(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
EMERGING MARKETS INCOME
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
JUNE 30, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 19 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 22 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 23 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 29 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 38 NOTES TO FINANCIAL STATEMENTS.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
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 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 shares, the original class of
the fund, and reflect Class T shares' 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, 1998 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL A -2.03% 1.05% 75.83%
FIDELITY ADV EMERGING MARKETS INCOME - CL A -6.68% -3.75% 67.48%
(INCL. MAX. 4.75% SALES CHARGE)
JP EMBI PLUS -1.08% 1.39% 78.89%
EMERGING MARKETS DEBT FUNDS AVERAGE -2.94% -1.25% 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 39 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, 1998 PAST 1 LIFE OF
YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL A 1.05% 13.99%
FIDELITY ADV EMERGING MARKETS INCOME - CL A -3.75% 12.71%
(INCL. MAX. 4.75% SALES CHARGE)
JP EMBI PLUS 1.39% 14.45%
EMERGING MARKETS DEBT FUNDS AVERAGE -1.25% 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.
$10,000 OVER LIFE OF FUND
FA Emerg Mkt Inc -CL A JP EMBI Plus
00255 JP004
1994/03/10 9525.00 10000.00
1994/03/31 9128.32 8807.82
1994/04/30 9248.44 8643.25
1994/05/31 9844.60 9282.15
1994/06/30 9368.11 8810.67
1994/07/31 9578.30 8971.50
1994/08/31 10732.31 9714.11
1994/09/30 11038.76 10014.32
1994/10/31 10754.24 9697.82
1994/11/30 10530.74 9687.51
1994/12/31 9760.21 9059.99
1995/01/31 8639.66 8623.61
1995/02/28 8022.18 8222.51
1995/03/31 7787.58 8056.78
1995/04/30 8456.16 8918.88
1995/05/31 8960.63 9695.07
1995/06/30 9011.12 9909.06
1995/07/31 9026.46 9869.98
1995/08/31 9219.78 10140.13
1995/09/30 9586.60 10536.55
1995/10/31 9514.14 10422.17
1995/11/30 9831.92 10724.86
1995/12/31 10442.10 11485.35
1996/01/31 11211.15 12358.18
1996/02/29 10586.42 11676.46
1996/03/31 10686.18 11942.44
1996/04/30 11237.32 12593.99
1996/05/31 11532.65 12811.92
1996/06/30 11823.71 13262.30
1996/07/31 11956.95 13539.46
1996/08/31 12386.31 14036.78
1996/09/30 13395.58 14942.02
1996/10/31 13777.70 15043.72
1996/11/30 14543.65 15810.38
1996/12/31 14671.78 16000.37
1997/01/31 15288.34 16442.93
1997/02/28 15544.63 16729.03
1997/03/31 14908.02 16123.30
1997/04/30 15420.01 16602.74
1997/05/31 16079.19 17247.58
1997/06/30 16574.92 17644.32
1997/07/31 17288.48 18376.34
1997/08/31 17191.69 18301.91
1997/09/30 17741.43 18861.14
1997/10/31 15984.93 16688.46
1997/11/30 16562.96 17480.82
1997/12/31 17094.97 18083.31
1998/01/31 17114.76 18046.65
1998/02/28 17575.41 18563.20
1998/03/31 18039.84 19025.32
1998/04/30 18049.07 19071.47
1998/05/31 17302.88 18420.48
1998/06/30 16748.18 17888.74
IMATRL PRASUN SHR__CHT 19980630 19980709 163901 R00000000000055
$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 4.75% sales
charge was paid. As the chart shows, by June 30, 1998, the value of
the investment would have grown to $16,748 - a 67.48% 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 $17,889 - a 78.89% 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
SIX MONTHS YEAR ENDED SEPTEMBER 3, 1996
ENDED DECEMBER 31, (COMMENCEMENT
JUNE 30, OF SALE OF
CLASS A SHARES) TO
DECEMBER 31,
1998 1997 1996
DIVIDEND RETURNS 4.35% 8.37% 2.32%
CAPITAL RETURNS -6.38% 8.15% 15.39%
TOTAL RETURNS -2.03% 16.52% 17.71%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 9.22(CENTS) 50.39(CENTS) 111.46(CENTS)
ANNUALIZED DIVIDEND RATE 10.46% 9.14% 9.33%
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 $10.72 over the past one month, $11.12 over the past six
months, and $11.95 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. 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 expenses, the life of fund total returns and dividends would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL T -2.06% 0.89% 75.60%
FIDELITY ADV EMERGING MARKETS INCOME - CL T -5.49% -2.64% 69.45%
(INCL. MAX. 3.50% SALES CHARGE)
JP EMBI PLUS -1.08% 1.39% 78.89%
EMERGING MARKETS DEBT FUNDS AVERAGE -2.94% -1.25% 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 39 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, 1998 PAST 1 LIFE OF
YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL T 0.89% 13.95%
FIDELITY ADV EMERGING MARKETS INCOME - CL T -2.64% 13.02%
(INCL. MAX. 3.50% SALES CHARGE)
JP EMBI PLUS 1.39% 14.45%
EMERGING MARKETS DEBT FUNDS AVERAGE -1.25% 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
FA Emerg Mkt Inc -CL T JP EMBI Plus
00635 JP004
1994/03/10 9650.00 10000.00
1994/03/31 9248.12 8807.82
1994/04/30 9369.81 8643.25
1994/05/31 9973.79 9282.15
1994/06/30 9491.05 8810.67
1994/07/31 9704.00 8971.50
1994/08/31 10873.16 9714.11
1994/09/30 11183.62 10014.32
1994/10/31 10895.38 9697.82
1994/11/30 10668.94 9687.51
1994/12/31 9888.29 9059.99
1995/01/31 8753.04 8623.61
1995/02/28 8127.46 8222.51
1995/03/31 7889.78 8056.78
1995/04/30 8567.13 8918.88
1995/05/31 9078.23 9695.07
1995/06/30 9129.37 9909.06
1995/07/31 9144.92 9869.98
1995/08/31 9340.78 10140.13
1995/09/30 9712.41 10536.55
1995/10/31 9639.00 10422.17
1995/11/30 9960.95 10724.86
1995/12/31 10579.14 11485.35
1996/01/31 11358.28 12358.18
1996/02/29 10725.35 11676.46
1996/03/31 10826.42 11942.44
1996/04/30 11384.79 12593.99
1996/05/31 11684.00 12811.92
1996/06/30 11978.87 13262.30
1996/07/31 12113.86 13539.46
1996/08/31 12548.86 14036.78
1996/09/30 13572.33 14942.02
1996/10/31 13947.71 15043.72
1996/11/30 14723.78 15810.38
1996/12/31 14854.44 16000.37
1997/01/31 15480.72 16442.93
1997/02/28 15740.89 16729.03
1997/03/31 15095.79 16123.30
1997/04/30 15612.28 16602.74
1997/05/31 16280.02 17247.58
1997/06/30 16795.95 17644.32
1997/07/31 17517.42 18376.34
1997/08/31 17419.65 18301.91
1997/09/30 17975.36 18861.14
1997/10/31 16195.49 16688.46
1997/11/30 16765.19 17480.82
1997/12/31 17301.56 18083.31
1998/01/31 17318.97 18046.65
1998/02/28 17784.00 18563.20
1998/03/31 18254.99 19025.32
1998/04/30 18263.11 19071.47
1998/05/31 17506.64 18420.48
1998/06/30 16945.16 17888.74
IMATRL PRASUN SHR__CHT 19980630 19980713 095807 R00000000000055
$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 3.50% sales
charge was paid. As the chart shows, by June 30, 1998, the value of
your investment would have grown to $16,945 - a 69.45% 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 $17,889 - a 78.89% 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> <C>
SIX MONTHS YEARS ENDED DECEMBER 31, MARCH 10, 1994
ENDED (COMMENCEMENT
JUNE 30, OF OPERATIONS) TO
DECEMBER 31,
1998 1997 1996 1995 1994
DIVIDEND RETURNS 4.33% 8.32% 9.46% 9.51% 4.80%
CAPITAL RETURNS -6.39% 8.15% 30.95% -2.52% -2.33%
TOTAL RETURNS -2.06% 16.47% 40.41% 6.99% 2.47%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 9.23(CENTS) 50.05(CENTS) 110.56(CENTS)
ANNUALIZED DIVIDEND RATE 10.49% 9.08% 9.26%
30-DAY ANNUALIZED YIELD 8.05% - -
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 $10.71 over the past one month, $11.11 over the past six
months and $11.94 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 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 shares' 0.25% 12b-1
fee. Had Class B shares' 12b-1 fee been reflected, returns prior to
June 30, 1994 would have been lower. Class B shares' contingent
deferred sales charge included in the past six months, one year and
life of fund total return figures are 5%, 4% and 2%, respectively. If
Fidelity had not reimbursed certain class expenses, the total returns
and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL B -2.39% 0.27% 71.01%
FIDELITY ADV EMERGING MARKETS INCOME - CL B -7.07% -3.85% 69.01%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
JP EMBI PLUS -1.08% 1.39% 78.89%
EMERGING MARKETS DEBT FUNDS AVERAGE -2.94% -1.25% 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 39 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, 1998 PAST 1 LIFE OF
YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL B 0.27% 13.26%
FIDELITY ADV EMERGING MARKETS INCOME - CL B -3.85% 12.95%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
JP EMBI PLUS 1.39% 14.45%
EMERGING MARKETS DEBT FUNDS AVERAGE -1.25% 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
FA Emerg Mkt Inc -CL B JP EMBI Plus
00637 JP004
1994/03/10 10000.00 10000.00
1994/03/31 9583.54 8807.82
1994/04/30 9709.65 8643.25
1994/05/31 10335.54 9282.15
1994/06/30 9835.28 8810.67
1994/07/31 10042.78 8971.50
1994/08/31 11243.37 9714.11
1994/09/30 11566.18 10014.32
1994/10/31 11270.66 9697.82
1994/11/30 11019.23 9687.51
1994/12/31 10195.80 9059.99
1995/01/31 9040.37 8623.61
1995/02/28 8379.79 8222.51
1995/03/31 8129.96 8056.78
1995/04/30 8821.79 8918.88
1995/05/31 9341.02 9695.07
1995/06/30 9398.54 9909.06
1995/07/31 9408.41 9869.98
1995/08/31 9603.44 10140.13
1995/09/30 9967.22 10536.55
1995/10/31 9896.87 10422.17
1995/11/30 10220.12 10724.86
1995/12/31 10846.22 11485.35
1996/01/31 11637.09 12358.18
1996/02/29 10984.00 11676.46
1996/03/31 11081.11 11942.44
1996/04/30 11645.35 12593.99
1996/05/31 11956.55 12811.92
1996/06/30 12239.00 13262.30
1996/07/31 12370.24 13539.46
1996/08/31 12818.89 14036.78
1996/09/30 13841.33 14942.02
1996/10/31 14226.85 15043.72
1996/11/30 15019.85 15810.38
1996/12/31 15142.84 16000.37
1997/01/31 15770.43 16442.93
1997/02/28 16024.74 16729.03
1997/03/31 15360.81 16123.30
1997/04/30 15876.94 16602.74
1997/05/31 16543.60 17247.58
1997/06/30 17055.87 17644.32
1997/07/31 17775.74 18376.34
1997/08/31 17666.48 18301.91
1997/09/30 18218.22 18861.14
1997/10/31 16396.61 16688.46
1997/11/30 16991.95 17480.82
1997/12/31 17520.59 18083.31
1998/01/31 17513.16 18046.65
1998/02/28 17988.29 18563.20
1998/03/31 18450.12 19025.32
1998/04/30 18448.18 19071.47
1998/05/31 17676.74 18420.48
1998/06/30 16901.39 17888.74
IMATRL PRASUN SHR__CHT 19980630 19980727 110550 R00000000000055
$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,
1998, the value of the investment including the effect of the
applicable contingent deferred sales charge, would have been $16,901 -
a 69.01% 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 $17,889 - a 78.89% 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)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31, JUNE 30, 1994
ENDED (COMMENCEMENT
JUNE 30, OF SALE OF
CLASS B SHARES) TO
DECEMBER 31,
1998 1997 1996 1995 1994
DIVIDEND RETURNS 3.97% 7.57% 8.54% 8.69% 3.03%
CAPITAL RETURNS -6.36% 8.13% 31.07% -2.31% 0.64%
TOTAL RETURNS -2.39% 15.70% 39.61% 6.38% 3.67%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 8.55(CENTS) 46.13(CENTS) 102.30(CENTS)
ANNUALIZED DIVIDEND RATE 9.67% 8.34% 8.53%
30-DAY ANNUALIZED YIELD 7.49% - -
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 $10.76 over the past one month, $11.16 over the past six
months, and $11.99 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.
ADVISOR EMERGING MARKETS INCOME FUND - CLASS C
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 to measure performance.
The initial offering of Class C shares took place on November 3, 1997.
Class C shares bear a 1.00% 12b-1 fee that is reflected in returns
after November 3, 1997. Returns between June 30, 1994 and November 3,
1997 are those of Class B shares and reflect Class B shares' 0.90%
12b-1 fee (1.00% prior to January 1, 1996). Returns prior to June 30,
1994 are those of Class T shares and reflect Class T shares' 0.25%
12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns from
November 3, 1997 through January 1, 1996 and prior to June 30, 1994
would have been lower. Class C shares' contingent deferred sales
charge included in the past six months and one year total return
figures is 1.00%. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1998 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL C -2.47% 0.06% 70.72%
FIDELITY ADV EMERGING MARKETS INCOME - CL C -3.40% -0.78% 70.72%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
JP EMBI PLUS -1.08% 1.39% 78.89%
EMERGING MARKETS DEBT FUNDS AVERAGE -2.94% -1.25% N/A
CUMULATIVE TOTAL RETURNS show Class C'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 C'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 C'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 39 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, 1998 PAST 1 LIFE OF
YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - CL C 0.06% 13.21%
FIDELITY ADV EMERGING MARKETS INCOME - CL C -0.78% 13.21%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
JP EMBI PLUS 1.39% 14.45%
EMERGING MARKETS DEBT FUNDS AVERAGE -1.25% N/A
AVERAGE ANNUAL TOTAL RETURNS take Class C's cumulative return and show
you what would have happened if Class C had performed at a constant
rate each year.
$10,000 OVER LIFE OF FUND
FA Emerg Mkt Inc -CL C JP EMBI Plus
00488 JP004
1994/03/10 10000.00 10000.00
1994/03/31 9583.17 8807.82
1994/04/30 9709.74 8643.25
1994/05/31 10336.62 9282.15
1994/06/30 9820.53 8810.67
1994/07/31 10028.15 8971.50
1994/08/31 11229.20 9714.11
1994/09/30 11552.94 10014.32
1994/10/31 11256.94 9697.82
1994/11/30 11006.35 9687.51
1994/12/31 10180.30 9059.99
1995/01/31 9026.70 8623.61
1995/02/28 8365.12 8222.51
1995/03/31 8118.72 8056.78
1995/04/30 8811.66 8918.88
1995/05/31 9331.11 9695.07
1995/06/30 9389.60 9909.06
1995/07/31 9399.03 9869.98
1995/08/31 9594.43 10140.13
1995/09/30 9958.87 10536.55
1995/10/31 9888.04 10422.17
1995/11/30 10212.76 10724.86
1995/12/31 10840.78 11485.35
1996/01/31 11633.20 12358.18
1996/02/29 10977.80 11676.46
1996/03/31 11075.58 11942.44
1996/04/30 11641.10 12593.99
1996/05/31 11952.78 12811.92
1996/06/30 12236.74 13262.30
1996/07/31 12368.72 13539.46
1996/08/31 12817.53 14036.78
1996/09/30 13841.96 14942.02
1996/10/31 14227.42 15043.72
1996/11/30 15021.73 15810.38
1996/12/31 15143.81 16000.37
1997/01/31 15773.18 16442.93
1997/02/28 16026.88 16729.03
1997/03/31 15361.22 16123.30
1997/04/30 15879.45 16602.74
1997/05/31 16547.66 17247.58
1997/06/30 17060.51 17644.32
1997/07/31 17781.95 18376.34
1997/08/31 17672.14 18301.91
1997/09/30 18225.10 18861.14
1997/10/31 16393.15 16688.46
1997/11/30 16973.53 17480.82
1997/12/31 17503.14 18083.31
1998/01/31 17505.14 18046.65
1998/02/28 17964.84 18563.20
1998/03/31 18428.64 19025.32
1998/04/30 18425.01 19071.47
1998/05/31 17650.04 18420.48
1998/06/30 17071.57 17888.74
IMATRL PRASUN SHR__CHT 19980630 19980709 165157 R00000000000055
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Emerging Markets Income Fund - Class C on
March 10, 1994, when the fund started. As the chart shows, by June 30,
1998, the value of the investment would have been $17,072 - a 70.72%
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 $17,889 - a 78.89% 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
SIX MONTHS NOVEMBER 3, 1997
ENDED (COMMENCEMENT
JUNE 30, OF SALE OF
CLASS C SHARES) TO
DECEMBER 31,
1998 1997
DIVIDEND RETURNS 3.92% 2.48%
CAPITAL RETURNS -6.39% 1.68%
TOTAL RETURNS -2.47% 4.16%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
DIVIDENDS PER SHARE 8.47(CENTS) 45.43(CENTS) 73.99(CENTS)
ANNUALIZED DIVIDEND RATE 9.62% 8.25% 6.52%
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 $10.71 over the past one month, $11.11 over the past six
months, and $11.34 over the life of 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 compare funds from different
companies on an equal basis. Yield information will be reported once
Class C has a longer, more stable, operating history.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Emerging markets rallied strongly
toward the end of the first quarter.
The primary catalysts were improved
investor confidence, a strong U.S.
equity market and steadily
improving market demand. With
some exceptions, positive
developments in Asia also aided
performance as currencies
stabilized and progress with the
IMF was achieved. However, the
market was unable to maintain its
momentum and suffered a
reversal in the second quarter. An
escalating banking crisis in Japan,
combined with a brewing fiscal
crisis in Russia, increased spread
volatility and caused weakness in
emerging-market debt issues. The
Japanese banking crisis drew
renewed attention as the
government failed to propose a
credible bailout plan. The resulting
pressure on the yen called into
question the export
competitiveness of surrounding
Asian countries as well as that of
the U.S. One positive aspect
regarding the potential pressure
on U.S. corporate earnings was
the disappearance of the Federal
Reserve's motivation to pre-empt
any inflationary signals. Low
U.S. real interest rates continued
to be a favorable backdrop for the
emerging-market debt arena.
Russian debt came under
pressure as investors' attention
turned to the significant reform
challenges the country faces and
the slow progress in addressing
them to date. Lower commodity
prices, especially oil, also put
pressure on the country's
fundamentals. Developments in
Russia carried over to other
markets. Brazil's debt traded lower
as its weak fiscal position once
again raised concerns.
An interview with John Carlson, Portfolio Manager of Fidelity Advisor
Emerging Markets Income Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. For the six months that ended June 30, 1998, the fund's Class A,
Class T, Class B and Class C shares returned -2.03%, -2.06%, -2.39%
and -2.47%, respectively. The emerging markets debt funds average, as
tracked by Lipper Analytical Services, returned -2.94% during this
time. The J.P. Morgan Emerging Markets Bond Index Plus returned
- -1.08%. For the 12 months that ended June 30, 1998, the fund's Class
A, T, B and C shares returned 1.05%, 0.89%, 0.27% and 0.06%,
respectively. The Lipper peer group and J.P. Morgan index returned
- -1.25% and 1.39%, respectively, during that time.
Q. HOW WOULD YOU DESCRIBE THE INVESTING ENVIRONMENT FOR
EMERGING-MARKET DEBT OVER THE PAST SIX MONTHS?
A. The first six months of 1998 were characterized by pronounced
volatility. Yield spreads - which measure the premium an investor pays
for taking on risk - tightened versus U.S. government bonds in the
beginning of the year as sentiment toward Asia turned favorable due to
positive International Monetary Fund (IMF) negotiations. However, as
the year progressed, a liquidity crisis in Russia drew widespread
attention. Additionally, speculation surrounding a possible
devaluation of Russia's currency - the rouble - dragged other
emerging-market debt down in sympathy.
Q. ONE YEAR AGO, RUSSIA WAS THE APPLE OF MANY AN EMERGING-MARKET
INVESTOR'S EYE. WHAT HAPPENED?
A. Despite having a low external debt load as a percentage of gross
domestic product and exports, Russia's practice of funding budget
deficits with high-yielding, short-term government bonds sent interest
rates skyrocketing and led to a loss of investor confidence. Even with
interest rates of 150%, investors shied away from new issues. As a
major exporter of oil, lower oil prices also compounded Russia's
problems during the period.
Q. WHAT TYPES OF STRATEGIES DID YOU UTILIZE DURING THE PERIOD?
A. There were a few. First, I positioned the fund conservatively
during the period, believing there would be a second downtick in the
Asian markets that would have ramifications across all emerging-market
debt. The fund was overweighted - relative to its index - in
collateralized bonds, or Brady bonds. These U.S.-dollar-denominated
issues are backed by U.S. Treasury bonds. Second, I overweighted the
fund's positions in Poland and Bulgaria relative to the index. Poland
has experienced high growth amid lower inflation, while Bulgaria
presented a higher-quality opportunity in the market. Bulgaria has
successfully completed privatizations, maintained low borrowing
requirements and has managed to keep interest rates low.
Q. WHICH POSITIONS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE?
A. Overweighted positions in Poland and Bulgaria helped performance.
Spreads for Poland's debt tightened during the period as investors
recognized the country's growth prospects were mostly insulated from
the deteriorating Russian credit market. Bulgarian issues traded
higher as evidence of positive monetary and fiscal developments became
apparent. Turkey also contributed to performance on strong economic
growth in addition to IMF supervision. Additionally, declining oil
prices decreased Turkey's cost of imports. Having a lower exposure to
Venezuela - relative to the index - also helped as lower oil prices
continued to undermine the country's fiscal position.
Q. WERE THERE ANY POSITIONS THAT FAILED TO MEET YOUR EXPECTATIONS?
A. Lower relative weightings in both Mexico and Argentina hurt
performance, as both markets came on strong during the last three
months of the period. The fund was underweighted in Mexico because
return prospects - while improving - did not appear to support lofty
debt prices for the debt. While I was attracted to Argentina, I
underestimated its strength. Finally, an overweighting in Brazil and
Russia detracted from the fund's return.
Q. WHAT'S YOUR OUTLOOK?
A. Over the past six months, we've weathered some extreme market
conditions, including bull runs, chaotic economic downturns and
sideways moves. None of these events included scenarios I have not
seen before. Our experienced analysts and traders helped us uncover
values over the past six months, and I will continue to rely on them
for insights going forward. Specifically, I'll be watching
developments in three key markets very closely: Russia, China and
Japan. While Japan is not an emerging-market country, it is a powerful
Asian economy with significant influence on emerging-market debt.
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.
JOHN CARLSON TALKS ABOUT
EMERGING-MARKET EQUITIES:
"As many emerging markets
tumbled due to the faltering Asian
and Russian economies,
emerging-market equities -
which had long played second
fiddle to emerging-market debt -
displayed attractive valuation
profiles. As a result, the fund's
equity stake increased from 0% in
January 1998 to around 3% at the
end of June.
"Three equity positions accounted
for that total: Telebras, Huaneng
Power and YPF. Telebras is a large
Brazilian telecommunications
company that plans to go through a
privatization process this summer.
China-based Huaneng Power is
one of the world's largest
independent power producers, and
YPF is a major international oil
producer based in Argentina.
"Buoyed by strong research, I felt
these positions were attractively
valued and would be a nice fit for
the portfolio."
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, 1998,
more than $102 million
MANAGER: John Carlson, since
1995; also lead manager,
Fidelity Advisor Strategic
Income Fund, since 1996;
joined Fidelity in 1995
(checkmark)
INVESTMENT CHANGES
TOP FIVE COUNTRIES AS OF JUNE 30, 1998
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE COUNTRIES
6 MONTHS AGO
ARGENTINA 22.0 15.3
BRAZIL 15.1 18.6
MEXICO 12.7 9.9
RUSSIA 9.9 6.8
TURKEY 5.2 3.7
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, 1998
<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 17.9 12.2
BRAZILIAN FEDERATIVE REPUBLIC 11.4 18.1
BANCO NACIONAL DE COMERCIO EXTERIOR SNC 6.8 3.2
UNITED MEXICAN STATES 5.9 5.6
TURKISH REPUBLIC 5.2 3.7
</TABLE>
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 15.1 15.3
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, 1998 AS OF DECEMBER 31, 1997
ROW: 1, COL: 1, VALUE: 11.7
ROW: 1, COL: 2, VALUE: 74.3
ROW: 1, COL: 3, VALUE: 9.199999999999999
ROW: 1, COL: 4, VALUE: 4.8
CORPORATE BONDS 8.3%
FOREIGN GOVERNMENT
OBLIGATIONS 68.8%
OTHER 9.5%
SHORT-TERM
INVESTMENTS 13.4%
CORPORATE BONDS 11.7%
FOREIGN GOVERNMENT
OBLIGATIONS 74.3%
OTHER 9.2%
SHORT-TERM
INVESTMENTS 4.8%
ROW: 1, COL: 1, VALUE: 8.300000000000001
ROW: 1, COL: 2, VALUE: 68.8
ROW: 1, COL: 3, VALUE: 9.5
ROW: 1, COL: 4, VALUE: 13.4
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 11.7%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
ARGENTINA - 2.9%
Compania Internacional Telecomunicaciones
10 3/8%, 8/1/04 (Reg. S) BB ARS 990,000 $ 804,488
Compania Latinoamericana de Infraestructura
& Servicios SA:
11 5/8%, 6/1/04 (g) BB- 630,000 623,700
11 5/8%, 6/1/04 BB- 460,000 455,400
Mastellone Hermanos SA
11 3/4%, 4/1/08 (g) B1 1,055,000 1,049,725
2,933,313
BRAZIL - 1.1%
Banco Nac de Desen Econo 10.3%, 6/16/08 (f)(g) B1 1,140,000
1,137,720
DOMINICAN REPUBLIC - 0.9%
Tricom SA 11 3/8%, 9/1/04 B2 930,000 885,825
MEXICO - 6.8%
Banco Nacional de Comercio Exterior SNC
11 1/4%, 5/30/06 (Reg.) Ba2 6,110,000 6,751,550
TOTAL NONCONVERTIBLE BONDS
(Cost $12,146,245) 11,708,408
FOREIGN GOVERNMENT OBLIGATIONS (H) - 74.3%
ARGENTINA - 19.0%
Argentinian Republic:
Brady par euro
5 3/4%, 3/31/23 (e) Ba3 11,025,000 8,193,635
BOCON:
3.29%, 4/1/01 (f) Ba3 ARS 1,020,916 909,624
3.29%, 4/1/07 (f) Ba3 ARS 3,764,006 2,635,982
global bond:
8.726%, 4/10/05 (f) Ba3 640,000 640,000
11 3/8%, 1/30/17 Ba3 3,180,000 3,378,750
9 3/4%, 9/19/27 Ba3 610,000 563,488
11 3/4%, 2/12/07 Ba3 ARS 1,730,000 1,635,079
City of Buenos Aires euro 10 1/2%, 5/28/04 B1 ARS 1,310,000
1,100,554
19,057,112
FOREIGN GOVERNMENT OBLIGATIONS (H) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
BRAZIL - 11.4%
Brazilian Federative Republic Brady:
new money bond 6.688%, 4/15/09 (Reg.) (f) B1 $ 1,480,000 $ 1,124,800
capitalization bond 8%, 4/15/14 B1 9,484,730 6,971,276
discount euro 6 5/8%, 4/15/24 (f) B1 4,260,000 3,280,200
11,376,276
BULGARIA - 5.1%
Bulgarian Republic Brady (f):
FLIRB A 2.25%, 7/28/12 B2 2,135,000 1,323,700
discount 6.5625%, 7/28/24 B2 4,975,000 3,805,875
5,129,575
COTE D'IVOIRE - 2.3%
Ivory Coast Brady (f)(g):
past due interest 2.0%, 3/30/18 - 4,949,000 1,837,316
FLIRB 2.0%, 3/30/18 - 1,384,000 453,260
2,290,576
DOMINICAN REPUBLIC - 0.8%
Dominican Republic Brady
6 5/8%, 8/30/09 (f) B1 1,078,000 858,358
ECUADOR - 3.4%
Ecuador Republic Brady:
par euro 3 1/2%, 2/28/25 (e) B1 2,795,000 1,504,060
discount euro 6 5/8%, 2/28/25 (f) B1 2,670,000 1,855,650
3,359,710
GREECE - 0.8%
Greek Government Treasury Bill 0%, 4/29/99 (i) - GRD 255,700 769,332
JORDAN - 0.8%
Kingdom of Jordan 5%, 12/23/23 (f) Ba3 1,140,000 792,300
LEBANON - 0.3%
Lebanese Treasury Bill 0%, 10/29/98 (i) - LBP 436,000 276,592
FOREIGN GOVERNMENT OBLIGATIONS (H) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
MEXICO - 5.9%
Mexico Value recovery rights
6/30/03 discount C - $ 1,000 $ -
United Mexican States Brady:
par A 6 1/4%, 12/31/19 unit Ba2 3,060,000 2,535,975
par B 6 1/4%, 12/31/19 unit Ba2 4,020,000 3,331,575
5,867,550
PANAMA - 2.5%
Panamanian Republic Brady:
par 3%, 7/17/26 (e) Ba1 3,050,000 1,997,750
discount 6.5625%, 7/17/26 (f) Ba1 610,000 530,700
2,528,450
PERU - 1.7%
Peruvian Republic Brady FLIRB (f):
3 1/4%, 3/7/17 (g) B2 1,350,000 754,313
3 1/4%, 3/7/17 B2 1,775,000 991,781
1,746,094
POLAND - 4.4%
Polish Government:
23.18%, 5/6/01 (f) A- PLN 3,460,000 993,249
Brady par 3%, 10/27/24 (e) Baa3 5,185,000 3,428,581
4,421,830
RUSSIA - 4.9%
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) interest notes
6 5/8%, 12/15/15 (f)(g) B1 494 274
Moscow City 9 1/2%, 5/31/00 (Reg.) B1 1,780,000 1,533,025
Russian Government 11 3/4%, 6/10/03 (g) B+ 3,790,000 3,349,413
4,882,712
TURKEY - 5.2%
Turkish Republic Treasury Bill (d):
0%, 8/12/98 - TRL 353,100 1,222,344
0%, 9/16/98 - TRL 472,730 1,473,811
0%, 1/27/99 - TRL 951,280 2,482,489
5,178,644
FOREIGN GOVERNMENT OBLIGATIONS (H) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
VENEZUELA - 5.2%
Venezuelan Republic:
Brady:
debt conversion bond 6 5/8%, 12/18/07 (f) Ba2 $ 2,928,574 $
2,383,127
par A euro 6 3/4%, 3/31/20 Ba2 2,185,000 1,753,463
discount A 6.5625%, 3/31/20 (f) Ba2 1,250,000 1,021,875
Oil recovery rights 3/31/20 (a) - 10,955 -
5,158,465
VIETNAM - 0.6%
Socialist Republic of Vietnam Brady
3%, 3/12/28 (e) - 1,700,000 616,250
TOTAL GOVERNMENT OBLIGATIONS
(Cost $76,197,895) 74,309,826
SOVEREIGN LOAN PARTICIPATIONS - 6.1%
ANGOLA - 0.5%
Banco Nacional de Angola
0%, 9/10/27 - 1,596,128 558,645
CAMEROON - 0.3%
Cameroon Republic loan participation
- Societe Generale - FRF 1,960,000 93,757
- Societe Generale - DEM 1,430,000 229,369
323,126
CONGO - 0.3%
Congo Republic loan participation:
- Societe Generale - 734,288 212,944
- Societe Generale - FRF 841,728 40,264
- Societe Generale - DEM 255,860 41,039
294,247
SOVEREIGN LOAN PARTICIPATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
RUSSIA - 5.0%
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) loan participation
restructured under 1997 agreement (f):
- Bank Boston 6.7188%, 12/15/20 - $ 2,020,000 $ 954,450
- The Chase Manhattan Bank
6 5/8%, 12/15/20 - 920,000 434,700
- Deutsche Bank 6.7188%, 12/15/20 - 3,670,000 1,734,075
- ING Bank NV 6 5/8%, 12/15/20 - 1,070,000 505,575
- Lehman Commercial Paper, Inc.
6.7188%, 12/15/20 - 340,000 160,650
- Merrill Lynch, Pierce, Fenner & Smith, Inc.
6.7188%, 12/15/20 - 370,000 174,825
- Morgan (J.P.) Securities, Inc.
6 5/8%, 12/15/20 - 1,030,000 486,675
- Paribus Capital Markets
6.7188%, 12/15/20 - 1,070,000 505,575
4,956,525
TOTAL SOVEREIGN LOAN PARTICIPATIONS
(Cost $6,995,861) 6,132,543
COMMON STOCKS - 3.1%
SHARES
ARGENTINA - 0.1%
YPF Sociedad Anonima sponsored ADR
representing Class D shares 3,900 116,561
BRAZIL - 2.6%
Telecomunicacoes Brasileiras SA Sponsored ADR 24,100 2,631,419
CHINA - 0.4%
Huaneng Power International, Inc. Class N sponsored ADR (a) 26,700
358,781
TOTAL COMMON STOCKS
(Cost $3,257,228) 3,106,761
CASH EQUIVALENTS - 4.8%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.66%, dated
6/30/98 due 7/1/98
(Cost $4,801,000) $ 4,801,755 $ 4,801,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $103,398,229) $ 100,058,538
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest Reduction
Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
FRF - French franc
DEM - German deutsche mark
GRD - Greek drachma
LBP - Lebanese pound
PLN - Polish zloty
TRL - Turkish lira
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless
otherwise noted.
(c) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(d) Principal amount in millions.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) 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
$9,205,721 or 9.0% of net assets.
(h) 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.
(i) Principal amount in thousands
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 1.0%
Baa 3.4% BBB 8.6%
Ba 39.0% BB 46.3%
B 28.2% B 11.3%
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 Moody's or S&P amounted to 9.0%. FMR has determined that
unrated debt securities that are lower quality account for 9.0% of the
total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $104,087,298. Net unrealized depreciation
aggregated $4,028,760, of which $967,571 related to appreciated
investment securities and $4,996,331 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending December
31, 1998 approximately $1,921,000 of losses recognized during the
period November 1, 1997 to December 31, 1997.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 100,058,538
AGREEMENTS OF $4,801,000) (COST $103,398,229) -
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 5,905,230
RECEIVABLE FOR FUND SHARES SOLD 499,748
INTEREST RECEIVABLE 1,204,651
PREPAID EXPENSES 4,566
TOTAL ASSETS 107,672,733
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 283,012
PAYABLE FOR INVESTMENTS PURCHASED 4,097,045
PAYABLE FOR FUND SHARES REDEEMED 341,270
DISTRIBUTIONS PAYABLE 43,732
ACCRUED MANAGEMENT FEE 59,917
DISTRIBUTION FEES PAYABLE 33,990
OTHER PAYABLES AND ACCRUED EXPENSES 72,090
TOTAL LIABILITIES 4,931,056
NET ASSETS $ 102,741,677
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 111,159,061
UNDISTRIBUTED NET INVESTMENT INCOME 256,648
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (5,330,837)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (3,343,195)
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS $ 102,741,677
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $10.41
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,652,481 (DIVIDED BY) 254,763 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $10.41) $10.93
CLASS T: $10.40
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($76,509,695 (DIVIDED BY) 7,353,865 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $10.40) $10.78
CLASS B: $10.45
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($22,073,361 (DIVIDED BY) 2,112,594 SHARES) A
CLASS C: $10.40
NET ASSET VALUE, AND OFFERING PRICE PER SHARE
($647,292 (DIVIDED BY) 62,239 SHARES) A
INSTITUTIONAL CLASS: $10.35
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($858,848 (DIVIDED BY) 82,944 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME $ 6,282,696
INTEREST
LESS FOREIGN TAXES WITHHELD (128,620)
TOTAL INCOME 6,154,076
EXPENSES
MANAGEMENT FEE $ 392,502
TRANSFER AGENT FEES 152,917
DISTRIBUTION FEES 217,179
ACCOUNTING FEES AND EXPENSES 43,600
NON-INTERESTED TRUSTEES' COMPENSATION 218
CUSTODIAN FEES AND EXPENSES 39,747
REGISTRATION FEES 53,735
AUDIT 26,390
LEGAL 1,093
MISCELLANEOUS 4,302
TOTAL EXPENSES BEFORE REDUCTIONS 931,683
EXPENSE REDUCTIONS (34,018) 897,665
NET INVESTMENT INCOME 5,256,411
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES (981,781)
FOREIGN CURRENCY TRANSACTIONS (44,232)
WRITTEN OPTIONS 282,129 (743,884)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (6,537,946)
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 25,137 (6,512,809)
NET GAIN (LOSS) (7,256,693)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (2,000,282)
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 5,256,411 $ 8,315,876
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) (743,884) 13,134,999
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (6,512,809) (4,810,866)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,000,282) 16,640,009
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (4,999,763) (9,380,291)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN - (14,029,285)
TOTAL DISTRIBUTIONS (4,999,763) (23,409,576)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) (10,761,081) 27,548,589
TOTAL INCREASE (DECREASE) IN NET ASSETS (17,761,126) 20,779,022
NET ASSETS
BEGINNING OF PERIOD 120,502,803 99,723,781
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 102,741,677 $ 120,502,803
INCOME OF $256,648 AND $424,276, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED YEARS ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.120 $ 11.720 $ 10.520
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .520 .953 .274
NET REALIZED AND UNREALIZED GAIN (LOSS) (.726) .891 1.574
TOTAL FROM INVESTMENT OPERATIONS (.206) 1.844 1.848
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.504) (.984) (.238)
FROM NET REALIZED GAIN - (1.460) (.410)
TOTAL DISTRIBUTIONS (.504) (2.444) (.648)
NET ASSET VALUE, END OF PERIOD $ 10.410 $ 11.120 $ 11.720
TOTAL RETURN B, C (2.03)% 16.52% 17.71%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,652 $ 2,313 $ 478
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% A, F 1.40% F 1.40% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE 1.39% A, G 1.38% G 1.40% A
REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 9.43% A 7.74% 7.31% A
PORTFOLIO TURNOVER RATE 429% A 660% 410%
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO DECEMBER 31, 1996.
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 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.110 $ 11.710 $ 9.280 $ 9.520 $ 10.000
BEGINNING OF PERIOD
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .518 D .877 D .758 D .860 .356
NET REALIZED AND (.727) .961 2.832 (.323) (.073)
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS (.209) 1.838 3.590 .537 .283
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.501) (.978) (.750) (.777) (.503)
FROM NET REALIZED GAIN - (1.460) (.410) - (.260)
TOTAL DISTRIBUTIONS (.501) (2.438) (1.160) (.777) (.763)
NET ASSET VALUE, END OF PERIOD $ 10.400 $ 11.110 $ 11.710 $ 9.280 $ 9.520
TOTAL RETURN B, C (2.06)% 16.47% 40.41% 6.99% 2.47%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 76,510 $ 93,228 $ 78,861 $ 36,205 $ 30,029
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.44% A 1.47% 1.49% 1.50% F 1.50% A, F
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET 1.44% A 1.45% G 1.48% G 1.50% 1.50% A
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME 9.39% A 7.08% 7.23% 9.32% 6.60% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 429% A 660% 410% 305% 354% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD MARCH 10, 1994 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.160 $ 11.750 $ 9.300 $ 9.520 $ 9.700
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .481 D .806 D .686 D .835 .167
NET REALIZED AND (.730) .956 2.853 (.342) .227
UNREALIZED GAIN (LOSS)
TOTAL FROM (.249) 1.762 3.539 .493 .394
INVESTMENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.461) (.892) (.679) (.713) (.314)
FROM NET REALIZED GAIN - (1.460) (.410) - (.260)
TOTAL DISTRIBUTIONS (.461) (2.352) (1.089) (.713) (.574)
NET ASSET VALUE, END OF PERIOD $ 10.450 $ 11.160 $ 11.750 $ 9.300 $ 9.520
TOTAL RETURN B, C (2.39)% 15.70% 39.61% 6.38% 3.67%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 22,073 $ 23,576 $ 17,746 $ 9,486 $ 5,034
(000 OMITTED)
RATIO OF EXPENSES TO 2.15% A, F 2.15% 2.15% F 2.25% F 2.25% A, F
AVERAGE NET ASSETS
RATIO OF EXPENSES TO 2.14% A, G 2.13% G 2.15% 2.25% 2.25% A
AVERAGE NET ASSETS AFTER
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME 8.69% A 6.48% 6.56% 8.48% 5.86% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 429% A 660% 410% 305% 354% A
</TABLE>
A ANNUALIZED
B 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).
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 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 DECEMBER 31, 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 (SEE NOTE 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.110 $ 12.190
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .476 .154
NET REALIZED AND UNREALIZED GAIN (LOSS) (.732) .322
TOTAL FROM INVESTMENT OPERATIONS (.256) .476
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.454) (.286)
FROM NET REALIZED GAIN - (1.270)
TOTAL DISTRIBUTIONS (.454) (1.556)
NET ASSET VALUE, END OF PERIOD $ 10.400 $ 11.110
TOTAL RETURN B, C (2.47)% 4.16%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 647 $ 66
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.25% A, F 2.25% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 2.23% A, G 2.25% A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 8.92% A 9.04% A
PORTFOLIO TURNOVER RATE 429% A 660%
</TABLE>
A ANNUALIZED
B 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).
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 PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO DECEMBER 31, 1997.
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 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.060 $ 11.650 $ 9.280 $ 8.400
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .525 D .860 D .786 D .393
NET REALIZED AND UNREALIZED GAIN (LOSS) (.723) 1.008 2.779 .876
TOTAL FROM INVESTMENT OPERATIONS (.198) 1.868 3.565 1.269
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.512) (.998) (.785) (.389)
FROM NET REALIZED GAIN - (1.460) (.410) -
TOTAL DISTRIBUTIONS (.512) (2.458) (1.195) (.389)
NET ASSET VALUE, END OF PERIOD $ 10.350 $ 11.060 $ 11.650 $ 9.280
TOTAL RETURN B, C (1.97)% 16.84% 40.21% 15.52%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 859 $ 1,320 $ 2,639 $ 201
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.25% A, F 1.25% F 1.25% F 1.25% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.24% A, G 1.23% G 1.25% 1.25% A
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE 9.51% A 6.85% 7.46% 9.09% A
NET ASSETS
PORTFOLIO TURNOVER RATE 429% A 660% 410% 305% A
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
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 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (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, Class C, 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
matters that affect that class. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, 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, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts and foreign currency options, disposition of
foreign currencies, the difference between the amount of net
investment income accrued and the U.S. dollar amount actually
received, and gains and
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
losses between trade date and settlement on purchases and sales of
securities. 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. 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
among the funds in the trust.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class C and shares of Class C for distribution under federal and state
securities law. These expenses are 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 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.
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
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.
2. OPERATING POLICIES - CONTINUED
OPTIONS. The fund may use options to manage its exposure to the bond
market and to fluctuations in interest rates and currency values.
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 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 $6,132,543 or 6.0% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $205,624,033 and $208,495,704.
The following is a summary of the fund's written options activity:
NUMBER OF AGGREGATE FACE VALUE
CONTRACTS OF CONTRACTS
Call Options on Brazilian Federative Republic
Brady Capitalization Bonds
Outstanding at12/31/97 - $ -
Contracts opened 2 658,586
Contracts expired (1) (658)
Contracts closed (1) (657,928)
Outstanding at June 30, 1998 - $ -
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 .69% 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 Limited
(FIJ). In addition, FIIA entered into a sub-advisory agreement with
its subsidiary, Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L). 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 FIIA(U.K.)L 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. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
CLASS C 1.00% **
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .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 retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 1,981 $ 122
CLASS T 109,281 14,105
CLASS B 104,765 76,010
CLASS C 1,152 1,152
$ 217,179 $ 91,389
Under the Plans, FMR 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. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $ 1,900
CLASS T 16,060
CLASS B 11,760
CLASS C 334
INSTITUTIONAL CLASS 506
$ 30,560
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging from 5% to 1% for Class B and 1% for Class C, 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. In addition, purchases of Class A and
Class T shares that were subject to a finder's fee bear a contingent
deferred sales charge on assets that do not remain in the fund for at
least one year. The Class A and Class T contingent deferred sales
charge is based on 0.25% 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. A
portion of the sales charges paid to FDC are paid to securities
dealers, banks and other financial institutions.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 16,164 $ 3,394
CLASS T 38,121 11,986
CLASS B 40,069 40,069*
CLASS C 250 250*
TOTAL $ 94,604 $ 55,699
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the
fund(collectively referred to as the transfer agent) for the fund's
Class A, Class T, Class B, Class C and Institutional Class. FIIOC
receives 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. FIIOC pays for typesetting, printing and mailing
of all shareholder reports, except proxy statements. For the period,
the following amounts were paid to FIIOC :
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 4,585 .35*
CLASS T 112,310 .26*
CLASS B 33,660 .29*
CLASS C 595 .52*
INSTITUTIONAL CLASS 1,767 .34*
$ 152,917
* ANNUALIZED.
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse 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 of the following classes:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A 1.40% $ 6,006
CLASS B 2.15% 3,094
CLASS C 2.25% 11,155
INSTITUTIONAL CLASS 1.25% 10,078
$ 30,333
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 $3,685 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 9% of
the total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997 A
FROM NET INVESTMENT INCOME
CLASS A $ 118,020 $ 119,401
CLASS T 3,875,884 7,364,838
CLASS B 949,002 1,641,148
CLASS C 9,703 1,052
INSTITUTIONAL CLASS 47,154 253,852
TOTAL $ 4,999,763 $ 9,380,291
FROM NET REALIZED GAIN
CLASS A $ - $ 244,650
CLASS T - 10,866,769
CLASS B - 2,697,569
CLASS C - 6,680
INSTITUTIONAL CLASS - 213,617
TOTAL $ - $ 14,029,285
TOTAL $ 4,999,763 $ 23,409,576
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
9. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 A 1998 1997 A
CLASS A 82,305 157,759 $ 914,725 $ 1,980,163
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 10,064 27,924 111,162 317,016
SHARES REDEEMED (45,602) (18,479) (500,548) (229,598)
NET INCREASE (DECREASE) 46,767 167,204 $ 525,339 $ 2,067,581
CLASS T 1,166,387 5,560,853 $ 12,946,964 $ 68,604,516
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 309,617 1,422,242 3,417,070 16,356,926
SHARES REDEEMED (2,514,110) (5,324,070) (27,834,032) (65,213,725)
NET INCREASE (DECREASE) (1,038,106) 1,659,025 $ (11,469,998) $ 19,747,717
CLASS B 386,749 741,442 $ 4,302,534 $ 9,189,867
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 71,919 323,757 796,373 3,726,061
SHARES REDEEMED (459,500) (462,457) (5,134,442) (5,697,389)
NET INCREASE (DECREASE) (832) 602,742 $ (35,535) $ 7,218,539
CLASS C 60,318 5,254 $ 653,183 $ 65,143
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 695 692 7,635 7,663
SHARES REDEEMED (4,720) - (51,547) -
NET INCREASE (DECREASE) 56,293 5,946 $ 609,271 $ 72,806
INSTITUTIONAL CLASS 86,010 670,672 $ 946,706 $ 8,055,126
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 3,980 36,986 43,811 437,820
SHARES REDEEMED (126,403) (814,803) (1,380,675) (10,051,000)
NET INCREASE (DECREASE) (36,413) (107,145) $ (390,158) $ (1,558,054)
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997
10. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 6,090
CLASS T 16,730
CLASS B 9,782
CLASS C 10,982
INSTITUTIONAL CLASS 10,151
$ 53,735
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
Tokyo, Japan
Fidelity International Investment Advisors
Pembroke, Bermuda
Fidelity International Investment
Advisors (U.K.) Limited
London, England
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
John H. Carlson, Vice President
Eric D. Roiter, 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 International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
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 Municipal Income Fund
Fidelity Advisor Intermediate 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, 1998
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 17 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 26 NOTES TO FINANCIAL STATEMENTS.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
As the first half of 1998 drew to a close, benign inflation, low
interest rates and moderate economic growth provided a solid
foundation for strong stock and bond performance. Investors seemed to
put concerns about the financial and economic turmoil in Asia aside
for the most part, responding instead to stronger-than-expected
corporate earnings and a sound domestic economy. The bond markets
tended to benefit from the moderate growth in the economy and a
historically low rate of inflation, as well their traditional status
as a refuge from volatility in the equity markets.
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 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, the original class
of the fund, and reflect Class T shares' 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, 1998 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - INST CL -1.97% 1.20% 76.28%
JP EMBI PLUS -1.08% 1.39% 78.89%
EMERGING MARKETS DEBT FUNDS AVERAGE -2.94% -1.25% 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
39 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, 1998 PAST 1 LIFE OF
YEAR FUND
FIDELITY ADV EMERGING MARKETS INCOME - INST CL 1.20% 14.06%
JP EMBI PLUS 1.39% 14.45%
EMERGING MARKETS DEBT FUNDS AVERAGE -1.25% 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
FA Emerg Mkt Inc -CL I JP EMBI Plus
00607 JP004
1994/03/10 10000.00 10000.00
1994/03/31 9583.54 8807.82
1994/04/30 9709.65 8643.25
1994/05/31 10335.54 9282.15
1994/06/30 9835.28 8810.67
1994/07/31 10055.96 8971.50
1994/08/31 11267.52 9714.11
1994/09/30 11589.24 10014.32
1994/10/31 11290.55 9697.82
1994/11/30 11055.90 9687.51
1994/12/31 10246.94 9059.99
1995/01/31 9070.51 8623.61
1995/02/28 8422.24 8222.51
1995/03/31 8175.93 8056.78
1995/04/30 8877.85 8918.88
1995/05/31 9407.49 9695.07
1995/06/30 9460.49 9909.06
1995/07/31 9478.29 9869.98
1995/08/31 9683.27 10140.13
1995/09/30 10070.53 10536.55
1995/10/31 10009.09 10422.17
1995/11/30 10344.64 10724.86
1995/12/31 10975.98 11485.35
1996/01/31 11786.94 12358.18
1996/02/29 11132.52 11676.46
1996/03/31 11239.43 11942.44
1996/04/30 11817.53 12593.99
1996/05/31 12141.13 12811.92
1996/06/30 12409.00 13262.30
1996/07/31 12552.11 13539.46
1996/08/31 13008.06 14036.78
1996/09/30 14076.23 14942.02
1996/10/31 14441.53 15043.72
1996/11/30 15251.78 15810.38
1996/12/31 15389.41 16000.37
1997/01/31 16045.33 16442.93
1997/02/28 16318.80 16729.03
1997/03/31 15666.08 16123.30
1997/04/30 16195.03 16602.74
1997/05/31 16893.07 17247.58
1997/06/30 17418.65 17644.32
1997/07/31 18174.39 18376.34
1997/08/31 18074.50 18301.91
1997/09/30 18657.53 18861.14
1997/10/31 16803.76 16688.46
1997/11/30 17430.57 17480.82
1997/12/31 17981.09 18083.31
1998/01/31 18002.45 18046.65
1998/02/28 18492.36 18563.20
1998/03/31 18987.43 19025.32
1998/04/30 18999.68 19071.47
1998/05/31 18212.32 18420.48
1998/06/30 17627.52 17888.74
IMATRL PRASUN SHR__CHT 19980630 19980713 084304 R00000000000055
$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, 1998, the value of the investment would have
grown to $17,628 - a 76.28% 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
$17,889 - a 78.89% 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)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31, JULY 3, 1995
ENDED (COMMENCEMENT
JUNE 30, OF SALE OF
INSTITUTIONAL CLASS
SHARES) TO
DECEMBER 31,
1998 1997 1996 1995
DIVIDEND RETURN 4.45% 8.54% 9.89% 5.04%
CAPITAL RETURN -6.42% 8.30% 30.32% 10.48%
TOTAL RETURN -1.97% 16.84% 40.21% 15.52%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested, and exclude the effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 9.35(CENTS) 51.23(CENTS) 113.22(CENTS)
ANNUALIZED DIVIDEND RATE 10.67% 9.34% 9.52%
30-DAY ANNUALIZED YIELD 8.52% - -
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 $10.66 over the past one month, $11.06 over the past six
months, and $11.89 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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Emerging markets rallied strongly
toward the end of the first quarter.
The primary catalysts were improved
investor confidence, a strong U.S.
equity market and steadily
improving market demand. With
some exceptions, positive
developments in Asia also aided
performance as currencies
stabilized and progress with the
IMF was achieved. However, the
market was unable to maintain its
momentum and suffered a
reversal in the second quarter. An
escalating banking crisis in Japan,
combined with a brewing fiscal
crisis in Russia, increased spread
volatility and caused weakness in
emerging-market debt issues. The
Japanese banking crisis drew
renewed attention as the
government failed to propose a
credible bailout plan. The resulting
pressure on the yen called into
question the export
competitiveness of surrounding
Asian countries as well as that of
the U.S. One positive aspect
regarding the potential pressure
on U.S. corporate earnings was
the disappearance of the Federal
Reserve's motivation to pre-empt
any inflationary signals. Low
U.S. real interest rates continued
to be a favorable backdrop for the
emerging-market debt arena.
Russian debt came under
pressure as investors' attention
turned to the significant reform
challenges the country faces and
the slow progress in addressing
them to date. Lower commodity
prices, especially oil, also put
pressure on the country's
fundamentals. Developments in
Russia carried over to other
markets. Brazil's debt traded lower
as its weak fiscal position once
again raised concerns.
An interview with John Carlson, Portfolio Manager of Fidelity Advisor
Emerging Markets Income Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. For the six months that ended June 30, 1998, the fund's
Institutional Class shares returned -1.97%. The emerging markets debt
funds average, as tracked by Lipper Analytical Services, returned
- -2.94% during this time. The J.P. Morgan Emerging Markets Bond Index
Plus returned -1.08%. For the 12 months that ended June 30, 1998, the
fund's Institutional Class shares returned 1.20%, while the peer group
and index returned -1.25% and 1.39%, respectively.
Q. HOW WOULD YOU DESCRIBE THE INVESTING ENVIRONMENT FOR
EMERGING-MARKET DEBT OVER THE PAST SIX MONTHS?
A. The first six months of 1998 were characterized by pronounced
volatility. Yield spreads - which measure the premium an investor pays
for taking on risk - tightened versus U.S. government bonds in the
beginning of the year as sentiment toward Asia turned favorable due to
positive International Monetary Fund (IMF) negotiations. However, as
the year progressed, a liquidity crisis in Russia drew widespread
attention. Additionally, speculation surrounding a possible
devaluation of Russia's currency - the rouble - dragged other
emerging-market debt down in sympathy.
Q. ONE YEAR AGO, RUSSIA WAS THE APPLE OF MANY AN EMERGING-MARKET
INVESTOR'S EYE. WHAT HAPPENED?
A. Despite having a low external debt load as a percentage of gross
domestic product and exports, Russia's practice of funding budget
deficits with high-yielding, short-term government bonds sent interest
rates skyrocketing and led to a loss of investor confidence. Even with
interest rates of 150%, investors shied away from new issues. As a
major exporter of oil, lower oil prices also compounded Russia's
problems during the period.
Q. WHAT TYPES OF STRATEGIES DID YOU UTILIZE DURING THE PERIOD?
A. There were a few. First, I positioned the fund conservatively
during the period, believing there would be a second downtick in the
Asian markets that would have ramifications across all emerging-market
debt. The fund was overweighted - relative to its index - in
collateralized bonds, or Brady bonds. These U.S.-dollar-denominated
issues are backed by U.S. Treasury bonds. Second, I overweighted the
fund's positions in Poland and Bulgaria relative to the index. Poland
has experienced high growth amid lower inflation, while Bulgaria
presented a higher-quality opportunity in the market. Bulgaria has
successfully completed privatizations, maintained low borrowing
requirements and has managed to keep interest rates low.
Q. WHICH POSITIONS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE?
A. Overweighted positions in Poland and Bulgaria helped performance.
Spreads for Poland's debt tightened during the period as investors
recognized the country's growth prospects were mostly insulated from
the deteriorating Russian credit market. Bulgarian issues traded
higher as evidence of positive monetary and fiscal developments became
apparent. Turkey also contributed to performance on strong economic
growth in addition to IMF supervision. Additionally, declining oil
prices decreased Turkey's cost of imports. Having a lower exposure to
Venezuela - relative to the index - also helped as lower oil prices
continued to undermine the country's fiscal position.
Q. WERE THERE ANY POSITIONS THAT FAILED TO MEET YOUR EXPECTATIONS?
A. Lower relative weightings in both Mexico and Argentina hurt
performance, as both markets came on strong during the last three
months of the period. The fund was underweighted in Mexico because
return prospects - while improving - did not appear to support lofty
debt prices for the debt. While I was attracted to Argentina, I
underestimated its strength. Finally, an overweighting in Brazil and
Russia detracted from the fund's return.
Q. WHAT'S YOUR OUTLOOK?
A. Over the past six months, we've weathered some extreme market
conditions, including bull runs, chaotic economic downturns and
sideways moves. None of these events included scenarios I have not
seen before. Our experienced analysts and traders helped us uncover
values over the past six months, and I will continue to rely on them
for insights going forward. Specifically, I'll be watching
developments in three key markets very closely: Russia, China and
Japan. While Japan is not an emerging-market country, it is a powerful
Asian economy with significant influence on emerging-market debt.
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.
JOHN CARLSON TALKS ABOUT
EMERGING-MARKET EQUITIES:
"As many emerging markets
tumbled due to the faltering Asian
and Russian economies,
emerging-market equities -
which had long played second
fiddle to emerging-market debt -
displayed attractive valuation
profiles. As a result, the fund's
equity stake increased from 0% in
January 1998 to around 3% at the
end of June.
"Three equity positions accounted
for that total: Telebras, Huaneng
Power and YPF. Telebras is a large
Brazilian telecommunications
company that plans to go through a
privatization process this summer.
China-based Huaneng Power is
one of the world's largest
independent power producers, and
YPF is a major international oil
producer based in Argentina.
"Buoyed by strong research, I felt
these positions were attractively
valued and would be a nice fit for
the portfolio."
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, 1998,
more than $102 million
MANAGER: John Carlson, since
1995; also lead manager,
Fidelity Advisor Strategic
Income Fund, since 1996;
joined Fidelity in 1995
(checkmark)
INVESTMENT CHANGES
TOP FIVE COUNTRIES AS OF JUNE 30, 1998
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE COUNTRIES
6 MONTHS AGO
ARGENTINA 22.0 15.3
BRAZIL 15.1 18.6
MEXICO 12.7 9.9
RUSSIA 9.9 6.8
TURKEY 5.2 3.7
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, 1998
<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 17.9 12.2
BRAZILIAN FEDERATIVE REPUBLIC 11.4 18.1
BANCO NACIONAL DE COMERCIO EXTERIOR SNC 6.8 3.2
UNITED MEXICAN STATES 5.9 5.6
TURKISH REPUBLIC 5.2 3.7
</TABLE>
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1998
6 MONTHS AGO
YEARS 15.1 15.3
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, 1998 AS OF DECEMBER 31, 1997
ROW: 1, COL: 1, VALUE: 11.7
ROW: 1, COL: 2, VALUE: 74.3
ROW: 1, COL: 3, VALUE: 9.199999999999999
ROW: 1, COL: 4, VALUE: 4.8
CORPORATE BONDS 8.3%
FOREIGN GOVERNMENT
OBLIGATIONS 68.8%
OTHER 9.5%
SHORT-TERM
INVESTMENTS 13.4%
CORPORATE BONDS 11.7%
FOREIGN GOVERNMENT
OBLIGATIONS 74.3%
OTHER 9.2%
SHORT-TERM
INVESTMENTS 4.8%
ROW: 1, COL: 1, VALUE: 8.300000000000001
ROW: 1, COL: 2, VALUE: 68.8
ROW: 1, COL: 3, VALUE: 9.5
ROW: 1, COL: 4, VALUE: 13.4
INVESTMENTS JUNE 30, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 11.7%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
ARGENTINA - 2.9%
Compania Internacional Telecomunicaciones
10 3/8%, 8/1/04 (Reg. S) BB ARS 990,000 $ 804,488
Compania Latinoamericana de Infraestructura
& Servicios SA:
11 5/8%, 6/1/04 (g) BB- 630,000 623,700
11 5/8%, 6/1/04 BB- 460,000 455,400
Mastellone Hermanos SA
11 3/4%, 4/1/08 (g) B1 1,055,000 1,049,725
2,933,313
BRAZIL - 1.1%
Banco Nac de Desen Econo 10.3%, 6/16/08 (f)(g) B1 1,140,000
1,137,720
DOMINICAN REPUBLIC - 0.9%
Tricom SA 11 3/8%, 9/1/04 B2 930,000 885,825
MEXICO - 6.8%
Banco Nacional de Comercio Exterior SNC
11 1/4%, 5/30/06 (Reg.) Ba2 6,110,000 6,751,550
TOTAL NONCONVERTIBLE BONDS
(Cost $12,146,245) 11,708,408
FOREIGN GOVERNMENT OBLIGATIONS (H) - 74.3%
ARGENTINA - 19.0%
Argentinian Republic:
Brady par euro
5 3/4%, 3/31/23 (e) Ba3 11,025,000 8,193,635
BOCON:
3.29%, 4/1/01 (f) Ba3 ARS 1,020,916 909,624
3.29%, 4/1/07 (f) Ba3 ARS 3,764,006 2,635,982
global bond:
8.726%, 4/10/05 (f) Ba3 640,000 640,000
11 3/8%, 1/30/17 Ba3 3,180,000 3,378,750
9 3/4%, 9/19/27 Ba3 610,000 563,488
11 3/4%, 2/12/07 Ba3 ARS 1,730,000 1,635,079
City of Buenos Aires euro 10 1/2%, 5/28/04 B1 ARS 1,310,000
1,100,554
19,057,112
FOREIGN GOVERNMENT OBLIGATIONS (H) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
BRAZIL - 11.4%
Brazilian Federative Republic Brady:
new money bond 6.688%, 4/15/09 (Reg.) (f) B1 $ 1,480,000 $ 1,124,800
capitalization bond 8%, 4/15/14 B1 9,484,730 6,971,276
discount euro 6 5/8%, 4/15/24 (f) B1 4,260,000 3,280,200
11,376,276
BULGARIA - 5.1%
Bulgarian Republic Brady (f):
FLIRB A 2.25%, 7/28/12 B2 2,135,000 1,323,700
discount 6.5625%, 7/28/24 B2 4,975,000 3,805,875
5,129,575
COTE D'IVOIRE - 2.3%
Ivory Coast Brady (f)(g):
past due interest 2.0%, 3/30/18 - 4,949,000 1,837,316
FLIRB 2.0%, 3/30/18 - 1,384,000 453,260
2,290,576
DOMINICAN REPUBLIC - 0.8%
Dominican Republic Brady
6 5/8%, 8/30/09 (f) B1 1,078,000 858,358
ECUADOR - 3.4%
Ecuador Republic Brady:
par euro 3 1/2%, 2/28/25 (e) B1 2,795,000 1,504,060
discount euro 6 5/8%, 2/28/25 (f) B1 2,670,000 1,855,650
3,359,710
GREECE - 0.8%
Greek Government Treasury Bill 0%, 4/29/99 (i) - GRD 255,700 769,332
JORDAN - 0.8%
Kingdom of Jordan 5%, 12/23/23 (f) Ba3 1,140,000 792,300
LEBANON - 0.3%
Lebanese Treasury Bill 0%, 10/29/98 (i) - LBP 436,000 276,592
FOREIGN GOVERNMENT OBLIGATIONS (H) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
MEXICO - 5.9%
Mexico Value recovery rights
6/30/03 discount C - $ 1,000 $ -
United Mexican States Brady:
par A 6 1/4%, 12/31/19 unit Ba2 3,060,000 2,535,975
par B 6 1/4%, 12/31/19 unit Ba2 4,020,000 3,331,575
5,867,550
PANAMA - 2.5%
Panamanian Republic Brady:
par 3%, 7/17/26 (e) Ba1 3,050,000 1,997,750
discount 6.5625%, 7/17/26 (f) Ba1 610,000 530,700
2,528,450
PERU - 1.7%
Peruvian Republic Brady FLIRB (f):
3 1/4%, 3/7/17 (g) B2 1,350,000 754,313
3 1/4%, 3/7/17 B2 1,775,000 991,781
1,746,094
POLAND - 4.4%
Polish Government:
23.18%, 5/6/01 (f) A- PLN 3,460,000 993,249
Brady par 3%, 10/27/24 (e) Baa3 5,185,000 3,428,581
4,421,830
RUSSIA - 4.9%
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) interest notes
6 5/8%, 12/15/15 (f)(g) B1 494 274
Moscow City 9 1/2%, 5/31/00 (Reg.) B1 1,780,000 1,533,025
Russian Government 11 3/4%, 6/10/03 (g) B+ 3,790,000 3,349,413
4,882,712
TURKEY - 5.2%
Turkish Republic Treasury Bill (d):
0%, 8/12/98 - TRL 353,100 1,222,344
0%, 9/16/98 - TRL 472,730 1,473,811
0%, 1/27/99 - TRL 951,280 2,482,489
5,178,644
FOREIGN GOVERNMENT OBLIGATIONS (H) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
VENEZUELA - 5.2%
Venezuelan Republic:
Brady:
debt conversion bond 6 5/8%, 12/18/07 (f) Ba2 $ 2,928,574 $
2,383,127
par A euro 6 3/4%, 3/31/20 Ba2 2,185,000 1,753,463
discount A 6.5625%, 3/31/20 (f) Ba2 1,250,000 1,021,875
Oil recovery rights 3/31/20 (a) - 10,955 -
5,158,465
VIETNAM - 0.6%
Socialist Republic of Vietnam Brady
3%, 3/12/28 (e) - 1,700,000 616,250
TOTAL GOVERNMENT OBLIGATIONS
(Cost $76,197,895) 74,309,826
SOVEREIGN LOAN PARTICIPATIONS - 6.1%
ANGOLA - 0.5%
Banco Nacional de Angola
0%, 9/10/27 - 1,596,128 558,645
CAMEROON - 0.3%
Cameroon Republic loan participation
- Societe Generale - FRF 1,960,000 93,757
- Societe Generale - DEM 1,430,000 229,369
323,126
CONGO - 0.3%
Congo Republic loan participation:
- Societe Generale - 734,288 212,944
- Societe Generale - FRF 841,728 40,264
- Societe Generale - DEM 255,860 41,039
294,247
SOVEREIGN LOAN PARTICIPATIONS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (B) (NOTE 1)
RUSSIA - 5.0%
Bank for Foreign Economic Affairs of Russia
(Vnesheconombank) loan participation
restructured under 1997 agreement (f):
- Bank Boston 6.7188%, 12/15/20 - $ 2,020,000 $ 954,450
- The Chase Manhattan Bank
6 5/8%, 12/15/20 - 920,000 434,700
- Deutsche Bank 6.7188%, 12/15/20 - 3,670,000 1,734,075
- ING Bank NV 6 5/8%, 12/15/20 - 1,070,000 505,575
- Lehman Commercial Paper, Inc.
6.7188%, 12/15/20 - 340,000 160,650
- Merrill Lynch, Pierce, Fenner & Smith, Inc.
6.7188%, 12/15/20 - 370,000 174,825
- Morgan (J.P.) Securities, Inc.
6 5/8%, 12/15/20 - 1,030,000 486,675
- Paribus Capital Markets
6.7188%, 12/15/20 - 1,070,000 505,575
4,956,525
TOTAL SOVEREIGN LOAN PARTICIPATIONS
(Cost $6,995,861) 6,132,543
COMMON STOCKS - 3.1%
SHARES
ARGENTINA - 0.1%
YPF Sociedad Anonima sponsored ADR
representing Class D shares 3,900 116,561
BRAZIL - 2.6%
Telecomunicacoes Brasileiras SA Sponsored ADR 24,100 2,631,419
CHINA - 0.4%
Huaneng Power International, Inc. Class N sponsored ADR (a) 26,700
358,781
TOTAL COMMON STOCKS
(Cost $3,257,228) 3,106,761
CASH EQUIVALENTS - 4.8%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.66%, dated
6/30/98 due 7/1/98
(Cost $4,801,000) $ 4,801,755 $ 4,801,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $103,398,229) $ 100,058,538
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest Reduction
Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
FRF - French franc
DEM - German deutsche mark
GRD - Greek drachma
LBP - Lebanese pound
PLN - Polish zloty
TRL - Turkish lira
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless
otherwise noted.
(c) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(d) Principal amount in millions.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) 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
$9,205,721 or 9.0% of net assets.
(h) 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.
(i) Principal amount in thousands
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 1.0%
Baa 3.4% BBB 8.6%
Ba 39.0% BB 46.3%
B 28.2% B 11.3%
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 Moody's or S&P amounted to 9.0%. FMR has determined that
unrated debt securities that are lower quality account for 9.0% of the
total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1998, the aggregate cost of investment securities for
income tax purposes was $104,087,298. Net unrealized depreciation
aggregated $4,028,760, of which $967,571 related to appreciated
investment securities and $4,996,331 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending December
31, 1998 approximately $1,921,000 of losses recognized during the
period November 1, 1997 to December 31, 1997.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 100,058,538
AGREEMENTS OF $4,801,000) (COST $103,398,229) -
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 5,905,230
RECEIVABLE FOR FUND SHARES SOLD 499,748
INTEREST RECEIVABLE 1,204,651
PREPAID EXPENSES 4,566
TOTAL ASSETS 107,672,733
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 283,012
PAYABLE FOR INVESTMENTS PURCHASED 4,097,045
PAYABLE FOR FUND SHARES REDEEMED 341,270
DISTRIBUTIONS PAYABLE 43,732
ACCRUED MANAGEMENT FEE 59,917
DISTRIBUTION FEES PAYABLE 33,990
OTHER PAYABLES AND ACCRUED EXPENSES 72,090
TOTAL LIABILITIES 4,931,056
NET ASSETS $ 102,741,677
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 111,159,061
UNDISTRIBUTED NET INVESTMENT INCOME 256,648
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (5,330,837)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS (3,343,195)
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS $ 102,741,677
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
JUNE 30, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $10.41
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,652,481 (DIVIDED BY) 254,763 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $10.41) $10.93
CLASS T: $10.40
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($76,509,695 (DIVIDED BY) 7,353,865 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $10.40) $10.78
CLASS B: $10.45
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($22,073,361 (DIVIDED BY) 2,112,594 SHARES) A
CLASS C: $10.40
NET ASSET VALUE, AND OFFERING PRICE PER SHARE
($647,292 (DIVIDED BY) 62,239 SHARES) A
INSTITUTIONAL CLASS: $10.35
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($858,848 (DIVIDED BY) 82,944 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME $ 6,282,696
INTEREST
LESS FOREIGN TAXES WITHHELD (128,620)
TOTAL INCOME 6,154,076
EXPENSES
MANAGEMENT FEE $ 392,502
TRANSFER AGENT FEES 152,917
DISTRIBUTION FEES 217,179
ACCOUNTING FEES AND EXPENSES 43,600
NON-INTERESTED TRUSTEES' COMPENSATION 218
CUSTODIAN FEES AND EXPENSES 39,747
REGISTRATION FEES 53,735
AUDIT 26,390
LEGAL 1,093
MISCELLANEOUS 4,302
TOTAL EXPENSES BEFORE REDUCTIONS 931,683
EXPENSE REDUCTIONS (34,018) 897,665
NET INVESTMENT INCOME 5,256,411
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES (981,781)
FOREIGN CURRENCY TRANSACTIONS (44,232)
WRITTEN OPTIONS 282,129 (743,884)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES (6,537,946)
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 25,137 (6,512,809)
NET GAIN (LOSS) (7,256,693)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (2,000,282)
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 5,256,411 $ 8,315,876
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) (743,884) 13,134,999
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (6,512,809) (4,810,866)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,000,282) 16,640,009
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (4,999,763) (9,380,291)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN - (14,029,285)
TOTAL DISTRIBUTIONS (4,999,763) (23,409,576)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) (10,761,081) 27,548,589
TOTAL INCREASE (DECREASE) IN NET ASSETS (17,761,126) 20,779,022
NET ASSETS
BEGINNING OF PERIOD 120,502,803 99,723,781
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 102,741,677 $ 120,502,803
INCOME OF $256,648 AND $424,276, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED YEARS ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.120 $ 11.720 $ 10.520
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .520 .953 .274
NET REALIZED AND UNREALIZED GAIN (LOSS) (.726) .891 1.574
TOTAL FROM INVESTMENT OPERATIONS (.206) 1.844 1.848
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.504) (.984) (.238)
FROM NET REALIZED GAIN - (1.460) (.410)
TOTAL DISTRIBUTIONS (.504) (2.444) (.648)
NET ASSET VALUE, END OF PERIOD $ 10.410 $ 11.120 $ 11.720
TOTAL RETURN B, C (2.03)% 16.52% 17.71%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,652 $ 2,313 $ 478
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% A, F 1.40% F 1.40% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE 1.39% A, G 1.38% G 1.40% A
REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 9.43% A 7.74% 7.31% A
PORTFOLIO TURNOVER RATE 429% A 660% 410%
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO DECEMBER 31, 1996.
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 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.110 $ 11.710 $ 9.280 $ 9.520 $ 10.000
BEGINNING OF PERIOD
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .518 D .877 D .758 D .860 .356
NET REALIZED AND (.727) .961 2.832 (.323) (.073)
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS (.209) 1.838 3.590 .537 .283
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.501) (.978) (.750) (.777) (.503)
FROM NET REALIZED GAIN - (1.460) (.410) - (.260)
TOTAL DISTRIBUTIONS (.501) (2.438) (1.160) (.777) (.763)
NET ASSET VALUE, END OF PERIOD $ 10.400 $ 11.110 $ 11.710 $ 9.280 $ 9.520
TOTAL RETURN B, C (2.06)% 16.47% 40.41% 6.99% 2.47%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 76,510 $ 93,228 $ 78,861 $ 36,205 $ 30,029
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.44% A 1.47% 1.49% 1.50% F 1.50% A, F
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET 1.44% A 1.45% G 1.48% G 1.50% 1.50% A
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME 9.39% A 7.08% 7.23% 9.32% 6.60% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 429% A 660% 410% 305% 354% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD MARCH 10, 1994 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.160 $ 11.750 $ 9.300 $ 9.520 $ 9.700
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .481 D .806 D .686 D .835 .167
NET REALIZED AND (.730) .956 2.853 (.342) .227
UNREALIZED GAIN (LOSS)
TOTAL FROM (.249) 1.762 3.539 .493 .394
INVESTMENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.461) (.892) (.679) (.713) (.314)
FROM NET REALIZED GAIN - (1.460) (.410) - (.260)
TOTAL DISTRIBUTIONS (.461) (2.352) (1.089) (.713) (.574)
NET ASSET VALUE, END OF PERIOD $ 10.450 $ 11.160 $ 11.750 $ 9.300 $ 9.520
TOTAL RETURN B, C (2.39)% 15.70% 39.61% 6.38% 3.67%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 22,073 $ 23,576 $ 17,746 $ 9,486 $ 5,034
(000 OMITTED)
RATIO OF EXPENSES TO 2.15% A, F 2.15% 2.15% F 2.25% F 2.25% A, F
AVERAGE NET ASSETS
RATIO OF EXPENSES TO 2.14% A, G 2.13% G 2.15% 2.25% 2.25% A
AVERAGE NET ASSETS AFTER
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME 8.69% A 6.48% 6.56% 8.48% 5.86% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 429% A 660% 410% 305% 354% A
</TABLE>
A ANNUALIZED
B 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).
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 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 DECEMBER 31, 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 (SEE NOTE 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.110 $ 12.190
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .476 .154
NET REALIZED AND UNREALIZED GAIN (LOSS) (.732) .322
TOTAL FROM INVESTMENT OPERATIONS (.256) .476
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.454) (.286)
FROM NET REALIZED GAIN - (1.270)
TOTAL DISTRIBUTIONS (.454) (1.556)
NET ASSET VALUE, END OF PERIOD $ 10.400 $ 11.110
TOTAL RETURN B, C (2.47)% 4.16%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 647 $ 66
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.25% A, F 2.25% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 2.23% A, G 2.25% A
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 8.92% A 9.04% A
PORTFOLIO TURNOVER RATE 429% A 660%
</TABLE>
A ANNUALIZED
B 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).
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 PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO DECEMBER 31, 1997.
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 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.060 $ 11.650 $ 9.280 $ 8.400
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .525 D .860 D .786 D .393
NET REALIZED AND UNREALIZED GAIN (LOSS) (.723) 1.008 2.779 .876
TOTAL FROM INVESTMENT OPERATIONS (.198) 1.868 3.565 1.269
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.512) (.998) (.785) (.389)
FROM NET REALIZED GAIN - (1.460) (.410) -
TOTAL DISTRIBUTIONS (.512) (2.458) (1.195) (.389)
NET ASSET VALUE, END OF PERIOD $ 10.350 $ 11.060 $ 11.650 $ 9.280
TOTAL RETURN B, C (1.97)% 16.84% 40.21% 15.52%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 859 $ 1,320 $ 2,639 $ 201
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.25% A, F 1.25% F 1.25% F 1.25% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.24% A, G 1.23% G 1.25% 1.25% A
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE 9.51% A 6.85% 7.46% 9.09% A
NET ASSETS
PORTFOLIO TURNOVER RATE 429% A 660% 410% 305% A
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
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 5 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 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1998 (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, Class C, 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
matters that affect that class. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, 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, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts and foreign currency options, disposition of
foreign currencies, the difference between the amount of net
investment income accrued and the U.S. dollar amount actually
received, and gains and
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
losses between trade date and settlement on purchases and sales of
securities. 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. 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
among the funds in the trust.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class C and shares of Class C for distribution under federal and state
securities law. These expenses are 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 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.
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
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.
2. OPERATING POLICIES - CONTINUED
OPTIONS. The fund may use options to manage its exposure to the bond
market and to fluctuations in interest rates and currency values.
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 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 $6,132,543 or 6.0% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $205,624,033 and $208,495,704.
The following is a summary of the fund's written options activity:
NUMBER OF AGGREGATE FACE VALUE
CONTRACTS OF CONTRACTS
Call Options on Brazilian Federative Republic
Brady Capitalization Bonds
Outstanding at12/31/97 - $ -
Contracts opened 2 658,586
Contracts expired (1) (658)
Contracts closed (1) (657,928)
Outstanding at June 30, 1998 - $ -
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 .69% 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 Limited
(FIJ). In addition, FIIA entered into a sub-advisory agreement with
its subsidiary, Fidelity International Investment Advisors (U.K.)
Limited (FIIA(U.K.)L). 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 FIIA(U.K.)L 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. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
CLASS C 1.00% **
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .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 retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 1,981 $ 122
CLASS T 109,281 14,105
CLASS B 104,765 76,010
CLASS C 1,152 1,152
$ 217,179 $ 91,389
Under the Plans, FMR 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. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $ 1,900
CLASS T 16,060
CLASS B 11,760
CLASS C 334
INSTITUTIONAL CLASS 506
$ 30,560
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging from 5% to 1% for Class B and 1% for Class C, 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. In addition, purchases of Class A and
Class T shares that were subject to a finder's fee bear a contingent
deferred sales charge on assets that do not remain in the fund for at
least one year. The Class A and Class T contingent deferred sales
charge is based on 0.25% 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. A
portion of the sales charges paid to FDC are paid to securities
dealers, banks and other financial institutions.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 16,164 $ 3,394
CLASS T 38,121 11,986
CLASS B 40,069 40,069*
CLASS C 250 250*
TOTAL $ 94,604 $ 55,699
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the
fund(collectively referred to as the transfer agent) for the fund's
Class A, Class T, Class B, Class C and Institutional Class. FIIOC
receives 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. FIIOC pays for typesetting, printing and mailing
of all shareholder reports, except proxy statements. For the period,
the following amounts were paid to FIIOC :
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 4,585 .35*
CLASS T 112,310 .26*
CLASS B 33,660 .29*
CLASS C 595 .52*
INSTITUTIONAL CLASS 1,767 .34*
$ 152,917
* ANNUALIZED.
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse 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 of the following classes:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A 1.40% $ 6,006
CLASS B 2.15% 3,094
CLASS C 2.25% 11,155
INSTITUTIONAL CLASS 1.25% 10,078
$ 30,333
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 $3,685 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 9% of
the total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997 A
FROM NET INVESTMENT INCOME
CLASS A $ 118,020 $ 119,401
CLASS T 3,875,884 7,364,838
CLASS B 949,002 1,641,148
CLASS C 9,703 1,052
INSTITUTIONAL CLASS 47,154 253,852
TOTAL $ 4,999,763 $ 9,380,291
FROM NET REALIZED GAIN
CLASS A $ - $ 244,650
CLASS T - 10,866,769
CLASS B - 2,697,569
CLASS C - 6,680
INSTITUTIONAL CLASS - 213,617
TOTAL $ - $ 14,029,285
TOTAL $ 4,999,763 $ 23,409,576
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997.
9. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 A 1998 1997 A
CLASS A 82,305 157,759 $ 914,725 $ 1,980,163
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 10,064 27,924 111,162 317,016
SHARES REDEEMED (45,602) (18,479) (500,548) (229,598)
NET INCREASE (DECREASE) 46,767 167,204 $ 525,339 $ 2,067,581
CLASS T 1,166,387 5,560,853 $ 12,946,964 $ 68,604,516
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 309,617 1,422,242 3,417,070 16,356,926
SHARES REDEEMED (2,514,110) (5,324,070) (27,834,032) (65,213,725)
NET INCREASE (DECREASE) (1,038,106) 1,659,025 $ (11,469,998) $ 19,747,717
CLASS B 386,749 741,442 $ 4,302,534 $ 9,189,867
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 71,919 323,757 796,373 3,726,061
SHARES REDEEMED (459,500) (462,457) (5,134,442) (5,697,389)
NET INCREASE (DECREASE) (832) 602,742 $ (35,535) $ 7,218,539
CLASS C 60,318 5,254 $ 653,183 $ 65,143
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 695 692 7,635 7,663
SHARES REDEEMED (4,720) - (51,547) -
NET INCREASE (DECREASE) 56,293 5,946 $ 609,271 $ 72,806
INSTITUTIONAL CLASS 86,010 670,672 $ 946,706 $ 8,055,126
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 3,980 36,986 43,811 437,820
SHARES REDEEMED (126,403) (814,803) (1,380,675) (10,051,000)
NET INCREASE (DECREASE) (36,413) (107,145) $ (390,158) $ (1,558,054)
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1997
10. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 6,090
CLASS T 16,730
CLASS B 9,782
CLASS C 10,982
INSTITUTIONAL CLASS 10,151
$ 53,735
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
Tokyo, Japan
Fidelity International Investment Advisors
Pembroke, Bermuda
Fidelity International Investment
Advisors (U.K.) Limited
London, England
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Bart A. Grenier, Vice President
John H. Carlson, Vice President
Eric D. Roiter, 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 International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
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 Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
