITIES
Payable for investments purchased $ 14,862,985
Regular delivery
Delayed delivery 11,750,703
Payable for fund shares redeemed 523,299
Distributions payable 46,407
Accrued management fee 68,406
Distribution fees payable 37,019
Other payables and accrued expenses 65,646
TOTAL LIABILITIES 27,354,465
NET ASSETS $ 126,047,440
Net Assets consist of:
Paid in capital $ 107,373,270
Undistributed net investment income 427,615
Accumulated undistributed net realized gain (loss) on 11,244,359
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 7,002,196
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 126,047,440
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $12.64
CLASS A:
NET ASSET VALUE and redemption price per share
($1,171,812 (divided by) 92,682 shares)
Maximum offering price per share (100/95.75 of $12.64) $13.20
CLASS T: $12.64
NET ASSET VALUE and redemption price per share
($96,483,723 (divided by) 7,634,754 shares)
Maximum offering price per share (100/96.50 of $12.64) $13.10
CLASS B: $12.68
NET ASSET VALUE and offering price per share
($23,168,663 (divided by) 1,827,341 shares) A
INSTITUTIONAL CLASS: $12.58
NET ASSET VALUE, offering price and redemption price
per share ($5,223,242 (divided by) 415,157 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 4,444,158
Interest
EXPENSES
Management fee $ 392,534
Transfer agent fees 143,955
Distribution fees 202,690
Accounting fees and expenses 44,493
Non-interested trustees' compensation 230
Custodian fees and expenses 27,877
Registration fees 56,249
Audit 37,398
Legal 481
Reports to shareholders 17,734
Miscellaneous 79
Total expenses before reductions 923,720
Expense reductions (41,389) 882,331
NET INVESTMENT INCOME 3,561,827
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 10,711,908
Foreign currency transactions 2,793 10,714,701
Change in net unrealized appreciation (depreciation) on:
Investment securities (979,324)
Assets and liabilities in foreign currencies 1,040 (978,284)
NET GAIN (LOSS) 9,736,417
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 13,298,244
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 3,561,827 $ 5,003,629
Net investment income
Net realized gain (loss) 10,714,701 14,771,228
Change in net unrealized appreciation (depreciation) (978,284) 4,852,770
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 13,298,244 24,627,627
FROM OPERATIONS
Distributions to shareholders (3,440,491) (4,919,274)
From net investment income
From net realized gain (1,815,220) (3,337,616)
TOTAL DISTRIBUTIONS (5,255,711) (8,256,890)
Share transactions - net increase (decrease) 18,281,126 37,461,113
TOTAL INCREASE (DECREASE) IN NET ASSETS 26,323,659 53,831,850
NET ASSETS
Beginning of period 99,723,781 45,891,931
End of period (including undistributed net investment $ 126,047,440 $ 99,723,781
income of $427,615 and $306,279, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.720 $ 10.520
Income from Investment Operations
Net investment income D .569 .274
Net realized and unrealized gain (loss) .914 1.574
Total from investment operations 1.483 1.848
Less Distributions
From net investment income (.373) (.238)
From net realized gain (.190) (.410)
Total distributions (.563) (.648)
Net asset value, end of period $ 12.640 $ 11.720
TOTAL RETURN B, C 12.97% 17.71%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,172 $ 478
Ratio of expenses to average net assets 1.40% A, 1.40% A,
F F
Ratio of expenses to average net assets after 1.38% A, 1.40% A
expense reductions G
Ratio of net investment income to average net assets 9.54% A 7.31% A
Portfolio turnover rate 482% A 410%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO DECEMBER 31, 1996.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.710 $ 9.280 $ 9.520 $ 10.000
Income from Investment Operations
Net investment income .374 D .758 D .860 .356
Net realized and unrealized gain (loss) 1.119 2.832 (.323) (.073)
Total from investment operations 1.493 3.590 .537 .283
Less Distributions
From net investment income (.373) (.750) (.777) (.503)
From net realized gain (.190) (.410) - (.260)
Total distributions (.563) (1.160) (.777) (.763)
Net asset value, end of period $ 12.640 $ 11.710 $ 9.280 $ 9.520
TOTAL RETURN B, C 13.07% 40.41% 6.99% 2.47%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 96,484 $ 78,861 $ 36,205 $ 30,029
Ratio of expenses to average net assets 1.47% A 1.49% 1.50% 1.50% A,
F F
Ratio of expenses to average net assets 1.45% A, 1.48% 1.50% 1.50% A
G G
after expense reductions
Ratio of net investment income to 6.27% A 7.23% 9.32% 6.60% A
average
net assets
Portfolio turnover rate 482% A 410% 305% 354% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD MARCH 10, 1994 (COMMENCEMENT OF SALE OF CLASS T SHARES) TO
DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A 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).
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.750 $ 9.300 $ 9.520 $ 9.700
Income from Investment Operations
Net investment income .359 D .686 D .835 .167
Net realized and unrealized gain (loss) 1.092 2.853 (.342) .227
Total from investment operations 1.451 3.539 .493 .394
Less Distributions
From net investment income (.331) (.679) (.713) (.314)
From net realized gain (.190) (.410) - (.260)
Total distributions (.521) (1.089) (.713) (.574)
Net asset value, end of period $ 12.680 $ 11.750 $ 9.300 $ 9.520
TOTAL RETURN B, C 12.63% 39.61% 6.38% 3.67%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 23,169 $ 17,746 $ 9,486 $ 5,034
Ratio of expenses to average net assets 2.15% A, F 2.15% 2.25% 2.25% A,
F F F
Ratio of expenses to average net assets 2.14% A, 2.15% 2.25% 2.25% A
after expense reductions G
Ratio of net investment income to 5.99% A 6.56% 8.48% 5.86% A
average net assets
Portfolio turnover rate 482% A 410% 305% 354% A
</TABLE>
A ANNUALIZED
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
DECEMBER 31, 1994.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 1995 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.650 $ 9.280 $ 8.400
Income from Investment Operations
Net investment income .552 D .786 D .393
Net realized and unrealized gain (loss) .947 2.779 .876
Total from investment operations 1.499 3.565 1.269
Less Distributions
From net investment income (.379) (.785) (.389)
From net realized gain (.190) (.410) -
Total distributions (.569) (1.195) (.389)
Net asset value, end of period $ 12.580 $ 11.650 $ 9.280
TOTAL RETURN B, C 13.19% 40.21% 15.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 5,223 $ 2,639 $ 201
Ratio of expenses to average net assets 1.25% A, 1.25% 1.25% A,
F F F
Ratio of expenses to average net assets after 1.23% A, 1.25% 1.25% A
expense reductions G
Ratio of net investment income to average net assets 9.18% A 7.46% 9.09% A
Portfolio turnover rate 482% A 410% 305%
</TABLE>
A ANNUALIZED
A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A 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).
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
A 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).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Emerging Markets Income Fund(the fund) is a fund of
Fidelity Advisor Series VIII(the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, and Institutional 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, the
common expenses of the fund, and certain fund-level expense reductions 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, expenses, and expense
reductions.
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 at the last sale price, or if no sale price, at the closing bid
price in the principal market in which such securities are normally traded.
Securities (including restricted securities) for which quotations are not
readily available are valued primarily using dealer-supplied valuations or
at their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less for
which quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
exchange rates on investments in securities are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to U.S. federal
income taxes to the extent that it distributes substantially all of its
taxable income for its fiscal year. The fund may be subject to foreign
taxes on income and gains on investments which are accrued based upon the
fund's understanding of the tax rules and regulations that exist in the
markets in which it invests. The fund accrues such taxes as applicable. The
schedule of investments includes information regarding income taxes under
the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned. Interest 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends and capital
gain distributions are declared separately for each class.
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 the
recognition of gains/losses on certain securities, foreign currency
transactions, market discount and losses deferred due to wash sales. The
fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased on a when-issued or forward commitment basis are
identified as such in the fund's schedule of investments. The fund may
receive compensation for interest forgone in the purchase of a when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery."
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
Losses may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract, or if
the issuer does not issue the securities due to political, economic, or
other factors.
OPTIONS. The fund may use options to manage its exposure to the bond
markets and to fluctuations in interest rates. Writing puts and buying
calls tend to increase the fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. The underlying face
amount at value of any open options at period end is shown in the schedule
of investments under the caption "Purchased Options." This amount reflects
each contract's exposure to the underlying instrument at period end. Losses
may arise from changes in the value of the underlying instruments, if there
is an illiquid secondary market for the contracts, or if the counterparties
do not perform under the contracts' terms. Gains and losses are realized
upon the expiration or closing of the options. Realized gains (losses) on
purchased options are included in realized gains (losses) on investment
securities.
Exchange-traded options are valued using the last sale price or, in the
absence of a sale, the last offering price. Options traded over-the-counter
are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to invest in
loans and loan participations, trade claims or other receivables. These
investments may include standby financing commitments that obligate the
fund to supply additional cash to the borrower on demand. Loan
participations involve a risk of insolvency of the lending bank or other
financial intermediary. At the end of the period, these investments
amounted to $15,430,649 or 12.2% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $260,954,104 and $242,367,779, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .55%. 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.
For the period, the management fee was equivalent to an annualized rate of
.70% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research Far East Inc., Fidelity International Investment
Advisors (FIIA), and Fidelity Investments Japan Ltd. In addition, FIIA
entered into a sub-advisory agreement with its subsidiary, Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the
sub-advisory arrangements, FMR may receive investment advice and research
services and may grant the sub-advisers investment management authority to
buy and sell securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services. FIIA
pays FIIAL U.K. a fee based on costs incurred for either service.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 571 $ 571
CLASS T 111,316 111,316
CLASS B 90,803 25,222
$ 202,690 $ 137,109
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.25% and 3.50%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within six years of purchase (five years prior to
January 2, 1997). The Class B charge is based on declining rates which
range from 5% to 1% (4% to 1% prior to January 2, 1997) 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. Effective August 1, 1997, Class A's maximum sales charge was
increased to 4.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 8,896 $ 8,275
CLASS T 68,428 59,004
CLASS B 35,241 0*
$ 112,565 $ 67,279
* WHEN CLASS B SHARES ARE INITIALLY 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
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 1,693 .45%***
CLASS T ** FIIOC * 110,488 .25%***
CLASS B FIIOC * 27,403 .27%***
INSTITUTIONAL CLASS FIIOC * 4,371 .25%***
$ 143,955
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AN
AFFILIATE OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED CERTAIN
TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES TO FIIOC FOR WHICH
FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH FEES.
*** ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level of
average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A 1.40% $ 16,886
CLASS B 2.15% 5,763
INSTITUTIONAL CLASS 1.25% 12,116
$ 34,765
In addition, the fund has entered into an arrangement with its custodian
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of expenses. During the period, the fund's custodian
fees were reduced by $6,624 under the custodian arrangement.
6. CREDIT RISK.
The fund's relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments in
more developed markets and the prices of such investments may be volatile.
The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The consequences of political, social or economic
changes in these markets may have disruptive effects on the market prices
of the fund's investments and the income they generate, as well as the
fund's ability to repatriate such amounts.
7. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of approximately 7% of the
total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 A
1997
CLASS A
From net investment income $ 23,550 $ 5,916
From net realized gain 9,178 15,462
Total $ 32,728 $ 21,378
CLASS T
From net investment income $ 2,753,706 $ 3,931,995
From net realized gain 1,434,255 2,638,864
Total $ 4,187,961 $ 6,570,859
CLASS B
From net investment income $ 552,626 $ 844,871
From net realized gain 294,087 595,454
Total $ 846,713 $ 1,440,325
INSTITUTIONAL CLASS
From net investment income $ 110,609 $ 136,492
From net realized gain 77,700 87,836
Total $ 188,309 $ 224,328
$ 5,255,711 $ 8,256,890
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
9. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1997 1996 A 1997 1996 A
CLASS A 54,608 45,480 $ 656,904 $ 518,247
Shares sold
Reinvestment of distributions 2,325 1,560 28,180 18,190
Shares redeemed (5,043) (6,248) (59,826) (75,540)
Net increase (decrease) 51,890 40,792 $ 625,258 $ 460,897
CLASS T 3,420,554 8,120,736 $ 41,461,705 $ 85,014,110
Shares sold
Reinvestment of distributions 303,027 523,792 3,660,055 5,729,874
Shares redeemed (2,821,773) (5,813,045) (33,558,011) (60,826,882)
Net increase (decrease) 901,808 2,831,483 $ 11,563,749 $ 29,917,102
CLASS B 442,243 657,075 $ 5,353,912 $ 6,890,016
Shares sold
Reinvestment of distributions 59,717 116,167 723,547 1,270,300
Shares redeemed (185,303) (282,713) (2,229,279) (2,964,969)
Net increase (decrease) 316,657 490,529 $ 3,848,180 $ 5,195,347
INSTITUTIONAL CLASS 612,829 1,151,436 $ 7,305,255 $ 12,012,762
Shares sold
Reinvestment of distributions 15,308 19,417 185,158 214,294
Shares redeemed (439,482) (966,036) (5,246,474) (10,339,289)
Net increase (decrease) 188,655 204,817 $ 2,243,939 $ 1,887,767
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
10. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 16,305
CLASS T 16,615
CLASS B 9,944
INSTITUTIONAL CLASS 13,385
$ 56,249
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on June 18, 1997. The
results of votes taken among shareholders on proposals before them are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 32,670,431.969 97.30
Withheld 905,735.323 2.70
TOTAL 33,576,167.292 100.00
RALPH F. COX
Affirmative 32,661,943.620 97.28
Withheld 914,223.672 2.72
TOTAL 33,576,167.292 100.00
PHYLLIS BURKE DAVIS
Affirmative 32,639,275.890 97.21
Withheld 936,891.402 2.79
TOTAL 33,576,167.292 100.00
ROBERT M. GATES
Affirmative 32,647,573.114 97.23
Withheld 928,594.178 2.77
TOTAL 33,576,167.292 100.00
EDWARD C. JOHNSON 3RD
Affirmative 32,653,017.035 97.25
Withheld 923,150.257 2.75
TOTAL 33,576,167.292 100.00
E. BRADLEY JONES
Affirmative 32,635,245.079 97.20
Withheld 940,922.213 2.80
TOTAL 33,576,167.292 100.00
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 32,673,572.230 97.31
Withheld 902,595.062 2.69
TOTAL 33,576,167.292 100.00
PETER S. LYNCH
Affirmative 32,665,741.087 97.29
Withheld 910,426.205 2.71
TOTAL 33,576,167.292 100.00
WILLIAM O. MCCOY
Affirmative 32,665,426.588 97.29
Withheld 910,740.704 2.71
TOTAL 33,576,167.292 100.00
GERALD C. MCDONOUGH
Affirmative 32,645,173.119 97.23
Withheld 930,994.173 2.77
TOTAL 33,576,167.292 100.00
MARVIN L. MANN
Affirmative 32,667,258.985 97.29
Withheld 908,908.307 2.71
TOTAL 33,576,167.292 100.00
THOMAS R. WILLIAMS
Affirmative 32,646,425.418 97.23
Withheld 929,741.874 2.77
TOTAL 33,576,167.292 100.00
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 31,181,969.270 92.87
Against 265,724.175 .79
Abstain 2,128,473.847 6.34
TOTAL 33,576,167.292 100.00
PROPOSAL 3
To amend the Declaration of Trust to provide dollar-based voting rights for
shareholders of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,126,370.108 87.12
Against 1,000,318.214 3.77
Abstain 2,419,170.970 9.11
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 4
To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,207,061.951 87.42
Against 870,816.482 3.28
Abstain 2,467,980.859 9.30
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 5
To amend the Declaration of Trust to provide each fund with the ability to
invest all of its assets in another open-ended investment company with
substantially the same investment objectives and policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 22,687,221.159 85.46
Against 1,327,189.441 5.00
Abstain 2,531,448.692 9.54
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 9
To approve an amended management contract for Emerging Markets Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 5,564,683.602 91.19
Against 144,043.111 2.36
Abstain 393,547.007 6.45
TOTAL 6,102,273.720 100.00
Not Voting 216,332.000
PROPOSAL 12
To amend the Class B Distribution and Service Plan for Emerging Markets
Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 775,134.658 82.14
Against 53,437.126 5.67
Abstain 115,065.137 12.19
TOTAL 943,636.921 100.00
Not Voting 275,500.000
PROPOSAL 13
To amend the Class T Distribution and Service Plan for Emerging Markets
Income Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 3,425,570.978 88.70
Against 122,865.968 3.18
Abstain 313,579.683 8.12
TOTAL 3,862,016.629 100.00
Not Voting 1,119,001.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment
Advisors (U.K.) Limited
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
John H. Carlson, Vice President
Robert A. Lawrence, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
Brooklyn, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
STRATEGIC OPPORTUNITIES
FUND - CLASS A, CLASS T AND CLASS B
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on stock market
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 12 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 15 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 16 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 33 Notes to the financial statements.
PROXY VOTING RESULTS 43
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will greatly
reduce your vulnerability to any single decline. We know from experience,
for example, that stock prices have gone up over longer periods of time,
have significantly outperformed other types of investments and have stayed
ahead of inflation.
Second, you can further manage your investing risk through diversification.
A stock mutual fund, for instance, is already diversified, because it
invests in many different companies. You can increase your diversification
further by investing in a number of different stock funds, or in such other
investment categories as bonds. If you have a short investment time
horizon, you might want to consider moving some of your investment into a
money market fund, which seeks income and a stable share price by investing
in high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will achieve
its goal of maintaining a stable net asset value of $1.00 per share, and
that these types of funds are neither insured nor guaranteed by any agency
of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). The initial offering of Class A
shares took place on September 3, 1996. Class A shares bear a 0.25% 12b-1
fee that is reflected in returns after September 3, 1996. Returns prior to
September 3, 1996 are those of Class T and reflect Class T's 0.50% 12b-1
fee (0.65% prior to January 1, 1996). Effective August 1, 1997, the maximum
5.25% sales charge on Class A shares was increased to 5.75%. If Fidelity
had not reimbursed certain class expenses during the periods shown, the
total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Strategic Opportunities - Class 12.88% 14.60% 90.85% 204.89%
A
Advisor Strategic Opportunities - Class 6.39% 8.01% 79.87% 187.36%
A
(incl. max. 5.75% sales charge) 1
S&P 500(registered trademark) 20.61% 34.70% 146.59% 292.69%
Capital Appreciation Funds Average 10.16% 14.44% 113.79% 208.97%
</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 had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare Class A's returns to those of the Standard & Poor's 500
Index - a widely recognized, unmanaged index of common stocks. 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 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past six months average represents a peer group of 233
mutual funds. These benchmarks reflect reinvestment of dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Strategic Opportunities - Class A 14.60% 13.80% 11.79%
Advisor Strategic Opportunities - Class A 8.01% 12.46% 11.13%
(incl. max. 5.75% sales charge) 1
S&P 500 34.70% 19.78% 14.64%
Capital Appreciation Funds Average 14.44% 15.94% 11.24%
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show you
what would have happened if Class A had performed at a constant rate each
year.
1 HAD THE FORMER 5.25% SALES CHARGE BEEN REFLECTED, THE PAST SIX MONTHS
CUMULATIVE TOTAL RETURN WOULD HAVE BEEN 6.96%, THE CUMULATIVE AND AVERAGE
ANNUAL RETURNS WOULD HAVE BEEN 8.59% AND 8.59% FOR THE PAST ONE YEAR,
80.83% AND 12.58% FOR THE PAST FIVE YEARS, AND 188.89% AND 11.19% FOR THE
PAST 10 YEARS.
$10,000 OVER 10 YEARS
1987/06/30 9425.00 10000.00
1987/07/31 9803.43 10507.00
1987/08/31 9997.76 10898.91
1987/09/30 9747.18 10660.22
1987/10/31 7957.30 8364.01
1987/11/30 7594.21 7674.82
1987/12/31 7764.65 8258.87
1988/01/31 8372.94 8606.57
1988/02/29 8647.27 9007.64
1988/03/31 8510.11 8729.30
1988/04/30 8563.78 8826.20
1988/05/31 8712.87 8902.98
1988/06/30 9309.23 9311.63
1988/07/31 9255.56 9276.25
1988/08/31 8969.31 8960.85
1988/09/30 9261.52 9342.59
1988/10/31 9422.54 9602.31
1988/11/30 9482.18 9465.00
1988/12/31 9492.16 9630.63
1989/01/31 10029.80 10335.60
1989/02/28 9986.54 10078.24
1989/03/31 10196.66 10313.06
1989/04/30 10585.98 10848.31
1989/05/31 11074.19 11287.67
1989/06/30 11160.70 11223.33
1989/07/31 11927.00 12236.79
1989/08/31 12081.49 12476.64
1989/09/30 12081.49 12425.48
1989/10/31 11883.74 12137.21
1989/11/30 12205.09 12384.81
1989/12/31 12586.40 12682.05
1990/01/31 11754.08 11831.08
1990/02/28 11817.62 11983.70
1990/03/31 11817.62 12301.27
1990/04/30 11334.75 11993.74
1990/05/31 11703.26 13163.13
1990/06/30 11817.62 13073.62
1990/07/31 11849.39 13031.78
1990/08/31 11017.07 11853.71
1990/09/30 10934.47 11276.43
1990/10/31 10928.12 11227.94
1990/11/30 11410.99 11953.27
1990/12/31 11683.92 12286.77
1991/01/31 12061.47 12822.47
1991/02/28 12783.43 13739.28
1991/03/31 13187.47 14071.77
1991/04/30 13366.30 14105.54
1991/05/31 13843.20 14714.90
1991/06/30 13406.05 14040.96
1991/07/31 13810.08 14695.26
1991/08/31 14108.14 15043.54
1991/09/30 14161.13 14792.31
1991/10/31 13876.32 14990.53
1991/11/30 13538.52 14386.41
1991/12/31 14380.49 16032.22
1992/01/31 14403.82 15734.02
1992/02/29 14683.81 15938.56
1992/03/31 14310.49 15627.76
1992/04/30 14582.70 16087.22
1992/05/31 15057.12 16166.04
1992/06/30 15057.12 15925.17
1992/07/31 15523.77 16576.51
1992/08/31 15251.56 16236.69
1992/09/30 15189.34 16428.28
1992/10/31 15313.78 16485.78
1992/11/30 15967.09 17047.95
1992/12/31 16231.62 17257.64
1993/01/31 16538.36 17402.60
1993/02/28 17006.99 17639.28
1993/03/31 17535.26 18011.46
1993/04/30 17185.92 17575.59
1993/05/31 17586.38 18046.61
1993/06/30 17731.23 18098.95
1993/07/31 18106.14 18026.55
1993/08/31 19239.37 18709.76
1993/09/30 19188.24 18565.69
1993/10/31 19793.20 18950.00
1993/11/30 18958.19 18769.98
1993/12/31 19548.74 18997.10
1994/01/31 19717.91 19643.00
1994/02/28 19013.03 19110.67
1994/03/31 18279.95 18277.45
1994/04/30 18430.33 18511.40
1994/05/31 18467.92 18814.98
1994/06/30 18467.92 18354.02
1994/07/31 18909.65 18956.03
1994/08/31 19022.43 19733.23
1994/09/30 18759.27 19249.76
1994/10/31 18561.90 19682.88
1994/11/30 17988.60 18966.03
1994/12/31 18147.15 19247.30
1995/01/31 18952.61 19746.38
1995/02/28 19437.83 20515.90
1995/03/31 19622.21 21121.32
1995/04/30 20049.20 21743.34
1995/05/31 20573.24 22612.42
1995/06/30 21650.42 23137.71
1995/07/31 22378.25 23904.96
1995/08/31 23018.74 23964.96
1995/09/30 23804.79 24976.28
1995/10/31 23717.45 24887.12
1995/11/30 24348.23 25979.66
1995/12/31 25071.94 26480.03
1996/01/31 25082.01 27381.41
1996/02/29 24582.80 27635.23
1996/03/31 23763.03 27901.36
1996/04/30 24388.10 28312.63
1996/05/31 25105.40 29042.81
1996/06/30 25074.66 29153.46
1996/07/31 23353.14 27865.46
1996/08/31 24234.39 28453.15
1996/09/30 25074.66 30054.49
1996/10/31 24613.54 30883.39
1996/11/30 25474.29 33217.87
1996/12/31 25456.67 32559.82
1997/01/31 26417.94 34594.16
1997/02/28 26057.69 34865.38
1997/03/31 24389.44 33432.76
1997/04/30 24518.67 35428.69
1997/05/31 27714.20 37585.59
1997/06/30 28736.30 39269.43
$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,
1987, and the current maximum 5.75% sales charge was paid. As the chart
shows, by June 30, 1997, the value of the investment would have grown to
$28,736 - a 187.36% increase on the initial investment. For comparison,
look at how the S&P 500 did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would have
grown to $39,269 - a 292.69% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn,
the share price and return of
a fund that invests in stocks
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS T
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). The initial offering of Class T
shares took place on August 20, 1986. Class T shares bear a 0.50% 12b-1 fee
(0.65% prior to January 1, 1996). If Fidelity had not reimbursed certain
class expenses, the past five and 10 year total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Strategic Opportunities - Class 12.96% 14.67% 90.97% 205.08%
T
Advisor Strategic Opportunities - Class 9.01% 10.66% 84.28% 194.40%
T
(incl. max. 3.50% sales charge)
S&P 500 20.61% 34.70% 146.59% 292.69%
Capital Appreciation Funds Average 10.16% 14.44% 113.79% 208.97%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage terms
over a set period - in this case, six months, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare Class T's returns to those of the Standard & Poor's 500
Index - a widely recognized, unmanaged index of common stocks. To measure
how Class T's performance stacked up against its peers, you can compare it
to the capital appreciation funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past six months average represents a peer group of 233
mutual funds. These benchmarks reflect reinvestment of dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Strategic Opportunities - Class T 14.67% 13.81% 11.80%
Advisor Strategic Opportunities - Class T 10.66% 13.00% 11.40%
(incl. max. 3.50% sales charge)
S&P 500 34.70% 19.78% 14.64%
Capital Appreciation Funds Average 14.44% 15.94% 11.24%
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show you
what would have happened if Class T had performed at a constant rate each
year.
$10,000 OVER 10 YEARS
1987/06/30 9650.00 10000.00
1987/07/31 10037.47 10507.00
1987/08/31 10236.44 10898.91
1987/09/30 9979.87 10660.22
1987/10/31 8147.26 8364.01
1987/11/30 7775.50 7674.82
1987/12/31 7950.01 8258.87
1988/01/31 8572.83 8606.57
1988/02/29 8853.70 9007.64
1988/03/31 8713.26 8729.30
1988/04/30 8768.22 8826.20
1988/05/31 8920.87 8902.98
1988/06/30 9531.47 9311.63
1988/07/31 9476.52 9276.25
1988/08/31 9183.43 8960.85
1988/09/30 9482.62 9342.59
1988/10/31 9647.48 9602.31
1988/11/30 9708.54 9465.00
1988/12/31 9718.76 9630.63
1989/01/31 10269.24 10335.60
1989/02/28 10224.95 10078.24
1989/03/31 10440.08 10313.06
1989/04/30 10838.70 10848.31
1989/05/31 11338.56 11287.67
1989/06/30 11427.14 11223.33
1989/07/31 12211.73 12236.79
1989/08/31 12369.91 12476.64
1989/09/30 12369.91 12425.48
1989/10/31 12167.44 12137.21
1989/11/30 12496.46 12384.81
1989/12/31 12886.87 12682.05
1990/01/31 12034.69 11831.08
1990/02/28 12099.74 11983.70
1990/03/31 12099.74 12301.27
1990/04/30 11605.34 11993.74
1990/05/31 11982.64 13163.13
1990/06/30 12099.74 13073.62
1990/07/31 12132.26 13031.78
1990/08/31 11280.08 11853.71
1990/09/30 11195.51 11276.43
1990/10/31 11189.00 11227.94
1990/11/30 11683.40 11953.27
1990/12/31 11962.85 12286.77
1991/01/31 12349.41 12822.47
1991/02/28 13088.61 13739.28
1991/03/31 13502.29 14071.77
1991/04/30 13685.39 14105.54
1991/05/31 14173.67 14714.90
1991/06/30 13726.08 14040.96
1991/07/31 14139.76 14695.26
1991/08/31 14444.94 15043.54
1991/09/30 14499.19 14792.31
1991/10/31 14207.58 14990.53
1991/11/30 13861.72 14386.41
1991/12/31 14723.79 16032.22
1992/01/31 14747.68 15734.02
1992/02/29 15034.35 15938.56
1992/03/31 14652.12 15627.76
1992/04/30 14930.83 16087.22
1992/05/31 15416.58 16166.04
1992/06/30 15416.58 15925.17
1992/07/31 15894.37 16576.51
1992/08/31 15615.66 16236.69
1992/09/30 15551.95 16428.28
1992/10/31 15679.36 16485.78
1992/11/30 16348.26 17047.95
1992/12/31 16619.11 17257.64
1993/01/31 16933.17 17402.60
1993/02/28 17412.99 17639.28
1993/03/31 17953.87 18011.46
1993/04/30 17596.19 17575.59
1993/05/31 18006.22 18046.61
1993/06/30 18154.52 18098.95
1993/07/31 18538.38 18026.55
1993/08/31 19698.66 18709.76
1993/09/30 19646.32 18565.69
1993/10/31 20265.72 18950.00
1993/11/30 19410.77 18769.98
1993/12/31 20015.42 18997.10
1994/01/31 20188.63 19643.00
1994/02/28 19466.92 19110.67
1994/03/31 18716.34 18277.45
1994/04/30 18870.31 18511.40
1994/05/31 18908.80 18814.98
1994/06/30 18908.80 18354.02
1994/07/31 19361.07 18956.03
1994/08/31 19476.54 19733.23
1994/09/30 19207.11 19249.76
1994/10/31 19005.03 19682.88
1994/11/30 18418.04 18966.03
1994/12/31 18580.37 19247.30
1995/01/31 19405.06 19746.38
1995/02/28 19901.86 20515.90
1995/03/31 20090.65 21121.32
1995/04/30 20527.83 21743.34
1995/05/31 21064.38 22612.42
1995/06/30 22167.28 23137.71
1995/07/31 22912.48 23904.96
1995/08/31 23568.26 23964.96
1995/09/30 24373.07 24976.28
1995/10/31 24283.65 24887.12
1995/11/30 24929.49 25979.66
1995/12/31 25670.47 26480.03
1996/01/31 25680.79 27381.41
1996/02/29 25169.65 27635.23
1996/03/31 24330.31 27901.36
1996/04/30 24970.31 28312.63
1996/05/31 25704.73 29042.81
1996/06/30 25673.26 29153.46
1996/07/31 23910.65 27865.46
1996/08/31 24812.93 28453.15
1996/09/30 25662.76 30054.49
1996/10/31 25201.13 30883.39
1996/11/30 26092.92 33217.87
1996/12/31 26062.35 32559.82
1997/01/31 27038.68 34594.16
1997/02/28 26684.80 34865.38
1997/03/31 24978.97 33432.76
1997/04/30 25110.19 35428.69
1997/05/31 28378.69 37585.59
1997/06/30 29440.36 39269.43
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Strategic Opportunities Fund - Class T on June 30,
1987, and the current maximum 3.50% sales charge was paid. As the chart
shows, by June 30, 1997, the value of the investment would have grown to
$29,440 - a 194.40% increase on the initial investment. For comparison,
look at how the S&P 500 did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would have
grown to $39,269 - a 292.69% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn,
the share price and return of
a fund that invests in stocks
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). Initial offering of Class B shares
took place on June 30, 1994. Class B shares bear a 1.00% 12b-1/shareholder
service fee that is reflected in returns after June 30, 1994. Returns
between August 20, 1986 (the date Class T shares were first offered) and
June 30, 1994 are those of Class T, and reflect Class T's prior 0.65% 12b-1
fee. Had Class B's 12b-1 fee been reflected, returns prior to June 30, 1994
would have been lower. Effective January 2, 1997, Class B's contingent
deferred sales charge is based on a declining scale that ranges from 5% to
1% on Class B shares redeemed within six years of purchase. This scale is
revised from the previous scale of 4% to 1% on shares redeemed within five
years of purchase. Class B's contingent deferred sales charges included in
the past six months, past one year, past five years and past 10 years total
return figures are 5%, 5%, 2% 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, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Strategic Opportunities - Class B 12.65% 14.10% 88.25% 200.74%
Advisor Strategic Opportunities - Class B 7.65% 9.10% 86.25% 200.74%
(incl. contingent deferred sales charge)
S&P 500(registered trademark) 20.61% 34.70% 146.59% 292.69%
Capital Appreciation Funds Average 10.16% 14.44% 113.79% 208.97%
</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 had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare Class B's returns to those of the Standard & Poor's 500
Index - a widely recognized, unmanaged index of common stocks. 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 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past six months average represents a peer group of 233
mutual funds. These benchmarks reflect reinvestment of dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Strategic Opportunities - Class B 14.10% 13.49% 11.64%
Advisor Strategic Opportunities - Class B 9.10% 13.25% 11.64%
(incl. contingent deferred sales charge)
S&P 500 34.70% 19.78% 14.64%
Capital Appreciation Funds Average 14.44% 15.94% 11.24%
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and show you
what would have happened if Class B had performed at a constant rate each
year.
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10401.52 10507.00
1987/08/31 10607.70 10898.91
1987/09/30 10341.83 10660.22
1987/10/31 8442.76 8364.01
1987/11/30 8057.51 7674.82
1987/12/31 8238.36 8258.87
1988/01/31 8883.76 8606.57
1988/02/29 9174.82 9007.64
1988/03/31 9029.29 8729.30
1988/04/30 9086.24 8826.20
1988/05/31 9244.42 8902.98
1988/06/30 9877.17 9311.63
1988/07/31 9820.22 9276.25
1988/08/31 9516.50 8960.85
1988/09/30 9826.55 9342.59
1988/10/31 9997.39 9602.31
1988/11/30 10060.67 9465.00
1988/12/31 10071.26 9630.63
1989/01/31 10641.70 10335.60
1989/02/28 10595.80 10078.24
1989/03/31 10818.73 10313.06
1989/04/30 11231.81 10848.31
1989/05/31 11749.80 11287.67
1989/06/30 11841.60 11223.33
1989/07/31 12654.64 12236.79
1989/08/31 12818.56 12476.64
1989/09/30 12818.56 12425.48
1989/10/31 12608.74 12137.21
1989/11/30 12949.70 12384.81
1989/12/31 13354.27 12682.05
1990/01/31 12471.18 11831.08
1990/02/28 12538.59 11983.70
1990/03/31 12538.59 12301.27
1990/04/30 12026.26 11993.74
1990/05/31 12417.25 13163.13
1990/06/30 12538.59 13073.62
1990/07/31 12572.29 13031.78
1990/08/31 11689.20 11853.71
1990/09/30 11601.56 11276.43
1990/10/31 11594.82 11227.94
1990/11/30 12107.15 11953.27
1990/12/31 12396.74 12286.77
1991/01/31 12797.31 12822.47
1991/02/28 13563.32 13739.28
1991/03/31 13992.01 14071.77
1991/04/30 14181.75 14105.54
1991/05/31 14687.74 14714.90
1991/06/30 14223.92 14040.96
1991/07/31 14652.61 14695.26
1991/08/31 14968.85 15043.54
1991/09/30 15025.07 14792.31
1991/10/31 14722.88 14990.53
1991/11/30 14364.47 14386.41
1991/12/31 15257.81 16032.22
1992/01/31 15282.57 15734.02
1992/02/29 15579.64 15938.56
1992/03/31 15183.54 15627.76
1992/04/30 15472.36 16087.22
1992/05/31 15975.73 16166.04
1992/06/30 15975.73 15925.17
1992/07/31 16470.84 16576.51
1992/08/31 16182.03 16236.69
1992/09/30 16116.01 16428.28
1992/10/31 16248.04 16485.78
1992/11/30 16941.20 17047.95
1992/12/31 17221.88 17257.64
1993/01/31 17547.33 17402.60
1993/02/28 18044.55 17639.28
1993/03/31 18605.05 18011.46
1993/04/30 18234.40 17575.59
1993/05/31 18659.29 18046.61
1993/06/30 18812.98 18098.95
1993/07/31 19210.75 18026.55
1993/08/31 20413.12 18709.76
1993/09/30 20358.88 18565.69
1993/10/31 21000.74 18950.00
1993/11/30 20114.79 18769.98
1993/12/31 20741.37 18997.10
1994/01/31 20920.86 19643.00
1994/02/28 20172.98 19110.67
1994/03/31 19395.17 18277.45
1994/04/30 19554.72 18511.40
1994/05/31 19594.61 18814.98
1994/06/30 19594.61 18354.02
1994/07/31 20083.23 18956.03
1994/08/31 20192.92 19733.23
1994/09/30 19923.68 19249.76
1994/10/31 19694.33 19682.88
1994/11/30 19066.10 18966.03
1994/12/31 19244.81 19247.30
1995/01/31 20063.52 19746.38
1995/02/28 20571.33 20515.90
1995/03/31 20757.87 21121.32
1995/04/30 21203.49 21743.34
1995/05/31 21752.75 22612.42
1995/06/30 22892.73 23137.71
1995/07/31 23649.25 23904.96
1995/08/31 24302.15 23964.96
1995/09/30 25120.86 24976.28
1995/10/31 25027.59 24887.12
1995/11/30 25680.48 25979.66
1995/12/31 26432.24 26480.03
1996/01/31 26432.24 27381.41
1996/02/29 25898.99 27635.23
1996/03/31 25012.34 27901.36
1996/04/30 25669.12 28312.63
1996/05/31 26413.47 29042.81
1996/06/30 26358.74 29153.46
1996/07/31 24541.65 27865.46
1996/08/31 25461.14 28453.15
1996/09/30 26325.90 30054.49
1996/10/31 25844.26 30883.39
1996/11/30 26741.86 33217.87
1996/12/31 26697.04 32559.82
1997/01/31 27688.03 34594.16
1997/02/28 27307.62 34865.38
1997/03/31 25545.84 33432.76
1997/04/30 25669.91 35428.69
1997/05/31 29007.37 37585.59
1997/06/30 30074.37 39269.43
$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,
1987. As the chart shows, by June 30, 1997, the value of the investment
would have grown to $30,074 - a 200.74% increase on the initial investment.
For comparison, look at how the S&P 500 did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $39,269 - a 292.69% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn,
the share price and return of
a fund that invests in stocks
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Harris Leviton, Portfolio Manager of Fidelity Advisor
Strategic Opportunities Fund
Q. HOW DID THE FUND PERFORM, HARRIS?
A. For the six months that ended June 30, 1997, the fund's Class A, Class T
and Class B shares had total returns of 12.88%, 12.96% and 12.65%,
respectively. During the same period, the capital appreciation funds
average posted a return of 10.16%, according to Lipper Analytical Services.
For the 12 months that ended June 30, 1997, the fund's Class A, Class T and
Class B shares had total returns of 14.60%, 14.67% and 14.10%,
respectively, while the capital appreciation funds average had a total
return of 14.44%.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE DURING THE FIRST HALF OF
THE YEAR?
A. I'd attribute the fund's performance to big investments in specific
stocks that did well. A lot of the large positions in the fund appreciated
considerably during the period, including the fund's top two holdings on
June 30, Whole Foods Market and American Bankers Insurance Group. Those two
stocks made up about 16% of the portfolio by the end of the period - a
position that really paid off for the fund.
Q. WHOLE FOODS MARKET AND AMERICAN BANKERS INSURANCE GROUP WERE THE FUND'S
TOP HOLDINGS AT THE BEGINNING OF THE PERIOD AS WELL. WHAT ATTRACTED YOU TO
THESE STOCKS?
A. Whole Foods Market, a diversified chain of natural foods supermarkets,
was a solid performer because natural foods have been gaining huge market
acceptance. People are getting more concerned about the quality of their
food supply, especially after recent news reports of food scares such as
mad-cow disease and tainted strawberries. The company has also benefited
from the move toward homeopathic medicine, where people use natural herbs
for cures. As for American Bankers Insurance, a specialty property-casualty
insurance company, I thought the stock's valuation was too cheap relative
to the company's earnings potential. New management pushed the company to
exit some less profitable lines of business and focus on its credit-based
accident, health and life insurance operations - where the company offers
insurance that pays your credit card bills if you get injured or lose your
job. In fact, American Bankers recently signed a contract with some
utilities, under which it arranged to offer similar insurance for paying
utility bills. Whole Foods Market and American Bankers Insurance are good
examples of "special situation" stocks.
Q. WERE THERE OTHER HOLDINGS THAT PERFORMED PARTICULARLY WELL DURING THE
PERIOD?
A. Sepracor, a maker of improved versions of existing drugs, was another
big stock for the fund. During the period, the company released good
clinical data for some of its drugs and also filed its first new drug
application for an asthma medication. A lot of the large-cap pharmaceutical
companies have done very well since the beginning of the year, but I think
they've gotten too expensive. Considering that I might have to pay
somewhere between 30 and 40 times earnings for the large-cap pharmaceutical
stocks that have participated in the latest market rally, Sepracor looked
cheap given what it has in its product pipeline.
Q. YOU'VE INCREASED THE FUND'S INVESTMENTS IN THE BASIC INDUSTRIES SECTOR
TO 11.5% AT THE END OF THE PERIOD FROM 7.2% SIX MONTHS EARLIER. WHAT WAS
YOUR REASONING BEHIND THIS MOVE?
A. Because I look for investments on a stock-by-stock basis, I didn't
intentionally drive up the fund's investments in the basic industries
sector. Rather, I increased the fund's investment in a few wire and cable
makers, which are included in this sector, and that helped the fund's
performance during the period. I've found that increased capital spending
is driving demand for the new technologies these companies develop. On top
of that, several of the stocks were very cheap relative to their potential
earnings growth. AFC Cable Systems and Cable Design Technology were among
the fund's top 10 holdings at the end of the period and both contributed to
the fund's performance.
Q. WERE THERE ANY SECTORS THAT WERE PARTICULARLY DISAPPOINTING DURING THE
PERIOD?
A. The casino-gaming stocks in the fund were disappointing because business
in Las Vegas has slowed down over the past four or five months. A lot of
companies are adding capacity and in the past when you added capacity,
business improved. That didn't happen during the period. Starting in 1998,
several new hotel complexes with added attractions will open and business
may rebound. Also, the stocks were cheap at the end of the period.
Q. WHAT'S YOUR OUTLOOK FOR THE SECOND HALF OF THE YEAR?
A. It really depends on the market's appetite for small stocks. The rally
in large-cap stocks is unprecedented in market history in terms of
magnitude, duration and valuation extremes. I think the massive investments
in the Standard & Poor's 500 Index funds - and the influence they're having
on the market's rise - has to end at some point. Either the market has to
come down or the small-cap stocks are going to have to come up. During the
first six months of the year, the fund lagged the S&P 500 every month
except for May, when it dramatically outperformed the broader market. The
market's performance may continue in that fashion during the second half -
where you'll see periods of underperformance by small stocks relative to
the index, followed by short periods of dramatic outperformance.
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, 1997,
more than $592 million
MANAGER: Harris Leviton,
since 1996; joined Fidelity in
1986
(checkmark)
HARRIS LEVITON ON DISCOVERING
"SPECIAL SITUATION" STOCKS IN
THE ONGOING BULL MARKET:
"When a bull market is as
long and large as this one
has been, it is tough to find
attractive stocks. You have to
look in a lot of unusual places.
As the bull market
continues, most investors don't
spend as much time
investigating the neglected
sectors of the market. In
contrast, I investigate all sorts
of small- and mid-cap stocks
and foreign companies. I also
spend a lot of time looking at
broken IPOs - companies
that went public a few years
ago, traded up on the hype of
their initial public offerings and
then dwindled after analysts
and the public lost interest. At
the end of May, I visited about
10 companies that had gone
public a few years ago and
their stocks were trading at
50% to 70% off of their highs.
You can find a lot of
opportunities by just going
around digging under rocks. If
I find a cheap stock, I look for
improving company
fundamentals. I also look for a
catalyst for improvement,
such as a new product cycle
or cost cutting, and try to get
in ahead of the crowd."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Whole Foods Market, Inc. 8.5 4.7
American Bankers Insurance Group, Inc. 7.9 5.4
Sepracor, Inc. 4.4 2.3
Nintendo Co. Ltd Ord. 3.8 4.3
AFC Cable Systems, Inc. 2.8 2.3
Cable Design Technology Corp. 2.8 1.2
Lennar Corp. 2.5 1.7
Harveys Casino Resorts 2.4 1.7
CVS Corp. 1.9 1.2
I-Stat Corp. 1.8 1.7
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Media & Leisure 13.8 15.7
Retail & Wholesale 13.1 8.2
Technology 12.4 11.8
Basic Industries 11.5 7.2
Health 9.9 7.7
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 * AS OF DECEMBER 31, 1996 **
Row: 1, Col: 1, Value: 7.9
Row: 1, Col: 2, Value: 1.1
Row: 1, Col: 3, Value: 91.0
Stocks 93.2%
Bonds 1.4%
Short-term
investments 5.4%
FOREIGN
INVESTMENTS 10.1%
Stocks 91.4%
Bonds 0.7%
Short-term
investments 7.9%
FOREIGN
INVESTMENTS 10.8%
Row: 1, Col: 1, Value: 5.4
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 92.59999999999999
*
**
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 91.2%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.0%
Doncasters PLC sponsored ADR 4,000 $ 92,500
DEFENSE ELECTRONICS - 0.4%
Herley Microwave Systems, Inc. (a)(c) 183,500 2,362,562
TOTAL AEROSPACE & DEFENSE 2,455,062
BASIC INDUSTRIES - 11.5%
IRON & STEEL - 0.5%
Cold Metal Products, Inc. (a) 179,900 1,011,937
Quanex Corp. 10,000 306,875
Steel Dynamics, Inc. (a) 63,500 1,587,500
2,906,312
METALS & MINING - 9.7%
AFC Cable Systems, Inc. (a)(c) 627,300 16,937,100
Alumax, Inc. (a) 216,500 8,213,469
Cable Design Technology Corp. (a) 569,700 16,770,544
Essex International, Inc. 108,900 3,035,587
General Cable Corp. 250,000 6,406,250
Inco Ltd. 200,000 5,975,446
Ryerson Tull, Inc. Class A 20,000 330,000
57,668,396
PAPER & FOREST PRODUCTS - 1.3%
Fort Howard Corp. (a) 84,700 4,287,938
Mercer International, Inc. (SBI) 407,900 3,875,050
8,162,988
TOTAL BASIC INDUSTRIES 68,737,696
CONSTRUCTION & REAL ESTATE - 3.7%
CONSTRUCTION - 2.9%
Beazer Homes USA, Inc. (a) 152,200 2,435,200
Lennar Corp. 459,200 14,665,700
17,100,900
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 0.8%
Jameson Co. 230,000 $ 2,702,500
Sovran Self Storage, Inc. 68,700 2,009,475
4,711,975
TOTAL CONSTRUCTION & REAL ESTATE 21,812,875
DURABLES - 5.5%
CONSUMER ELECTRONICS - 1.2%
Movado Group, Inc. (c) 275,000 7,012,500
Tag-Heuer International SA sponsored ADR (a) 11,000 165,687
7,178,187
HOME FURNISHINGS - 0.9%
Maxim Group, Inc. (a) 504,300 5,547,300
TEXTILES & APPAREL - 3.4%
Converse, Inc. (a) 185,100 4,095,337
Deckers Outdoor Corp. (a)(c) 596,900 4,402,138
Galey & Lord, Inc. (a) 115,800 2,171,250
Maxwell Shoe Co., Inc. Class A (a)(c) 758,800 9,295,300
19,964,025
TOTAL DURABLES 32,689,512
FINANCE - 9.5%
INSURANCE - 9.5%
American Bankers Insurance Group, Inc. 739,800 46,792,350
Amerus Life Holdings, Inc. 132,900 3,704,587
Centris Group, Inc. 42,700 902,038
Norwich Union PLC (a) 56,000 297,848
Old Republic International Corp. 156,500 4,743,906
56,440,729
HEALTH - 9.9%
DRUGS & PHARMACEUTICALS - 6.0%
Alliance Pharmaceutical Corp. (a) 357,600 3,598,350
Creative Biomolecules, Inc. (a) 335,300 2,368,056
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Myriad Genetics (a) 140,000 $ 3,780,000
Sepracor, Inc. (a) 1,004,700 25,933,819
35,680,225
MEDICAL EQUIPMENT & SUPPLIES - 3.9%
Cygnus, Inc. (a) 414,250 7,145,812
Heartport, Inc. (a) 151,100 2,663,138
Hemasure, Inc. (a) 359,000 987,250
I-Stat Corp. (a)(c) 639,700 10,954,863
Physiometrix, Inc. (a) 165,000 515,625
Resound Corp. (a) 195,000 1,096,875
23,363,563
TOTAL HEALTH 59,043,788
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
Columbus McKinnon Corp. 257,600 4,894,400
Regal-Beloit Corp. 107,300 2,843,450
Sulzer AG (Reg.) 12,000 10,263,428
T B Wood's Corp. 164,000 2,388,250
20,389,528
MEDIA & LEISURE - 13.6%
BROADCASTING - 0.8%
American Telecasting, Inc. (a) 510,000 318,750
Ascent Entertainment Group, Inc. (a) 64,500 588,562
CAI Wireless Systems, Inc. (a) 1,125,615 1,195,966
Heartland Wireless Communications, Inc. (a) 429,167 1,019,272
People's Choice TV Corp. (a)(c) 679,675 1,104,472
Wireless One, Inc. (a) 227,600 583,225
4,810,247
ENTERTAINMENT - 3.7%
Film Roman, Inc. (a) 85,000 148,750
Harveys Casino Resorts (c) 811,700 14,255,481
MGM Grand, Inc. (a) 200,500 7,418,500
21,822,731
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 4.1%
Equity Marketing, Inc. (a) 10,000 $ 235,000
Just Toys, Inc. (a)(c) 253,900 349,113
Nintendo Co. Ltd. Ord. 268,900 22,516,812
Silicon Gaming, Inc. (a) 109,800 1,427,400
24,528,325
LODGING & GAMING - 3.1%
Circus Circus Enterprises, Inc. (a) 364,300 8,970,887
WMS Industries, Inc. 379,100 9,501,194
18,472,081
PUBLISHING - 0.2%
Scholastic Corp. (a) 38,700 1,354,500
RESTAURANTS - 1.7%
Foodmaker, Inc. (a) 130,000 2,128,750
Morton's Restaurant Group, Inc. (a)(c) 414,800 8,244,150
10,372,900
TOTAL MEDIA & LEISURE 81,360,784
NONDURABLES - 4.1%
AGRICULTURE - 1.3%
Saskatchewan Wheat Pool (a):
Class B (non-vtg.) 478,300 5,889,328
Class B (b) 158,000 1,945,460
7,834,788
FOODS - 0.1%
Earthgrains Co. 13,200 865,425
Tomkins PLC Ord. 3,425 14,824
880,249
HOUSEHOLD PRODUCTS - 1.1%
Church & Dwight Co., Inc. 251,800 6,735,650
TOBACCO - 1.6%
Philip Morris Companies, Inc. 208,300 9,243,313
TOTAL NONDURABLES 24,694,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
PRECIOUS METALS - 1.5%
Getchell Gold Corp. (a) 32,200 $ 1,135,050
Newmont Mining Corp. 200,000 7,800,000
8,935,050
RETAIL & WHOLESALE - 13.1%
APPAREL STORES - 0.3%
Charming Shoppes, Inc. (a) 211,400 1,103,244
Footstar, Inc. (a) 19,922 520,462
1,623,706
DRUG STORES - 1.9%
CVS Corp. 219,600 11,254,500
GENERAL MERCHANDISE STORES - 1.5%
Freds, Inc. Class A (c) 590,300 8,854,500
GROCERY STORES - 8.8%
Whole Foods Market, Inc. (a)(c) 1,530,300 50,691,187
Wild Oats Markets, Inc. 80,000 2,040,000
52,731,187
RETAIL & WHOLESALE, MISCELLANEOUS - 0.6%
Toys "R" Us, Inc. (a) 105,638 3,697,330
TOTAL RETAIL & WHOLESALE 78,161,223
SERVICES - 0.2%
LEASING & RENTAL - 0.2%
Hanover Compressor Co. 7,800 7,800
Hertz Corp. Class A 26,800 964,800
972,600
SERVICES - 0.0%
Pierce Leahy Corp. 28,800 28,800
TOTAL Services 1,001,400
TECHNOLOGY - 12.1%
COMMUNICATIONS EQUIPMENT - 0.6%
Alcatel Alsthom Compagnie Generale d'Electricite
SA sponsored ADR 129,900 3,279,975
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - 9.6%
Activision, Inc. (a) 135,000 $ 1,940,625
BancTec, Inc. (a) 270,000 7,003,125
Broadway & Seymour, Inc. (a) 88,300 1,114,787
Broderbund Software, Inc. (a) 145,000 3,579,687
CACI International, Inc. Class A (a) 116,100 1,770,525
CompUSA, Inc. (a) 427,200 9,184,800
Eidos PLC sponsored ADR 389,000 4,765,250
GT Interactive Software, Inc. (a) 188,100 2,233,688
Maxis, Inc. (a) 254,600 3,055,200
Midway Games, Inc. (a)(c) 291,300 6,262,950
Spectrum Holobyte, Inc. (a)(c) 2,056,500 10,025,438
Sybase, Inc. (a) 421,700 6,272,788
57,208,863
COMPUTERS & OFFICE EQUIPMENT - 1.3%
Creative Technology Corp. Ltd. (a) 239,400 4,069,800
Performance Technologies, Inc. (a) 230,000 3,507,500
Sandisk Corp. 4,500 65,812
7,643,112
ELECTRONIC INSTRUMENTS - 0.1%
ORBIT/FR, Inc. 75,000 731,250
ELECTRONICS - 0.5%
AVX Corp. 99,700 2,691,900
ESS Technology, Inc. 35,000 470,313
3Dfx Interactive, Inc. 1,100 14,713
3,176,926
TOTAL TECHNOLOGY 72,040,126
TRANSPORTATION - 2.7%
AIR TRANSPORTATION - 1.6%
Reno Air, Inc. (a)(c) 934,800 8,062,650
Ryanair Holdings PLC sponsored ADR 50,600 1,372,525
9,435,175
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 1.1%
Hunt (J.B.) Transport Services, Inc. 435,600 $ 6,479,550
SPACEHAB, Inc. (a) 30,000 266,250
6,745,800
TOTAL TRANSPORTATION 16,180,975
TOTAL COMMON STOCKS
(Cost $488,256,516) 543,942,748
CONVERTIBLE PREFERRED STOCKS - 0.2%
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Triathalon Broadcasting Co. $0.945
depositary share (Cost $1,226,360) 114,080 1,026,720
CONVERTIBLE BONDS - 0.7%
MOODY'S PRINCIPAL
RATINGS AMOUNT
DURABLES - 0.4%
TEXTILES & APPAREL - 0.4%
Converse, Inc. 7%, 6/1/04 - $ 1,945,000 2,197,850
TECHNOLOGY - 0.3%
ELECTRONICS - 0.3%
Richardson Electronics, Ltd.:
8 1/4%, 6/15/06 B3 1,978,000 1,701,080
7 1/4%, 12/15/06 B3 404,000 307,040
TOTAL TECHNOLOGY 2,008,120
TOTAL CONVERTIBLE BONDS
(Cost $4,024,180) 4,205,970
CASH EQUIVALENTS - 7.9%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 $ 46,890,723 $ 46,883,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $540,390,056) $ 596,058,438
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 $1,945,460 or 0.3% of net
assets.
3. Affiliated company (see Note 11 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 89.2%
Japan 3.8
Canada 3.0
Switzerland 1.8
Others (individually less than 1%) 2.2
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $540,412,067. Net unrealized appreciation aggregated
$55,646,371, of which $127,827,014 related to appreciated investment
securities and $72,180,643 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 596,058,438
agreements of $46,883,000) (cost $540,390,056) -
See accompanying schedule
Cash 887,485
Receivable for investments sold 2,467,926
Receivable for fund shares sold 224,902
Dividends receivable 352,690
Interest receivable 46,726
Other receivables 73,080
Prepaid expenses 3,354
TOTAL ASSETS 600,114,601
LIABILITIES
Payable for investments purchased $ 3,660,151
Payable for fund shares redeemed 3,376,170
Accrued management fee 198,149
Distribution fees payable 273,906
Other payables and accrued expenses 196,273
TOTAL LIABILITIES 7,704,649
NET ASSETS $ 592,409,952
Net Assets consist of:
Paid in capital $ 490,060,859
Accumulated net investment loss (723,376)
Accumulated undistributed net realized gain (loss) on 47,393,519
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 55,678,950
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 592,409,952
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $24.46
CLASS A:
NET ASSET VALUE and redemption price per share
($918,657 (divided by) 37,559 shares)
Maximum offering price per share (100/94.75 of $24.46) $25.82
CLASS T: $24.68
NET ASSET VALUE and redemption price per share
($469,444,476 (divided by) 19,020,008 shares)
Maximum offering price per share (100/96.50 of $24.68) $25.58
CLASS B: $24.24
NET ASSET VALUE and offering price per share
($97,397,263 (divided by) 4,018,431 shares) A
INITIAL CLASS: $24.98
NET ASSET VALUE and redemption price per share
($20,689,260 (divided by) 828,072 shares)
Maximum offering price per share (100/96.50 of $24.98) $25.89
INSTITUTIONAL CLASS: $24.52
NET ASSET VALUE, offering price and redemption price
per share ($3,960,296 (divided by) 161,541 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 2,102,889
Dividends (including $133,100 received from
affiliated issuers)
Interest 1,025,004
TOTAL INCOME 3,127,893
EXPENSES
Management fee $ 1,771,758
Basic fee
Performance adjustment (591,597)
Transfer agent fees 671,038
Distribution fees 1,647,530
Accounting fees and expenses 165,185
Non-interested trustees' compensation 2,207
Custodian fees and expenses 26,888
Registration fees 64,178
Audit 35,364
Legal 4,243
Interest 16,435
Reports to shareholders 75,356
Miscellaneous 1,148
Total expenses before reductions 3,889,733
Expense reductions (39,859) 3,849,874
NET INVESTMENT INCOME (LOSS) (721,981)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain (loss) of 47,771,796
$1,050,483 on sales of investments in affiliated
issuers)
Foreign currency transactions (2,997) 47,768,799
Change in net unrealized appreciation (depreciation) on:
Investment securities 23,247,938
Assets and liabilities in foreign currencies 11,943 23,259,881
NET GAIN (LOSS) 71,028,680
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 70,306,699
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ (721,981) $ 5,065,025
Net investment income (loss)
Net realized gain (loss) 47,768,799 101,103,020
Change in net unrealized appreciation (depreciation) 23,259,881 (96,084,415)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 70,306,699 10,083,630
FROM OPERATIONS
Distributions to shareholders - (5,501,432)
From net investment income
From net realized gain (23,324,662) (70,113,368)
TOTAL DISTRIBUTIONS (23,324,662) (75,614,800)
Share transactions - net increase (decrease) (176,628,154) 36,171,237
TOTAL INCREASE (DECREASE) IN NET ASSETS (129,646,117) (29,359,933)
NET ASSETS
Beginning of period 722,056,069 751,416,002
End of period (including undistributed net $ 592,409,952 $ 722,056,069
investment income (loss) of $(723,376) and
$1,667,423, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 F
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.51 $ 23.48
Income from Investment Operations
Net investment income (loss) E (.04) .08
Net realized and unrealized gain (loss) 2.86 1.26
Total from investment operations 2.82 1.34
Less Distributions
From net investment income - (.37)
From net realized gain (.87) (1.94)
Total distributions (.87) (2.31)
Net asset value, end of period $ 24.46 $ 22.51
TOTAL RETURN B, C 12.88% 5.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 919 $ 638
Ratio of expenses to average net assets 1.49% A, I .99% A,
D
Ratio of expenses to average net assets after expense 1.48% A, G .97% A,
reductions G
Ratio of net investment income (loss) to average net assets (.40)% A 1.00% A
Portfolio turnover 41% A 151%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO DECEMBER 31, 1996.
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 6 OF
NOTES TO FINANCIAL STATEMENTS).
H 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.
I FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE MONTHS YEARS ENDED SEPTEMBER 30,
ENDED 31, ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 F 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.69 $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53 $ 21.38
Income from Investment Operations
Net investment income (loss) (.02) E .17 E .39 .10 E .39 E .33 .61
Net realized and unrealized gain (loss) 2.88 .18 6.73 (.75) (.81) 4.44 .58
Total from investment operations 2.86 .35 7.12 (.65) (.42) 4.77 1.19
Less Distributions
From net investment income - (.19) (.39) (.35) (.43) (.57) (.62)
From net realized gain (.87) (2.35) (.55) (.26) (1.71) (1.21) (2.42)
Total distributions (.87) (2.54) (.94) (.61) (2.14) (1.78) (3.04)
Net asset value, end of period $ 24.68 $ 22.69 $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53
TOTAL RETURN B, C 12.96% 1.53% 38.16% (3.26)% (2.24)% 26.33% 7.26%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 469,444 $ 560,645 $ 619,993 $ 375,691 $ 385,349 $ 269,833 $ 194,710
Ratio of expenses to average net assets 1.26% A 1.28% 1.61% 1.73% A, G 1.85% 1.57% 1.46%
D
Ratio of expenses to average net assets after 1.25% A, 1.27% 1.61% 1.73% A 1.84% 1.57% 1.46%
expense reductions H H H
Ratio of net investment income (loss) to (.17)% A .70% 1.90% 2.03% A 1.89% 2.06% 3.22%
average net assets
Portfolio turnover 41% A 151% 142% 228% A 159% 183% 211%
Average commission rate I $ .0420 $ .0409
</TABLE>
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D INCLUDES
REIMBURSEMENT OF $.03 PER SHARE FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. E
NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD. F 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. G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER. H FMR OR THE FUND HAS ENTERED INTO VARYING
ARANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE
CLASS' EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). I 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE YEAR ENDED
ENDED 31, MONTHS SEPTEMBER
JUNE 30, 1997 ENDED 30,
DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 E
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 22.36 $ 24.56 $ 18.57 $ 19.98 $ 19.65
beginning of period
Income from Investment
Operations
Net investment (.08) D .04 D .38 .06 D .05 D
income (loss)
Net realized and 2.83 .18 6.54 (.74) .28
unrealized gain
(loss)
Total from investment 2.75 .22 6.92 (.68) .33
operations
Less Distributions
From net investment - (.07) (.38) (.47) -
income
From net realized gain (.87) (2.35) (.55) (.26) -
Total distributions (.87) (2.42) (.93) (.73) -
Net asset value, $ 24.24 $ 22.36 $ 24.56 $ 18.57 $ 19.98
end of period
TOTAL RETURN B, C 12.65% 1.00% 37.35% (3.41)% 1.68%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 97,397 $ 98,535 $ 87,566 $ 17,090 $ 8,824
(000 omitted)
Ratio of expenses to 1.82% A 1.80% 2.11% 2.58% A 2.63% A
average net assets , F
Ratio of expenses to 1.81% A, 1.79% 2.10% G 2.53% A, 2.63% A
average net assets G G G
after expense
reductions
Ratio of net investment (.73)% A .18% 1.40% 1.22% A 1.11% A
income (loss) to
average net assets
Portfolio turnover 41% A 151% 142% 228% A 159%
Average commission $ .0420 $ .0409
rate H
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME (LOSS) 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 6 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE MONTHS YEARS ENDED SEPTEMBER 30,
ENDED 31, ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 F 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.90 $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72 $ 21.55
Income from Investment Operations
Net investment income .03 E .28 E .50 .13 E .54 E .45 .73
Net realized and unrealized gain (loss) 2.92 .19 6.79 (.74) (.81) 4.46 .58
Total from investment operations 2.95 .47 7.29 (.61) (.27) 4.91 1.31
Less Distributions
From net investment income - (.32) (.50) (.50) (.51) (.70) (.72)
From net realized gain (.87) (2.35) (.55) (.26) (1.71) (1.21) (2.42)
Total distributions (.87) (2.67) (1.05) (.76) (2.22) (1.91) (3.14)
Net asset value, end of period $ 24.98 $ 22.90 $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72
TOTAL RETURN B, C 13.24% 2.00% 38.75% (3.02)% (1.51)% 26.98% 7.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 20,689 $ 20,406 $ 23,428 $ 17,583 $ 18,850 $ 20,707 $ 17,933
Ratio of expenses to average net assets .79% A .82% 1.04% 1.14% A 1.15% .89% .87%
D
Ratio of expenses to average net assets after .78% A, .81% G 1.03% G 1.11% A, G 1.14% .89% .87%
expense reductions G G
Ratio of net investment income to average net .30% A 1.16% 2.47% 2.65% A 2.60% 2.74% 3.78%
assets
Portfolio turnover 41% A 151% 142% 228% A 159% 183% 211%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D INCLUDES
REIMBURSEMENT OF $.03 PER SHARE FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. E
NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD. F 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. 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 6 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 ENDED
JUNE 30, 1997 YEARS ENDED
DECEMBER 31,
(UNAUDITED) 1996 1995 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.57 $ 24.80 $ 22.35
Income from Investment Operations
Net investment income (loss) (.04) D .29 D .55
Net realized and unrealized gain (loss) 2.86 .17 3.00
Total from investment operations 2.82 .46 3.55
Less Distributions
From net investment income - (.34) (.55)
From net realized gain (.87) (2.35) (.55)
Total distributions (.87) (2.69) (1.10)
Net asset value, end of period $ 24.52 $ 22.57 $ 24.80
TOTAL RETURN B, C 12.85% 1.99% 15.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,960 $ 41,832 $ 20,429
Ratio of expenses to average net assets 1.24% A, F .78% .97% A
Ratio of expenses to average net assets after 1.23% A, G .76% G .96% A,
expense reductions G
Ratio of net investment income (loss) to average (.30)% A 1.21% 2.55% A
net assets
Portfolio turnover 41% A 151% 142%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
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 ( SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
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 6 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Strategic Opportunities Fund (the fund) is a fund of
Fidelity Advisor Series VIII (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and Institutional
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, the common expenses of the fund, and certain fund-level expense
reductions 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, expenses, and expense
reductions.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities with remaining maturities
of sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net investment income accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
and the U.S. dollar amount actually received. The effects of changes in
foreign currency exchange rates on investments in securities are included
with the net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
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 passive
foreign investment companies (PFIC), market discount and losses deferred
due to wash sales. The fund also utilized earnings and profits distributed
to shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated net investment loss and accumulated undistributed net realized
gain (loss) on investments and foreign currency transactions
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the
SEC, the fund, along with other registered investment companies having
management contracts with FMR, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
fund to borrow from, or lend money to, other participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered.
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, the fund had no investments in restricted securities
(excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $114,868,059 and $324,634,277, 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. The annual individual
fund fee rate is .30%. 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 basic fee is subject to a performance adjustment (up to a maximum of
".20% of the fund's average net assets over the performance period) based
on the investment performance of the lowest performing class as compared to
the appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annualized rate of .41% of average net
assets after the performance adjustment. Effective July 1, 1997 the fund's
performance adjustment is based on the asset weighted average return of all
classes as compared to the appropriate index over a specific period of
time.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares, except for the Initial Class (collectively referred
to as "the Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. This fee is based on the following annual rates of the average
net assets of each applicable class:
CLASS A .25%
CLASS T .50%
CLASS B 1.00%*
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 888 $ 888
CLASS T 1,177,927 1,177,927
CLASS B 468,715 117,178
$ 1,647,530 $ 1,295,993
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 5.25% for
selling Class A shares and 3.50% for selling Class T and Initial Class
shares of the fund, respectively, and the proceeds of a contingent deferred
sales charge levied on Class B share redemptions occurring within six years
of purchase (five years prior to January 2, 1997). The Class B charge is
based on declining rates which range from 5% to 1% (4% to 1% prior to
January 2, 1997) 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. Effective August 1, 1997, Class A's
maximum sales charge was increased to 5.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 11,682 $ 9,408
CLASS T 87,987 72,120
CLASS B 193,469 0 *
INITIAL CLASS 259 0
$ 293,397 $ 81,528
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 1,329 .38% ***
CLASS T ** FIIOC * 525,196 .23% ***
CLASS B FIIOC * 119,317 .26% ***
INITIAL CLASS FSC * 18,955 .20% ***
INSTITUTIONAL CLASS FIIOC * 6,241 .24% ***
$ 671,038
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AND
FIDELITY SERVICE CO., INC. (FSC), AFFILIATES OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED
CERTAIN TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES TO FIIOC
FOR WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH FEES.
*** ANNUALIZED
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 $86,806 for the period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a borrower. The
maximum loan and the average daily loan balances during the period for
which loans were outstanding amounted to $36,999,000 and $15,594,143,
respectively. The weighted average interest rate was 5.42%.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A 1.75% $ 11,608
INSTITUTIONAL CLASS 1.50% 914
$ 12,522
FMR also voluntarily agreed to reimburse certain transfer agent,
registration and other class specific expenses for Class A and
Institutional Class. For the period, the reimbursement reduced these
expenses by $3,127 and $1,684, respectively.
FMR has also 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 $18,850 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $3,275 under the
custodian arrangement, and each applicable class' expenses were reduced as
follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST
CREDITS
INITIAL CLASS $ 401
7. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
11% of the total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996 A
CLASS A
From net investment income $ - $ 9,050
From net realized gain 23,625 47,453
Total $ 23,625 $ 56,503
CLASS T
From net investment income $ - $ 4,356,302
From net realized gain 18,661,262 54,934,732
Total $ 18,661,262 $ 59,291,034
CLASS B
From net investment income $ - $ 291,486
From net realized gain 3,719,315 9,460,141
Total $ 3,719,315 $ 9,751,627
INITIAL CLASS
From net investment income $ - $ 263,298
From net realized gain 742,870 1,978,165
Total $ 742,870 $ 2,241,463
INSTITUTIONAL CLASS
From net investment income $ - $ 581,296
From net realized gain 177,590 3,692,877
Total $ 177,590 $ 4,274,173
$ 23,324,662 $ 75,614,800
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
9. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1997 1996 A 1997 1996 A
CLASS A 17,253 26,335 $ 385,972 $ 633,035
Shares sold
Reinvestment of distributions 1,055 2,536 23,641 56,498
Shares redeemed (9,089) (531) (208,268) (12,990)
Net increase (decrease) 9,219 28,340 $ 201,345 $ 676,543
CLASS T 1,605,394 7,239,477 $ 36,349,232 $ 173,637,131
Shares sold
Reinvestment of distributions 702,987 2,215,089 15,866,387 50,421,264
Shares redeemed (7,999,696) (9,664,112) (180,656,556) (231,598,779)
Net increase (decrease) (5,691,315) (209,546) $ (128,440,937) $ (7,540,384)
CLASS B 320,457 1,826,263 $ 7,137,402 $ 43,251,259
Shares sold
Reinvestment of distributions 155,073 422,830 3,447,259 9,473,517
Shares redeemed (864,175) (1,407,472) (19,120,949) (33,157,193)
Net increase (decrease) (388,645) 841,621 $ (8,536,288) $ 19,567,583
INITIAL CLASS 4,005 7,958 $ 94,673 $ 193,575
Shares sold
Reinvestment of distributions 29,056 86,899 663,041 1,996,834
Shares redeemed (96,001) (137,073) (2,173,271) (3,325,386)
Net increase (decrease) (62,940) (42,216) $ (1,415,557) $ (1,134,977)
INSTITUTIONAL CLASS 133,815 1,132,115 $ 3,005,701 $ 27,291,041
Shares sold
Reinvestment of distributions 6,165 182,073 138,401 4,097,341
Shares redeemed (1,831,791) (284,588) (41,580,819) (6,785,910)
Net increase (decrease) (1,691,811) 1,029,600 $ (38,436,717) $ 24,602,472
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
10. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 15,925
CLASS T 13,303
CLASS B 12,071
INITIAL CLASS 7,182
INSTITUTIONAL CLASS 15,697
$ 64,178
11. 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. $ - $ 867,000 $ - $ 16,937,100
Deckers Outdoor Corp. 10,150 - - 4,402,138
Freds, Inc. Class A - - 59,030 8,854,500
Harveys Casino Resorts 1,196,210 92,880 74,070 14,255,481
Herley Microwave Systems, Inc. - 144,375 - 2,362,562
I-Stat Corp. 1,246,197 377,754 - 10,954,863
Just Toys, Inc. - - - 349,113
Maxwell Shoe Co., Inc. Class A - - - 9,295,300
Midway Games, Inc. 166,070 - - 6,262,950
Morton's Restaurant Group, Inc. - - - 8,244,150
Movado Group, Inc. - - - 7,012,500
People's Choice TV Corp. - - - 1,104,472
Reno Air, Inc. - - - 8,062,650
Spectrum Holobyte, Inc. 1,084,327 - - 10,025,438
Whole Foods Market, Inc. - - - 50,691,187
TOTALS $ 3,702,954 $ 1,482,009 $ 133,100 $158,814,404
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on June 18, 1997. The
results of votes taken among shareholders on proposals before them are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 32,670,431.969 97.30
Withheld 905,735.323 2.70
TOTAL 33,576,167.292 100.00
RALPH F. COX
Affirmative 32,661,943.620 97.28
Withheld 914,223.672 2.72
TOTAL 33,576,167.292 100.00
PHYLLIS BURKE DAVIS
Affirmative 32,639,275.890 97.21
Withheld 936,891.402 2.79
TOTAL 33,576,167.292 100.00
ROBERT M. GATES
Affirmative 32,647,573.114 97.23
Withheld 928,594.178 2.77
TOTAL 33,576,167.292 100.00
EDWARD C. JOHNSON 3RD
Affirmative 32,653,017.035 97.25
Withheld 923,150.257 2.75
TOTAL 33,576,167.292 100.00
E. BRADLEY JONES
Affirmative 32,635,245.079 97.20
Withheld 940,922.213 2.80
TOTAL 33,576,167.292 100.00
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 32,673,572.230 97.31
Withheld 902,595.062 2.69
TOTAL 33,576,167.292 100.00
PETER S. LYNCH
Affirmative 32,665,741.087 97.29
Withheld 910,426.205 2.71
TOTAL 33,576,167.292 100.00
WILLIAM O. MCCOY
Affirmative 32,665,426.588 97.29
Withheld 910,740.704 2.71
TOTAL 33,576,167.292 100.00
GERALD C. MCDONOUGH
Affirmative 32,645,173.119 97.23
Withheld 930,994.173 2.77
TOTAL 33,576,167.292 100.00
MARVIN L. MANN
Affirmative 32,667,258.985 97.29
Withheld 908,908.307 2.71
TOTAL 33,576,167.292 100.00
THOMAS R. WILLIAMS
Affirmative 32,646,425.418 97.23
Withheld 929,741.874 2.77
TOTAL 33,576,167.292 100.00
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 31,181,969.270 92.87
Against 265,724.175 .79
Abstain 2,128,473.847 6.34
TOTAL 33,576,167.292 100.00
PROPOSAL 3
To amend the Declaration of Trust to provide dollar-based voting rights for
shareholders of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,126,370.108 87.12
Against 1,000,318.214 3.77
Abstain 2,419,170.970 9.11
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 4
To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,207,061.951 87.42
Against 870,816.482 3.28
Abstain 2,467,980.859 9.30
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 5
To amend the Declaration of Trust to provide each fund with the ability to
invest all of its assets in another open-ended investment company with
substantially the same investment objective and policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 22,687,221.159 85.46
Against 1,327,189.441 5.00
Abstain 2,531,448.692 9.54
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 6
To adopt a new fundamental investment policy for Strategic Opportunities
Fund to permit the fund to invest all of its assets in another open-end
investment company with substantially the same investment objectives and
policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,502,130.425 84.45
Against 665,332.546 4.89
Abstain 1,451,551.531 10.66
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 7
To approve an amended management contract for Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,194,953.682 87.83
Against 452,965.106 2.80
Abstain 1,514,968.714 9.37
TOTAL 16,162,887.502 100.00
PROPOSAL 10
To approve an amended Sub-Advisory Agreement between Strategic
Opportunities Fund and FMR Far East.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,285,781.165 88.39
Against 368,239.310 2.28
Abstain 1,508,867.027 9.33
TOTAL 16,162,887.502 100.00
PROPOSAL 11
To approve an amended Sub-Advisory Agreement between Strategic
Opportunities Fund and FMR U.K.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,323,952.957 88.62
Against 345,515.729 2.14
Abstain 1,493,418.816 9.24
TOTAL 16,162,887.502 100.00
PROPOSAL 12
To amend the Class B Distribution and Service Plan for Strategic
Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 1,694,126.749 79.63
Against 94,643.399 4.45
Abstain 338,759.404 15.92
TOTAL 2,127,529.552 100.00
PROPOSAL 13
To amend the Class T Distribution and Service Plan for Strategic
Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 9,246,908.777 84.95
Against 370,816.918 3.41
Abstain 1,266,692.369 11.64
TOTAL 10,884,418.064 100.00
PROPOSAL 14
To approve an agreement and plan providing for the reorganization of
Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,679,951.701 85.76
Against 403,539.968 2.96
Abstain 1,535,522.833 11.28
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 16
To amend the fundamental investment limitation on diversification for
Strategic Opportunities Fund to permit increased investment in the
securities of any single issuer.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,085,311.192 81.40
Against 1,066,436.724 7.83
Abstain 1,467,266.586 10.77
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 17
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning diversification to exclude investments in other investment
companies from the limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,069,685.759 81.28
Against 1,053,090.996 7.73
Abstain 1,496,237.747 10.99
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 18
To amend the fundamental investment limitation concerning real estate for
Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,076,196.350 81.33
Against 1,025,367.020 7.53
Abstain 1,517,451.132 11.14
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 19
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning senior securities.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,584,067.577 85.06
Against 501,562.178 3.68
Abstain 1,533,384.747 11.26
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 20
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning short sales of securities and replace it with a
similar non-fundamental investment limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,001,582.538 80.78
Against 1,087,062.521 7.98
Abstain 1,530,369.443 11.24
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 21
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning margin purchases and replace it with a similar
non-fundamental investment limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,992,209.318 80.71
Against 1,100,116.876 8.08
Abstain 1,526,688.308 11.21
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 22
To amend Strategic Opportunities Fund's fundamental investment concerning
borrowing limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,955,546.335 80.44
Against 1,149,393.710 8.44
Abstain 1,514,074.457 11.12
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 23
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning the underwriting of securities.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,509,524.223 84.51
Against 573,168.443 4.21
Abstain 1,536,321.836 11.28
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 24
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning the concentration of its investments in a single industry.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,441,217.081 84.01
Against 678,505.413 4.98
Abstain 1,499,302.008 11.01
TOTAL 13,619,024.502 100.00
Not Voting 2,543,863.000
PROPOSAL 25
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning lending.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,970,495.148 80.55
Against 1,121,522.738 8.24
Abstain 1,526,996.616 11.21
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 26
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investments in other investment companies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,452,450.853 84.09
Against 663,648.453 4.87
Abstain 1,502,915.196 11.04
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 27
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investing in oil, gas, and mineral exploration
programs.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,008,669.024 80.83
Against 1,118,266.376 8.21
Abstain 1,492,079.102 10.96
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 28
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investments in securities of newly-formed issuers.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,023,807.584 80.95
Against 1,085,872.726 7.97
Abstain 1,509,334.192 11.08
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
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
Robert C. Pozen, Senior Vice President
William J. Hayes, Vice President
Abigail Johnson, Vice President
Harris Leviton, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
STRATEGIC OPPORTUNITIES
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1997
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 18 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 27 Notes to the financial statements.
PROXY VOTING RESULTS 37
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will greatly
reduce your vulnerability to any single decline. We know from experience,
for example, that stock prices have gone up over longer periods of time,
have significantly outperformed other types of investments and have stayed
ahead of inflation.
Second, you can further manage your investing risk through diversification.
A stock mutual fund, for instance, is already diversified, because it
invests in many different companies. You can increase your diversification
further by investing in a number of different stock funds, or in such other
investment categories as bonds. If you have a short investment time
horizon, you might want to consider moving some of your investment into a
money market fund, which seeks income and a stable share price by investing
in high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will achieve
its goal of maintaining a stable net asset value of $1.00 per share, and
that these types of funds are neither insured nor guaranteed by any agency
of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR STRATEGIC OPPORTUNITIES FUND - INSTITUTIONAL CLASS
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). The initial offering of
Institutional Class shares took place on July 3, 1995. Institutional Class
shares are sold to eligible investors without a sales load or 12b-1 fee.
Returns prior to July 3, 1995 are those of Class T and reflect Class T's
prior 0.65% 12b-1 fee. If Fidelity had not reimbursed certain class
expenses during the periods shown, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Strategic Opportunities - 12.85% 14.89% 92.26% 207.14%
Institutional Class
S&P 500(registered trademark) 20.61% 34.70% 146.59% 292.69%
Capital Appreciation Funds Average 10.16% 14.44% 113.79% 208.97%
CUMULATIVE TOTAL RETURNS show Institutional 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 had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. You can compare Institutional Class' returns to those of the
Standard & Poor's 500 Index - a widely recognized, unmanaged index of
common stocks. To measure how Institutional Class' performance stacked up
against its peers, you can compare it to the capital appreciation funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past six months
average represents a peer group of 233 mutual funds. These benchmarks
reflect the reinvestment of dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Strategic Opportunities - 14.89% 13.97% 11.88%
Institutional Class
S&P 500 34.70% 19.78% 14.64%
Capital Appreciation Funds Average 14.44% 15.94% 11.24%
AVERAGE ANNUAL TOTAL RETURNS take the Institutional Class' cumulative
return and show you what would have happened if Institutional Class had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10401.52 10507.00
1987/08/31 10607.70 10898.91
1987/09/30 10341.83 10660.22
1987/10/31 8442.76 8364.01
1987/11/30 8057.51 7674.82
1987/12/31 8238.36 8258.87
1988/01/31 8883.76 8606.57
1988/02/29 9174.82 9007.64
1988/03/31 9029.29 8729.30
1988/04/30 9086.24 8826.20
1988/05/31 9244.42 8902.98
1988/06/30 9877.17 9311.63
1988/07/31 9820.22 9276.25
1988/08/31 9516.50 8960.85
1988/09/30 9826.55 9342.59
1988/10/31 9997.39 9602.31
1988/11/30 10060.67 9465.00
1988/12/31 10071.26 9630.63
1989/01/31 10641.70 10335.60
1989/02/28 10595.80 10078.24
1989/03/31 10818.73 10313.06
1989/04/30 11231.81 10848.31
1989/05/31 11749.80 11287.67
1989/06/30 11841.60 11223.33
1989/07/31 12654.64 12236.79
1989/08/31 12818.56 12476.64
1989/09/30 12818.56 12425.48
1989/10/31 12608.74 12137.21
1989/11/30 12949.70 12384.81
1989/12/31 13354.27 12682.05
1990/01/31 12471.18 11831.08
1990/02/28 12538.59 11983.70
1990/03/31 12538.59 12301.27
1990/04/30 12026.26 11993.74
1990/05/31 12417.25 13163.13
1990/06/30 12538.59 13073.62
1990/07/31 12572.29 13031.78
1990/08/31 11689.20 11853.71
1990/09/30 11601.56 11276.43
1990/10/31 11594.82 11227.94
1990/11/30 12107.15 11953.27
1990/12/31 12396.74 12286.77
1991/01/31 12797.31 12822.47
1991/02/28 13563.32 13739.28
1991/03/31 13992.01 14071.77
1991/04/30 14181.75 14105.54
1991/05/31 14687.74 14714.90
1991/06/30 14223.92 14040.96
1991/07/31 14652.61 14695.26
1991/08/31 14968.85 15043.54
1991/09/30 15025.07 14792.31
1991/10/31 14722.88 14990.53
1991/11/30 14364.47 14386.41
1991/12/31 15257.81 16032.22
1992/01/31 15282.57 15734.02
1992/02/29 15579.64 15938.56
1992/03/31 15183.54 15627.76
1992/04/30 15472.36 16087.22
1992/05/31 15975.73 16166.04
1992/06/30 15975.73 15925.17
1992/07/31 16470.84 16576.51
1992/08/31 16182.03 16236.69
1992/09/30 16116.01 16428.28
1992/10/31 16248.04 16485.78
1992/11/30 16941.20 17047.95
1992/12/31 17221.88 17257.64
1993/01/31 17547.33 17402.60
1993/02/28 18044.55 17639.28
1993/03/31 18605.05 18011.46
1993/04/30 18234.40 17575.59
1993/05/31 18659.29 18046.61
1993/06/30 18812.98 18098.95
1993/07/31 19210.75 18026.55
1993/08/31 20413.12 18709.76
1993/09/30 20358.88 18565.69
1993/10/31 21000.74 18950.00
1993/11/30 20114.79 18769.98
1993/12/31 20741.37 18997.10
1994/01/31 20920.86 19643.00
1994/02/28 20172.98 19110.67
1994/03/31 19395.17 18277.45
1994/04/30 19554.72 18511.40
1994/05/31 19594.61 18814.98
1994/06/30 19594.61 18354.02
1994/07/31 20063.29 18956.03
1994/08/31 20182.95 19733.23
1994/09/30 19903.74 19249.76
1994/10/31 19694.33 19682.88
1994/11/30 19086.05 18966.03
1994/12/31 19254.27 19247.30
1995/01/31 20108.87 19746.38
1995/02/28 20623.69 20515.90
1995/03/31 20819.32 21121.32
1995/04/30 21272.37 21743.34
1995/05/31 21828.37 22612.42
1995/06/30 22971.27 23137.71
1995/07/31 23764.09 23904.96
1995/08/31 24453.95 23964.96
1995/09/30 25308.55 24976.28
1995/10/31 25215.89 24887.12
1995/11/30 25905.75 25979.66
1995/12/31 26686.25 26480.03
1996/01/31 26707.77 27381.41
1996/02/29 26185.62 27635.23
1996/03/31 25310.21 27901.36
1996/04/30 25988.65 28312.63
1996/05/31 26754.63 29042.81
1996/06/30 26732.75 29153.46
1996/07/31 24905.33 27865.46
1996/08/31 25868.28 28453.15
1996/09/30 26765.57 30054.49
1996/10/31 26295.04 30883.39
1996/11/30 27236.11 33217.87
1996/12/31 27216.89 32559.82
1997/01/31 28229.84 34594.16
1997/02/28 27820.68 34865.38
1997/03/31 26054.49 33432.76
1997/04/30 26192.28 35428.69
1997/05/31 29599.40 37585.59
1997/06/30 30714.23 39269.43
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Strategic Opportunities Fund - Institutional Class on
June 30, 1987. As the chart shows, by June 30, 1997, the value of the
investment would have grown to $30,714 - a 207.14% increase on the initial
investment. For comparison, look at how the S&P 500 did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $39,269 - a 292.69% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn,
the share price and return of
a fund that invests in stocks
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Harris Leviton, Portfolio Manager of Fidelity Advisor
Strategic Opportunities Fund
Q. HOW DID THE FUND PERFORM, HARRIS?
A. For the six months that ended June 30, 1997, the fund's Institutional
Class shares had a total return of 12.85%. During the same period, the
capital appreciation funds average posted a return of 10.16%, according to
Lipper Analytical Services. For the 12 months that ended June 30, 1997, the
fund's Institutional Class shares had a total return of 14.89%, while the
capital appreciation funds average had a total return of 14.44%.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE DURING THE FIRST HALF OF
THE YEAR?
A. I'd attribute the fund's performance to big investments in specific
stocks that did well. A lot of the large positions in the fund appreciated
considerably during the period, including the fund's top two holdings on
June 30, Whole Foods Market and American Bankers Insurance Group. Those two
stocks made up about 16% of the portfolio by the end of the period - a
position that really paid off for the fund.
Q. WHOLE FOODS MARKET AND AMERICAN BANKERS INSURANCE GROUP WERE THE FUND'S
TOP HOLDINGS AT THE BEGINNING OF THE PERIOD AS WELL. WHAT ATTRACTED YOU TO
THESE STOCKS?
A. Whole Foods Market, a diversified chain of natural foods supermarkets,
was a solid performer because natural foods have been gaining huge market
acceptance. People are getting more concerned about the quality of their
food supply, especially after recent news reports of food scares such as
mad-cow disease and tainted strawberries. The company has also benefited
from the move toward homeopathic medicine, where people use natural herbs
for cures. As for American Bankers Insurance, a specialty property-casualty
insurance company, I thought the stock's valuation was too cheap relative
to the company's earnings potential. New management pushed the company to
exit some less profitable lines of business and focus on its credit-based
accident, health and life insurance operations - where the company offers
insurance that pays your credit card bills if you get injured or lose your
job. In fact, American Bankers recently signed a contract with some
utilities, under which it arranged to offer similar insurance for paying
utility bills. Whole Foods Market and American Bankers Insurance are good
examples of "special situation" stocks.
Q. WERE THERE OTHER HOLDINGS THAT PERFORMED PARTICULARLY WELL DURING THE
PERIOD?
A. Sepracor, a maker of improved versions of existing drugs, was another
big stock for the fund. During the period, the company released good
clinical data for some of its drugs and also filed its first new drug
application for an asthma medication. A lot of the large-cap pharmaceutical
companies have done very well since the beginning of the year, but I think
they've gotten too expensive. Considering that I might have to pay
somewhere between 30 and 40 times earnings for the large-cap pharmaceutical
stocks that have participated in the latest market rally, Sepracor looked
cheap given what it has in its product pipeline.
Q. YOU'VE INCREASED THE FUND'S INVESTMENTS IN THE BASIC INDUSTRIES SECTOR
TO 11.5% AT THE END OF THE PERIOD FROM 7.2% SIX MONTHS EARLIER. WHAT WAS
YOUR REASONING BEHIND THIS MOVE?
A. Because I look for investments on a stock-by-stock basis, I didn't
intentionally drive up the fund's investments in the basic industries
sector. Rather, I increased the fund's investment in a few wire and cable
makers, which are included in this sector, and that helped the fund's
performance during the period. I've found that increased capital spending
is driving demand for the new technologies these companies develop. On top
of that, several of the stocks were very cheap relative to their potential
earnings growth. AFC Cable Systems and Cable Design Technology were among
the fund's top 10 holdings at the end of the period and both contributed to
the fund's performance.
Q. WERE THERE ANY SECTORS THAT WERE PARTICULARLY DISAPPOINTING DURING THE
PERIOD?
A. The casino-gaming stocks in the fund were disappointing because business
in Las Vegas has slowed down over the past four or five months. A lot of
companies are adding capacity and in the past when you added capacity,
business improved. That didn't happen during the period. Starting in 1998,
several new hotel complexes with added attractions will open and business
may rebound. Also, the stocks were cheap at the end of the period.
Q. WHAT'S YOUR OUTLOOK FOR THE SECOND HALF OF THE YEAR?
A. It really depends on the market's appetite for small stocks. The rally
in large-cap stocks is unprecedented in market history in terms of
magnitude, duration and valuation extremes. I think the massive investments
in the Standard & Poor's 500 Index funds - and the influence they're having
on the market's rise - has to end at some point. Either the market has to
come down or the small-cap stocks are going to have to come up. During the
first six months of the year, the fund lagged the S&P 500 every month
except for May, when it dramatically outperformed the broader market. The
market's performance may continue in that fashion during the second half -
where you'll see periods of underperformance by small stocks relative to
the index, followed by short periods of dramatic outperformance.
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, 1997,
more than $592 million
MANAGER: Harris Leviton,
since 1996; joined Fidelity in
1986
(checkmark)
HARRIS LEVITON ON DISCOVERING
"SPECIAL SITUATION" STOCKS IN
THE ONGOING BULL MARKET:
"When a bull market is as
long and large as this one
has been, it is tough to find
attractive stocks. You have to
look in a lot of unusual places.
As the bull market
continues, most investors don't
spend as much time
investigating the neglected
sectors of the market. In
contrast, I investigate all sorts
of small- and mid-cap stocks
and foreign companies. I also
spend a lot of time looking at
broken IPOs - companies
that went public a few years
ago, traded up on the hype of
their initial public offerings and
then dwindled after analysts
and the public lost interest. At
the end of May, I visited about
10 companies that had gone
public a few years ago and
their stocks were trading at
50% to 70% off of their highs.
You can find a lot of
opportunities by just going
around digging under rocks. If
I find a cheap stock, I look for
improving company
fundamentals. I also look for a
catalyst for improvement,
such as a new product cycle
or cost cutting, and try to get
in ahead of the crowd."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Whole Foods Market, Inc. 8.5 4.7
American Bankers Insurance Group, Inc. 7.9 5.4
Sepracor, Inc. 4.4 2.3
Nintendo Co. Ltd Ord. 3.8 4.3
AFC Cable Systems, Inc. 2.8 2.3
Cable Design Technology Corp. 2.8 1.2
Lennar Corp. 2.5 1.7
Harveys Casino Resorts 2.4 1.7
CVS Corp. 1.9 1.2
I-Stat Corp. 1.8 1.7
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Media & Leisure 13.8 15.7
Retail & Wholesale 13.1 8.2
Technology 12.4 11.8
Basic Industries 11.5 7.2
Health 9.9 7.7
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 * AS OF DECEMBER 31, 1996 **
Row: 1, Col: 1, Value: 7.9
Row: 1, Col: 2, Value: 1.1
Row: 1, Col: 3, Value: 91.0
Stocks 93.2%
Bonds 1.4%
Short-term
investments 5.4%
FOREIGN
INVESTMENTS 10.1%
Stocks 91.4%
Bonds 0.7%
Short-term
investments 7.9%
FOREIGN
INVESTMENTS 10.8%
Row: 1, Col: 1, Value: 5.4
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 92.59999999999999
*
**
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 91.2%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.0%
Doncasters PLC sponsored ADR 4,000 $ 92,500
DEFENSE ELECTRONICS - 0.4%
Herley Microwave Systems, Inc. (a)(c) 183,500 2,362,562
TOTAL AEROSPACE & DEFENSE 2,455,062
BASIC INDUSTRIES - 11.5%
IRON & STEEL - 0.5%
Cold Metal Products, Inc. (a) 179,900 1,011,937
Quanex Corp. 10,000 306,875
Steel Dynamics, Inc. (a) 63,500 1,587,500
2,906,312
METALS & MINING - 9.7%
AFC Cable Systems, Inc. (a)(c) 627,300 16,937,100
Alumax, Inc. (a) 216,500 8,213,469
Cable Design Technology Corp. (a) 569,700 16,770,544
Essex International, Inc. 108,900 3,035,587
General Cable Corp. 250,000 6,406,250
Inco Ltd. 200,000 5,975,446
Ryerson Tull, Inc. Class A 20,000 330,000
57,668,396
PAPER & FOREST PRODUCTS - 1.3%
Fort Howard Corp. (a) 84,700 4,287,938
Mercer International, Inc. (SBI) 407,900 3,875,050
8,162,988
TOTAL BASIC INDUSTRIES 68,737,696
CONSTRUCTION & REAL ESTATE - 3.7%
CONSTRUCTION - 2.9%
Beazer Homes USA, Inc. (a) 152,200 2,435,200
Lennar Corp. 459,200 14,665,700
17,100,900
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 0.8%
Jameson Co. 230,000 $ 2,702,500
Sovran Self Storage, Inc. 68,700 2,009,475
4,711,975
TOTAL CONSTRUCTION & REAL ESTATE 21,812,875
DURABLES - 5.5%
CONSUMER ELECTRONICS - 1.2%
Movado Group, Inc. (c) 275,000 7,012,500
Tag-Heuer International SA sponsored ADR (a) 11,000 165,687
7,178,187
HOME FURNISHINGS - 0.9%
Maxim Group, Inc. (a) 504,300 5,547,300
TEXTILES & APPAREL - 3.4%
Converse, Inc. (a) 185,100 4,095,337
Deckers Outdoor Corp. (a)(c) 596,900 4,402,138
Galey & Lord, Inc. (a) 115,800 2,171,250
Maxwell Shoe Co., Inc. Class A (a)(c) 758,800 9,295,300
19,964,025
TOTAL DURABLES 32,689,512
FINANCE - 9.5%
INSURANCE - 9.5%
American Bankers Insurance Group, Inc. 739,800 46,792,350
Amerus Life Holdings, Inc. 132,900 3,704,587
Centris Group, Inc. 42,700 902,038
Norwich Union PLC (a) 56,000 297,848
Old Republic International Corp. 156,500 4,743,906
56,440,729
HEALTH - 9.9%
DRUGS & PHARMACEUTICALS - 6.0%
Alliance Pharmaceutical Corp. (a) 357,600 3,598,350
Creative Biomolecules, Inc. (a) 335,300 2,368,056
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Myriad Genetics (a) 140,000 $ 3,780,000
Sepracor, Inc. (a) 1,004,700 25,933,819
35,680,225
MEDICAL EQUIPMENT & SUPPLIES - 3.9%
Cygnus, Inc. (a) 414,250 7,145,812
Heartport, Inc. (a) 151,100 2,663,138
Hemasure, Inc. (a) 359,000 987,250
I-Stat Corp. (a)(c) 639,700 10,954,863
Physiometrix, Inc. (a) 165,000 515,625
Resound Corp. (a) 195,000 1,096,875
23,363,563
TOTAL HEALTH 59,043,788
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
Columbus McKinnon Corp. 257,600 4,894,400
Regal-Beloit Corp. 107,300 2,843,450
Sulzer AG (Reg.) 12,000 10,263,428
T B Wood's Corp. 164,000 2,388,250
20,389,528
MEDIA & LEISURE - 13.6%
BROADCASTING - 0.8%
American Telecasting, Inc. (a) 510,000 318,750
Ascent Entertainment Group, Inc. (a) 64,500 588,562
CAI Wireless Systems, Inc. (a) 1,125,615 1,195,966
Heartland Wireless Communications, Inc. (a) 429,167 1,019,272
People's Choice TV Corp. (a)(c) 679,675 1,104,472
Wireless One, Inc. (a) 227,600 583,225
4,810,247
ENTERTAINMENT - 3.7%
Film Roman, Inc. (a) 85,000 148,750
Harveys Casino Resorts (c) 811,700 14,255,481
MGM Grand, Inc. (a) 200,500 7,418,500
21,822,731
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 4.1%
Equity Marketing, Inc. (a) 10,000 $ 235,000
Just Toys, Inc. (a)(c) 253,900 349,113
Nintendo Co. Ltd. Ord. 268,900 22,516,812
Silicon Gaming, Inc. (a) 109,800 1,427,400
24,528,325
LODGING & GAMING - 3.1%
Circus Circus Enterprises, Inc. (a) 364,300 8,970,887
WMS Industries, Inc. 379,100 9,501,194
18,472,081
PUBLISHING - 0.2%
Scholastic Corp. (a) 38,700 1,354,500
RESTAURANTS - 1.7%
Foodmaker, Inc. (a) 130,000 2,128,750
Morton's Restaurant Group, Inc. (a)(c) 414,800 8,244,150
10,372,900
TOTAL MEDIA & LEISURE 81,360,784
NONDURABLES - 4.1%
AGRICULTURE - 1.3%
Saskatchewan Wheat Pool (a):
Class B (non-vtg.) 478,300 5,889,328
Class B (b) 158,000 1,945,460
7,834,788
FOODS - 0.1%
Earthgrains Co. 13,200 865,425
Tomkins PLC Ord. 3,425 14,824
880,249
HOUSEHOLD PRODUCTS - 1.1%
Church & Dwight Co., Inc. 251,800 6,735,650
TOBACCO - 1.6%
Philip Morris Companies, Inc. 208,300 9,243,313
TOTAL NONDURABLES 24,694,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
PRECIOUS METALS - 1.5%
Getchell Gold Corp. (a) 32,200 $ 1,135,050
Newmont Mining Corp. 200,000 7,800,000
8,935,050
RETAIL & WHOLESALE - 13.1%
APPAREL STORES - 0.3%
Charming Shoppes, Inc. (a) 211,400 1,103,244
Footstar, Inc. (a) 19,922 520,462
1,623,706
DRUG STORES - 1.9%
CVS Corp. 219,600 11,254,500
GENERAL MERCHANDISE STORES - 1.5%
Freds, Inc. Class A (c) 590,300 8,854,500
GROCERY STORES - 8.8%
Whole Foods Market, Inc. (a)(c) 1,530,300 50,691,187
Wild Oats Markets, Inc. 80,000 2,040,000
52,731,187
RETAIL & WHOLESALE, MISCELLANEOUS - 0.6%
Toys "R" Us, Inc. (a) 105,638 3,697,330
TOTAL RETAIL & WHOLESALE 78,161,223
SERVICES - 0.2%
LEASING & RENTAL - 0.2%
Hanover Compressor Co. 7,800 7,800
Hertz Corp. Class A 26,800 964,800
972,600
SERVICES - 0.0%
Pierce Leahy Corp. 28,800 28,800
TOTAL Services 1,001,400
TECHNOLOGY - 12.1%
COMMUNICATIONS EQUIPMENT - 0.6%
Alcatel Alsthom Compagnie Generale d'Electricite
SA sponsored ADR 129,900 3,279,975
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - 9.6%
Activision, Inc. (a) 135,000 $ 1,940,625
BancTec, Inc. (a) 270,000 7,003,125
Broadway & Seymour, Inc. (a) 88,300 1,114,787
Broderbund Software, Inc. (a) 145,000 3,579,687
CACI International, Inc. Class A (a) 116,100 1,770,525
CompUSA, Inc. (a) 427,200 9,184,800
Eidos PLC sponsored ADR 389,000 4,765,250
GT Interactive Software, Inc. (a) 188,100 2,233,688
Maxis, Inc. (a) 254,600 3,055,200
Midway Games, Inc. (a)(c) 291,300 6,262,950
Spectrum Holobyte, Inc. (a)(c) 2,056,500 10,025,438
Sybase, Inc. (a) 421,700 6,272,788
57,208,863
COMPUTERS & OFFICE EQUIPMENT - 1.3%
Creative Technology Corp. Ltd. (a) 239,400 4,069,800
Performance Technologies, Inc. (a) 230,000 3,507,500
Sandisk Corp. 4,500 65,812
7,643,112
ELECTRONIC INSTRUMENTS - 0.1%
ORBIT/FR, Inc. 75,000 731,250
ELECTRONICS - 0.5%
AVX Corp. 99,700 2,691,900
ESS Technology, Inc. 35,000 470,313
3Dfx Interactive, Inc. 1,100 14,713
3,176,926
TOTAL TECHNOLOGY 72,040,126
TRANSPORTATION - 2.7%
AIR TRANSPORTATION - 1.6%
Reno Air, Inc. (a)(c) 934,800 8,062,650
Ryanair Holdings PLC sponsored ADR 50,600 1,372,525
9,435,175
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 1.1%
Hunt (J.B.) Transport Services, Inc. 435,600 $ 6,479,550
SPACEHAB, Inc. (a) 30,000 266,250
6,745,800
TOTAL TRANSPORTATION 16,180,975
TOTAL COMMON STOCKS
(Cost $488,256,516) 543,942,748
CONVERTIBLE PREFERRED STOCKS - 0.2%
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Triathalon Broadcasting Co. $0.945
depositary share (Cost $1,226,360) 114,080 1,026,720
CONVERTIBLE BONDS - 0.7%
MOODY'S PRINCIPAL
RATINGS AMOUNT
DURABLES - 0.4%
TEXTILES & APPAREL - 0.4%
Converse, Inc. 7%, 6/1/04 - $ 1,945,000 2,197,850
TECHNOLOGY - 0.3%
ELECTRONICS - 0.3%
Richardson Electronics, Ltd.:
8 1/4%, 6/15/06 B3 1,978,000 1,701,080
7 1/4%, 12/15/06 B3 404,000 307,040
TOTAL TECHNOLOGY 2,008,120
TOTAL CONVERTIBLE BONDS
(Cost $4,024,180) 4,205,970
CASH EQUIVALENTS - 7.9%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 $ 46,890,723 $ 46,883,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $540,390,056) $ 596,058,438
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 $1,945,460 or 0.3% of net
assets.
3. Affiliated company (see Note 11 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 89.2%
Japan 3.8
Canada 3.0
Switzerland 1.8
Others (individually less than 1%) 2.2
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $540,412,067. Net unrealized appreciation aggregated
$55,646,371, of which $127,827,014 related to appreciated investment
securities and $72,180,643 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 596,058,438
agreements of $46,883,000) (cost $540,390,056) -
See accompanying schedule
Cash 887,485
Receivable for investments sold 2,467,926
Receivable for fund shares sold 224,902
Dividends receivable 352,690
Interest receivable 46,726
Other receivables 73,080
Prepaid expenses 3,354
TOTAL ASSETS 600,114,601
LIABILITIES
Payable for investments purchased $ 3,660,151
Payable for fund shares redeemed 3,376,170
Accrued management fee 198,149
Distribution fees payable 273,906
Other payables and accrued expenses 196,273
TOTAL LIABILITIES 7,704,649
NET ASSETS $ 592,409,952
Net Assets consist of:
Paid in capital $ 490,060,859
Accumulated net investment loss (723,376)
Accumulated undistributed net realized gain (loss) on 47,393,519
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 55,678,950
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 592,409,952
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $24.46
CLASS A:
NET ASSET VALUE and redemption price per share
($918,657 (divided by) 37,559 shares)
Maximum offering price per share (100/94.75 of $24.46) $25.82
CLASS T: $24.68
NET ASSET VALUE and redemption price per share
($469,444,476 (divided by) 19,020,008 shares)
Maximum offering price per share (100/96.50 of $24.68) $25.58
CLASS B: $24.24
NET ASSET VALUE and offering price per share
($97,397,263 (divided by) 4,018,431 shares) A
INITIAL CLASS: $24.98
NET ASSET VALUE and redemption price per share
($20,689,260 (divided by) 828,072 shares)
Maximum offering price per share (100/96.50 of $24.98) $25.89
INSTITUTIONAL CLASS: $24.52
NET ASSET VALUE, offering price and redemption price
per share ($3,960,296 (divided by) 161,541 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 2,102,889
Dividends (including $133,100 received from
affiliated issuers)
Interest 1,025,004
TOTAL INCOME 3,127,893
EXPENSES
Management fee $ 1,771,758
Basic fee
Performance adjustment (591,597)
Transfer agent fees 671,038
Distribution fees 1,647,530
Accounting fees and expenses 165,185
Non-interested trustees' compensation 2,207
Custodian fees and expenses 26,888
Registration fees 64,178
Audit 35,364
Legal 4,243
Interest 16,435
Reports to shareholders 75,356
Miscellaneous 1,148
Total expenses before reductions 3,889,733
Expense reductions (39,859) 3,849,874
NET INVESTMENT INCOME (LOSS) (721,981)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain (loss) of 47,771,796
$1,050,483 on sales of investments in affiliated
issuers)
Foreign currency transactions (2,997) 47,768,799
Change in net unrealized appreciation (depreciation) on:
Investment securities 23,247,938
Assets and liabilities in foreign currencies 11,943 23,259,881
NET GAIN (LOSS) 71,028,680
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 70,306,699
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ (721,981) $ 5,065,025
Net investment income (loss)
Net realized gain (loss) 47,768,799 101,103,020
Change in net unrealized appreciation (depreciation) 23,259,881 (96,084,415)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 70,306,699 10,083,630
FROM OPERATIONS
Distributions to shareholders - (5,501,432)
From net investment income
From net realized gain (23,324,662) (70,113,368)
TOTAL DISTRIBUTIONS (23,324,662) (75,614,800)
Share transactions - net increase (decrease) (176,628,154) 36,171,237
TOTAL INCREASE (DECREASE) IN NET ASSETS (129,646,117) (29,359,933)
NET ASSETS
Beginning of period 722,056,069 751,416,002
End of period (including undistributed net $ 592,409,952 $ 722,056,069
investment income (loss) of $(723,376) and
$1,667,423, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 F
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.51 $ 23.48
Income from Investment Operations
Net investment income (loss) E (.04) .08
Net realized and unrealized gain (loss) 2.86 1.26
Total from investment operations 2.82 1.34
Less Distributions
From net investment income - (.37)
From net realized gain (.87) (1.94)
Total distributions (.87) (2.31)
Net asset value, end of period $ 24.46 $ 22.51
TOTAL RETURN B, C 12.88% 5.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 919 $ 638
Ratio of expenses to average net assets 1.49% A, I .99% A,
D
Ratio of expenses to average net assets after expense 1.48% A, G .97% A,
reductions G
Ratio of net investment income (loss) to average net assets (.40)% A 1.00% A
Portfolio turnover 41% A 151%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO DECEMBER 31, 1996.
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 6 OF
NOTES TO FINANCIAL STATEMENTS).
H 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.
I FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE MONTHS YEARS ENDED SEPTEMBER 30,
ENDED 31, ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 F 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.69 $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53 $ 21.38
Income from Investment Operations
Net investment income (loss) (.02) E .17 E .39 .10 E .39 E .33 .61
Net realized and unrealized gain (loss) 2.88 .18 6.73 (.75) (.81) 4.44 .58
Total from investment operations 2.86 .35 7.12 (.65) (.42) 4.77 1.19
Less Distributions
From net investment income - (.19) (.39) (.35) (.43) (.57) (.62)
From net realized gain (.87) (2.35) (.55) (.26) (1.71) (1.21) (2.42)
Total distributions (.87) (2.54) (.94) (.61) (2.14) (1.78) (3.04)
Net asset value, end of period $ 24.68 $ 22.69 $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53
TOTAL RETURN B, C 12.96% 1.53% 38.16% (3.26)% (2.24)% 26.33% 7.26%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 469,444 $ 560,645 $ 619,993 $ 375,691 $ 385,349 $ 269,833 $ 194,710
Ratio of expenses to average net assets 1.26% A 1.28% 1.61% 1.73% A, G 1.85% 1.57% 1.46%
D
Ratio of expenses to average net assets after 1.25% A, 1.27% 1.61% 1.73% A 1.84% 1.57% 1.46%
expense reductions H H H
Ratio of net investment income (loss) to (.17)% A .70% 1.90% 2.03% A 1.89% 2.06% 3.22%
average net assets
Portfolio turnover 41% A 151% 142% 228% A 159% 183% 211%
Average commission rate I $ .0420 $ .0409
</TABLE>
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D INCLUDES
REIMBURSEMENT OF $.03 PER SHARE FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. E
NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD. F 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. G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER. H FMR OR THE FUND HAS ENTERED INTO VARYING
ARANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE
CLASS' EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). I 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE YEAR ENDED
ENDED 31, MONTHS SEPTEMBER
JUNE 30, 1997 ENDED 30,
DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 E
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 22.36 $ 24.56 $ 18.57 $ 19.98 $ 19.65
beginning of period
Income from Investment
Operations
Net investment (.08) D .04 D .38 .06 D .05 D
income (loss)
Net realized and 2.83 .18 6.54 (.74) .28
unrealized gain
(loss)
Total from investment 2.75 .22 6.92 (.68) .33
operations
Less Distributions
From net investment - (.07) (.38) (.47) -
income
From net realized gain (.87) (2.35) (.55) (.26) -
Total distributions (.87) (2.42) (.93) (.73) -
Net asset value, $ 24.24 $ 22.36 $ 24.56 $ 18.57 $ 19.98
end of period
TOTAL RETURN B, C 12.65% 1.00% 37.35% (3.41)% 1.68%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 97,397 $ 98,535 $ 87,566 $ 17,090 $ 8,824
(000 omitted)
Ratio of expenses to 1.82% A 1.80% 2.11% 2.58% A 2.63% A
average net assets , F
Ratio of expenses to 1.81% A, 1.79% 2.10% G 2.53% A, 2.63% A
average net assets G G G
after expense
reductions
Ratio of net investment (.73)% A .18% 1.40% 1.22% A 1.11% A
income (loss) to
average net assets
Portfolio turnover 41% A 151% 142% 228% A 159%
Average commission $ .0420 $ .0409
rate H
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME (LOSS) 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 6 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE MONTHS YEARS ENDED SEPTEMBER 30,
ENDED 31, ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 F 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.90 $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72 $ 21.55
Income from Investment Operations
Net investment income .03 E .28 E .50 .13 E .54 E .45 .73
Net realized and unrealized gain (loss) 2.92 .19 6.79 (.74) (.81) 4.46 .58
Total from investment operations 2.95 .47 7.29 (.61) (.27) 4.91 1.31
Less Distributions
From net investment income - (.32) (.50) (.50) (.51) (.70) (.72)
From net realized gain (.87) (2.35) (.55) (.26) (1.71) (1.21) (2.42)
Total distributions (.87) (2.67) (1.05) (.76) (2.22) (1.91) (3.14)
Net asset value, end of period $ 24.98 $ 22.90 $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72
TOTAL RETURN B, C 13.24% 2.00% 38.75% (3.02)% (1.51)% 26.98% 7.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 20,689 $ 20,406 $ 23,428 $ 17,583 $ 18,850 $ 20,707 $ 17,933
Ratio of expenses to average net assets .79% A .82% 1.04% 1.14% A 1.15% .89% .87%
D
Ratio of expenses to average net assets after .78% A, .81% G 1.03% G 1.11% A, G 1.14% .89% .87%
expense reductions G G
Ratio of net investment income to average net .30% A 1.16% 2.47% 2.65% A 2.60% 2.74% 3.78%
assets
Portfolio turnover 41% A 151% 142% 228% A 159% 183% 211%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D INCLUDES
REIMBURSEMENT OF $.03 PER SHARE FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. E
NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD. F 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. 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 6 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 ENDED
JUNE 30, 1997 YEARS ENDED
DECEMBER 31,
(UNAUDITED) 1996 1995 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.57 $ 24.80 $ 22.35
Income from Investment Operations
Net investment income (loss) (.04) D .29 D .55
Net realized and unrealized gain (loss) 2.86 .17 3.00
Total from investment operations 2.82 .46 3.55
Less Distributions
From net investment income - (.34) (.55)
From net realized gain (.87) (2.35) (.55)
Total distributions (.87) (2.69) (1.10)
Net asset value, end of period $ 24.52 $ 22.57 $ 24.80
TOTAL RETURN B, C 12.85% 1.99% 15.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,960 $ 41,832 $ 20,429
Ratio of expenses to average net assets 1.24% A, F .78% .97% A
Ratio of expenses to average net assets after 1.23% A, G .76% G .96% A,
expense reductions G
Ratio of net investment income (loss) to average (.30)% A 1.21% 2.55% A
net assets
Portfolio turnover 41% A 151% 142%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
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 ( SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
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 6 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Strategic Opportunities Fund (the fund) is a fund of
Fidelity Advisor Series VIII (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and Institutional
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, the common expenses of the fund, and certain fund-level expense
reductions 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, expenses, and expense
reductions.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities with remaining maturities
of sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net investment income accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
and the U.S. dollar amount actually received. The effects of changes in
foreign currency exchange rates on investments in securities are included
with the net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
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 passive
foreign investment companies (PFIC), market discount and losses deferred
due to wash sales. The fund also utilized earnings and profits distributed
to shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated net investment loss and accumulated undistributed net realized
gain (loss) on investments and foreign currency transactions
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the
SEC, the fund, along with other registered investment companies having
management contracts with FMR, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
fund to borrow from, or lend money to, other participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered.
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, the fund had no investments in restricted securities
(excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $114,868,059 and $324,634,277, 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. The annual individual
fund fee rate is .30%. 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 basic fee is subject to a performance adjustment (up to a maximum of
".20% of the fund's average net assets over the performance period) based
on the investment performance of the lowest performing class as compared to
the appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annualized rate of .41% of average net
assets after the performance adjustment. Effective July 1, 1997 the fund's
performance adjustment is based on the asset weighted average return of all
classes as compared to the appropriate index over a specific period of
time.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares, except for the Initial Class (collectively referred
to as "the Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. This fee is based on the following annual rates of the average
net assets of each applicable class:
CLASS A .25%
CLASS T .50%
CLASS B 1.00%*
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 888 $ 888
CLASS T 1,177,927 1,177,927
CLASS B 468,715 117,178
$ 1,647,530 $ 1,295,993
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 5.25% for
selling Class A shares and 3.50% for selling Class T and Initial Class
shares of the fund, respectively, and the proceeds of a contingent deferred
sales charge levied on Class B share redemptions occurring within six years
of purchase (five years prior to January 2, 1997). The Class B charge is
based on declining rates which range from 5% to 1% (4% to 1% prior to
January 2, 1997) 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. Effective August 1, 1997, Class A's
maximum sales charge was increased to 5.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 11,682 $ 9,408
CLASS T 87,987 72,120
CLASS B 193,469 0 *
INITIAL CLASS 259 0
$ 293,397 $ 81,528
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 1,329 .38% ***
CLASS T ** FIIOC * 525,196 .23% ***
CLASS B FIIOC * 119,317 .26% ***
INITIAL CLASS FSC * 18,955 .20% ***
INSTITUTIONAL CLASS FIIOC * 6,241 .24% ***
$ 671,038
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AND
FIDELITY SERVICE CO., INC. (FSC), AFFILIATES OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED
CERTAIN TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES TO FIIOC
FOR WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH FEES.
*** ANNUALIZED
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 $86,806 for the period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a borrower. The
maximum loan and the average daily loan balances during the period for
which loans were outstanding amounted to $36,999,000 and $15,594,143,
respectively. The weighted average interest rate was 5.42%.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A 1.75% $ 11,608
INSTITUTIONAL CLASS 1.50% 914
$ 12,522
FMR also voluntarily agreed to reimburse certain transfer agent,
registration and other class specific expenses for Class A and
Institutional Class. For the period, the reimbursement reduced these
expenses by $3,127 and $1,684, respectively.
FMR has also 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 $18,850 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $3,275 under the
custodian arrangement, and each applicable class' expenses were reduced as
follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST
CREDITS
INITIAL CLASS $ 401
7. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
11% of the total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996 A
CLASS A
From net investment income $ - $ 9,050
From net realized gain 23,625 47,453
Total $ 23,625 $ 56,503
CLASS T
From net investment income $ - $ 4,356,302
From net realized gain 18,661,262 54,934,732
Total $ 18,661,262 $ 59,291,034
CLASS B
From net investment income $ - $ 291,486
From net realized gain 3,719,315 9,460,141
Total $ 3,719,315 $ 9,751,627
INITIAL CLASS
From net investment income $ - $ 263,298
From net realized gain 742,870 1,978,165
Total $ 742,870 $ 2,241,463
INSTITUTIONAL CLASS
From net investment income $ - $ 581,296
From net realized gain 177,590 3,692,877
Total $ 177,590 $ 4,274,173
$ 23,324,662 $ 75,614,800
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
9. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1997 1996 A 1997 1996 A
CLASS A 17,253 26,335 $ 385,972 $ 633,035
Shares sold
Reinvestment of distributions 1,055 2,536 23,641 56,498
Shares redeemed (9,089) (531) (208,268) (12,990)
Net increase (decrease) 9,219 28,340 $ 201,345 $ 676,543
CLASS T 1,605,394 7,239,477 $ 36,349,232 $ 173,637,131
Shares sold
Reinvestment of distributions 702,987 2,215,089 15,866,387 50,421,264
Shares redeemed (7,999,696) (9,664,112) (180,656,556) (231,598,779)
Net increase (decrease) (5,691,315) (209,546) $ (128,440,937) $ (7,540,384)
CLASS B 320,457 1,826,263 $ 7,137,402 $ 43,251,259
Shares sold
Reinvestment of distributions 155,073 422,830 3,447,259 9,473,517
Shares redeemed (864,175) (1,407,472) (19,120,949) (33,157,193)
Net increase (decrease) (388,645) 841,621 $ (8,536,288) $ 19,567,583
INITIAL CLASS 4,005 7,958 $ 94,673 $ 193,575
Shares sold
Reinvestment of distributions 29,056 86,899 663,041 1,996,834
Shares redeemed (96,001) (137,073) (2,173,271) (3,325,386)
Net increase (decrease) (62,940) (42,216) $ (1,415,557) $ (1,134,977)
INSTITUTIONAL CLASS 133,815 1,132,115 $ 3,005,701 $ 27,291,041
Shares sold
Reinvestment of distributions 6,165 182,073 138,401 4,097,341
Shares redeemed (1,831,791) (284,588) (41,580,819) (6,785,910)
Net increase (decrease) (1,691,811) 1,029,600 $ (38,436,717) $ 24,602,472
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
10. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 15,925
CLASS T 13,303
CLASS B 12,071
INITIAL CLASS 7,182
INSTITUTIONAL CLASS 15,697
$ 64,178
11. 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. $ - $ 867,000 $ - $ 16,937,100
Deckers Outdoor Corp. 10,150 - - 4,402,138
Freds, Inc. Class A - - 59,030 8,854,500
Harveys Casino Resorts 1,196,210 92,880 74,070 14,255,481
Herley Microwave Systems, Inc. - 144,375 - 2,362,562
I-Stat Corp. 1,246,197 377,754 - 10,954,863
Just Toys, Inc. - - - 349,113
Maxwell Shoe Co., Inc. Class A - - - 9,295,300
Midway Games, Inc. 166,070 - - 6,262,950
Morton's Restaurant Group, Inc. - - - 8,244,150
Movado Group, Inc. - - - 7,012,500
People's Choice TV Corp. - - - 1,104,472
Reno Air, Inc. - - - 8,062,650
Spectrum Holobyte, Inc. 1,084,327 - - 10,025,438
Whole Foods Market, Inc. - - - 50,691,187
TOTALS $ 3,702,954 $ 1,482,009 $ 133,100 $158,814,404
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on June 18, 1997. The
results of votes taken among shareholders on proposals before them are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 32,670,431.969 97.30
Withheld 905,735.323 2.70
TOTAL 33,576,167.292 100.00
RALPH F. COX
Affirmative 32,661,943.620 97.28
Withheld 914,223.672 2.72
TOTAL 33,576,167.292 100.00
PHYLLIS BURKE DAVIS
Affirmative 32,639,275.890 97.21
Withheld 936,891.402 2.79
TOTAL 33,576,167.292 100.00
ROBERT M. GATES
Affirmative 32,647,573.114 97.23
Withheld 928,594.178 2.77
TOTAL 33,576,167.292 100.00
EDWARD C. JOHNSON 3RD
Affirmative 32,653,017.035 97.25
Withheld 923,150.257 2.75
TOTAL 33,576,167.292 100.00
E. BRADLEY JONES
Affirmative 32,635,245.079 97.20
Withheld 940,922.213 2.80
TOTAL 33,576,167.292 100.00
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 32,673,572.230 97.31
Withheld 902,595.062 2.69
TOTAL 33,576,167.292 100.00
PETER S. LYNCH
Affirmative 32,665,741.087 97.29
Withheld 910,426.205 2.71
TOTAL 33,576,167.292 100.00
WILLIAM O. MCCOY
Affirmative 32,665,426.588 97.29
Withheld 910,740.704 2.71
TOTAL 33,576,167.292 100.00
GERALD C. MCDONOUGH
Affirmative 32,645,173.119 97.23
Withheld 930,994.173 2.77
TOTAL 33,576,167.292 100.00
MARVIN L. MANN
Affirmative 32,667,258.985 97.29
Withheld 908,908.307 2.71
TOTAL 33,576,167.292 100.00
THOMAS R. WILLIAMS
Affirmative 32,646,425.418 97.23
Withheld 929,741.874 2.77
TOTAL 33,576,167.292 100.00
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 31,181,969.270 92.87
Against 265,724.175 .79
Abstain 2,128,473.847 6.34
TOTAL 33,576,167.292 100.00
PROPOSAL 3
To amend the Declaration of Trust to provide dollar-based voting rights for
shareholders of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,126,370.108 87.12
Against 1,000,318.214 3.77
Abstain 2,419,170.970 9.11
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 4
To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,207,061.951 87.42
Against 870,816.482 3.28
Abstain 2,467,980.859 9.30
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 5
To amend the Declaration of Trust to provide each fund with the ability to
invest all of its assets in another open-ended investment company with
substantially the same investment objective and policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 22,687,221.159 85.46
Against 1,327,189.441 5.00
Abstain 2,531,448.692 9.54
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 6
To adopt a new fundamental investment policy for Strategic Opportunities
Fund to permit the fund to invest all of its assets in another open-end
investment company with substantially the same investment objectives and
policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,502,130.425 84.45
Against 665,332.546 4.89
Abstain 1,451,551.531 10.66
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 7
To approve an amended management contract for Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,194,953.682 87.83
Against 452,965.106 2.80
Abstain 1,514,968.714 9.37
TOTAL 16,162,887.502 100.00
PROPOSAL 10
To approve an amended Sub-Advisory Agreement between Strategic
Opportunities Fund and FMR Far East.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,285,781.165 88.39
Against 368,239.310 2.28
Abstain 1,508,867.027 9.33
TOTAL 16,162,887.502 100.00
PROPOSAL 11
To approve an amended Sub-Advisory Agreement between Strategic
Opportunities Fund and FMR U.K.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,323,952.957 88.62
Against 345,515.729 2.14
Abstain 1,493,418.816 9.24
TOTAL 16,162,887.502 100.00
PROPOSAL 12
To amend the Class B Distribution and Service Plan for Strategic
Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 1,694,126.749 79.63
Against 94,643.399 4.45
Abstain 338,759.404 15.92
TOTAL 2,127,529.552 100.00
PROPOSAL 13
To amend the Class T Distribution and Service Plan for Strategic
Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 9,246,908.777 84.95
Against 370,816.918 3.41
Abstain 1,266,692.369 11.64
TOTAL 10,884,418.064 100.00
PROPOSAL 14
To approve an agreement and plan providing for the reorganization of
Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,679,951.701 85.76
Against 403,539.968 2.96
Abstain 1,535,522.833 11.28
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 16
To amend the fundamental investment limitation on diversification for
Strategic Opportunities Fund to permit increased investment in the
securities of any single issuer.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,085,311.192 81.40
Against 1,066,436.724 7.83
Abstain 1,467,266.586 10.77
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 17
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning diversification to exclude investments in other investment
companies from the limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,069,685.759 81.28
Against 1,053,090.996 7.73
Abstain 1,496,237.747 10.99
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 18
To amend the fundamental investment limitation concerning real estate for
Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,076,196.350 81.33
Against 1,025,367.020 7.53
Abstain 1,517,451.132 11.14
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 19
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning senior securities.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,584,067.577 85.06
Against 501,562.178 3.68
Abstain 1,533,384.747 11.26
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 20
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning short sales of securities and replace it with a
similar non-fundamental investment limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,001,582.538 80.78
Against 1,087,062.521 7.98
Abstain 1,530,369.443 11.24
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 21
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning margin purchases and replace it with a similar
non-fundamental investment limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,992,209.318 80.71
Against 1,100,116.876 8.08
Abstain 1,526,688.308 11.21
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 22
To amend Strategic Opportunities Fund's fundamental investment concerning
borrowing limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,955,546.335 80.44
Against 1,149,393.710 8.44
Abstain 1,514,074.457 11.12
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 23
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning the underwriting of securities.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,509,524.223 84.51
Against 573,168.443 4.21
Abstain 1,536,321.836 11.28
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 24
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning the concentration of its investments in a single industry.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,441,217.081 84.01
Against 678,505.413 4.98
Abstain 1,499,302.008 11.01
TOTAL 13,619,024.502 100.00
Not Voting 2,543,863.000
PROPOSAL 25
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning lending.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,970,495.148 80.55
Against 1,121,522.738 8.24
Abstain 1,526,996.616 11.21
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 26
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investments in other investment companies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,452,450.853 84.09
Against 663,648.453 4.87
Abstain 1,502,915.196 11.04
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 27
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investing in oil, gas, and mineral exploration
programs.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,008,669.024 80.83
Against 1,118,266.376 8.21
Abstain 1,492,079.102 10.96
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 28
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investments in securities of newly-formed issuers.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,023,807.584 80.95
Against 1,085,872.726 7.97
Abstain 1,509,334.192 11.08
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
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
Robert C. Pozen, Senior Vice President
William J. Hayes, Vice President
Abigail Johnson, Vice President
Harris Leviton, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
STRATEGIC OPPORTUNITIES
FUND - INITIAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1997
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 18 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 27 Notes to the financial statements.
PROXY VOTING RESULTS 37
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will greatly
reduce your vulnerability to any single decline. We know from experience,
for example, that stock prices have gone up over longer periods of time,
have significantly outperformed other types of investments and have stayed
ahead of inflation.
Second, you can further manage your investing risk through diversification.
A stock mutual fund, for instance, is already diversified, because it
invests in many different companies. You can increase your diversification
further by investing in a number of different stock funds, or in such other
investment categories as bonds. If you have a short investment time
horizon, you might want to consider moving some of your investment into a
money market fund, which seeks income and a stable share price by investing
in high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will achieve
its goal of maintaining a stable net asset value of $1.00 per share, and
that these types of funds are neither insured nor guaranteed by any agency
of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR STRATEGIC OPPORTUNITIES FUND - INITIAL CLASS
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. Total return reflects
the changes in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). If Fidelity had not reimbursed
certain class expenses, the past five and 10 year total returns would have
been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Strategic Opportunities - Initial 13.24% 15.22% 96.37% 221.31%
Class
Advisor Strategic Opportunities - Initial 9.28% 11.19% 89.50% 210.06%
Class
(incl. max. 3.50% sales charge)
S&P 500 (registered trademark) 20.61% 34.70% 146.59% 292.69%
Capital Appreciation Funds Average 10.16% 14.44% 113.79% 208.97%
</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 had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare Initial Class' returns to those of the Standard & Poor's
500 Index - a widely recognized, unmanaged index of common stocks. 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 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 233 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Strategic Opportunities - Initial Class 15.22% 14.45% 12.38%
Advisor Strategic Opportunities - Initial Class 11.19% 13.64% 11.98%
(incl. max. 3.50% sales charge)
S&P 500 34.70% 19.78% 14.64%
Capital Appreciation Funds Average 14.44% 15.94% 11.24%
AVERAGE ANNUAL TOTAL RETURNS take the Initial Class' cumulative return and
show you what would have happened if Initial Class had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an arithmetic
average. This may produce a slightly different figure than that obtained by
averaging the cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 9650.00 10000.00
1987/07/31 10046.65 10507.00
1987/08/31 10244.97 10898.91
1987/09/30 9984.02 10660.22
1987/10/31 8167.79 8364.01
1987/11/30 7797.24 7674.82
1987/12/31 7976.39 8258.87
1988/01/31 8609.15 8606.57
1988/02/29 8895.11 9007.64
1988/03/31 8736.92 8729.30
1988/04/30 8791.67 8826.20
1988/05/31 8943.78 8902.98
1988/06/30 9558.28 9311.63
1988/07/31 9503.53 9276.25
1988/08/31 9217.57 8960.85
1988/09/30 9521.78 9342.59
1988/10/31 9692.14 9602.31
1988/11/30 9746.89 9465.00
1988/12/31 9787.61 9630.63
1989/01/31 10375.24 10335.60
1989/02/28 10331.01 10078.24
1989/03/31 10545.85 10313.06
1989/04/30 10943.92 10848.31
1989/05/31 11443.10 11287.67
1989/06/30 11537.88 11223.33
1989/07/31 12327.71 12236.79
1989/08/31 12479.36 12476.64
1989/09/30 12492.00 12425.48
1989/10/31 12289.80 12137.21
1989/11/30 12631.01 12384.81
1989/12/31 13015.61 12682.05
1990/01/31 12171.03 11831.08
1990/02/28 12243.05 11983.70
1990/03/31 12256.15 12301.27
1990/04/30 11758.57 11993.74
1990/05/31 12144.85 13163.13
1990/06/30 12262.69 13073.62
1990/07/31 12308.52 13031.78
1990/08/31 11457.40 11853.71
1990/09/30 11372.29 11276.43
1990/10/31 11372.29 11227.94
1990/11/30 11876.42 11953.27
1990/12/31 12157.31 12286.77
1991/01/31 12562.10 12822.47
1991/02/28 13309.92 13739.28
1991/03/31 13735.29 14071.77
1991/04/30 13927.40 14105.54
1991/05/31 14428.23 14714.90
1991/06/30 13982.28 14040.96
1991/07/31 14407.65 14695.26
1991/08/31 14723.25 15043.54
1991/09/30 14784.99 14792.31
1991/10/31 14496.84 14990.53
1991/11/30 14153.80 14386.41
1991/12/31 15037.45 16032.22
1992/01/31 15069.81 15734.02
1992/02/29 15369.10 15938.56
1992/03/31 14988.92 15627.76
1992/04/30 15280.12 16087.22
1992/05/31 15781.64 16166.04
1992/06/30 15789.73 15925.17
1992/07/31 16275.07 16576.51
1992/08/31 16008.13 16236.69
1992/09/30 15951.51 16428.28
1992/10/31 16080.93 16485.78
1992/11/30 16768.50 17047.95
1992/12/31 17063.70 17257.64
1993/01/31 17384.64 17402.60
1993/02/28 17883.90 17639.28
1993/03/31 18454.47 18011.46
1993/04/30 18097.86 17575.59
1993/05/31 18534.71 18046.61
1993/06/30 18704.09 18098.95
1993/07/31 19114.19 18026.55
1993/08/31 20317.75 18709.76
1993/09/30 20255.34 18565.69
1993/10/31 20906.15 18950.00
1993/11/30 20032.46 18769.98
1993/12/31 20659.36 18997.10
1994/01/31 20856.59 19643.00
1994/02/28 20136.71 19110.67
1994/03/31 19377.40 18277.45
1994/04/30 19535.18 18511.40
1994/05/31 19594.34 18814.98
1994/06/30 19594.34 18354.02
1994/07/31 20087.41 18956.03
1994/08/31 20215.60 19733.23
1994/09/30 19949.35 19249.76
1994/10/31 19752.13 19682.88
1994/11/30 19150.59 18966.03
1994/12/31 19347.02 19247.30
1995/01/31 20188.19 19746.38
1995/02/28 20721.62 20515.90
1995/03/31 20916.53 21121.32
1995/04/30 21378.15 21743.34
1995/05/31 21952.61 22612.42
1995/06/30 23111.79 23137.71
1995/07/31 23911.93 23904.96
1995/08/31 24599.23 23964.96
1995/09/30 25460.92 24976.28
1995/10/31 25368.60 24887.12
1995/11/30 26066.16 25979.66
1995/12/31 26843.15 26480.03
1996/01/31 26875.24 27381.41
1996/02/29 26345.67 27635.23
1996/03/31 25475.82 27901.36
1996/04/30 26149.95 28312.63
1996/05/31 26932.82 29042.81
1996/06/30 26911.07 29153.46
1996/07/31 25073.51 27865.46
1996/08/31 26030.35 28453.15
1996/09/30 26932.82 30054.49
1996/10/31 26465.27 30883.39
1996/11/30 27411.24 33217.87
1996/12/31 27380.71 32559.82
1997/01/31 28432.89 34594.16
1997/02/28 28064.62 34865.38
1997/03/31 26277.22 33432.76
1997/04/30 26426.17 35428.69
1997/05/31 29876.84 37585.59
1997/06/30 31006.38 39269.43
$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, 1987, and the current maximum 3.50% sales charge was paid. As the chart
shows, by June 30, 1997, the value of the investment would have grown to
$31,006 - a 210.06% increase on the initial investment. For comparison,
look at how the S&P 500 did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would have
grown to $39,269 - a 292.69% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn,
the share price and return of
a fund that invests in stocks
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Harris Leviton, Portfolio Manager of Fidelity Advisor
Strategic Opportunities Fund
Q. HOW DID THE FUND PERFORM, HARRIS?
A. For the six months that ended June 30, 1997, the fund's Initial Class
shares had a total return of 13.24%. During the same period, the capital
appreciation funds average posted a return of 10.16%, according to Lipper
Analytical Services. For the 12 months that ended June 30, 1997, the fund's
Initial Class shares had a total return of 15.22%, while the capital
appreciation funds average had a total return of 14.44%.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE DURING THE FIRST HALF OF
THE YEAR?
A. I'd attribute the fund's performance to big investments in specific
stocks that did well. A lot of the large positions in the fund appreciated
considerably during the period, including the fund's top two holdings on
June 30, Whole Foods Market and American Bankers Insurance Group. Those two
stocks made up about 16% of the portfolio by the end of the period - a
position that really paid off for the fund.
Q. WHOLE FOODS MARKET AND AMERICAN BANKERS INSURANCE GROUP WERE THE FUND'S
TOP HOLDINGS AT THE BEGINNING OF THE PERIOD AS WELL. WHAT ATTRACTED YOU TO
THESE STOCKS?
A. Whole Foods Market, a diversified chain of natural foods supermarkets,
was a solid performer because natural foods have been gaining huge market
acceptance. People are getting more concerned about the quality of their
food supply, especially after recent news reports of food scares such as
mad-cow disease and tainted strawberries. The company has also benefited
from the move toward homeopathic medicine, where people use natural herbs
for cures. As for American Bankers Insurance, a specialty property-casualty
insurance company, I thought the stock's valuation was too cheap relative
to the company's earnings potential. New management pushed the company to
exit some less profitable lines of business and focus on its credit-based
accident, health and life insurance operations - where the company offers
insurance that pays your credit card bills if you get injured or lose your
job. In fact, American Bankers recently signed a contract with some
utilities, under which it arranged to offer similar insurance for paying
utility bills. Whole Foods Market and American Bankers Insurance are good
examples of "special situation" stocks.
Q. WERE THERE OTHER HOLDINGS THAT PERFORMED PARTICULARLY WELL DURING THE
PERIOD?
A. Sepracor, a maker of improved versions of existing drugs, was another
big stock for the fund. During the period, the company released good
clinical data for some of its drugs and also filed its first new drug
application for an asthma medication. A lot of the large-cap pharmaceutical
companies have done very well since the beginning of the year, but I think
they've gotten too expensive. Considering that I might have to pay
somewhere between 30 and 40 times earnings for the large-cap pharmaceutical
stocks that have participated in the latest market rally, Sepracor looked
cheap given what it has in its product pipeline.
Q. YOU'VE INCREASED THE FUND'S INVESTMENTS IN THE BASIC INDUSTRIES SECTOR
TO 11.5% AT THE END OF THE PERIOD FROM 7.2% SIX MONTHS EARLIER. WHAT WAS
YOUR REASONING BEHIND THIS MOVE?
A. Because I look for investments on a stock-by-stock basis, I didn't
intentionally drive up the fund's investments in the basic industries
sector. Rather, I increased the fund's investment in a few wire and cable
makers, which are included in this sector, and that helped the fund's
performance during the period. I've found that increased capital spending
is driving demand for the new technologies these companies develop. On top
of that, several of the stocks were very cheap relative to their potential
earnings growth. AFC Cable Systems and Cable Design Technology were among
the fund's top 10 holdings at the end of the period and both contributed to
the fund's performance.
Q. WERE THERE ANY SECTORS THAT WERE PARTICULARLY DISAPPOINTING DURING THE
PERIOD?
A. The casino-gaming stocks in the fund were disappointing because business
in Las Vegas has slowed down over the past four or five months. A lot of
companies are adding capacity and in the past when you added capacity,
business improved. That didn't happen during the period. Starting in 1998,
several new hotel complexes with added attractions will open and business
may rebound. Also, the stocks were cheap at the end of the period.
Q. WHAT'S YOUR OUTLOOK FOR THE SECOND HALF OF THE YEAR?
A. It really depends on the market's appetite for small stocks. The rally
in large-cap stocks is unprecedented in market history in terms of
magnitude, duration and valuation extremes. I think the massive investments
in the Standard & Poor's 500 Index funds - and the influence they're having
on the market's rise - has to end at some point. Either the market has to
come down or the small-cap stocks are going to have to come up. During the
first six months of the year, the fund lagged the S&P 500 every month
except for May, when it dramatically outperformed the broader market. The
market's performance may continue in that fashion during the second half -
where you'll see periods of underperformance by small stocks relative to
the index, followed by short periods of dramatic outperformance.
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, 1997,
more than $592 million
MANAGER: Harris Leviton,
since 1996; joined Fidelity in
1986
(checkmark)
HARRIS LEVITON ON DISCOVERING
"SPECIAL SITUATION" STOCKS IN
THE ONGOING BULL MARKET:
"When a bull market is as
long and large as this one
has been, it is tough to find
attractive stocks. You have to
look in a lot of unusual places.
As the bull market
continues, most investors don't
spend as much time
investigating the neglected
sectors of the market. In
contrast, I investigate all sorts
of small- and mid-cap stocks
and foreign companies. I also
spend a lot of time looking at
broken IPOs - companies
that went public a few years
ago, traded up on the hype of
their initial public offerings and
then dwindled after analysts
and the public lost interest. At
the end of May, I visited about
10 companies that had gone
public a few years ago and
their stocks were trading at
50% to 70% off of their highs.
You can find a lot of
opportunities by just going
around digging under rocks. If
I find a cheap stock, I look for
improving company
fundamentals. I also look for a
catalyst for improvement,
such as a new product cycle
or cost cutting, and try to get
in ahead of the crowd."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Whole Foods Market, Inc. 8.5 4.7
American Bankers Insurance Group, Inc. 7.9 5.4
Sepracor, Inc. 4.4 2.3
Nintendo Co. Ltd Ord. 3.8 4.3
AFC Cable Systems, Inc. 2.8 2.3
Cable Design Technology Corp. 2.8 1.2
Lennar Corp. 2.5 1.7
Harveys Casino Resorts 2.4 1.7
CVS Corp. 1.9 1.2
I-Stat Corp. 1.8 1.7
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Media & Leisure 13.8 15.7
Retail & Wholesale 13.1 8.2
Technology 12.4 11.8
Basic Industries 11.5 7.2
Health 9.9 7.7
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 * AS OF DECEMBER 31, 1996 **
Row: 1, Col: 1, Value: 7.9
Row: 1, Col: 2, Value: 1.1
Row: 1, Col: 3, Value: 91.0
Stocks 93.2%
Bonds 1.4%
Short-term
investments 5.4%
FOREIGN
INVESTMENTS 10.1%
Stocks 91.4%
Bonds 0.7%
Short-term
investments 7.9%
FOREIGN
INVESTMENTS 10.8%
Row: 1, Col: 1, Value: 5.4
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 92.59999999999999
*
**
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 91.2%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.0%
Doncasters PLC sponsored ADR 4,000 $ 92,500
DEFENSE ELECTRONICS - 0.4%
Herley Microwave Systems, Inc. (a)(c) 183,500 2,362,562
TOTAL AEROSPACE & DEFENSE 2,455,062
BASIC INDUSTRIES - 11.5%
IRON & STEEL - 0.5%
Cold Metal Products, Inc. (a) 179,900 1,011,937
Quanex Corp. 10,000 306,875
Steel Dynamics, Inc. (a) 63,500 1,587,500
2,906,312
METALS & MINING - 9.7%
AFC Cable Systems, Inc. (a)(c) 627,300 16,937,100
Alumax, Inc. (a) 216,500 8,213,469
Cable Design Technology Corp. (a) 569,700 16,770,544
Essex International, Inc. 108,900 3,035,587
General Cable Corp. 250,000 6,406,250
Inco Ltd. 200,000 5,975,446
Ryerson Tull, Inc. Class A 20,000 330,000
57,668,396
PAPER & FOREST PRODUCTS - 1.3%
Fort Howard Corp. (a) 84,700 4,287,938
Mercer International, Inc. (SBI) 407,900 3,875,050
8,162,988
TOTAL BASIC INDUSTRIES 68,737,696
CONSTRUCTION & REAL ESTATE - 3.7%
CONSTRUCTION - 2.9%
Beazer Homes USA, Inc. (a) 152,200 2,435,200
Lennar Corp. 459,200 14,665,700
17,100,900
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 0.8%
Jameson Co. 230,000 $ 2,702,500
Sovran Self Storage, Inc. 68,700 2,009,475
4,711,975
TOTAL CONSTRUCTION & REAL ESTATE 21,812,875
DURABLES - 5.5%
CONSUMER ELECTRONICS - 1.2%
Movado Group, Inc. (c) 275,000 7,012,500
Tag-Heuer International SA sponsored ADR (a) 11,000 165,687
7,178,187
HOME FURNISHINGS - 0.9%
Maxim Group, Inc. (a) 504,300 5,547,300
TEXTILES & APPAREL - 3.4%
Converse, Inc. (a) 185,100 4,095,337
Deckers Outdoor Corp. (a)(c) 596,900 4,402,138
Galey & Lord, Inc. (a) 115,800 2,171,250
Maxwell Shoe Co., Inc. Class A (a)(c) 758,800 9,295,300
19,964,025
TOTAL DURABLES 32,689,512
FINANCE - 9.5%
INSURANCE - 9.5%
American Bankers Insurance Group, Inc. 739,800 46,792,350
Amerus Life Holdings, Inc. 132,900 3,704,587
Centris Group, Inc. 42,700 902,038
Norwich Union PLC (a) 56,000 297,848
Old Republic International Corp. 156,500 4,743,906
56,440,729
HEALTH - 9.9%
DRUGS & PHARMACEUTICALS - 6.0%
Alliance Pharmaceutical Corp. (a) 357,600 3,598,350
Creative Biomolecules, Inc. (a) 335,300 2,368,056
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Myriad Genetics (a) 140,000 $ 3,780,000
Sepracor, Inc. (a) 1,004,700 25,933,819
35,680,225
MEDICAL EQUIPMENT & SUPPLIES - 3.9%
Cygnus, Inc. (a) 414,250 7,145,812
Heartport, Inc. (a) 151,100 2,663,138
Hemasure, Inc. (a) 359,000 987,250
I-Stat Corp. (a)(c) 639,700 10,954,863
Physiometrix, Inc. (a) 165,000 515,625
Resound Corp. (a) 195,000 1,096,875
23,363,563
TOTAL HEALTH 59,043,788
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
Columbus McKinnon Corp. 257,600 4,894,400
Regal-Beloit Corp. 107,300 2,843,450
Sulzer AG (Reg.) 12,000 10,263,428
T B Wood's Corp. 164,000 2,388,250
20,389,528
MEDIA & LEISURE - 13.6%
BROADCASTING - 0.8%
American Telecasting, Inc. (a) 510,000 318,750
Ascent Entertainment Group, Inc. (a) 64,500 588,562
CAI Wireless Systems, Inc. (a) 1,125,615 1,195,966
Heartland Wireless Communications, Inc. (a) 429,167 1,019,272
People's Choice TV Corp. (a)(c) 679,675 1,104,472
Wireless One, Inc. (a) 227,600 583,225
4,810,247
ENTERTAINMENT - 3.7%
Film Roman, Inc. (a) 85,000 148,750
Harveys Casino Resorts (c) 811,700 14,255,481
MGM Grand, Inc. (a) 200,500 7,418,500
21,822,731
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 4.1%
Equity Marketing, Inc. (a) 10,000 $ 235,000
Just Toys, Inc. (a)(c) 253,900 349,113
Nintendo Co. Ltd. Ord. 268,900 22,516,812
Silicon Gaming, Inc. (a) 109,800 1,427,400
24,528,325
LODGING & GAMING - 3.1%
Circus Circus Enterprises, Inc. (a) 364,300 8,970,887
WMS Industries, Inc. 379,100 9,501,194
18,472,081
PUBLISHING - 0.2%
Scholastic Corp. (a) 38,700 1,354,500
RESTAURANTS - 1.7%
Foodmaker, Inc. (a) 130,000 2,128,750
Morton's Restaurant Group, Inc. (a)(c) 414,800 8,244,150
10,372,900
TOTAL MEDIA & LEISURE 81,360,784
NONDURABLES - 4.1%
AGRICULTURE - 1.3%
Saskatchewan Wheat Pool (a):
Class B (non-vtg.) 478,300 5,889,328
Class B (b) 158,000 1,945,460
7,834,788
FOODS - 0.1%
Earthgrains Co. 13,200 865,425
Tomkins PLC Ord. 3,425 14,824
880,249
HOUSEHOLD PRODUCTS - 1.1%
Church & Dwight Co., Inc. 251,800 6,735,650
TOBACCO - 1.6%
Philip Morris Companies, Inc. 208,300 9,243,313
TOTAL NONDURABLES 24,694,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
PRECIOUS METALS - 1.5%
Getchell Gold Corp. (a) 32,200 $ 1,135,050
Newmont Mining Corp. 200,000 7,800,000
8,935,050
RETAIL & WHOLESALE - 13.1%
APPAREL STORES - 0.3%
Charming Shoppes, Inc. (a) 211,400 1,103,244
Footstar, Inc. (a) 19,922 520,462
1,623,706
DRUG STORES - 1.9%
CVS Corp. 219,600 11,254,500
GENERAL MERCHANDISE STORES - 1.5%
Freds, Inc. Class A (c) 590,300 8,854,500
GROCERY STORES - 8.8%
Whole Foods Market, Inc. (a)(c) 1,530,300 50,691,187
Wild Oats Markets, Inc. 80,000 2,040,000
52,731,187
RETAIL & WHOLESALE, MISCELLANEOUS - 0.6%
Toys "R" Us, Inc. (a) 105,638 3,697,330
TOTAL RETAIL & WHOLESALE 78,161,223
SERVICES - 0.2%
LEASING & RENTAL - 0.2%
Hanover Compressor Co. 7,800 7,800
Hertz Corp. Class A 26,800 964,800
972,600
SERVICES - 0.0%
Pierce Leahy Corp. 28,800 28,800
TOTAL Services 1,001,400
TECHNOLOGY - 12.1%
COMMUNICATIONS EQUIPMENT - 0.6%
Alcatel Alsthom Compagnie Generale d'Electricite
SA sponsored ADR 129,900 3,279,975
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - 9.6%
Activision, Inc. (a) 135,000 $ 1,940,625
BancTec, Inc. (a) 270,000 7,003,125
Broadway & Seymour, Inc. (a) 88,300 1,114,787
Broderbund Software, Inc. (a) 145,000 3,579,687
CACI International, Inc. Class A (a) 116,100 1,770,525
CompUSA, Inc. (a) 427,200 9,184,800
Eidos PLC sponsored ADR 389,000 4,765,250
GT Interactive Software, Inc. (a) 188,100 2,233,688
Maxis, Inc. (a) 254,600 3,055,200
Midway Games, Inc. (a)(c) 291,300 6,262,950
Spectrum Holobyte, Inc. (a)(c) 2,056,500 10,025,438
Sybase, Inc. (a) 421,700 6,272,788
57,208,863
COMPUTERS & OFFICE EQUIPMENT - 1.3%
Creative Technology Corp. Ltd. (a) 239,400 4,069,800
Performance Technologies, Inc. (a) 230,000 3,507,500
Sandisk Corp. 4,500 65,812
7,643,112
ELECTRONIC INSTRUMENTS - 0.1%
ORBIT/FR, Inc. 75,000 731,250
ELECTRONICS - 0.5%
AVX Corp. 99,700 2,691,900
ESS Technology, Inc. 35,000 470,313
3Dfx Interactive, Inc. 1,100 14,713
3,176,926
TOTAL TECHNOLOGY 72,040,126
TRANSPORTATION - 2.7%
AIR TRANSPORTATION - 1.6%
Reno Air, Inc. (a)(c) 934,800 8,062,650
Ryanair Holdings PLC sponsored ADR 50,600 1,372,525
9,435,175
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 1.1%
Hunt (J.B.) Transport Services, Inc. 435,600 $ 6,479,550
SPACEHAB, Inc. (a) 30,000 266,250
6,745,800
TOTAL TRANSPORTATION 16,180,975
TOTAL COMMON STOCKS
(Cost $488,256,516) 543,942,748
CONVERTIBLE PREFERRED STOCKS - 0.2%
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Triathalon Broadcasting Co. $0.945
depositary share (Cost $1,226,360) 114,080 1,026,720
CONVERTIBLE BONDS - 0.7%
MOODY'S PRINCIPAL
RATINGS AMOUNT
DURABLES - 0.4%
TEXTILES & APPAREL - 0.4%
Converse, Inc. 7%, 6/1/04 - $ 1,945,000 2,197,850
TECHNOLOGY - 0.3%
ELECTRONICS - 0.3%
Richardson Electronics, Ltd.:
8 1/4%, 6/15/06 B3 1,978,000 1,701,080
7 1/4%, 12/15/06 B3 404,000 307,040
TOTAL TECHNOLOGY 2,008,120
TOTAL CONVERTIBLE BONDS
(Cost $4,024,180) 4,205,970
CASH EQUIVALENTS - 7.9%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
6/30/97 due 7/1/97 $ 46,890,723 $ 46,883,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $540,390,056) $ 596,058,438
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 $1,945,460 or 0.3% of net
assets.
3. Affiliated company (see Note 11 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 89.2%
Japan 3.8
Canada 3.0
Switzerland 1.8
Others (individually less than 1%) 2.2
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $540,412,067. Net unrealized appreciation aggregated
$55,646,371, of which $127,827,014 related to appreciated investment
securities and $72,180,643 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 596,058,438
agreements of $46,883,000) (cost $540,390,056) -
See accompanying schedule
Cash 887,485
Receivable for investments sold 2,467,926
Receivable for fund shares sold 224,902
Dividends receivable 352,690
Interest receivable 46,726
Other receivables 73,080
Prepaid expenses 3,354
TOTAL ASSETS 600,114,601
LIABILITIES
Payable for investments purchased $ 3,660,151
Payable for fund shares redeemed 3,376,170
Accrued management fee 198,149
Distribution fees payable 273,906
Other payables and accrued expenses 196,273
TOTAL LIABILITIES 7,704,649
NET ASSETS $ 592,409,952
Net Assets consist of:
Paid in capital $ 490,060,859
Accumulated net investment loss (723,376)
Accumulated undistributed net realized gain (loss) on 47,393,519
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 55,678,950
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 592,409,952
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $24.46
CLASS A:
NET ASSET VALUE and redemption price per share
($918,657 (divided by) 37,559 shares)
Maximum offering price per share (100/94.75 of $24.46) $25.82
CLASS T: $24.68
NET ASSET VALUE and redemption price per share
($469,444,476 (divided by) 19,020,008 shares)
Maximum offering price per share (100/96.50 of $24.68) $25.58
CLASS B: $24.24
NET ASSET VALUE and offering price per share
($97,397,263 (divided by) 4,018,431 shares) A
INITIAL CLASS: $24.98
NET ASSET VALUE and redemption price per share
($20,689,260 (divided by) 828,072 shares)
Maximum offering price per share (100/96.50 of $24.98) $25.89
INSTITUTIONAL CLASS: $24.52
NET ASSET VALUE, offering price and redemption price
per share ($3,960,296 (divided by) 161,541 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 2,102,889
Dividends (including $133,100 received from
affiliated issuers)
Interest 1,025,004
TOTAL INCOME 3,127,893
EXPENSES
Management fee $ 1,771,758
Basic fee
Performance adjustment (591,597)
Transfer agent fees 671,038
Distribution fees 1,647,530
Accounting fees and expenses 165,185
Non-interested trustees' compensation 2,207
Custodian fees and expenses 26,888
Registration fees 64,178
Audit 35,364
Legal 4,243
Interest 16,435
Reports to shareholders 75,356
Miscellaneous 1,148
Total expenses before reductions 3,889,733
Expense reductions (39,859) 3,849,874
NET INVESTMENT INCOME (LOSS) (721,981)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain (loss) of 47,771,796
$1,050,483 on sales of investments in affiliated
issuers)
Foreign currency transactions (2,997) 47,768,799
Change in net unrealized appreciation (depreciation) on:
Investment securities 23,247,938
Assets and liabilities in foreign currencies 11,943 23,259,881
NET GAIN (LOSS) 71,028,680
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 70,306,699
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ (721,981) $ 5,065,025
Net investment income (loss)
Net realized gain (loss) 47,768,799 101,103,020
Change in net unrealized appreciation (depreciation) 23,259,881 (96,084,415)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 70,306,699 10,083,630
FROM OPERATIONS
Distributions to shareholders - (5,501,432)
From net investment income
From net realized gain (23,324,662) (70,113,368)
TOTAL DISTRIBUTIONS (23,324,662) (75,614,800)
Share transactions - net increase (decrease) (176,628,154) 36,171,237
TOTAL INCREASE (DECREASE) IN NET ASSETS (129,646,117) (29,359,933)
NET ASSETS
Beginning of period 722,056,069 751,416,002
End of period (including undistributed net $ 592,409,952 $ 722,056,069
investment income (loss) of $(723,376) and
$1,667,423, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 F
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.51 $ 23.48
Income from Investment Operations
Net investment income (loss) E (.04) .08
Net realized and unrealized gain (loss) 2.86 1.26
Total from investment operations 2.82 1.34
Less Distributions
From net investment income - (.37)
From net realized gain (.87) (1.94)
Total distributions (.87) (2.31)
Net asset value, end of period $ 24.46 $ 22.51
TOTAL RETURN B, C 12.88% 5.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 919 $ 638
Ratio of expenses to average net assets 1.49% A, I .99% A,
D
Ratio of expenses to average net assets after expense 1.48% A, G .97% A,
reductions G
Ratio of net investment income (loss) to average net assets (.40)% A 1.00% A
Portfolio turnover 41% A 151%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO DECEMBER 31, 1996.
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 6 OF
NOTES TO FINANCIAL STATEMENTS).
H 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.
I FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE MONTHS YEARS ENDED SEPTEMBER 30,
ENDED 31, ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 F 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.69 $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53 $ 21.38
Income from Investment Operations
Net investment income (loss) (.02) E .17 E .39 .10 E .39 E .33 .61
Net realized and unrealized gain (loss) 2.88 .18 6.73 (.75) (.81) 4.44 .58
Total from investment operations 2.86 .35 7.12 (.65) (.42) 4.77 1.19
Less Distributions
From net investment income - (.19) (.39) (.35) (.43) (.57) (.62)
From net realized gain (.87) (2.35) (.55) (.26) (1.71) (1.21) (2.42)
Total distributions (.87) (2.54) (.94) (.61) (2.14) (1.78) (3.04)
Net asset value, end of period $ 24.68 $ 22.69 $ 24.88 $ 18.70 $ 19.96 $ 22.52 $ 19.53
TOTAL RETURN B, C 12.96% 1.53% 38.16% (3.26)% (2.24)% 26.33% 7.26%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 469,444 $ 560,645 $ 619,993 $ 375,691 $ 385,349 $ 269,833 $ 194,710
Ratio of expenses to average net assets 1.26% A 1.28% 1.61% 1.73% A, G 1.85% 1.57% 1.46%
D
Ratio of expenses to average net assets after 1.25% A, 1.27% 1.61% 1.73% A 1.84% 1.57% 1.46%
expense reductions H H H
Ratio of net investment income (loss) to (.17)% A .70% 1.90% 2.03% A 1.89% 2.06% 3.22%
average net assets
Portfolio turnover 41% A 151% 142% 228% A 159% 183% 211%
Average commission rate I $ .0420 $ .0409
</TABLE>
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D INCLUDES
REIMBURSEMENT OF $.03 PER SHARE FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. E
NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD. F 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. G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER. H FMR OR THE FUND HAS ENTERED INTO VARYING
ARANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE
CLASS' EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). I 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE YEAR ENDED
ENDED 31, MONTHS SEPTEMBER
JUNE 30, 1997 ENDED 30,
DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 E
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 22.36 $ 24.56 $ 18.57 $ 19.98 $ 19.65
beginning of period
Income from Investment
Operations
Net investment (.08) D .04 D .38 .06 D .05 D
income (loss)
Net realized and 2.83 .18 6.54 (.74) .28
unrealized gain
(loss)
Total from investment 2.75 .22 6.92 (.68) .33
operations
Less Distributions
From net investment - (.07) (.38) (.47) -
income
From net realized gain (.87) (2.35) (.55) (.26) -
Total distributions (.87) (2.42) (.93) (.73) -
Net asset value, $ 24.24 $ 22.36 $ 24.56 $ 18.57 $ 19.98
end of period
TOTAL RETURN B, C 12.65% 1.00% 37.35% (3.41)% 1.68%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 97,397 $ 98,535 $ 87,566 $ 17,090 $ 8,824
(000 omitted)
Ratio of expenses to 1.82% A 1.80% 2.11% 2.58% A 2.63% A
average net assets , F
Ratio of expenses to 1.81% A, 1.79% 2.10% G 2.53% A, 2.63% A
average net assets G G G
after expense
reductions
Ratio of net investment (.73)% A .18% 1.40% 1.22% A 1.11% A
income (loss) to
average net assets
Portfolio turnover 41% A 151% 142% 228% A 159%
Average commission $ .0420 $ .0409
rate H
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME (LOSS) 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 6 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER THREE MONTHS YEARS ENDED SEPTEMBER 30,
ENDED 31, ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1994 F 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.90 $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72 $ 21.55
Income from Investment Operations
Net investment income .03 E .28 E .50 .13 E .54 E .45 .73
Net realized and unrealized gain (loss) 2.92 .19 6.79 (.74) (.81) 4.46 .58
Total from investment operations 2.95 .47 7.29 (.61) (.27) 4.91 1.31
Less Distributions
From net investment income - (.32) (.50) (.50) (.51) (.70) (.72)
From net realized gain (.87) (2.35) (.55) (.26) (1.71) (1.21) (2.42)
Total distributions (.87) (2.67) (1.05) (.76) (2.22) (1.91) (3.14)
Net asset value, end of period $ 24.98 $ 22.90 $ 25.10 $ 18.86 $ 20.23 $ 22.72 $ 19.72
TOTAL RETURN B, C 13.24% 2.00% 38.75% (3.02)% (1.51)% 26.98% 7.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 20,689 $ 20,406 $ 23,428 $ 17,583 $ 18,850 $ 20,707 $ 17,933
Ratio of expenses to average net assets .79% A .82% 1.04% 1.14% A 1.15% .89% .87%
D
Ratio of expenses to average net assets after .78% A, .81% G 1.03% G 1.11% A, G 1.14% .89% .87%
expense reductions G G
Ratio of net investment income to average net .30% A 1.16% 2.47% 2.65% A 2.60% 2.74% 3.78%
assets
Portfolio turnover 41% A 151% 142% 228% A 159% 183% 211%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D INCLUDES
REIMBURSEMENT OF $.03 PER SHARE FOR ADJUSTMENTS TO PRIOR PERIOD'S FEES. E
NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD. F 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. 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 6 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 ENDED
JUNE 30, 1997 YEARS ENDED
DECEMBER 31,
(UNAUDITED) 1996 1995 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.57 $ 24.80 $ 22.35
Income from Investment Operations
Net investment income (loss) (.04) D .29 D .55
Net realized and unrealized gain (loss) 2.86 .17 3.00
Total from investment operations 2.82 .46 3.55
Less Distributions
From net investment income - (.34) (.55)
From net realized gain (.87) (2.35) (.55)
Total distributions (.87) (2.69) (1.10)
Net asset value, end of period $ 24.52 $ 22.57 $ 24.80
TOTAL RETURN B, C 12.85% 1.99% 15.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,960 $ 41,832 $ 20,429
Ratio of expenses to average net assets 1.24% A, F .78% .97% A
Ratio of expenses to average net assets after 1.23% A, G .76% G .96% A,
expense reductions G
Ratio of net investment income (loss) to average (.30)% A 1.21% 2.55% A
net assets
Portfolio turnover 41% A 151% 142%
Average commission rate H $ .0420 $ .0409
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUIONAL CLASS
SHARES) TO DECEMBER 31, 1995.
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 ( SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
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 6 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
12. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Strategic Opportunities Fund (the fund) is a fund of
Fidelity Advisor Series VIII (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Initial Class, and Institutional
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, the common expenses of the fund, and certain fund-level expense
reductions 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, expenses, and expense
reductions.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities with remaining maturities
of sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net investment income accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
and the U.S. dollar amount actually received. The effects of changes in
foreign currency exchange rates on investments in securities are included
with the net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
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 passive
foreign investment companies (PFIC), market discount and losses deferred
due to wash sales. The fund also utilized earnings and profits distributed
to shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated net investment loss and accumulated undistributed net realized
gain (loss) on investments and foreign currency transactions
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
13. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the
SEC, the fund, along with other registered investment companies having
management contracts with FMR, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
fund to borrow from, or lend money to, other participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered.
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, the fund had no investments in restricted securities
(excluding 144A issues).
14. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $114,868,059 and $324,634,277, respectively.
15. 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. The annual individual
fund fee rate is .30%. 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 basic fee is subject to a performance adjustment (up to a maximum of
".20% of the fund's average net assets over the performance period) based
on the investment performance of the lowest performing class as compared to
the appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annualized rate of .41% of average net
assets after the performance adjustment. Effective July 1, 1997 the fund's
performance adjustment is based on the asset weighted average return of all
classes as compared to the appropriate index over a specific period of
time.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares, except for the Initial Class (collectively referred
to as "the Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. This fee is based on the following annual rates of the average
net assets of each applicable class:
CLASS A .25%
CLASS T .50%
CLASS B 1.00%*
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 888 $ 888
CLASS T 1,177,927 1,177,927
CLASS B 468,715 117,178
$ 1,647,530 $ 1,295,993
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 5.25% for
selling Class A shares and 3.50% for selling Class T and Initial Class
shares of the fund, respectively, and the proceeds of a contingent deferred
sales charge levied on Class B share redemptions occurring within six years
of purchase (five years prior to January 2, 1997). The Class B charge is
based on declining rates which range from 5% to 1% (4% to 1% prior to
January 2, 1997) 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. Effective August 1, 1997, Class A's
maximum sales charge was increased to 5.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 11,682 $ 9,408
CLASS T 87,987 72,120
CLASS B 193,469 0 *
INITIAL CLASS 259 0
$ 293,397 $ 81,528
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 1,329 .38% ***
CLASS T ** FIIOC * 525,196 .23% ***
CLASS B FIIOC * 119,317 .26% ***
INITIAL CLASS FSC * 18,955 .20% ***
INSTITUTIONAL CLASS FIIOC * 6,241 .24% ***
$ 671,038
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AND
FIDELITY SERVICE CO., INC. (FSC), AFFILIATES OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED
CERTAIN TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES TO FIIOC
FOR WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH FEES.
*** ANNUALIZED
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 $86,806 for the period.
16. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a borrower. The
maximum loan and the average daily loan balances during the period for
which loans were outstanding amounted to $36,999,000 and $15,594,143,
respectively. The weighted average interest rate was 5.42%.
17. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A 1.75% $ 11,608
INSTITUTIONAL CLASS 1.50% 914
$ 12,522
FMR also voluntarily agreed to reimburse certain transfer agent,
registration and other class specific expenses for Class A and
Institutional Class. For the period, the reimbursement reduced these
expenses by $3,127 and $1,684, respectively.
FMR has also 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 $18,850 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $3,275 under the
custodian arrangement, and each applicable class' expenses were reduced as
follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST
CREDITS
INITIAL CLASS $ 401
18. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
11% of the total outstanding shares of the fund.
19. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996 A
CLASS A
From net investment income $ - $ 9,050
From net realized gain 23,625 47,453
Total $ 23,625 $ 56,503
CLASS T
From net investment income $ - $ 4,356,302
From net realized gain 18,661,262 54,934,732
Total $ 18,661,262 $ 59,291,034
CLASS B
From net investment income $ - $ 291,486
From net realized gain 3,719,315 9,460,141
Total $ 3,719,315 $ 9,751,627
INITIAL CLASS
From net investment income $ - $ 263,298
From net realized gain 742,870 1,978,165
Total $ 742,870 $ 2,241,463
INSTITUTIONAL CLASS
From net investment income $ - $ 581,296
From net realized gain 177,590 3,692,877
Total $ 177,590 $ 4,274,173
$ 23,324,662 $ 75,614,800
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
20. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1997 1996 A 1997 1996 A
CLASS A 17,253 26,335 $ 385,972 $ 633,035
Shares sold
Reinvestment of distributions 1,055 2,536 23,641 56,498
Shares redeemed (9,089) (531) (208,268) (12,990)
Net increase (decrease) 9,219 28,340 $ 201,345 $ 676,543
CLASS T 1,605,394 7,239,477 $ 36,349,232 $ 173,637,131
Shares sold
Reinvestment of distributions 702,987 2,215,089 15,866,387 50,421,264
Shares redeemed (7,999,696) (9,664,112) (180,656,556) (231,598,779)
Net increase (decrease) (5,691,315) (209,546) $ (128,440,937) $ (7,540,384)
CLASS B 320,457 1,826,263 $ 7,137,402 $ 43,251,259
Shares sold
Reinvestment of distributions 155,073 422,830 3,447,259 9,473,517
Shares redeemed (864,175) (1,407,472) (19,120,949) (33,157,193)
Net increase (decrease) (388,645) 841,621 $ (8,536,288) $ 19,567,583
INITIAL CLASS 4,005 7,958 $ 94,673 $ 193,575
Shares sold
Reinvestment of distributions 29,056 86,899 663,041 1,996,834
Shares redeemed (96,001) (137,073) (2,173,271) (3,325,386)
Net increase (decrease) (62,940) (42,216) $ (1,415,557) $ (1,134,977)
INSTITUTIONAL CLASS 133,815 1,132,115 $ 3,005,701 $ 27,291,041
Shares sold
Reinvestment of distributions 6,165 182,073 138,401 4,097,341
Shares redeemed (1,831,791) (284,588) (41,580,819) (6,785,910)
Net increase (decrease) (1,691,811) 1,029,600 $ (38,436,717) $ 24,602,472
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
21. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 15,925
CLASS T 13,303
CLASS B 12,071
INITIAL CLASS 7,182
INSTITUTIONAL CLASS 15,697
$ 64,178
22. 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. $ - $ 867,000 $ - $ 16,937,100
Deckers Outdoor Corp. 10,150 - - 4,402,138
Freds, Inc. Class A - - 59,030 8,854,500
Harveys Casino Resorts 1,196,210 92,880 74,070 14,255,481
Herley Microwave Systems, Inc. - 144,375 - 2,362,562
I-Stat Corp. 1,246,197 377,754 - 10,954,863
Just Toys, Inc. - - - 349,113
Maxwell Shoe Co., Inc. Class A - - - 9,295,300
Midway Games, Inc. 166,070 - - 6,262,950
Morton's Restaurant Group, Inc. - - - 8,244,150
Movado Group, Inc. - - - 7,012,500
People's Choice TV Corp. - - - 1,104,472
Reno Air, Inc. - - - 8,062,650
Spectrum Holobyte, Inc. 1,084,327 - - 10,025,438
Whole Foods Market, Inc. - - - 50,691,187
TOTALS $ 3,702,954 $ 1,482,009 $ 133,100 $158,814,404
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on June 18, 1997. The
results of votes taken among shareholders on proposals before them are
listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 32,670,431.969 97.30
Withheld 905,735.323 2.70
TOTAL 33,576,167.292 100.00
RALPH F. COX
Affirmative 32,661,943.620 97.28
Withheld 914,223.672 2.72
TOTAL 33,576,167.292 100.00
PHYLLIS BURKE DAVIS
Affirmative 32,639,275.890 97.21
Withheld 936,891.402 2.79
TOTAL 33,576,167.292 100.00
ROBERT M. GATES
Affirmative 32,647,573.114 97.23
Withheld 928,594.178 2.77
TOTAL 33,576,167.292 100.00
EDWARD C. JOHNSON 3RD
Affirmative 32,653,017.035 97.25
Withheld 923,150.257 2.75
TOTAL 33,576,167.292 100.00
E. BRADLEY JONES
Affirmative 32,635,245.079 97.20
Withheld 940,922.213 2.80
TOTAL 33,576,167.292 100.00
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 32,673,572.230 97.31
Withheld 902,595.062 2.69
TOTAL 33,576,167.292 100.00
PETER S. LYNCH
Affirmative 32,665,741.087 97.29
Withheld 910,426.205 2.71
TOTAL 33,576,167.292 100.00
WILLIAM O. MCCOY
Affirmative 32,665,426.588 97.29
Withheld 910,740.704 2.71
TOTAL 33,576,167.292 100.00
GERALD C. MCDONOUGH
Affirmative 32,645,173.119 97.23
Withheld 930,994.173 2.77
TOTAL 33,576,167.292 100.00
MARVIN L. MANN
Affirmative 32,667,258.985 97.29
Withheld 908,908.307 2.71
TOTAL 33,576,167.292 100.00
THOMAS R. WILLIAMS
Affirmative 32,646,425.418 97.23
Withheld 929,741.874 2.77
TOTAL 33,576,167.292 100.00
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 31,181,969.270 92.87
Against 265,724.175 .79
Abstain 2,128,473.847 6.34
TOTAL 33,576,167.292 100.00
PROPOSAL 3
To amend the Declaration of Trust to provide dollar-based voting rights for
shareholders of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,126,370.108 87.12
Against 1,000,318.214 3.77
Abstain 2,419,170.970 9.11
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 4
To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 23,207,061.951 87.42
Against 870,816.482 3.28
Abstain 2,467,980.859 9.30
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 5
To amend the Declaration of Trust to provide each fund with the ability to
invest all of its assets in another open-ended investment company with
substantially the same investment objective and policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 22,687,221.159 85.46
Against 1,327,189.441 5.00
Abstain 2,531,448.692 9.54
TOTAL 26,545,859.292 100.00
Not Voting 7,030,308.000
PROPOSAL 6
To adopt a new fundamental investment policy for Strategic Opportunities
Fund to permit the fund to invest all of its assets in another open-end
investment company with substantially the same investment objectives and
policies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,502,130.425 84.45
Against 665,332.546 4.89
Abstain 1,451,551.531 10.66
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 7
To approve an amended management contract for Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,194,953.682 87.83
Against 452,965.106 2.80
Abstain 1,514,968.714 9.37
TOTAL 16,162,887.502 100.00
PROPOSAL 10
To approve an amended Sub-Advisory Agreement between Strategic
Opportunities Fund and FMR Far East.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,285,781.165 88.39
Against 368,239.310 2.28
Abstain 1,508,867.027 9.33
TOTAL 16,162,887.502 100.00
PROPOSAL 11
To approve an amended Sub-Advisory Agreement between Strategic
Opportunities Fund and FMR U.K.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 14,323,952.957 88.62
Against 345,515.729 2.14
Abstain 1,493,418.816 9.24
TOTAL 16,162,887.502 100.00
PROPOSAL 12
To amend the Class B Distribution and Service Plan for Strategic
Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 1,694,126.749 79.63
Against 94,643.399 4.45
Abstain 338,759.404 15.92
TOTAL 2,127,529.552 100.00
PROPOSAL 13
To amend the Class T Distribution and Service Plan for Strategic
Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 9,246,908.777 84.95
Against 370,816.918 3.41
Abstain 1,266,692.369 11.64
TOTAL 10,884,418.064 100.00
PROPOSAL 14
To approve an agreement and plan providing for the reorganization of
Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,679,951.701 85.76
Against 403,539.968 2.96
Abstain 1,535,522.833 11.28
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 16
To amend the fundamental investment limitation on diversification for
Strategic Opportunities Fund to permit increased investment in the
securities of any single issuer.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,085,311.192 81.40
Against 1,066,436.724 7.83
Abstain 1,467,266.586 10.77
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 17
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning diversification to exclude investments in other investment
companies from the limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,069,685.759 81.28
Against 1,053,090.996 7.73
Abstain 1,496,237.747 10.99
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 18
To amend the fundamental investment limitation concerning real estate for
Strategic Opportunities Fund.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,076,196.350 81.33
Against 1,025,367.020 7.53
Abstain 1,517,451.132 11.14
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 19
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning senior securities.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,584,067.577 85.06
Against 501,562.178 3.68
Abstain 1,533,384.747 11.26
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 20
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning short sales of securities and replace it with a
similar non-fundamental investment limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,001,582.538 80.78
Against 1,087,062.521 7.98
Abstain 1,530,369.443 11.24
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 21
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning margin purchases and replace it with a similar
non-fundamental investment limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,992,209.318 80.71
Against 1,100,116.876 8.08
Abstain 1,526,688.308 11.21
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 22
To amend Strategic Opportunities Fund's fundamental investment concerning
borrowing limitation.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,955,546.335 80.44
Against 1,149,393.710 8.44
Abstain 1,514,074.457 11.12
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 23
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning the underwriting of securities.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,509,524.223 84.51
Against 573,168.443 4.21
Abstain 1,536,321.836 11.28
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 24
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning the concentration of its investments in a single industry.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,441,217.081 84.01
Against 678,505.413 4.98
Abstain 1,499,302.008 11.01
TOTAL 13,619,024.502 100.00
Not Voting 2,543,863.000
PROPOSAL 25
To amend Strategic Opportunities Fund's fundamental investment limitation
concerning lending.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 10,970,495.148 80.55
Against 1,121,522.738 8.24
Abstain 1,526,996.616 11.21
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 26
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investments in other investment companies.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,452,450.853 84.09
Against 663,648.453 4.87
Abstain 1,502,915.196 11.04
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 27
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investing in oil, gas, and mineral exploration
programs.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,008,669.024 80.83
Against 1,118,266.376 8.21
Abstain 1,492,079.102 10.96
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
PROPOSAL 28
To eliminate Strategic Opportunities Fund's fundamental investment
limitation concerning investments in securities of newly-formed issuers.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 11,023,807.584 80.95
Against 1,085,872.726 7.97
Abstain 1,509,334.192 11.08
TOTAL 13,619,014.502 100.00
Not Voting 2,543,873.000
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
Robert C. Pozen, Senior Vice President
William J. Hayes, Vice President
Abigail Johnson, Vice President
Harris Leviton, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
