(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
EMERGING MARKETS INCOME
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
DECEMBER 31, 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 30 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 39 Notes to financial statements.
REPORT OF INDEPENDENT 51 The auditors' opinion.
ACCOUNTANTS
TAX INFORMATION 52
OF SPECIAL NOTE 53
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
(recycle logo) This report is printed on recycled paper using
soy-based inks.
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:
Resurgent stock market performance in the fourth quarter helped the
Dow Jones Industrial Average post a double-digit return for the fourth
year in a row - a first in the Dow's 100-plus year history. Three
interest-rate cuts made late in the year by the Federal Reserve Board
helped spark the equity rally. Meanwhile, while the majority of bonds
posted positive performance, most bond returns for 1998 trailed their
gains from 1997.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -21.94% 40.10%
INCOME - CL A
FIDELITY ADV EMERGING MARKETS -25.65% 33.45%
INCOME - CL A (INCL. 4.75%
SALES CHARGE)
JP EMBI Plus -14.35% 54.88%
Emerging Markets Debt Funds -20.80% n/a
Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, 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
value-weighted index of U.S. dollars- and other external
currency-denominated Brady bonds, loans, Eurobonds, and local
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 Inc. The past
one year average represents a peer group of 45 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -21.94% 7.26%
INCOME - CL A
FIDELITY ADV EMERGING MARKETS -25.65% 6.18%
INCOME - CL A (INCL. 4.75%
SALES CHARGE)
JP EMBI Plus -14.35% 9.51%
Emerging Markets Debt Funds -20.80% n/a
Average
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
1998/07/31 17001.72 18011.22
1998/08/31 10989.02 12835.61
1998/09/30 11969.35 14090.76
1998/10/31 12790.50 15002.37
1998/11/30 13759.46 15885.48
1998/12/31 13344.82 15488.40
IMATRL PRASUN SHR__CHT 19981231 19990114 113238 R00000000000061
$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 December 31, 1998, the value
of the investment would have grown to $13,345 - a 33.45% 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 $15,488 - a 54.88% increase.
(checkmark) 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.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO DECEMBER
31,
1998 1997 1996
Dividend returns 8.10% A 8.37% 2.32%
Capital returns -30.04% 8.15% 15.39%
Total returns -21.94% 16.52% 17.71%
</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 DECEMBER 31, 1998 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 6.62(cents) 50.37(cents) 100.76(cents)
Annualized dividend rate 10.04% 12.14% 10.44%
30-day annualized yield n/a - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $7.76 over the past one month, $8.23 over the past six months, and
$9.65 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AND DO NOT REFLECT CURRENCY RELATED LOSSES. AS A
RESULT OF CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 17.4(CENTS) PER
SHARE PAID DURING 1998 WERE A NON-TAXABLE RETURN OF CAPITAL. THE EXACT
NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN WILL
DEPEND ON YOUR SHARE ACTIVITY AND WAS REPORTED TO YOU IN JANUARY 1999.
FIDELITY 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -22.07% 39.73%
INCOME - CL T
FIDELITY ADV EMERGING MARKETS -24.79% 34.84%
INCOME - CL T (INCL. 3.50%
SALES CHARGE)
JP EMBI Plus -14.35% 54.88%
Emerging Markets Debt Funds -20.80% n/a
Average
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, 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
value-weighted index of U.S. dollars- and other external
currency-denominated Brady bonds, loans, Eurobonds, and local
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 Inc. The past
one year average represents a peer group of 45 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -22.07% 7.20%
INCOME - CL T
FIDELITY ADV EMERGING MARKETS -24.79% 6.41%
INCOME - CL T (INCL. 3.50%
SALES CHARGE)
JP EMBI Plus -14.35% 9.51%
Emerging Markets Debt Funds -20.80% n/a
Average
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
1998/07/31 17201.57 18011.22
1998/08/31 11111.23 12835.61
1998/09/30 12098.20 14090.76
1998/10/31 12943.55 15002.37
1998/11/30 13905.35 15885.48
1998/12/31 13483.97 15488.40
IMATRL PRASUN SHR__CHT 19981231 19990208 161157 R00000000000061
$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 December 31, 1998, the value
of your investment would have grown to $13,484 - a 34.84% 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 $15,488 - a 54.88% increase.
(checkmark) 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.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, MARCH 10, 1994 (COMMENCEMENT
OF OPERATIONS) TO DECEMBER 31,
1998 1997 1996 1995 1994
Dividend returns 7.99% A 8.32% 9.46% 9.51% 4.80%
Capital returns -30.06% 8.15% 30.95% -2.52% -2.33%
Total returns -22.07% 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 DECEMBER 31, 1998 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 6.51(cents) 49.57(cents) 99.62(cents)
Annualized dividend rate 9.89% 11.95% 10.32%
30-day annualized yield 10.21% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $7.75 over the past one month, $8.23 over the past six months and
$9.65 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AND DO NOT REFLECT CURRENCY RELATED LOSSES. AS A
RESULT OF CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 17.2(CENTS) PER
SHARE PAID DURING 1998 WERE A NON-TAXABLE RETURN OF CAPITAL. THE EXACT
NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN WILL
DEPEND ON YOUR SHARE ACTIVITY AND WAS REPORTED TO YOU IN JANUARY 1999.
FIDELITY 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 one year and life of fund total return
figures are 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -22.66% 35.51%
INCOME - CL B
FIDELITY ADV EMERGING MARKETS -26.15% 33.95%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
JP EMBI Plus -14.35% 54.88%
Emerging Markets Debt Funds -20.80% n/a
Average
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, 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
value-weighted index of U.S. dollars- and other external
currency-denominated Brady bonds, loans, Eurobonds, and local
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 Inc. The past one year average
represents a peer group of 45 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -22.66% 6.52%
INCOME - CL B
FIDELITY ADV EMERGING MARKETS -26.15% 6.26%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
JP EMBI Plus -14.35% 9.51%
Emerging Markets Debt Funds -20.80% n/a
Average
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 17101.39 17888.74
1998/07/31 17348.20 18011.22
1998/08/31 11210.43 12835.61
1998/09/30 12197.71 14090.76
1998/10/31 13022.87 15002.37
1998/11/30 13997.31 15885.48
1998/12/31 13395.00 15488.40
IMATRL PRASUN SHR__CHT 19981231 19990208 161343 R00000000000061
$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 December
31, 1998, the value of the investment including the effect of the
applicable contingent deferred sales charge, would have been $13,395 -
a 33.95% 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 $15,488 - a 54.88% increase.
(checkmark)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.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, JUNE 30, 1994 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO DECEMBER 31,
1998 1997 1996 1995 1994
Dividend returns 7.45% A 7.57% 8.54% 8.69% 3.03%
Capital returns -30.11% 8.13% 31.07% -2.31% 0.64%
Total returns -22.66% 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 DECEMBER 31, 1998 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 6.13(cents) 47.16(cents) 93.29(cents)
Annualized dividend rate 9.27% 11.33% 9.63%
30-day annualized yield 9.91% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $7.79 over the past one month, $8.26 over the past six months, and
$9.69 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AND DO NOT REFLECT CURRENCY RELATED LOSSES. AS A
RESULT OF CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 16.1(CENTS) PER
SHARE PAID DURING 1998 WERE A NON-TAXABLE RETURN OF CAPITAL. THE EXACT
NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN WILL
DEPEND ON YOUR SHARE ACTIVITY AND WAS REPORTED TO YOU IN JANUARY 1999.
FIDELITY 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
January 1, 1996 through November 3, 1997 and prior to June 30, 1994
would have been lower. Class C shares' contingent deferred sales
charge included in the past one year and life of fund total return
figures are 1.00% and 0%, respectively. If Fidelity had not reimbursed
certain class expenses, the total returns and dividends would have
been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -22.47% 35.74%
INCOME - CL C
FIDELITY ADV EMERGING MARKETS -23.17% 35.74%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
JP EMBI Plus -14.35% 54.88%
Emerging Markets Debt Funds -20.80% n/a
Average
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, 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
value-weighted index of U.S. dollars- and other external
currency-denominated Brady bonds, loans, Eurobonds, and local
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 Inc. The past one year average
represents a peer group of 45 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -22.47% 6.55%
INCOME - CL C
FIDELITY ADV EMERGING MARKETS -23.17% 6.55%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
JP EMBI Plus -14.35% 9.51%
Emerging Markets Debt Funds -20.80% n/a
Average
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 9583.54 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 16977.03 17480.82
1997/12/31 17506.75 18083.31
1998/01/31 17508.74 18046.65
1998/02/28 17968.54 18563.20
1998/03/31 18432.44 19025.32
1998/04/30 18428.80 19071.47
1998/05/31 17653.68 18420.48
1998/06/30 17075.09 17888.74
1998/07/31 17319.09 18011.22
1998/08/31 11194.28 12835.61
1998/09/30 12184.82 14090.76
1998/10/31 13011.47 15002.37
1998/11/30 13987.53 15885.48
1998/12/31 13573.71 15488.40
IMATRL PRASUN SHR__CHT 19981231 19990114 113934 R00000000000061
$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 December
31, 1998, the value of the investment would have been $13,574 - a
35.74% 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 $15,488 - a 54.88% increase.
(checkmark) 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.
TOTAL RETURN COMPONENTS
YEAR ENDED DECEMBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO DECEMBER
31,
1998 1997
Dividend returns 7.41% A 2.48%
Capital returns -29.88% 1.68%
Total returns -22.47% 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 DECEMBER 31, 1998 PAST 1 MONTH PAST 6 MONTHS LIFE OF CLASS
Dividends per share A 6.07(cents) 46.68(cents) 92.12(cents)
Annualized dividend rate 9.20% 11.25% 9.55%
30-day annualized yield n/a - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $7.77 over the past one month, $8.23 over the past six months, and
$9.65 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AND DO NOT REFLECT CURRENCY RELATED LOSSES. AS A
RESULT OF CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 15.9(CENTS) PER
SHARE PAID DURING 1998 WERE A NON-TAXABLE RETURN OF CAPITAL. THE EXACT
NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN WILL
DEPEND ON YOUR SHARE ACTIVITY AND WAS REPORTED TO YOU IN JANUARY 1999.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Escalating volatility characterized
emerging markets during the
12-month period ended
December 31, 1998. For the year,
the JP Morgan EMBI Index Plus
returned -14.35%. The market's poor
showing was driven largely by
Russia's devaluation of the ruble
and loan defaults in August,
causing emerging market debt
prices to fall to unprecedented
levels. Emerging markets began
1998 on a positive note with
renewed investor confidence in
Mexico, Argentina and Venezuela
sparking a rally in the first quarter.
However, the escalating Japanese
banking crisis and Russia's brewing
fiscal problems increased yield
volatility relative to U.S. Treasuries,
leading to weaker prices in the
second quarter. This was only a
preamble to the significant liquidity
disruption to come. Banks, hedge
funds and other market participants
re-examined their portfolio
diversification and risk, and reined in
lending to emerging-market
countries. Fourth quarter returns
rebounded strongly as the Federal
Reserve Board announced a series
of rate cuts, Japan publicized a
bank bailout plan and Argentina
sold $1 billion of bonds, the first
Latin American deal since August.
However, as 1998 ended, investor
concerns over Brazil's significant
budget deficit intensified despite a
newly minted agreement with the
International Monetary Fund and
third-party lenders for a $40 billion
aid package.
(photograph of John Carlson)
An interview with John Carlson, Portfolio Manager of Fidelity Advisor
Emerging Markets Income Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. It was a tough year for emerging markets. For the 12 months ending
December 31, 1998, the fund's Class A, Class T, Class B and Class C
shares returned -21.94%, -22.07%, -22.66% and -22.47%, respectively.
The emerging market debt funds average, as tracked by Lipper Inc.,
returned -20.80% during the period, while the J.P. Morgan Emerging
Markets Bond Index Plus returned -14.35%.
Q. CAN YOU RELATE HOW THE EVENTS HIGHLIGHTED IN THE MARKET RECAP
INFLUENCED THE FUND'S RETURN?
A. Sure. In fact, we have done a great deal of analysis to answer this
question for ourselves. The fund entered the second half of 1998 in
line with the index, which was down 1.08% year-to-date through June
30. However, the overriding performance factor for the fund in 1998
was its exposure to Russia and the critical few days in August when
the country defaulted on its local currency debt and devalued the
ruble.
Q. WHAT LED TO RUSSIA TAKING SUCH UNPRECEDENTED STEPS?
A. From a credit perspective, Russia's external debt profile was not
that dissimilar to Mexico's. Russia had a low external debt load as a
percent of GDP (less than 55%) and exports (less than 160%), and a
debt-service ratio of approximately 10%, while Mexico had comparable
ratios of 40%, 120% and 20%, respectively. In 1998, the Russian
government found itself coming under pressure as a result of the
country's extended recession and plunging commodity prices. The
problems were compounded by Russia's practice of funding budget
deficits with short-term, high- yielding government bonds that sent
local interest rates skyrocketing and led to a loss of investor
confidence in late spring. Ultimately, even with ruble-denominated
interest rates of 150%, investors were unwilling to finance new debt
or rollover existing debt, and the authorities were forced to devalue
the ruble. At the same time, the government also took the further step
of defaulting on their domestic debt.
Q. HAD YOU ANTICIPATED THESE EVENTS?
A. Having traveled to Russia in June, I was troubled by the economic
environment and anticipated a ruble devaluation, but not a
local-currency debt default. Defaulting on local currency denominated
debt is considered highly unusual because a government has the option
to service the debt by printing more money. As a result, the fund was
underweighted in Russia from October 1997 though mid-summer 1998 and
never owned any Russian local debt denominated in rubles. After a
dramatic fall in Russian debt prices from the mid-70's to
approximately 28 cents on the dollar, I increased the fund's weighting
in U.S. dollar-denominated Russian debt in mid-August because I
believed prices reflected compelling valuations. However, the decision
by the Russian government to both devalue the ruble and default on
their local currency debt on August 17th caused prices to fall even
further to unprecedented levels. One Russian dollar-denominated debt
instrument was trading as low as five cents on the dollar.
Q. HOW DID YOU POSITION THE FUND IN THE AFTERMATH OF THIS SELL-OFF?
A. The last two weeks of August were characterized by investors' panic
selling, lack of liquidity and very little real news to make
investment decisions. During this period, I quickly raised cash by
selling the less liquid non-Russian assets and swapping the Soviet-era
debt for higher-credit Russian Eurobonds. I maintained the fund's
overweighted position in Russia and refused to sell into the panic. At
year-end, U.S. dollar-denominated Russian exposure accounted for 7.0%
of the fund.
Q. WHAT WERE SOME OF THE BRIGHT SPOTS FOR THE FUND IN 1998?
A. The principal way I try to add value to fund performance is by
investing in countries that are represented in the J.P. Morgan
Emerging Markets Bond Index Plus, as well as in a handful of countries
not in the index. Country fundamentals drive my decision-making, as do
individual security valuations in the market. This strategy continued
to serve the fund well even in a turbulent year. For example, Turkey,
an out-of-index country, was a relatively small investment, but the
largest source of fund outperformance relative to the index. Venezuela
and Bulgaria, countries also represented in the index, generated
positive returns due to security selection and country weighting,
respectively.
Q. JOHN, WHAT IS YOUR OUTLOOK FOR 1999?
A. Looking forward to next year, I remain cautious given the global
financial crisis, the U.S. trade imbalance and the lower estimates of
global growth. In addition, due to an uneven distribution of wealth in
almost all emerging-market countries, political and social instability
will likely rise as well. I'm focusing on countries with positive
fundamentals such as a strong trade surplus, positive domestic growth
prospects, low public sector borrowing requirements and records of
strong economic reform.
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.
(checkmark) FUND FACTS
GOAL: seeks a high level of
current income; as a
secondary objective, the fund
seeks capital appreciation
START DATE: March 10, 1994
SIZE: as of December 31,
1998, more than $75 million
MANAGER: John Carlson,
since 1995; lead manager,
Fidelity Advisor Strategic
Income Fund, since 1996;
joined Fidelity in 1995
JOHN CARLSON DISCUSSES
1998'S MAJOR MARKET THEMES:
"When I look back on 1998, two
words come to mind - deflation
and deleveraging. Deflation,
particularly in the form of
declining commodity prices, put
pressure on a number of emerging
countries that export resources
such as oil, aluminum, copper and
agricultural products. For
example, historically low oil
prices hurt countries like
Venezuela, Ecuador, Russia and
Nigeria by putting pressure on the
government's budget deficit and
reducing the U.S. dollars coming
into the economy. In a number of
emerging economies these
problems caused a general
deterioration in creditworthiness.
The most extreme example of this
was Russia, which devalued its
currency and defaulted on its
domestic ruble debt in August.
"Deleveraging also played a major
role, particularly after the Russian
crisis. Large losses by banks,
hedge funds and other market
participants dramatically reduced
investors' appetites for risk. Banks
reduced emerging-country loan
exposure, and Wall Street reduced
their capital commitments to
emerging-market businesses.
Some hedge funds also suffered
catastrophic losses, removing
them from the markets. These
factors led to enormous risk
premiums for emerging-market
debt securities in the second half of
1998.
"Liquidity improved somewhat in
the fourth quarter, aided by
interest-rate cuts by the Federal
Reserve Board and other central
banks, but yield spreads were still
significantly higher at the end of
1998 than in January of 1998."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE COUNTRIES AS OF
DECEMBER 31, 1998
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE COUNTRIES 6 MONTHS AGO
Mexico 22.9 12.7
Argentina 19.2 22.0
Brazil 15.8 15.1
Venezuela 12.5 5.2
Russia 7.0 9.9
</TABLE>
TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURITY,
INCLUDING WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT
RISKS.
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
DECEMBER 31, 1998
(BY ISSUER, EXCLUDING CASH % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
EQUIVALENTS) THESE BOND ISSUERS 6 MONTHS
AGO
United Mexican States 17.0 5.9
Argentinian Republic 12.8 17.9
Venezuelan Republic 12.5 5.2
Brazilian Federative Republic 6.1 11.4
Banco Nacional De 5.5 1.1
Desenvolvimento Economico e
Social
</TABLE>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF DECEMBER 31, 1998
Row: 1, Col: 1, Value: 16.8
Row: 1, Col: 2, Value: 67.3
Row: 1, Col: 3, Value: 11.7
Row: 1, Col: 4, Value: 4.2
Corporate bonds 16.8%
Foreign government obligations 67.3%
Other 11.7%
Short-term investments 4.2%
AS OF JUNE 30, 1998
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 11.7%
Foreign government obligations 74.3%
Other 9.2%
Short-term investments 4.8%
INVESTMENTS DECEMBER 31, 1998
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 16.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ARGENTINA - 3.2%
Compania Internacional de BB ARS 3,310,000 $ 2,286,037
Telecomunicaciones 10.375%
8/1/04 (Reg. S)
BRAZIL - 5.5%
Banco Nacional de
Desenvolvimento Economico e
Social:
14.724% 6/16/08 (f) B1 3,855,000 3,084,000
14.724% 6/16/08 (e)(f) B1 980,000 784,000
3,868,000
MALAYSIA - 2.7%
Petroliam Nasional BHD:
yankee 7.625% 10/15/26 (e) Baa3 490,000 339,815
7.125% 10/18/06 (Reg. S) Baa3 900,000 735,660
7.625% 10/15/26 (Reg. S) A2 1,210,000 839,135
1,914,610
MEXICO - 4.6%
Petroleos Mexicanos:
9.25% 3/30/18 Ba2 920,000 754,400
9.5% 9/15/27 BB 920,000 754,400
10.2613% 7/15/05 (Reg. S) (f) Ba2 1,880,000 1,748,400
3,257,200
UNITED STATES OF AMERICA - 0.8%
Samsung Electronics America,
Inc.:
9.75% 5/1/03 (e) Ba1 490,000 463,050
9.75% 5/1/03 Ba1 140,000 132,300
595,350
TOTAL NONCONVERTIBLE BONDS 11,921,197
(Cost $11,722,446)
GOVERNMENT OBLIGATIONS (G) -
67.3%
ARGENTINA - 14.9%
Argentinian Republic:
global bond:
11% 12/4/05 Ba3 2,940,000 2,923,463
11.375% 1/30/17 Ba3 1,730,000 1,727,838
11.375% 1/30/17 Ba3 290,000 289,638
GOVERNMENT OBLIGATIONS (G) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ARGENTINA - CONTINUED
Argentinian Republic: -
continued
warrants 12/3/99 (a)(h) - 2,940 $ 132,300
8.75% 7/10/02 (Reg. S) Ba3 ARS 1,230,000 1,003,388
11.75% 2/12/07 Ba3 ARS 3,520,000 2,979,386
City of Buenos Aires euro B1 ARS 1,920,000 1,479,784
10.5% 5/28/04
10,535,797
BRAZIL - 6.1%
Brazilian Federative Republic
Brady:
FLIRB L 5% 4/15/09 (Bearer) B2 630,000 326,813
(f)
IDU euro 6.75% 1/1/01 (f) B2 738,000 669,735
new money bond L:
6.1875% 4/15/09 (Bearer) (f) B2 4,050,000 2,212,313
6.1875% 4/15/09 (Reg.) (f) B2 1,990,000 1,087,038
4,295,899
BULGARIA - 5.3%
Bulgarian Republic:
Brady discount A 6.6875% B2 3,680,000 2,603,600
7/28/24 (f)
Brady FLIRB A 2.5% 7/28/12 (f) B2 1,995,000 1,137,150
3,740,750
ECUADOR - 0.4%
Ecuador Republic Brady B3 408,000 257,040
interest equalization bond
6% 12/21/04 (Reg.) (f)
GREECE - 2.2%
Greek Government Treasury Bill:
8.6% 3/26/08 A2 GRD 200,000,000 793,792
9.2% 3/21/02 A2 GRD 201,400,000 743,305
1,537,097
HUNGARY - 1.0%
Hungarian Government:
13% 7/24/03 A1 HUF 74,100,000 346,411
15% 7/24/01 A1 HUF 80,700,000 383,058
729,469
MEXICO - 17.0%
United Mexican States:
Brady par A 6.25% 12/31/19 Ba2 6,800,000 5,287,000
unit
GOVERNMENT OBLIGATIONS (G) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
MEXICO - CONTINUED
United Mexican States: -
continued
Brady par B 6.25% 12/31/19 Ba2 $ 2,100,000 $ 1,632,750
unit
Cetes:
0% 3/4/99 - MXN 8,360,000 799,243
0% 3/11/99 - MXN 3,890,000 371,602
global bond 11.5% 5/15/26 Ba2 3,690,000 3,957,525
value recovery rights 6/30/03 - 1,000 -
discount C (h)
12,048,120
PERU - 1.5%
Peruvian Republic Brady FLIRB:
3.25% 3/7/17 (f) Ba3 585,000 331,988
3.25% 3/7/17 (e)(f) Ba3 1,350,000 766,125
1,098,113
POLAND - 1.5%
Polish Republic 25.05% A2 PLN 3,620,000 1,047,840
1/18/08 (f)
RUSSIA - 4.9%
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) interest
notes:
5.9688% 12/15/15 (f) B1 4,400,000 478,500
5.9688% 12/15/15 (e)(f) Ca 457 50
Moscow City 9.5% 5/31/00 B3 6,030,000 2,231,100
(Reg.)
Russian Federation euro B3 2,520,000 768,600
12.75% 6/24/28 (Reg. S)
3,478,250
VENEZUELA - 12.5%
Venezuelan Republic:
Brady debt conversion bond B2 12,214,245 7,756,040
euro 5.9375% 12/18/07 (f)
global bond:
13.625% 8/15/18 B2 340,000 261,800
13.625% 8/15/18 B2 1,130,000 870,100
Oil recovery rights 3/31/20 - 8,955 -
(h)
8,887,940
TOTAL GOVERNMENT OBLIGATIONS 47,656,315
(Cost $48,512,069)
</TABLE>
COMMON STOCKS - 7.0%
SHARES VALUE (NOTE 1)
ARGENTINA - 1.1%
YPF Sociedad Anonima 28,700 $ 801,806
sponsored ADR representing
Class D shares
BRAZIL - 4.2%
Telebras sponsored ADR 41,100 2,987,456
PFD-Holdr
MEXICO - 1.3%
Fomento Economico Mexicano SA 34,300 913,238
de CV sponsored ADR
RUSSIA - 0.4%
AO Tatneft sponsored ADR 134,600 260,788
(Reg.) unit (a)
TOTAL COMMON STOCKS 4,963,288
(Cost $6,130,818)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOVEREIGN LOAN PARTICIPATIONS
- - 4.6%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D)
ANGOLA - 0.6%
Banco Nacional de Angola loan - $ 1,596,128 399,032
participation - Societe
Generale (a)
CAMEROON - 0.3%
Cameroon Republic (a):
loan participation - Societe - FRF 1,960,000 56,103
Generale
loan participation - Societe - DEM 1,430,000 137,455
Generale
193,558
CONGO - 0.3%
Congo Republic (a):
loan participation - Societe - 1,056,047 190,089
Generale
loan participation - Societe - FRF 841,728 27,105
Generale
loan participation - Societe - DEM 255,860 27,668
Generale
244,862
MOROCCO - 1.7%
Moroccan Kingdom loan
participation:
Series A - Merrill Lynch, - 340,000 270,300
Pierce, Fenner & Smith, Inc.
6.0625% 1/1/09 (f)
Series A - Morgan Guaranty - 1,200,000 954,000
Trust Co. 6.0625% 1/1/09 (f)
1,224,300
SOVEREIGN LOAN PARTICIPATIONS
- - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
RUSSIA - 1.7%
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:
- - BankBoston Corp. 6.7188% - $ 450,000 $ 28,125
12/15/20 (c)(f)
- - Deutsche Bank 6.7188% - 450,000 28,125
12/15/20 (c)(f)
- - Donald, Lufkin & Jenrette - 930,000 58,125
Securities Corp. 6.7188%
12/15/20 (c)(f)
- - ING Bank NV 5.9688% - 1,680,000 105,000
12/15/20 (c)(f)
- - Lehman Commercial Paper, - 170,000 10,625
Inc. 6.7188% 12/15/20 (c)(f)
- - Merrill Lynch, Pierce, - 2,370,000 148,125
Fenner & Smith, Inc. 6.7188%
12/15/20 (c)(f)
- - Morgan (J.P.) Securities, - 5,370,000 335,625
Inc. 5.9688% 12/15/20 (c)(f)
- - Paribus Capital Markets - 1,070,000 66,875
6.7188% 12/15/20 (c)(f)
- - The Chase Manhattan Bank - 6,320,000 395,000
5.9688% 12/15/20 (c)(f)
1,175,625
TOTAL SOVEREIGN LOAN 3,237,377
PARTICIPATIONS
(Cost $5,512,105)
CASH EQUIVALENTS - 4.2%
MATURITY AMOUNT
Investments in repurchase $ 2,953,548 2,952,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 4.72%,
dated 12/31/98 due 1/4/99
(Cost $2,952,000)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS - 0.1%
EXPIRATION DATE/STRIKE YIELD UNDERLYING FACE AMOUNT VALUE (NOTE 1)
SOUTH AFRICA - 0.1%
The Chase Manhattan Bank Call May 99/ $ 1,222,714 $ 33,335
Option on ZAR 8,500,000 16%
notional amount of South
African Republic 12% 2/28/05
(Cost $46,241)
TOTAL INVESTMENT IN $ 70,763,512
SECURITIES - 100%
(Cost $74,875,679)
</TABLE>
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest
Reduction Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
DEM - German deutsche mark
FRF - French franc
GRD - Greek drachma
HUF - Hungarian forint
MXN - Mexican peso
PLN - Polish zloty
ZAR - South African rand
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Principal amount is stated in United States dollars unless
otherwise noted.
(e) 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 $2,353,040 or 3.1% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(h) Quantity represents share amount.
OTHER INFORMATION
The composition of long-term debt
holdings as a percentage of total value of investments in securities,
is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 5.9% AAA, AA, A 4.7%
Baa 1.5% BBB 7.1%
Ba 33.8% BB 48.5%
B 36.8% B 12.5%
Ca, C 0.0% CCC 1.1%
For some foreign government obligations, FMR has assigned the ratings
for the sovereign credit of the issuing government. The percentage not
rated by Moody's or S&P amounted to 4.6%. FMR has determined that
unrated debt securities that are lower quality account for 4.6% of the
total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1998, the aggregate cost of investment securities for
income tax purposes was $77,304,695. Net unrealized depreciation
aggregated $6,541,183, of which $2,615,519 related to appreciated
investment securities and $9,156,702 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending December
31, 1999 approximately $4,525,000 of losses recognized during the
period November 1, 1998 to December 31, 1998.
At December 31, 1998, the fund had a capital loss carryforward of
approximately $20,267,000 all of which will expire on December 31,
2006.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
ASSETS
Investment in securities, at $ 70,763,512
value (including repurchase
agreements of $2,952,000)
(cost $74,875,679) - See
accompanying schedule
Receivable for investments 4,051,325
sold
Receivable for fund shares 124,781
sold
Interest receivable 1,718,302
TOTAL ASSETS 76,657,920
LIABILITIES
Payable to custodian bank $ 1,094
Payable for investments 248,490
purchased
Payable for fund shares 259,947
redeemed
Distributions payable 87,193
Accrued management fee 43,483
Distribution fees payable 25,027
Foreign tax payable 322,320
Other payables and accrued 97,964
expenses
TOTAL LIABILITIES 1,085,518
NET ASSETS $ 75,572,402
Net Assets consist of:
Paid in capital $ 107,558,817
Distribution in excess of net (632,109)
investment income
Accumulated undistributed net (27,235,373)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (4,118,933)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 75,572,402
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1998
CALCULATION OF MAXIMUM $7.78
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,828,544 (divided by)
363,623 shares)
Maximum offering price per $8.17
share (100/95.25 of $7.78)
CLASS T: NET ASSET VALUE and $7.77
redemption price per share
($53,643,471 (divided by)
6,904,966 shares)
Maximum offering price per $8.05
share (100/96.50 of $7.77)
CLASS B: NET ASSET VALUE and $7.80
offering price per share
($16,703,216 (divided by)
2,140,262 shares) A
CLASS C: NET ASSET VALUE and $7.79
offering price per share
($963,623 (divided by)
123,676 shares) A
INSTITUTIONAL CLASS: NET $7.74
ASSET VALUE, offering price
and redemption price per
share ($1,433,548 (divided
by) 185,251 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME $ 4,356
Dividends
Interest 11,320,235
11,324,591
Less foreign taxes withheld (196,718)
TOTAL INCOME 11,127,873
EXPENSES
Management fee $ 665,704
Transfer agent fees 293,805
Distribution fees 373,950
Accounting fees and expenses 75,433
Non-interested trustees' 385
compensation
Custodian fees and expenses 84,900
Registration fees 74,790
Audit 53,180
Legal 1,236
Miscellaneous 4,507
Total expenses before 1,627,890
reductions
Expense reductions (56,496) 1,571,394
NET INVESTMENT INCOME 9,556,479
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (24,656,314)
Foreign currency transactions (68,409) (24,724,723)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (7,310,422)
Assets and liabilities in 21,875 (7,288,547)
foreign currencies
NET GAIN (LOSS) (32,013,270)
NET INCREASE (DECREASE) IN $ (22,456,791)
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998 YEAR ENDED DECEMBER 31, 1997
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,556,479 $ 8,315,876
income
Net realized gain (loss) (24,724,723) 13,134,999
Change in net unrealized (7,288,547) (4,810,866)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (22,456,791) 16,640,009
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (8,112,285) (9,380,291)
From net investment income
From net realized gain - (14,029,285)
Return of capital (1,692,592) -
TOTAL DISTRIBUTIONS (9,804,877) (23,409,576)
Share transactions - net (12,668,733) 27,548,589
increase (decrease)
TOTAL INCREASE (DECREASE) (44,930,401) 20,779,022
IN NET ASSETS
NET ASSETS
Beginning of period 120,502,803 99,723,781
End of period (including $ 75,572,402 $ 120,502,803
under (over) distribution
of net investment income of
$(632,109) and $424,276,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.120 $ 11.720 $ 10.520
period
Income from Investment
Operations
Net investment income D .943 .953 .274
Net realized and unrealized (3.275) .891 1.574
gain (loss)
Total from investment (2.332) 1.844 1.848
operations
Less Distributions
From net investment income (.834) (.984) (.238)
From net realized gain - (1.460) (.410)
Return of capital (.174) - -
Total distributions (1.008) (2.444) (.648)
Net asset value, end of period $ 7.780 $ 11.120 $ 11.720
TOTAL RETURN B, C (21.94)% 16.52% 17.71%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,829 $ 2,313 $ 478
(000 omitted)
Ratio of expenses to average 1.40% F 1.40% F 1.40% A, F
net assets
Ratio of expenses to average 1.39% G 1.38% G 1.40% A
net assets after expense
reductions
Ratio of net investment 10.05% 7.74% 7.31% A
income to average net assets
Portfolio turnover rate 514% 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).
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.110 $ 11.710 $ 9.280 $ 9.520 $ 10.000
of period
Income from Investment
Operations
Net investment income .975 D .877 D .758 D .860 .356
Net realized and unrealized (3.319) .961 2.832 (.323) (.073)
gain (loss)
Total from investment (2.344) 1.838 3.590 .537 .283
operations
Less Distributions
From net investment income (.824) (.978) (.750) (.777) (.503)
From net realized gain - (1.460) (.410) - (.260)
Return of capital (.172) - - - -
Total distributions (.996) (2.438) (1.160) (.777) (.763)
Net asset value, end of period $ 7.770 $ 11.110 $ 11.710 $ 9.280 $ 9.520
TOTAL RETURN B, C (22.07)% 16.47% 40.41% 6.99% 2.47%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 53,643 $ 93,228 $ 78,861 $ 36,205 $ 30,029
(000 omitted)
Ratio of expenses to average 1.50% 1.47% 1.49% 1.50% F 1.50% A, F
net assets
Ratio of expenses to average 1.48% G 1.45% G 1.48% G 1.50% 1.50% A
net assets after expense
reductions
Ratio of net investment 9.96% 7.08% 7.23% 9.32% 6.60% A
income to average net assets
Portfolio turnover rate 514% 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 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
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.160 $ 11.750 $ 9.300 $ 9.520 $ 9.700
of period
Income from Investment
Operations
Net investment income .907 D .806 D .686 D .835 .167
Net realized and unrealized (3.334) .956 2.853 (.342) .227
gain (loss)
Total from investment (2.427) 1.762 3.539 .493 .394
operations
Less Distributions
From net investment income (.772) (.892) (.679) (.713) (.314)
From net realized gain - (1.460) (.410) - (.260)
Return of capital (.161) - - - -
Total distributions (.933) (2.352) (1.089) (.713) (.574)
Net asset value, end of period $ 7.800 $ 11.160 $ 11.750 $ 9.300 $ 9.520
TOTAL RETURN B, C (22.66)% 15.70% 39.61% 6.38% 3.67%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 16,703 $ 23,576 $ 17,746 $ 9,486 $ 5,034
(000 omitted)
Ratio of expenses to average 2.15% F 2.15% 2.15% F 2.25% F 2.25% A, F
net assets
Ratio of expenses to average 2.13% G 2.13% G 2.15% 2.25% 2.25% A
net assets after expense
reductions
Ratio of net investment 9.36% 6.48% 6.56% 8.48% 5.86% A
income to average net assets
Portfolio turnover rate 514% 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).
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED DECEMBER 31,
1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.110 $ 12.190
period
Income from Investment
Operations
Net investment income D .792 .154
Net realized and unrealized (3.191) .322
gain (loss)
Total from investment (2.399) .476
operations
Less Distributions
From net investment income (.762) (.286)
From net realized gain - (1.270)
Return of capital (.159) -
Total distributions (.921) (1.556)
Net asset value, end of period $ 7.790 $ 11.110
TOTAL RETURN B, C (22.47)% 4.16%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 964 $ 66
(000 omitted)
Ratio of expenses to average 2.25% F 2.25% A, F
net assets
Ratio of expenses to average 2.23% G 2.25% A
net assets after expense
reductions
Ratio of net investment 9.30% 9.04% A
income to average net assets
Portfolio turnover rate 514% 660%
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).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.060 $ 11.650 $ 9.280 $ 8.400
period
Income from Investment
Operations
Net investment income .931 D .860 D .786 D .393
Net realized and unrealized (3.229) 1.008 2.779 .876
gain (loss)
Total from investment (2.298) 1.868 3.565 1.269
operations
Less Distributions
From net investment income (.846) (.998) (.785) (.389)
From net realized gain - (1.460) (.410) -
Return of capital (.176) - - -
Total distributions (1.022) (2.458) (1.195) (.389)
Net asset value, end of period $ 7.740 $ 11.060 $ 11.650 $ 9.280
TOTAL RETURN B, C (21.75)% 16.84% 40.21% 15.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,434 $ 1,320 $ 2,639 $ 201
(000 omitted)
Ratio of expenses to average 1.25% F 1.25% F 1.25% F 1.25% A, F
net assets
Ratio of expenses to average 1.24% G 1.23% G 1.25% 1.25% A
net assets after expense
reductions
Ratio of net investment 10.02% 6.85% 7.46% 9.09% A
income to average net assets
Portfolio turnover rate 514% 660% 410% 305% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D 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 December 31, 1998
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. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. 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 and settlement date 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. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
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.
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, net
operating losses, capital loss carryforwards and losses deferred due
to wash sales and excise tax regulations.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
For the period ended December 31, 1998, the fund's distributions
exceeded the aggregate amount of taxable income and net realized gains
resulting in a return of capital. This was due to certain foreign
currency losses which decreased taxable income available for
distribution after certain distributions had been made. (The tax
treatment of distributions for the 1998 calendar year will be reported
to shareholders prior to February 1, 1999.)
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 Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements 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.
OPTIONS. The fund may use options to manage its exposure to the bond
markets and to fluctuations in 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
2. OPERATING POLICIES - CONTINUED
OPTIONS - CONTINUED
the fund's exposure to the underlying instrument, or hedge other fund
investments. The underlying face amount at value of any open options
at period end is shown in the schedule of investments under the
caption "Purchased Options". This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise
from changes in the value of the underlying instruments, if there is
an illiquid secondary market for the contracts, or if the
counterparties do not perform under the contracts' terms. Gains and
losses are realized upon the expiration or closing of the options.
Realized gains (losses) on purchased options are included in realized
gains (losses) on investment securities.
Exchange-traded options are valued using the last sale price or, in
the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $3,237,377 or 4.3% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $428,732,060 and $431,021,943, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEES - CONTINUED
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 annual rate of .69% of average net assets .
SUB-ADVISER FEE. FMR, on behalf of the funds, 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 3,810 $ 184
CLASS T 182,151 23,840
CLASS B 183,603 132,853
CLASS C 4,386 4,322
$ 373,950 $ 161,199
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 $ 2,476
CLASS T 32,484
CLASS B 14,214
CLASS C 308
INSTITUTIONAL CLASS 1,076
$ 50,558
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 on 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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 26,332 $ 8,219
CLASS T 61,537 20,587
CLASS B 71,458 71,458 *
CLASS C 2,699 2,699 *
$ 162,026 $ 102,963
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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.
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 $ 9,971 .39
CLASS T 211,795 .29
CLASS B 66,377 .33
CLASS C 1,841 .42
INSTITUTIONAL CLASS 3,821 .37
$ 293,805
ACCOUNTING FEES. Fidelity Service Company 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 EXPENSE LIMITATIONS REIMBURSEMENT
CLASS A 1.40% $ 8,227
CLASS B 2.15% 12,168
CLASS C 2.25% 11,410
INSTITUTIONAL CLASS 1.25% 10,783
$ 42,588
FMR has also directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $605 under this arrangement.
5. EXPENSE REDUCTIONS - CONTINUED
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 $13,303 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:
YEARS ENDED DECEMBER 31,
1998 1997 A
FROM NET INVESTMENT INCOME
Class A $ 219,978 $ 119,401
Class T 6,143,721 7,364,838
Class B 1,620,830 1,641,148
Class C 37,441 1,052
Institutional Class 90,315 253,852
Total $ 8,112,285 $ 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
RETURN OF CAPITAL
Class A $ 45,897 $ -
Class T 1,281,860 -
Class B 338,179 -
Class C 7,812 -
Institutional Class 18,844 -
Total $ 1,692,592 $ -
Total $ 9,804,877 $ 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
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 A 1998 1997 A
CLASS A Shares sold 235,098 157,759 $ 2,083,069 $ 1,980,163
Reinvestment of
distributions 24,274 27,924 221,948 317,016
Shares redeemed (103,745) (18,479) (983,680) (229,598)
Net increase (decrease) 155,627 167,204 $ 1,321,337 $ 2,067,581
CLASS T Shares sold 2,933,653 5,560,853 $ 27,650,341 $ 68,604,516
Reinvestment of
distributions 698,169 1,422,242 6,462,132 16,356,926
Shares redeemed (5,118,827) (5,324,070) (49,719,962) (65,213,725)
Net increase (decrease) (1,487,005) 1,659,025 $ (15,607,489) $ 19,747,717
CLASS B Shares sold 816,033 741,442 $ 7,761,777 $ 9,189,867
Reinvestment of
distributions 175,037 323,757 1,605,746 3,726,061
Shares redeemed (964,234) (462,457) (9,294,273) (5,697,389)
Net increase (decrease) 26,836 602,742 $ 73,250 $ 7,218,539
CLASS C Shares sold 170,399 5,254 $ 1,580,351 $ 65,143
Reinvestment of
distributions 4,144 692 34,839 7,663
Shares redeemed (56,813) - (482,761) -
Net increase (decrease) 117,730 5,946 $ 1,132,429 $ 72,806
INSTITUTIONAL CLASS
Shares 330,391 670,672 $ 2,916,407 $ 8,055,126
sold
Reinvestment of
distributions 10,655 36,986 96,223 437,820
Shares redeemed (275,152) (814,803) (2,600,890) (10,051,000)
Net increase (decrease) 65,894 (107,145) $ 411,740 $ (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 $ 6,945
CLASS T 31,669
CLASS B 14,450
CLASS C 11,112
INSTITUTIONAL CLASS 10,614
$ 74,790
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series VIII and the Shareholders
of Fidelity Advisor Emerging Markets Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Emerging Markets Income Fund (a fund of Fidelity
Advisor Series VIII) at December 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Emerging Markets Income Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 17, 1999
TAX INFORMATION
The percentage of the dividends distributed during the fiscal year for
the following classes representing income derived from sources within,
and taxes paid to, foreign countries or possessions of the United
States:
Income Foreign Tax credit
Percent Percent
Class A 100% 0%
Class T 100% 0%
Class B 100% 0%
Class C 100% 0%
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
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
Matthew N. Karstetter, Deputy 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 Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuant SM Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement
Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
EMI-ANN-0299 70361
1.540210.101
(Fidelity logo graphic)(registered trademark)
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
EMERGING MARKETS INCOME
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
DECEMBER 31, 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 18 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 27 Notes to financial statements.
REPORT OF INDEPENDENT 39 The auditors' opinion.
ACCOUNTANTS
TAX INFORMATION 40
OF SPECIAL NOTE 41
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
(recycle logo) This report is printed on recycled paper using
soy-based inks.
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:
Resurgent stock market performance in the fourth quarter helped the
Dow Jones Industrial Average post a double-digit return for the fourth
year in a row - a first in the Dow's 100-plus year history. Three
interest-rate cuts made late in the year by the Federal Reserve Board
helped spark the equity rally. Meanwhile, while the majority of bonds
posted positive performance, most bond returns for 1998 trailed their
gains from 1997.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -21.75% 40.70%
INCOME - INST CL
JP EMBI Plus -14.35% 54.88%
Emerging Markets Debt Funds -20.80% n/a
Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, 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 value-weighted index of U.S. dollar and other external
currency-denominated Brady bonds, loans, Eurobonds, and local
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,
Inc. The past one year average represents a peer group of 45 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 DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1998
FIDELITY ADV EMERGING MARKETS -21.75% 7.35%
INCOME - INST CL
JP EMBI Plus -14.35% 9.51%
Emerging Markets Debt Funds -20.80% n/a
Average
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 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
1998/07/31 17898.02 18011.22
1998/08/31 11585.73 12835.61
1998/09/30 12607.92 14090.76
1998/10/31 13479.33 15002.37
1998/11/30 14507.78 15885.48
1998/12/31 14070.24 15488.40
IMATRL PRASUN SHR__CHT 19981231 19990114 114047 R00000000000061
$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 December 31, 1998, the value of the investment would
have grown to $14,070 - a 40.70% 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
$15,488 - a 54.88% increase.
(checkmark) 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.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL CLASS
SHARES) TO DECEMBER 31,
1998 1997 1996 1995
Dividend returns 8.27% A 8.54% 9.89% 5.04%
Capital returns -30.02% 8.30% 30.32% 10.48%
Total returns -21.75% 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 DECEMBER 31, 1998 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 6.72(cents) 51.00(cents) 102.23(cents)
Annualized dividend rate 10.25% 12.35% 10.65%
30-day annualized yield 10.95% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $7.72 over the past one month, $8.19 over the past six months, and
$9.60 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AND DO NOT REFLECT CURRENCY RELATED LOSSES. AS A
RESULT OF CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 17.6(CENTS) PER
SHARE PAID DURING 1998 WERE A NON-TAXABLE RETURN OF CAPITAL. THE EXACT
NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN WILL
DEPEND ON YOUR SHARE ACTIVITY AND WAS REPORTED TO YOU IN JANUARY 1999.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Escalating volatility characterized
emerging markets during the
12-month period ended
December 31, 1998. For the year,
the JP Morgan EMBI Index Plus
returned -14.35%. The market's poor
showing was driven largely by
Russia's devaluation of the ruble
and loan defaults in August,
causing emerging-market debt
prices to fall to unprecedented
levels. Emerging markets began
1998 on a positive note with
renewed investor confidence in
Mexico, Argentina and Venezuela
sparking a rally in the first quarter.
However, the escalating Japanese
banking crisis and Russia's brewing
fiscal problems increased yield
volatility relative to U.S. Treasuries,
leading to weaker prices in the
second quarter. This was only a
preamble to the significant liquidity
disruption to come. Banks, hedge
funds and other market participants
re-examined their portfolio
diversification and risk, and reined in
lending to emerging-market
countries. Fourth quarter returns
rebounded strongly as the Federal
Reserve Board announced a series
of rate cuts, Japan publicized a
bank bailout plan and Argentina
sold $1 billion of bonds, the first
Latin American deal since August.
However, as 1998 ended, investor
concerns over Brazil's significant
budget deficit intensified despite a
newly minted agreement with the
International Monetary Fund and
third-party lenders for a $40 billion
aid package.
(photograph of John Carlson)
An interview with John Carlson, Portfolio Manager of Fidelity Advisor
Emerging Markets Income Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. It was a tough year for emerging markets. For the 12 months ending
December 31, 1998, the fund's Institutional Class shares returned
- -21.75%. The emerging market debt funds average as tracked by Lipper
Inc. returned -20.80% during the period, while the J.P. Morgan
Emerging Markets Bond Index Plus returned -14.35%.
Q. CAN YOU RELATE HOW THE EVENTS HIGHLIGHTED IN THE MARKET RECAP
INFLUENCED THE FUND'S RETURN?
A. Sure. In fact, we have done a great deal of analysis to answer this
question for ourselves. The fund entered the second half of 1998 in
line with the index, which was down 1.08% year-to-date through June
30. However, the overriding performance factor for the fund in 1998
was its exposure to Russia and the critical few days in August when
the country defaulted on its local currency debt and devalued the
ruble.
Q. WHAT LED TO RUSSIA TAKING SUCH UNPRECEDENTED STEPS?
A. From a credit perspective, Russia's external debt profile was not
that dissimilar to Mexico's. Russia had a low external debt load as a
percent of GDP (less than 55%) and exports (less than 160%), and a
debt-service ratio of approximately 10%, while Mexico had comparable
ratios of 40%, 120% and 20%, respectively. In 1998, the Russian
government found itself coming under pressure as a result of the
country's extended recession and plunging commodity prices. The
problems were compounded by Russia's practice of funding budget
deficits with short-term, high- yielding government bonds that sent
local interest rates skyrocketing and led to a loss of investor
confidence in late spring. Ultimately, even with ruble-denominated
interest rates of 150%, investors were unwilling to finance new debt
or rollover existing debt, and the authorities were forced to devalue
the ruble. At the same time, the government also took the further step
of defaulting on their domestic debt.
Q. HAD YOU ANTICIPATED THESE EVENTS?
A. Having traveled to Russia in June, I was troubled by the economic
environment and anticipated a ruble devaluation, but not a
local-currency debt default. Defaulting on local currency denominated
debt is considered highly unusual because a government has the option
to service the debt by printing more money. As a result, the fund was
underweighted in Russia from October 1997 though mid-summer 1998 and
never owned any Russian local debt denominated in rubles. After a
dramatic fall in Russian debt prices from the mid-70's to
approximately 28 cents on the dollar, I increased the fund's weighting
in U.S. dollar-denominated Russian debt in mid-August because I
believed prices reflected compelling valuations. However, the decision
by the Russian government to both devalue the ruble and default on
their local currency debt on August 17th caused prices to fall even
further to unprecedented levels. One Russian dollar-denominated debt
instrument was trading as low as five cents on the dollar.
Q. HOW DID YOU POSITION THE FUND IN THE AFTERMATH OF THIS SELL-OFF?
A. The last two weeks of August were characterized by investors' panic
selling, lack of liquidity and very little real news to make
investment decisions. During this period, I quickly raised cash by
selling the less liquid non-Russian assets and swapping the Soviet-era
debt for higher-credit Russian Eurobonds. I maintained the fund's
overweighted position in Russia and refused to sell into the panic. At
year-end, U.S. dollar-denominated Russian exposure accounted for 7.0%
of the fund.
Q. WHAT WERE SOME OF THE BRIGHT SPOTS FOR THE FUND IN 1998?
A. The principal way I try to add value to fund performance is by
investing in countries that are represented in the J.P. Morgan
Emerging Markets Bond Index Plus, as well as in a handful of countries
not in the index. Country fundamentals drive my decision-making, as do
individual security valuations in the market. This strategy continued
to serve the fund well even in a turbulent year. For example, Turkey,
an out-of-index country, was a relatively small investment, but the
largest source of fund outperformance relative to the index. Venezuela
and Bulgaria, countries also represented in the index, generated
positive returns due to security selection and country weighting,
respectively.
Q. JOHN, WHAT IS YOUR OUTLOOK FOR 1999?
A. Looking forward to next year, I remain cautious given the global
financial crisis, the U.S. trade imbalance and the lower estimates of
global growth. In addition, due to an uneven distribution of wealth in
almost all emerging-market countries, political and social instability
will likely rise as well. I'm focusing on countries with positive
fundamentals such as a strong trade surplus, positive domestic growth
prospects, low public sector borrowing requirements and records of
strong economic reform.
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.
(checkmark) FUND FACTS
GOAL: seeks a high level of
current income; as a
secondary objective, the fund
seeks capital appreciation
START DATE: March 10, 1994
SIZE: as of December 31,
1998, more than $75 million
MANAGER: John Carlson,
since 1995; lead manager,
Fidelity Advisor Strategic
Income Fund, since 1996;
joined Fidelity in 1995
JOHN CARLSON DISCUSSES
1998'S MAJOR MARKET THEMES:
"When I look back on 1998, two
words come to mind - deflation
and deleveraging. Deflation,
particularly in the form of
declining commodity prices, put
pressure on a number of emerging
countries that export resources
such as oil, aluminum, copper and
agricultural products. For
example, historically low oil
prices hurt countries like
Venezuela, Ecuador, Russia and
Nigeria by putting pressure on the
government's budget deficit and
reducing the U.S. dollars coming
into the economy. In a number of
emerging economies these
problems caused a general
deterioration in creditworthiness.
The most extreme example of this
was Russia, which devalued its
currency and defaulted on its
domestic ruble debt in August.
"Deleveraging also played a major
role, particularly after the Russian
crisis. Large losses by banks,
hedge funds and other market
participants dramatically reduced
investors' appetites for risk. Banks
reduced emerging-country loan
exposure, and Wall Street reduced
their capital commitments to
emerging-market businesses.
Some hedge funds also suffered
catastrophic losses, removing
them from the markets. These
factors led to enormous risk
premiums for emerging-market
debt securities in the second half of
1998.
"Liquidity improved somewhat in
the fourth quarter, aided by
interest-rate cuts by the Federal
Reserve Board and other central
banks, but yield spreads were still
significantly higher at the end of
1998 than in January of 1998."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE COUNTRIES AS OF
DECEMBER 31, 1998
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE COUNTRIES 6 MONTHS AGO
Mexico 22.9 12.7
Argentina 19.2 22.0
Brazil 15.8 15.1
Venezuela 12.5 5.2
Russia 7.0 9.9
</TABLE>
TOP COUNTRIES ARE BASED UPON LOCATION OF ISSUER OF EACH SECURITY,
INCLUDING WHERE THE FUND IS EXPOSED TO POTENTIAL POLITICAL AND CREDIT
RISKS.
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
DECEMBER 31, 1998
(BY ISSUER, EXCLUDING CASH % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
EQUIVALENTS) THESE BOND ISSUERS 6 MONTHS
AGO
United Mexican States 17.0 5.9
Argentinian Republic 12.8 17.9
Venezuelan Republic 12.5 5.2
Brazilian Federative Republic 6.1 11.4
Banco Nacional De 5.5 1.1
Desenvolvimento Economico e
Social
</TABLE>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF DECEMBER 31, 1998
Row: 1, Col: 1, Value: 16.8
Row: 1, Col: 2, Value: 67.3
Row: 1, Col: 3, Value: 11.7
Row: 1, Col: 4, Value: 4.2
Corporate bonds 16.8%
Foreign government obligations 67.3%
Other 11.7%
Short-term investments 4.2%
AS OF JUNE 30, 1998
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 11.7%
Foreign government obligations 74.3%
Other 9.2%
Short-term investments 4.8%
INVESTMENTS DECEMBER 31, 1998
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 16.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ARGENTINA - 3.2%
Compania Internacional de BB ARS 3,310,000 $ 2,286,037
Telecomunicaciones 10.375%
8/1/04 (Reg. S)
BRAZIL - 5.5%
Banco Nacional de
Desenvolvimento Economico e
Social:
14.724% 6/16/08 (f) B1 3,855,000 3,084,000
14.724% 6/16/08 (e)(f) B1 980,000 784,000
3,868,000
MALAYSIA - 2.7%
Petroliam Nasional BHD:
yankee 7.625% 10/15/26 (e) Baa3 490,000 339,815
7.125% 10/18/06 (Reg. S) Baa3 900,000 735,660
7.625% 10/15/26 (Reg. S) A2 1,210,000 839,135
1,914,610
MEXICO - 4.6%
Petroleos Mexicanos:
9.25% 3/30/18 Ba2 920,000 754,400
9.5% 9/15/27 BB 920,000 754,400
10.2613% 7/15/05 (Reg. S) (f) Ba2 1,880,000 1,748,400
3,257,200
UNITED STATES OF AMERICA - 0.8%
Samsung Electronics America,
Inc.:
9.75% 5/1/03 (e) Ba1 490,000 463,050
9.75% 5/1/03 Ba1 140,000 132,300
595,350
TOTAL NONCONVERTIBLE BONDS 11,921,197
(Cost $11,722,446)
GOVERNMENT OBLIGATIONS (G) -
67.3%
ARGENTINA - 14.9%
Argentinian Republic:
global bond:
11% 12/4/05 Ba3 2,940,000 2,923,463
11.375% 1/30/17 Ba3 1,730,000 1,727,838
11.375% 1/30/17 Ba3 290,000 289,638
GOVERNMENT OBLIGATIONS (G) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
ARGENTINA - CONTINUED
Argentinian Republic: -
continued
warrants 12/3/99 (a)(h) - 2,940 $ 132,300
8.75% 7/10/02 (Reg. S) Ba3 ARS 1,230,000 1,003,388
11.75% 2/12/07 Ba3 ARS 3,520,000 2,979,386
City of Buenos Aires euro B1 ARS 1,920,000 1,479,784
10.5% 5/28/04
10,535,797
BRAZIL - 6.1%
Brazilian Federative Republic
Brady:
FLIRB L 5% 4/15/09 (Bearer) B2 630,000 326,813
(f)
IDU euro 6.75% 1/1/01 (f) B2 738,000 669,735
new money bond L:
6.1875% 4/15/09 (Bearer) (f) B2 4,050,000 2,212,313
6.1875% 4/15/09 (Reg.) (f) B2 1,990,000 1,087,038
4,295,899
BULGARIA - 5.3%
Bulgarian Republic:
Brady discount A 6.6875% B2 3,680,000 2,603,600
7/28/24 (f)
Brady FLIRB A 2.5% 7/28/12 (f) B2 1,995,000 1,137,150
3,740,750
ECUADOR - 0.4%
Ecuador Republic Brady B3 408,000 257,040
interest equalization bond
6% 12/21/04 (Reg.) (f)
GREECE - 2.2%
Greek Government Treasury Bill:
8.6% 3/26/08 A2 GRD 200,000,000 793,792
9.2% 3/21/02 A2 GRD 201,400,000 743,305
1,537,097
HUNGARY - 1.0%
Hungarian Government:
13% 7/24/03 A1 HUF 74,100,000 346,411
15% 7/24/01 A1 HUF 80,700,000 383,058
729,469
MEXICO - 17.0%
United Mexican States:
Brady par A 6.25% 12/31/19 Ba2 6,800,000 5,287,000
unit
GOVERNMENT OBLIGATIONS (G) -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
MEXICO - CONTINUED
United Mexican States: -
continued
Brady par B 6.25% 12/31/19 Ba2 $ 2,100,000 $ 1,632,750
unit
Cetes:
0% 3/4/99 - MXN 8,360,000 799,243
0% 3/11/99 - MXN 3,890,000 371,602
global bond 11.5% 5/15/26 Ba2 3,690,000 3,957,525
value recovery rights 6/30/03 - 1,000 -
discount C (h)
12,048,120
PERU - 1.5%
Peruvian Republic Brady FLIRB:
3.25% 3/7/17 (f) Ba3 585,000 331,988
3.25% 3/7/17 (e)(f) Ba3 1,350,000 766,125
1,098,113
POLAND - 1.5%
Polish Republic 25.05% A2 PLN 3,620,000 1,047,840
1/18/08 (f)
RUSSIA - 4.9%
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) interest
notes:
5.9688% 12/15/15 (f) B1 4,400,000 478,500
5.9688% 12/15/15 (e)(f) Ca 457 50
Moscow City 9.5% 5/31/00 B3 6,030,000 2,231,100
(Reg.)
Russian Federation euro B3 2,520,000 768,600
12.75% 6/24/28 (Reg. S)
3,478,250
VENEZUELA - 12.5%
Venezuelan Republic:
Brady debt conversion bond B2 12,214,245 7,756,040
euro 5.9375% 12/18/07 (f)
global bond:
13.625% 8/15/18 B2 340,000 261,800
13.625% 8/15/18 B2 1,130,000 870,100
Oil recovery rights 3/31/20 - 8,955 -
(h)
8,887,940
TOTAL GOVERNMENT OBLIGATIONS 47,656,315
(Cost $48,512,069)
</TABLE>
COMMON STOCKS - 7.0%
SHARES VALUE (NOTE 1)
ARGENTINA - 1.1%
YPF Sociedad Anonima 28,700 $ 801,806
sponsored ADR representing
Class D shares
BRAZIL - 4.2%
Telebras sponsored ADR 41,100 2,987,456
PFD-Holdr
MEXICO - 1.3%
Fomento Economico Mexicano SA 34,300 913,238
de CV sponsored ADR
RUSSIA - 0.4%
AO Tatneft sponsored ADR 134,600 260,788
(Reg.) unit (a)
TOTAL COMMON STOCKS 4,963,288
(Cost $6,130,818)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOVEREIGN LOAN PARTICIPATIONS
- - 4.6%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D)
ANGOLA - 0.6%
Banco Nacional de Angola loan - $ 1,596,128 399,032
participation - Societe
Generale (a)
CAMEROON - 0.3%
Cameroon Republic (a):
loan participation - Societe - FRF 1,960,000 56,103
Generale
loan participation - Societe - DEM 1,430,000 137,455
Generale
193,558
CONGO - 0.3%
Congo Republic (a):
loan participation - Societe - 1,056,047 190,089
Generale
loan participation - Societe - FRF 841,728 27,105
Generale
loan participation - Societe - DEM 255,860 27,668
Generale
244,862
MOROCCO - 1.7%
Moroccan Kingdom loan
participation:
Series A - Merrill Lynch, - 340,000 270,300
Pierce, Fenner & Smith, Inc.
6.0625% 1/1/09 (f)
Series A - Morgan Guaranty - 1,200,000 954,000
Trust Co. 6.0625% 1/1/09 (f)
1,224,300
SOVEREIGN LOAN PARTICIPATIONS
- - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) VALUE (NOTE 1)
RUSSIA - 1.7%
Bank for Foreign Economic
Affairs of Russia
(Vnesheconombank) loan
participation restructured
under 1997 Agreement:
- - BankBoston Corp. 6.7188% - $ 450,000 $ 28,125
12/15/20 (c)(f)
- - Deutsche Bank 6.7188% - 450,000 28,125
12/15/20 (c)(f)
- - Donald, Lufkin & Jenrette - 930,000 58,125
Securities Corp. 6.7188%
12/15/20 (c)(f)
- - ING Bank NV 5.9688% - 1,680,000 105,000
12/15/20 (c)(f)
- - Lehman Commercial Paper, - 170,000 10,625
Inc. 6.7188% 12/15/20 (c)(f)
- - Merrill Lynch, Pierce, - 2,370,000 148,125
Fenner & Smith, Inc. 6.7188%
12/15/20 (c)(f)
- - Morgan (J.P.) Securities, - 5,370,000 335,625
Inc. 5.9688% 12/15/20 (c)(f)
- - Paribus Capital Markets - 1,070,000 66,875
6.7188% 12/15/20 (c)(f)
- - The Chase Manhattan Bank - 6,320,000 395,000
5.9688% 12/15/20 (c)(f)
1,175,625
TOTAL SOVEREIGN LOAN 3,237,377
PARTICIPATIONS
(Cost $5,512,105)
CASH EQUIVALENTS - 4.2%
MATURITY AMOUNT
Investments in repurchase $ 2,953,548 2,952,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 4.72%,
dated 12/31/98 due 1/4/99
(Cost $2,952,000)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS - 0.1%
EXPIRATION DATE/STRIKE YIELD UNDERLYING FACE AMOUNT VALUE (NOTE 1)
SOUTH AFRICA - 0.1%
The Chase Manhattan Bank Call May 99/ $ 1,222,714 $ 33,335
Option on ZAR 8,500,000 16%
notional amount of South
African Republic 12% 2/28/05
(Cost $46,241)
TOTAL INVESTMENT IN $ 70,763,512
SECURITIES - 100%
(Cost $74,875,679)
</TABLE>
SECURITY TYPE ABBREVIATIONS
FLIRB - Front Loaded Interest
Reduction Bonds
CURRENCY ABBREVIATIONS
ARS - Argentine peso
DEM - German deutsche mark
FRF - French franc
GRD - Greek drachma
HUF - Hungarian forint
MXN - Mexican peso
PLN - Polish zloty
ZAR - South African rand
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Principal amount is stated in United States dollars unless
otherwise noted.
(e) 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 $2,353,040 or 3.1% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(h) Quantity represents share amount.
OTHER INFORMATION
The composition of long-term debt
holdings as a percentage of total value of investments in securities,
is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 5.9% AAA, AA, A 4.7%
Baa 1.5% BBB 7.1%
Ba 33.8% BB 48.5%
B 36.8% B 12.5%
Ca, C 0.0% CCC 1.1%
For some foreign government obligations, FMR has assigned the ratings
for the sovereign credit of the issuing government. The percentage not
rated by Moody's or S&P amounted to 4.6%. FMR has determined that
unrated debt securities that are lower quality account for 4.6% of the
total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1998, the aggregate cost of investment securities for
income tax purposes was $77,304,695. Net unrealized depreciation
aggregated $6,541,183, of which $2,615,519 related to appreciated
investment securities and $9,156,702 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending December
31, 1999 approximately $4,525,000 of losses recognized during the
period November 1, 1998 to December 31, 1998.
At December 31, 1998, the fund had a capital loss carryforward of
approximately $20,267,000 all of which will expire on December 31,
2006.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
ASSETS
Investment in securities, at $ 70,763,512
value (including repurchase
agreements of $2,952,000)
(cost $74,875,679) - See
accompanying schedule
Receivable for investments 4,051,325
sold
Receivable for fund shares 124,781
sold
Interest receivable 1,718,302
TOTAL ASSETS 76,657,920
LIABILITIES
Payable to custodian bank $ 1,094
Payable for investments 248,490
purchased
Payable for fund shares 259,947
redeemed
Distributions payable 87,193
Accrued management fee 43,483
Distribution fees payable 25,027
Foreign tax payable 322,320
Other payables and accrued 97,964
expenses
TOTAL LIABILITIES 1,085,518
NET ASSETS $ 75,572,402
Net Assets consist of:
Paid in capital $ 107,558,817
Distribution in excess of net (632,109)
investment income
Accumulated undistributed net (27,235,373)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (4,118,933)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 75,572,402
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 1998
CALCULATION OF MAXIMUM $7.78
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,828,544 (divided by)
363,623 shares)
Maximum offering price per $8.17
share (100/95.25 of $7.78)
CLASS T: NET ASSET VALUE and $7.77
redemption price per share
($53,643,471 (divided by)
6,904,966 shares)
Maximum offering price per $8.05
share (100/96.50 of $7.77)
CLASS B: NET ASSET VALUE and $7.80
offering price per share
($16,703,216 (divided by)
2,140,262 shares) A
CLASS C: NET ASSET VALUE and $7.79
offering price per share
($963,623 (divided by)
123,676 shares) A
INSTITUTIONAL CLASS: NET $7.74
ASSET VALUE, offering price
and redemption price per
share ($1,433,548 (divided
by) 185,251 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME $ 4,356
Dividends
Interest 11,320,235
11,324,591
Less foreign taxes withheld (196,718)
TOTAL INCOME 11,127,873
EXPENSES
Management fee $ 665,704
Transfer agent fees 293,805
Distribution fees 373,950
Accounting fees and expenses 75,433
Non-interested trustees' 385
compensation
Custodian fees and expenses 84,900
Registration fees 74,790
Audit 53,180
Legal 1,236
Miscellaneous 4,507
Total expenses before 1,627,890
reductions
Expense reductions (56,496) 1,571,394
NET INVESTMENT INCOME 9,556,479
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (24,656,314)
Foreign currency transactions (68,409) (24,724,723)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (7,310,422)
Assets and liabilities in 21,875 (7,288,547)
foreign currencies
NET GAIN (LOSS) (32,013,270)
NET INCREASE (DECREASE) IN $ (22,456,791)
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998 YEAR ENDED DECEMBER 31, 1997
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,556,479 $ 8,315,876
income
Net realized gain (loss) (24,724,723) 13,134,999
Change in net unrealized (7,288,547) (4,810,866)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (22,456,791) 16,640,009
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (8,112,285) (9,380,291)
From net investment income
From net realized gain - (14,029,285)
Return of capital (1,692,592) -
TOTAL DISTRIBUTIONS (9,804,877) (23,409,576)
Share transactions - net (12,668,733) 27,548,589
increase (decrease)
TOTAL INCREASE (DECREASE) (44,930,401) 20,779,022
IN NET ASSETS
NET ASSETS
Beginning of period 120,502,803 99,723,781
End of period (including $ 75,572,402 $ 120,502,803
under (over) distribution
of net investment income of
$(632,109) and $424,276,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.120 $ 11.720 $ 10.520
period
Income from Investment
Operations
Net investment income D .943 .953 .274
Net realized and unrealized (3.275) .891 1.574
gain (loss)
Total from investment (2.332) 1.844 1.848
operations
Less Distributions
From net investment income (.834) (.984) (.238)
From net realized gain - (1.460) (.410)
Return of capital (.174) - -
Total distributions (1.008) (2.444) (.648)
Net asset value, end of period $ 7.780 $ 11.120 $ 11.720
TOTAL RETURN B, C (21.94)% 16.52% 17.71%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,829 $ 2,313 $ 478
(000 omitted)
Ratio of expenses to average 1.40% F 1.40% F 1.40% A, F
net assets
Ratio of expenses to average 1.39% G 1.38% G 1.40% A
net assets after expense
reductions
Ratio of net investment 10.05% 7.74% 7.31% A
income to average net assets
Portfolio turnover rate 514% 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).
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.110 $ 11.710 $ 9.280 $ 9.520 $ 10.000
of period
Income from Investment
Operations
Net investment income .975 D .877 D .758 D .860 .356
Net realized and unrealized (3.319) .961 2.832 (.323) (.073)
gain (loss)
Total from investment (2.344) 1.838 3.590 .537 .283
operations
Less Distributions
From net investment income (.824) (.978) (.750) (.777) (.503)
From net realized gain - (1.460) (.410) - (.260)
Return of capital (.172) - - - -
Total distributions (.996) (2.438) (1.160) (.777) (.763)
Net asset value, end of period $ 7.770 $ 11.110 $ 11.710 $ 9.280 $ 9.520
TOTAL RETURN B, C (22.07)% 16.47% 40.41% 6.99% 2.47%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 53,643 $ 93,228 $ 78,861 $ 36,205 $ 30,029
(000 omitted)
Ratio of expenses to average 1.50% 1.47% 1.49% 1.50% F 1.50% A, F
net assets
Ratio of expenses to average 1.48% G 1.45% G 1.48% G 1.50% 1.50% A
net assets after expense
reductions
Ratio of net investment 9.96% 7.08% 7.23% 9.32% 6.60% A
income to average net assets
Portfolio turnover rate 514% 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 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
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.160 $ 11.750 $ 9.300 $ 9.520 $ 9.700
of period
Income from Investment
Operations
Net investment income .907 D .806 D .686 D .835 .167
Net realized and unrealized (3.334) .956 2.853 (.342) .227
gain (loss)
Total from investment (2.427) 1.762 3.539 .493 .394
operations
Less Distributions
From net investment income (.772) (.892) (.679) (.713) (.314)
From net realized gain - (1.460) (.410) - (.260)
Return of capital (.161) - - - -
Total distributions (.933) (2.352) (1.089) (.713) (.574)
Net asset value, end of period $ 7.800 $ 11.160 $ 11.750 $ 9.300 $ 9.520
TOTAL RETURN B, C (22.66)% 15.70% 39.61% 6.38% 3.67%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 16,703 $ 23,576 $ 17,746 $ 9,486 $ 5,034
(000 omitted)
Ratio of expenses to average 2.15% F 2.15% 2.15% F 2.25% F 2.25% A, F
net assets
Ratio of expenses to average 2.13% G 2.13% G 2.15% 2.25% 2.25% A
net assets after expense
reductions
Ratio of net investment 9.36% 6.48% 6.56% 8.48% 5.86% A
income to average net assets
Portfolio turnover rate 514% 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).
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED DECEMBER 31,
1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.110 $ 12.190
period
Income from Investment
Operations
Net investment income D .792 .154
Net realized and unrealized (3.191) .322
gain (loss)
Total from investment (2.399) .476
operations
Less Distributions
From net investment income (.762) (.286)
From net realized gain - (1.270)
Return of capital (.159) -
Total distributions (.921) (1.556)
Net asset value, end of period $ 7.790 $ 11.110
TOTAL RETURN B, C (22.47)% 4.16%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 964 $ 66
(000 omitted)
Ratio of expenses to average 2.25% F 2.25% A, F
net assets
Ratio of expenses to average 2.23% G 2.25% A
net assets after expense
reductions
Ratio of net investment 9.30% 9.04% A
income to average net assets
Portfolio turnover rate 514% 660%
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).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.060 $ 11.650 $ 9.280 $ 8.400
period
Income from Investment
Operations
Net investment income .931 D .860 D .786 D .393
Net realized and unrealized (3.229) 1.008 2.779 .876
gain (loss)
Total from investment (2.298) 1.868 3.565 1.269
operations
Less Distributions
From net investment income (.846) (.998) (.785) (.389)
From net realized gain - (1.460) (.410) -
Return of capital (.176) - - -
Total distributions (1.022) (2.458) (1.195) (.389)
Net asset value, end of period $ 7.740 $ 11.060 $ 11.650 $ 9.280
TOTAL RETURN B, C (21.75)% 16.84% 40.21% 15.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,434 $ 1,320 $ 2,639 $ 201
(000 omitted)
Ratio of expenses to average 1.25% F 1.25% F 1.25% F 1.25% A, F
net assets
Ratio of expenses to average 1.24% G 1.23% G 1.25% 1.25% A
net assets after expense
reductions
Ratio of net investment 10.02% 6.85% 7.46% 9.09% A
income to average net assets
Portfolio turnover rate 514% 660% 410% 305% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D 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 December 31, 1998
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. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. 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 and settlement date 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. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
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.
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, net
operating losses, capital loss carryforwards and losses deferred due
to wash sales and excise tax regulations.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
For the period ended December 31, 1998, the fund's distributions
exceeded the aggregate amount of taxable income and net realized gains
resulting in a return of capital. This was due to certain foreign
currency losses which decreased taxable income available for
distribution after certain distributions had been made. (The tax
treatment of distributions for the 1998 calendar year will be reported
to shareholders prior to February 1, 1999.)
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 Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements 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.
OPTIONS. The fund may use options to manage its exposure to the bond
markets and to fluctuations in 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
2. OPERATING POLICIES - CONTINUED
OPTIONS - CONTINUED
the fund's exposure to the underlying instrument, or hedge other fund
investments. The underlying face amount at value of any open options
at period end is shown in the schedule of investments under the
caption "Purchased Options". This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise
from changes in the value of the underlying instruments, if there is
an illiquid secondary market for the contracts, or if the
counterparties do not perform under the contracts' terms. Gains and
losses are realized upon the expiration or closing of the options.
Realized gains (losses) on purchased options are included in realized
gains (losses) on investment securities.
Exchange-traded options are valued using the last sale price or, in
the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $3,237,377 or 4.3% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $428,732,060 and $431,021,943, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEES - CONTINUED
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 annual rate of .69% of average net assets .
SUB-ADVISER FEE. FMR, on behalf of the funds, 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 3,810 $ 184
CLASS T 182,151 23,840
CLASS B 183,603 132,853
CLASS C 4,386 4,322
$ 373,950 $ 161,199
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 $ 2,476
CLASS T 32,484
CLASS B 14,214
CLASS C 308
INSTITUTIONAL CLASS 1,076
$ 50,558
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 on 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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 26,332 $ 8,219
CLASS T 61,537 20,587
CLASS B 71,458 71,458 *
CLASS C 2,699 2,699 *
$ 162,026 $ 102,963
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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.
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 $ 9,971 .39
CLASS T 211,795 .29
CLASS B 66,377 .33
CLASS C 1,841 .42
INSTITUTIONAL CLASS 3,821 .37
$ 293,805
ACCOUNTING FEES. Fidelity Service Company 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 EXPENSE LIMITATIONS REIMBURSEMENT
CLASS A 1.40% $ 8,227
CLASS B 2.15% 12,168
CLASS C 2.25% 11,410
INSTITUTIONAL CLASS 1.25% 10,783
$ 42,588
FMR has also directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $605 under this arrangement.
5. EXPENSE REDUCTIONS - CONTINUED
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 $13,303 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:
YEARS ENDED DECEMBER 31,
1998 1997 A
FROM NET INVESTMENT INCOME
Class A $ 219,978 $ 119,401
Class T 6,143,721 7,364,838
Class B 1,620,830 1,641,148
Class C 37,441 1,052
Institutional Class 90,315 253,852
Total $ 8,112,285 $ 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
RETURN OF CAPITAL
Class A $ 45,897 $ -
Class T 1,281,860 -
Class B 338,179 -
Class C 7,812 -
Institutional Class 18,844 -
Total $ 1,692,592 $ -
Total $ 9,804,877 $ 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
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 A 1998 1997 A
CLASS A Shares sold 235,098 157,759 $ 2,083,069 $ 1,980,163
Reinvestment of
distributions 24,274 27,924 221,948 317,016
Shares redeemed (103,745) (18,479) (983,680) (229,598)
Net increase (decrease) 155,627 167,204 $ 1,321,337 $ 2,067,581
CLASS T Shares sold 2,933,653 5,560,853 $ 27,650,341 $ 68,604,516
Reinvestment of
distributions 698,169 1,422,242 6,462,132 16,356,926
Shares redeemed (5,118,827) (5,324,070) (49,719,962) (65,213,725)
Net increase (decrease) (1,487,005) 1,659,025 $ (15,607,489) $ 19,747,717
CLASS B Shares sold 816,033 741,442 $ 7,761,777 $ 9,189,867
Reinvestment of
distributions 175,037 323,757 1,605,746 3,726,061
Shares redeemed (964,234) (462,457) (9,294,273) (5,697,389)
Net increase (decrease) 26,836 602,742 $ 73,250 $ 7,218,539
CLASS C Shares sold 170,399 5,254 $ 1,580,351 $ 65,143
Reinvestment of
distributions 4,144 692 34,839 7,663
Shares redeemed (56,813) - (482,761) -
Net increase (decrease) 117,730 5,946 $ 1,132,429 $ 72,806
INSTITUTIONAL CLASS
Shares 330,391 670,672 $ 2,916,407 $ 8,055,126
sold
Reinvestment of
distributions 10,655 36,986 96,223 437,820
Shares redeemed (275,152) (814,803) (2,600,890) (10,051,000)
Net increase (decrease) 65,894 (107,145) $ 411,740 $ (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 $ 6,945
CLASS T 31,669
CLASS B 14,450
CLASS C 11,112
INSTITUTIONAL CLASS 10,614
$ 74,790
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series VIII and the Shareholders
of Fidelity Advisor Emerging Markets Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Emerging Markets Income Fund (a fund of Fidelity
Advisor Series VIII) at December 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Emerging Markets Income Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 17, 1999
TAX INFORMATION
The percentage of the dividends distributed during the fiscal year for
the following classes representing income derived from sources within,
and taxes paid to, foreign countries or possessions of the United
States:
Income Foreign Tax credit
Percent Percent
Institutional
Class 100% 0%
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
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
Matthew N. Karstetter, Deputy 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 Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuant SM Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement
Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
EMI-ANN-0299 70362
1.540212.101
(Fidelity logo graphic)(registered trademark)
