(2_FIDELITY_LOGOS)
FIDELITY ADVISOR ANNUITY
FUND
FIDELITY ADVISOR ANNUITY MONEY MARKET FUND
FIDELITY ADVISOR ANNUITY GOVERNMENT INVESTMENT FUND
FIDELITY ADVISOR ANNUITY HIGH YIELD FUND
FIDELITY ADVISOR ANNUITY INCOME & GROWTH FUND
FIDELITY ADVISOR ANNUITY GROWTH OPPORTUNITIES FUND
FIDELITY ADVISOR ANNUITY OVERSEAS FUND
ANNUAL REPORT
DECEMBER 31, 1995
CONTENTS
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MARKET ENVIRONMENT 3 A REVIEW OF WHAT HAPPENED DURING THE PAST YEAR
MONEY MARKET FUND 4 PERFORMANCE
5 FUND TALK: THE MANAGER'S OVERVIEW
6 INVESTMENTS
8 FINANCIAL STATEMENTS
GOVERNMENT INVESTMENT FUND 10 PERFORMANCE AND INVESTMENT SUMMARY
11 FUND TALK: THE MANAGER'S OVERVIEW
12 INVESTMENTS
14 FINANCIAL STATEMENTS
HIGH YIELD FUND 16 PERFORMANCE AND INVESTMENT SUMMARY
17 FUND TALK: THE MANAGER'S OVERVIEW
18 INVESTMENTS
22 FINANCIAL STATEMENTS
INCOME & GROWTH FUND 24 PERFORMANCE AND INVESTMENT SUMMARY
25 FUND TALK: THE MANAGER'S OVERVIEW
26 INVESTMENTS
32 FINANCIAL STATEMENTS
GROWTH OPPORTUNITIES FUND 34 PERFORMANCE AND INVESTMENT SUMMARY
35 FUND TALK: THE MANAGER'S OVERVIEW
36 INVESTMENTS
40 FINANCIAL STATEMENTS
OVERSEAS FUND 42 PERFORMANCE AND INVESTMENT SUMMARY
43 FUND TALK: THE MANAGER'S OVERVIEW
44 INVESTMENTS
48 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS 50 NOTES TO THE FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS 54 THE AUDITORS' OPINION
DISTRIBUTIONS 55
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS 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.
MARKET ENVIRONMENT
Most stock and bond markets rebounded in 1995, after experiencing
volatility and inconsistent returns in 1994. Returns were fueled by
declining interest rates, moderate economic growth, sustained corporate
earnings growth and a relative absence of inflation. The U.S. stock market
outpaced counterparts in the developed world and those in emerging markets.
Returns from bond markets overseas generally topped those provided by the
U.S., although the U.S. bond market still was quite strong.
U.S. STOCK MARKETS
The Standard & Poor's Composite Index of 500 Stocks - a broad measure of
U.S. stock performance - rose 37.58% for the 12 months ended December 31,
1995, well above the market's long-term average annual return. The NASDAQ
Composite Index - a measure of small stock performance - rose 39.92%
(excluding dividends). The Dow Jones Industrial Average - an index of 30
blue-chip stocks - posted a return of 36.72%, closing above 5000 for the
first time in November.
Strong corporate earnings and a favorable interest rate environment helped
the U.S. stock market post robust returns. With inflation posing little
threat, interest rates fell during much of 1995. The Federal Reserve Board
cut short-term interest rates twice, in July and December. Lower interest
rates helped bolster earnings, as they reduced companies' borrowing costs.
A relatively weak dollar also helped sustain earnings, with American
products and services remaining fairly cheap overseas. Investor sentiment
toward the stock market was extremely positive, evidenced by a flurry of
successful initial public offerings throughout the year.
Market activity was marked by rapid sector rotation, with investors
reacting swiftly to breaking news. Technology was one of the best
performing market sectors until the fourth quarter, fueled by improving
earnings associated with strong growth in personal computers and related
products. Internet-related stocks posted extremely strong share price
gains. Although increases in cellular subscriptions helped semiconductor
stocks earlier in the year, that industry saw share price drops later in
the year due to concerns about over-capacity. Expanding inventories and
evidence of an economic slowdown hurt technology stocks later in the year.
Biotechnology issues saw a resurgence, partly because the sector had
struggled to the point where valuations - stock prices relative to other
measures such as earnings - appeared attractive. Consumer nondurables -
such as food, beverage and tobacco companies - health care and traditional
big-name growth stocks showed strength as investors sought companies that
traditionally have steady earnings growth regardless of the economic
environment.
Cyclical stocks - those that usually rise and fall with the economy -
provided subpar returns during 1995 as a result of over-capacity and
evidence the economy was slowing. Industrial commodities, such as chemicals
and paper, faltered due to decreased demand, despite the prospect for
renewed economic growth - and concurrent future earnings growth - resulting
from interest rate declines. On the other hand, lower interest rates and
continued merger and acquisition activity helped financial stocks perform
well. Regional Bell operating companies - RBOCs or "Baby Bells"-performed
well in the second half of the year, because they offered strong yields,
and because of their potential for growth as they enter new businesses.
FOREIGN STOCK MARKETS
Foreign stock markets showed mixed results in 1995. The Morgan Stanley EAFE
(Europe, Australasia, Far East) index was up 11.21%. Although interest
rates declined in most European countries, economies were generally
stagnant. While equity indexes in some countries posted strong returns, in
some cases these results were due to the strong performance of large
companies that made up a significant portion of the index, such as Nokia in
Finland and Ericsson in Sweden. The Morgan Stanley Europe Index rose 21.62%
in 1995. Japanese companies were hindered by a strong yen - which made
their products expensive overseas - and a weak economy earlier in the year.
However, in the fourth quarter of the year, both the Japanese market and
economy started to rebound. According to Morgan Stanley Capital
International, Japanese stocks rose 0.69% in U.S. dollars for the year.
Emerging markets struggled in 1995, hurt by a lack of capital inflows
caused by Mexico's peso devaluation in December 1994. This negative
sentiment contributed to the -5.21% return of the Morgan Stanley Emerging
Markets Free Index in 1995.
U.S. BOND MARKETS
U.S. bond markets posted strong returns in 1995. The Lehman Brothers
Aggregate Bond Index - a broad measure of U.S. taxable bonds - posted a
total return of 18.47% in 1995. A strong, year-long rally helped bonds
recover from the effects of the sharply rising interest rates seen in 1994.
Indications of a slowing economy and a relative absence of inflation
pressures encouraged bond investors, helping to push interest rates lower.
Prospects for a balanced budget agreement also helped to fuel optimism in
the markets. Monetary policy also played a role in the bond market's
performance. In an effort to thwart the possibility of a recession, the
Federal Reserve Board lowered the fed funds rates twice, in July and
December. Mortgage-backed securities also benefited from this environment,
as illustrated by the performance of the Salomon Brothers Mortgage Index,
which returned 16.77% during the year. The high-yield bond market also
turned in a strong performance in 1995, driven by generally good earnings,
strong demand for high-yield bonds among investors searching for high
current income and declining interest rates. The Merrill Lynch High Yield
Master Index rose 19.91%.
FOREIGN BOND MARKETS
Both developed and emerging fixed-income markets recorded strong returns in
1995. For the 12 months ended December 31, 1995, the Salomon Brothers World
Government Bond Index - a proxy of bond market performance in developed
nations including the U.S. - rose 19.04%. Bond markets in developed
countries benefited from slow economic growth and relatively low inflation
pressures. This led to a more favorable interest rate environment, as the
central banks of the U.S., Germany and Great Britain all lowered their
respective short-term interest rates. Emerging markets shrugged off the
fallout from December 1994's Mexican peso devaluation to record strong
returns. The J.P. Morgan Emerging Markets Bond Index posted a 27.54% return
for the year. The bulk of emerging markets' total return came from a
springtime rally following the announcement of a $50 billion bailout
package for Mexico by the U.S. Treasury and the International Monetary
Fund.
FIDELITY ADVISOR ANNUITY FUND: MONEY MARKET FUND
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance. Yield will vary.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND
Money Market 5.17%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 4,
1995.
Recent U.S. Consumer Price Index information is not available from the U.S.
Department of Labor. Therefore, the CPI comparison has not been included in
this report.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results.
YIELD
Row: 1, Col: 1, Value: 4.95
Row: 1, Col: 2, Value: 2.89
Row: 2, Col: 1, Value: 4.99
Row: 2, Col: 2, Value: 2.87
Row: 3, Col: 1, Value: 4.94
Row: 3, Col: 2, Value: 2.86
Row: 4, Col: 1, Value: 5.39
Row: 4, Col: 2, Value: 2.83
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
3/29/95 6/28/95 9/27/95 12/27/95
Money Market 4.95% 4.99% 4.94% 5.39%
MMDA 2.89% 2.87% 2.86% 2.83%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between a
bank money market deposit account (MMDA) and
a money market fund. First, the U.S. government
neither insures nor guarantees a money market
fund. In fact, there is no assurance that a money
fund will maintain a $1 share price. Second, a
money market fund returns to its shareholders
income earned by the fund's investments after
expenses. This is in contrast to banks, which set
their MMDA rates periodically based on current
interest rates, competitors' rates, and internal
criteria.
(checkmark)
FIDELITY ADVISOR ANNUITY FUND: MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bob Litterst, Portfolio Manager of Fidelity Advisor
Annuity Money
Market Fund
Q. BOB, HOW HAVE MARKET CONDITIONS CHANGED DURING THE
PAST YEAR?
A. Ironically, the interest rate banks charge each other for overnight
loans - known as the federal funds rate - ended the year exactly where it
started, at 5.50%. But if we compare market conditions a year ago to those
that prevailed at the close of the period, the difference is like night and
day. As 1995 began, the Fed was still in a restrictive mode, raising
interest rates as a means of slowing down the economic growth rate and
preventing an outbreak of inflation. After a torrid fourth quarter - during
which the economy expanded at an annual rate of more than 5% - most market
participants expected growth to continue at a fast pace and interest rates
to keep rising in 1995. That view was apparently confirmed when the Fed
increased the federal funds rate again in February to 6.00%. As it turned
out, however, that was the last rate increase in the cycle. Already, signs
of weakness were appearing among the key economic indicators, heralding a
dramatic slowdown in the first half of 1995.
Q. HOW DID THE FED REACT TO CHANGING CONDITIONS?
A. By gradually lowering interest rates. When growth slowed to an annual
growth rate of 1.3% during the second quarter of 1995, from 2.7% during the
first quarter, warnings arose from some quarters that the economy was in
danger of slipping back into recession. Such warnings were undoubtedly a
factor in the Fed's decision to lower the federal funds rate one-quarter
percentage point on July 6, 1995. Growth picked up again in the third
quarter, when the economy expanded at an annual rate of 4.2%. But
indications are that the fourth quarter numbers, when they're released in
January, will show a return to slower growth. The Fed apparently thinks so.
It lowered the federal funds rate another one-quarter percentage point on
December 19, 1995, bringing it back down to 5.50%. At present, conditions
appear stable, characterized by moderate growth, stable to declining
interest rates and mild inflation.
Q. HOW DID YOU POSITION THE FUND DURING THE PERIOD?
A. The fund is not yet one-year old; it began operating in January 1995. I
mention that because until total assets reached a certain threshold, SEC
diversification requirements limited the kinds of buys I could make for the
fund and the tactics I could employ. By the middle of the period, however,
the fund had accumulated enough assets that I could begin to put a coherent
strategy in place. That involved extending the fund's average maturity from
around 40 days in June to 53 days by the end of the third quarter and 59
days at the end of the period. That's still not quite as long as I would
like the fund to be, given that it generally makes sense to lengthen the
fund's average maturity during periods of stable to declining interest
rates.
Q. WHAT KIND OF SECURITIES HAVE YOU BEEN BUYING?
A. Again, my choices have been limited until recently by the size of the
fund. Buying in small lots early in the period, I found value mainly in
commercial paper. Lately, as assets have grown, the fund has taken on a
more diversified structure, with holdings spread among commercial paper,
bank liabilities, government securities, repurchase agreements and variable
rate instruments with interest rates that reset at stated intervals.
Q. WHAT'S THE OUTLOOK?
A. Not at all what it was a year ago, at least for the short-term. I'm
basing my investment decisions on the likelihood of continued moderate
growth, stable to declining interest rates and mild inflationary pressures.
I think there's a good chance the Fed will lower interest rates at least
one more time, possibly if and when the warring parties in Washington
finally agree on a balanced budget. The Fed has long been an advocate of a
balanced budget, and would likely respond to a credible agreement with a
rate cut. On the other hand, with the economy expanding near the Fed's
target growth rate and little chance of a recession, I don't expect further
dramatic reductions in interest rates. That's why I'll likely keep the
fund's average maturity between 50 and 70 days, possibly longer. That puts
the fund in a good position to benefit from stable to declining rates while
leaving me with some flexibility to respond to changing market conditions.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: income and share price stability by
investing in high-quality, short-term
investments
START DATE: January 4, 1995
SIZE: as of December 31, 1995, more than
$28 million
MANAGER: Robert Litterst, since January 1995;
joined Fidelity in 1992
(checkmark)
FIDELITY ADVISOR ANNUITY FUND: MONEY MARKET FUND
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 1.0%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES - 1.0%
Chemical Bank
2/14/96 5.95% $ 302,413 $ 300,180
CERTIFICATES OF DEPOSIT - 13.7%
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 10.3%
Deutsche Bank, A.G.
4/22/96 5.77 1,000,000 1,000,000
Societe Generale
1/17/96 5.84 1,000,000 1,000,000
Swiss Bank Corp. (c)
5/6/96 5.47 1,000,000 1,000,000
3,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 3.4%
Abbey National, PLC
2/29/96 5.73 1,000,000 1,000,000
TOTAL CERTIFICATES OF DEPOSIT 4,000,000
COMMERCIAL PAPER - 63.1%
ANZ (DE), Inc.
2/13/96 5.75 1,000,000 992,919
American Express Credit Corp.
4/15/96 5.76 1,000,000 983,356
American Home Products
4/3/96 5.71 1,000,000 985,222
American Telephone & Telegraph
3/20/96 5.63 200,000 197,502
Associates Corp. of North America
4/8/96 5.67 1,000,000 984,555
Caisse des Depots et Consignations
1/29/96 5.91 1,000,000 995,104
Canadian Wheat Board
3/11/96 5.62 300,000 296,670
Chrysler Financial Corporation
1/26/96 5.88 1,000,000 995,635
Corporate Asset Funding Co., Inc.
1/19/96 6.02 500,000 498,333
Dakota
1/11/96 5.87 287,000 286,442
du Pont (E.I.) de Nemours & Co.
2/13/96 5.76 650,000 645,458
8/5/96 5.54 600,000 580,472
General Motors Acceptance Corp.
3/5/96 5.83 1,000,000 989,495
Georgia Power Co.
3/14/96 5.62 700,000 691,906
Glaxo Wellcome, PLC
1/12/96 5.87 500,000 498,953
Goldman Sachs Group, L.P. (The)
3/18/96 5.75 1,000,000 987,601
Government of Canada
3/26/96 5.70 600,000 591,938
Hanson Finance (UK), PLC
1/19/96 5.88 500,000 498,389
2/9/96 5.86 700,000 695,376
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
Lilly (Eli) & Co.
5/6/96 5.53% $ 1,000,000 $ 980,729
Merrill Lynch & Co., Inc.
3/8/96 5.76 750,000 741,950
Norwest Financial, Inc.
2/7/96 5.76 1,000,000 993,847
Preferred Receivables Funding Corp.
1/11/96 6.17 1,000,000 997,950
REXAM, PLC
1/8/96 5.92 500,000 499,263
Wool International
2/27/96 5.84 750,000 743,031
TOTAL COMMERCIAL PAPER 18,352,096
FEDERAL AGENCIES - 0.9%
FEDERAL HOME LOAN BANK - DISCOUNT NOTES - 0.9%
2/26/96 6.06 100,000 99,069
4/1/96 6.09 155,000 152,690
TOTAL FEDERAL AGENCIES 251,759
MASTER NOTES (A) - 3.4%
J.P. Morgan Securities
1/16/96 5.94 1,000,000 1,000,000
MEDIUM-TERM NOTES (A) - 6.9%
Beneficial Corp.
2/3/96 5.85 1,000,000 999,396
Transamerica Life Insurance & Annuity Co.
3/15/96 5.84 1,000,000 1,000,000
TOTAL MEDIUM-TERM NOTES 1,999,396
SHORT-TERM NOTES (A) (B) - 3.4%
SMM Trust Company (1995-D)
1/27/96 5.99 1,000,000 1,000,000
REPURCHASE AGREEMENTS - 7.6%
MATURITY
AMOUNT
In a joint trading account
(U.S. Treasury Obligations)
dated 12/29/95 due 1/2/96:
At 6.14% $ 2,221,515 2,220,000
TOTAL INVESTMENTS - 100% $ 29,123,431
Total Cost for Income Tax Purposes - $29,123,431
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $1,000,000 or 3.5% of net
assets.
3. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
INCOME TAX INFORMATION
At December 31, 1995, the fund had a capital loss carryforward of $87 which
will expire on December 31, 2003.
FIDELITY ADVISOR ANNUITY FUND: MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
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DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $2,220,000) - See accompanying $ 29,123,431
schedule
Cash 839,432
Interest receivable 40,388
TOTAL ASSETS 30,003,251
LIABILITIES
Payable for investments purchased $ 1,000,000
Delayed delivery
Accrued management fee 4,868
Other payables and accrued expenses 23,958
TOTAL LIABILITIES 1,028,826
NET ASSETS $ 28,974,425
Net Assets consist of:
Paid in capital $ 28,974,512
Accumulated net realized gain (loss) on investments (87
)
NET ASSETS, for 28,974,512 shares outstanding $ 28,974,425
NET ASSET VALUE, offering price and redemption price per share ($28,974,425 (divided by) 28,974,512 shares) $1.00
</TABLE>
STATEMENT OF OPERATIONS
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JANUARY 4, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
INTEREST INCOME $ 656,965
EXPENSES
Management fee $ 26,382
Transfer agent fees 6,427
Accounting fees and expenses 19,843
Custodian fees and expenses 17,521
Audit 17,577
Miscellaneous 188
Total expenses before reductions 87,938
Expense reductions (5,383 82,555
)
NET INTEREST INCOME 574,410
NET REALIZED GAIN (LOSS) (87
ON INVESTMENTS )
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 574,323
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 4, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
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Operations $ 574,410
Net interest income
Net realized gain (loss) (87)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 574,323
Distributions to shareholders from net interest income (574,410)
Share transactions at net asset value of $1.00 per share 37,951,030
Proceeds from sales of shares
Reinvestment of distributions from net interest income 556,876
Cost of shares redeemed (9,533,394)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 28,974,512
TOTAL INCREASE (DECREASE) IN NET ASSETS 28,974,425
NET ASSETS
Beginning of period -
End of period $ 28,974,425
</TABLE>
<TABLE>
<CAPTION>
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SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SELECTED PER-SHARE DATA JANUARY 4, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
Net asset value, beginning of period $ 1.000
Income from Investment Operations .051
Net interest income
Less Distributions (.051)
From net interest income
Net asset value, end of period $ 1.000
TOTAL RETURN B,C 5.17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 28,974
Ratio of expenses to average net assets .74% A
,D
Ratio of net interest income to average net assets 5.18% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C TOTAL RETURN DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE
TOTAL RETURN SHOWN.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
FIDELITY ADVISOR ANNUITY FUND: GOVERNMENT INVESTMENT FUND
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). If the advisor had not reimbursed certain fund
expenses, the total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND
Government Investment 16.54%
Lehman Brothers Government Bond Index 18.34%
Salomon Brothers Treasury/Agency Index 18.39%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 3,
1995.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share price,
return, and yield of a fund that invests in bonds
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare the fund's return to the Lehman Brothers Government Bond
Index and the Salomon Brothers Treasury/Agency Index - both broad measures
of the performance of U.S. government bonds. These benchmarks include
reinvested dividends and capital gains, if any. Recent U.S. Consumer Price
Index information is not available from the U.S. Department of Labor.
Therefore, the CPI comparison has not been included in this report.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Although many of the fund's investments are guaranteed
by the U.S. government, the fund itself is not guaranteed.
$10,000 OVER LIFE OF FUND
FA Annuity Govt Inv Fund SB Treasury/Agency
01/03/95 10000.00 10000.00
01/31/95 10130.00 10195.95
02/28/95 10350.00 10409.66
03/31/95 10410.00 10471.57
04/30/95 10530.00 10606.50
05/31/95 10940.00 11041.45
06/30/95 11010.00 11125.12
07/31/95 10970.00 11086.50
08/31/95 11080.00 11213.22
09/30/95 11180.00 11314.41
10/31/95 11340.00 11490.83
11/30/95 11500.00 11676.80
12/29/95 11654.15 11838.58
Let's say you invested $10,000 in Government Investment Fund on January 3,
1995, when the fund started. By December 31, 1995, your investment would
have grown to $11,654 - a 16.54% increase. With reinvested dividends and
capital gains, if any, a $10,000 investment in the Salomon Brothers
Treasury/Agency Index would have grown to $11,839 over the same period - an
18.39% increase.
INVESTMENT SUMMARY
COUPON DISTRIBUTION AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
% OF FUND'S
INVESTMENTS
Under 6% 14.0
6 - 6.99% 8.0
7 - 7.99% 22.8
8 - 8.99% 36.4
9 - 9.99% 9.6
Over 10% 7.8
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
</TABLE>
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Years 8.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S
BONDS, WEIGHTED BY DOLLAR AMOUNT.
</TABLE>
DURATION AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Years 5.1
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR
EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS
LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY
DIFFER FROM THIS EXAMPLE.
</TABLE>
FIDELITY ADVISOR ANNUITY FUND: GOVERNMENT INVESTMENT FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Robert Ives, Portfolio
Manager of Fidelity
Advisor Annuity Government Investment Fund
Q. HOW DID THE FUND PERFORM, BOB?
A. For the life of the fund - which is just under one year - it slightly
trailed the Salomon Brothers Treasury/Agency Index, which returned 18.39%
for the same period ended December 31, 1995.
Q. WHAT WERE SOME OF THE MAJOR FACTORS IN THIS YEAR'S BOND MARKET RALLY?
PARTICULARLY, WHAT INFLUENCED THE MARKET IN THE SECOND HALF OF THE YEAR?
A. As I said at the end of June, interest rates - and therefore bonds
- -responded favorably to signs that strong economic growth and inflation
would not be issues in 1995. The lack of strength in the economy was
confirmed by the Federal Reserve Board's easing of short-term interest
rates in July and December. In the fourth quarter, the market was
enthusiastic about the possibility of a balanced budget agreement in
Washington. Investors viewed this as being positive for bonds because it
would most likely lead to less government spending and a slower growing
economy.
Q. SO, TURNING TO THE FUND, WHAT CHANGES DID YOU MAKE SINCE THE END OF
JUNE?
A. I increased the position in non-mortgage-backed U.S. government agency
securities in order to increase the fund's diversification. On June 30, the
fund had an 82% position in U.S. Treasury securities and a 6.8% stake in
agencies. At the end of the period, the portfolio had 69.2% in Treasuries
and 26.9% in agencies.
Q. WHAT KIND OF AGENCY SECURITIES DID YOU OWN AND WHAT WERE SOME OF THE
MAJOR ISSUERS?
A. The majority of the agency holdings are agency debentures. A debenture
is a promissory note backed only by the credit of the issuer. Some of the
fund's major issuers include the Private Export Funding Corp. and Federal
Home Loan Bank.
Q. WHY IS THE FUND'S POSITION IN MORTGAGE PASS-THROUGH
SECURITIES SO SMALL?
A. The fund will need to gain more assets before I can properly diversify
any mortgage pass-through securities. As the fund gets larger, I do plan to
add mortgage pass-through securities issued by U.S. government agencies.
Pass-throughs are pools of mortgages whose principal and income is
"passed-through" to investors. On the other hand, collateralized mortgage
obligations - or CMOs - are usually backed by larger pools of mortgages and
are thus more diversified. This is why CMOs make up the bulk of the fund's
2.5% weighting in mortgage-related securities.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. I think one disappointment was that, as the result of the current low
level of interest rates, it was difficult to find inexpensive,
yield-advantaged securities. That said, however, I will continue to manage
the fund in relation to its index and seek opportunities through sector and
individual security selection.
Q. WHAT'S YOUR OUTLOOK?
A. The direction of the bond market next year will depend on several
factors. The performance of the bond market will be dictated not only by
how long the budget situation drags on, but also the quality of the
agreement. Second, the strength of the economy will also be important. In
my opinion, consumer spending patterns will play a big role in whether we
continue to have a hospitable environment for bonds.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income by investing
primarily in obligations issued or guaranteed
by the U.S. government
START DATE: January 3, 1995
SIZE: as of December 31, 1995, more than
$10 million
MANAGER: Robert Ives, since February 1995;
joined Fidelity in 1991
(checkmark)
FIDELITY ADVISOR ANNUITY FUND: GOVERNMENT INVESTMENT FUND
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS - 96.1%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 69.2%
8%, 10/15/96 $ 378,000 $ 385,794
4 3/8%, 11/15/96 530,000 526,110
8 1/2%, 5/15/97 736,000 767,508
5 5/8%, 1/31/98 50,000 50,414
9%, 5/15/98 20,000 21,656
9 1/4%, 8/15/98 705,000 773,293
9 1/8%, 5/15/99 9,000 10,043
7 3/4%, 12/31/99 619,000 671,714
7 7/8%, 8/15/01 550,000 614,279
6 1/4%, 2/15/03 200,000 208,656
11 1/4%, 8/15/03 10,000 13,421
11 7/8%,11/15/03 45,000 62,866
11 5/8%, 11/15/04 100,000 141,531
12 3/4%,11/15/10 300,000 456,936
9%, 11/15/18 30,000 40,861
8 7/8%, 2/15/19 1,632,000 2,199,887
12%, 8/15/23 80,000 123,262
7,068,231
U.S. GOVERNMENT AGENCY OBLIGATIONS - 26.9%
Federal Agricultural Mortgage Corp.
7.01%, 2/10/05 10,000 10,838
Federal Home Loan Bank:
8.60%, 8/25/99 300,000 330,070
6 3/4%, 4/5/04 375,000 395,332
Federal Home Loan Mortgage Corp.:
4.78%, 2/10/97 (callable) 10,000 9,922
7 3/4%, 11/7/01 500,000 551,015
Federal National Mortgage Association:
5.45%, 10/10/03 20,000 19,559
7.40%, 7/1/04 10,000 11,009
Government Trust Certificates:
(assets of Trust guaranteed
by U.S. Government through Defense
Security Assistance Agency):
Class 1-C 9 1/4%, 11/15/01 42,000 46,658
Class 2-E 9.40%, 5/15/02 10,000 11,157
Class 3-B 8.55%, 11/15/97 6,957 7,118
(assets of Trust guaranteed by U.S.
Government through Export-Import Bank):
Series 1993-C 5.20%, 10/15/04 8,000 7,843
Series 1993-D 5.23%, 5/15/05 16,170 15,786
Series 1994-B 7 1/2%, 1/26/06 9,289 10,010
Series 1994-C 6.61%, 9/15/99 2,950 3,003
Series 1995-A 6.28%, 6/15/04 60,000 61,112
Israel Export Trust Certificate Series 1994-1
(assets of Trust guaranteed by U.S.
Government through Export-Import
Bank) 6.88%, 1/26/03 17,647 18,265
Private Export Funding Corp. secured:
5 3/4%, 4/30/98 600,000 603,750
9 1/2%, 3/31/99 20,000 22,367
7.90%, 3/31/00 400,000 435,040
5.65%, 3/15/03 48,750 48,818
8 3/4%, 6/30/03 10,000 11,739
5.80%, 2/1/04 5,000 5,004
PRINCIPAL VALUE
AMOUNT (NOTE 1)
State of Israel (guaranteed by U.S.
Government through Agency for
International Development):
4 7/8%, 9/15/98 $ 30,000 $ 29,616
5 3/4%, 3/15/00 20,000 20,100
6 1/4%, 8/15/02 52,000 53,606
8 1/2%, 4/1/06 10,000 11,519
2,750,256
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $9,610,375) 9,818,487
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 0.8%
Federal National Mortgage Association:
6.345%, 3/1/99 79,707 81,077
6 1/2%, 2/1/10 2,447 2,465
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $82,463) 83,542
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.7%
U.S. GOVERNMENT AGENCY - 1.7%
Federal Home Loan Mortgage Corp.
Z Bond Series 9, Class E,
9.05%, 8/15/19 48,792 51,780
Federal National Mortgage Association:
Series 1994-M3 Class A,
7.71%, 4/1/06 29,482 30,716
planned amortization class:
Series 1992 Class 193-D,
5 3/4%, 12/25/01 35,000 35,377
Series 1993 Class 72-B,
5%, 1/25/02 24,073 23,817
Series 1993 Class 135-PC,
5 1/2%, 7/25/02 30,000 29,831
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $167,394) 171,521
REPURCHASE AGREEMENTS - 1.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $140,092 140,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $10,000,232) $ 10,213,550
OTHER INFORMATION
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $19,491,871 and $9,842,389, respectively.
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $10,000,250. Net unrealized appreciation aggregated
$213,300, of which $214,742 related to appreciated investment securities
and $1,442 related to depreciated investment securities.
FIDELITY ADVISOR ANNUITY FUND: GOVERNMENT INVESTMENT FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $140,000) (cost $10,000,232) - See $ 10,213,550
accompanying schedule
Cash 827
Receivable for fund shares sold 329,121
Interest receivable 194,749
TOTAL ASSETS 10,738,247
LIABILITIES
Accrued management fee $ 2,350
Other payables and accrued expenses 10,377
TOTAL LIABILITIES 12,727
NET ASSETS $ 10,725,520
Net Assets consist of:
Paid in capital $ 10,512,220
Accumulated undistributed net realized gain (loss) on investments (18
)
Net unrealized appreciation (depreciation) on investments 213,318
NET ASSETS, for 968,038 shares outstanding $ 10,725,520
NET ASSET VALUE, offering price $11.08
and redemption price per share ($10,725,520 (divided by) 968,038 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
INVESTMENT INCOME $ 326,758
Interest
EXPENSES
Management fee $ 21,325
Transfer agent fees 2,667
Accounting fees and expenses 44,637
Non-interested trustees' compensation 17
Custodian fees and expenses 5,429
Audit 15,841
Legal 16
Miscellaneous 3
Total expenses before reductions 89,935
Expense reductions (42,405 47,530
)
NET INVESTMENT INCOME 279,228
REALIZED AND UNREALIZED GAIN (LOSS) 210,750
Net realized gain (loss) on
investment securities
Change in net unrealized appreciation (depreciation) on investment securities 213,318
NET GAIN (LOSS) 424,068
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 703,296
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
<CAPTION>
<S> <C>
Operations $ 279,228
Net investment income
Net realized gain (loss) 210,750
Change in net unrealized appreciation (depreciation) 213,318
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 703,296
Distributions to shareholders (287,183)
From net investment income
From net realized gain (208,860)
TOTAL DISTRIBUTIONS (496,043)
Share transactions 10,213,975
Net proceeds from sales of shares
Reinvestment of distributions 496,043
Cost of shares redeemed (191,751)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 10,518,267
TOTAL INCREASE (DECREASE) IN NET ASSETS 10,725,520
NET ASSETS
Beginning of period -
End of period $ 10,725,520
OTHER INFORMATION
Shares
Sold 940,275
Issued in reinvestment of distributions 45,095
Redeemed (17,332)
Net increase (decrease) 968,038
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C>
Net asset value, beginning of period $ 10.000
Income from Investment Operations .330
Net investment income
Net realized and unrealized gain (loss) 1.320
Total from investment operations 1.650
Less Distributions (.330)
From net investment income
From net realized gain (.240)
Total distributions (.570)
Net asset value, end of period $ 11.080
TOTAL RETURN B, C 16.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 10,726
Ratio of expenses to average net assets 1.00% A
, D
Ratio of net investment income to average net assets 5.87% A
Portfolio turnover rate 220% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS). TOTAL RETURN
DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL
RETURN SHOWN.
D FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
</TABLE>
FIDELITY ADVISOR ANNUITY FUND: HIGH YIELD FUND
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells stocks
that have grown in value). If the advisor had not reimbursed certain fund
expenses, the total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND
High Yield 20.12%
Merrill Lynch High Yield Master 19.91%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 3,
1995.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share price,
return, and yield of a fund that invests in bonds
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare the fund's return to that of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any. Recent
U.S. Consumer Price Index information is not available from the U.S.
Department of Labor. Therefore, the CPI comparison has not been included in
this report.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
FA Annuity High Yield ML High Yield Master
01/03/95 10000.00 10000.00
01/31/95 9960.00 10141.30
02/28/95 10350.00 10457.72
03/31/95 10500.00 10603.26
04/30/95 10920.00 10851.52
05/31/95 11160.00 11190.55
06/30/95 11120.00 11276.02
07/31/95 11400.00 11404.93
08/31/95 11410.00 11474.15
09/30/95 11580.00 11605.42
10/31/95 11770.00 11687.69
11/30/95 11800.00 11801.78
12/29/95 12012.24 11991.22
Let's say you invested $10,000 in High Yield Fund on January 3, 1995, when
the fund started. By December 31, 1995, your investment would have grown to
$12,012 - a 20.12% increase. That compares to $10,000 invested in the
Merrill Lynch High Yield Master Index, which would have grown to $11,991
over the same period - a 19.91% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF DECEMBER 31, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
Tenet Healthcare Corp. 5.2
SD Warren Co. 4.8
Comcast Cellular Corp. 3.1
Corporate Express, Inc. 2.7
Acetex Corp. 2.7
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 17.0
Basic Industries 13.7
Utilities 10.3
Retail & Wholesale 8.6
Nondurables 7.9
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 11.9
B 48.4
Caa, Ca, C 11.6
Nonrated 9.0
TABLE EXCLUDES SHORT-TERM INVESTMENTS.
FIDELITY ADVISOR ANNUITY FUND: HIGH YIELD FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Margaret Eagle, Portfolio Manager of Advisor Annuity High Yield Fund
Q. HOW DID THE FUND PERFORM, MARGARET?
A. Fairly well. The fund beat the Merrill Lynch High Yield Master Index,
which returned 19.91% for the life of the fund.
Q. WHAT FACTORS INFLUENCED THE PERFORMANCE OF THE FUND RELATIVE TO THE
INDEX?
A. Several holdings in particular did quite well, and I think that was the
key. Echostar, a satellite broadcasting services company, was one example.
The company is one of just three that have an orbital slot - an address in
the sky, so to speak - which can broadcast to the United States, Canada and
Mexico. The bonds appreciated significantly over the summer when the value
of orbital slots became more apparent. Their prices were further boosted
when they successfully launched a satellite at year-end. GPA, one of the
world's largest aircraft leasing companies, also had a positive impact on
the fund. Recently, GPA announced plans to securitize its aircraft and use
the proceeds to pay its creditors. Also, supply and demand for
narrow-bodied airplanes moved closer to equilibrium, reversing a long trend
of oversupply. Finally, PanAmSat, a worldwide television broadcaster, did
quite well, especially during the second half of the year. There's
currently a large and growing backlog of television programs earmarked to
be transmitted by PanAmSat.
Q. YOU BUILT A POSITION IN U.K.-BASED CABLE BONDS. WHY?
A. Many U.K. cable operators have come to the high-yield market in order to
get capital to build their systems. These issues came at a good yield
premium, as much as two percentage points higher than comparable bonds
issued by U.S. cable operators. And the rate of growth of those operators
is expected to outpace similar U.S. operators. What's interesting about the
cable industry in the United Kingdom is that its penetration into the
telephone business is much greater than its penetration in the television
business. As the market became more optimistic about the prospects for
these companies, their bond prices appreciated.
Q. WHICH INVESTMENTS DIDN'T TURN OUT AS YOU WOULD HAVE LIKED?
A. The refinery Transamerican was a disappointment. The company modified
its original plans for construction of a refinery, which caused delays and
increased construction costs. However, the asset protection of the company
continued to be strong so I maintained the fund's stake in Transamerican
bonds.
Q. BY THE END OF THE YEAR, THERE WERE INCREASING SIGNS THAT THE ECONOMY WAS
SLOWING. HOW DID THAT AFFECT YOUR STRATEGY?
A. By the end of 1995, more cyclical bonds - that is, bonds issued by
companies whose prospects tend to move in line with the health of the
economy - widened out, meaning that the difference in yields for the
lower-quality, higher-yielding bonds became greater than higher-quality
bonds. In other words, the market was showing a preference for less
cyclical issues. However, I continued to own some cyclical issues. I invest
from the bottom up. That is, I invest credit by credit, company by company,
looking for high total return potential. In looking for new investments, my
preference is to be in high-current-yield bonds from companies where I see
either stable or improving credit quality. As a result of this strategy, I
found some cyclical companies that fit my investment parameters. What I try
to do is choose cyclical companies that are in very good positions within
their respective industries. Even though an industry may be cyclical, I
look for something about the particular company that helps insulate it from
that cyclicality, such as a niche product or a lower cost structure.
Generally speaking, however, the fund had a lower-than-market weighting in
cyclical issues at the end of the period.
Q. WHAT'S YOUR OUTLOOK?
A. In my view, the interest rate environment could be fairly benign for at
least the first half of 1996. I think the Federal Reserve Board has been
pretty good at orchestrating a "soft landing," in which economic growth is
slow, but steady, and inflation reasonably low. Healthy, non-inflationary
economic growth is positive for the high-yield market. But from a
total-return perspective, it may be hard for high-yield bonds to have a
repeat performance of their strong 1995 gains.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to provide a high level of income and
the potential for capital gains by investing
primarily in high-yielding, lower-rated fixed-income
securities
START DATE: January 3, 1995
SIZE: as of December 31, 1995, more than
$41 million
MANAGER: Margaret Eagle, since January 1995;
joined Fidelity in 1980
(checkmark)
FIDELITY ADVISOR ANNUITY FUND: HIGH YIELD FUND
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 78.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
AEROSPACE & DEFENSE - 0.8%
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 $ 70,000 $ 75,598
Wyman-Gordon Co. 10 3/4%,
3/15/03 B1 250,000 262,500
338,098
BASIC INDUSTRIES - 13.4%
CHEMICALS & PLASTICS - 2.7%
Acetex Corp. 9 3/4%,
10/1/03 (e) B1 1,060,000 1,102,400
IRON & STEEL - 0.1%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 70,000 62,825
METALS & MINING - 1.6%
Kaiser Aluminum & Chemical
Corp. 12 3/4%, 2/1/03 B2 570,000 624,150
Sherritt, Inc. 10 1/2%, 3/31/14 B1 30,000 32,738
656,888
PACKAGING & CONTAINERS - 1.1%
Gaylord Container 0%,
5/15/05 (c) Caa 450,000 439,875
PAPER & FOREST PRODUCTS - 7.9%
Rapp International Finance Co.
BV yankee 13 1/4%,
12/15/05 Ba3 660,000 648,450
Repap New Brunswick, Inc.
yankee 10 5/8%, 4/15/05 B2 100,000 97,750
SD Warren Co.
12%, 12/15/04 B1 1,700,000 1,870,000
Stone Container Corp.:
9 7/8%, 2/1/01 B1 90,000 87,525
10 3/4%, 4/1/02 B2 70,000 68,775
10 3/4%, 10/1/02 B1 120,000 124,200
11 1/2%, 10/1/04 B1 50,000 50,000
Tjiwi Kimia International Finance
Co. 13 1/4%, 8/1/01 Ba3 290,000 313,200
3,259,900
TOTAL BASIC INDUSTRIES 5,521,888
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Fieldcrest Cannon, Inc. 11 1/4%,
6/15/04 B1 60,000 57,600
ENERGY - 6.1%
ENERGY SERVICES - 0.1%
Empire Gas Corp. 7%,
7/15/04 (d) Caa 60,000 51,600
OIL & GAS - 6.0%
Chesapeake Energy Corp.
10 1/2%, 6/1/02 B1 600,000 628,500
Flores & Rucks, Inc. 13 1/2%,
12/1/04 B3 390,000 442,650
Transamerican Refining Corp.
16 1/2%, 2/15/02 (f) Caa 500,000 470,000
Transtexas Gas Corp.
11 1/2%, 6/15/02 B2 700,000 719,250
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
United Meridian Corp.
10 3/8%, 10/15/05 B2 $ 190,000 $ 200,925
2,461,325
TOTAL ENERGY 2,512,925
FINANCE - 1.5%
CREDIT & OTHER FINANCE - 1.4%
HMC Acquisition Properties, Inc.
9%, 12/15/07 (e) Ba3 550,000 555,500
SAVINGS & LOANS - 0.1%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 50,000 55,500
TOTAL FINANCE 611,000
HEALTH - 5.2%
MEDICAL FACILITIES MANAGEMENT - 5.2%
Tenet Healthcare Corp.
8 5/8%, 12/1/03 Ba2 2,060,000 2,152,700
INDUSTRIAL MACHINERY & EQUIPMENT - 2.9%
INDUSTRIAL MACHINERY & EQUIPMENT - 2.3%
Calmar, Inc. 11 1/2%,
8/15/05 (e) B3 750,000 761,250
Howmet Corp. 10%,
12/1/03 (e) B3 40,000 42,000
MVE, Inc. 12 1/2%,
2/15/02 B3 140,000 137,900
941,150
POLLUTION CONTROL - 0.6%
Envirosource, Inc. 9 3/4%,
6/15/03 B3 300,000 258,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,199,150
MEDIA & LEISURE - 13.1%
BROADCASTING - 6.8%
Allbritton Communications Co.
11 1/2%, 8/15/20 B3 150,000 157,500
Cablevision System Corp.
9 1/4%, 11/1/05 B3 400,000 418,000
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 120,000 128,400
Diamond Cable
Communications PLC:
0%, 9/30/04 (c) B3 860,000 604,150
yankee 0%, 12/15/05 (c) B3 430,000 252,625
Peoples Choice TV Corp. Unit
0%, 6/1/04 (c) Caa 1,280,000 745,600
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 520,000 520,000
2,826,275
LODGING & GAMING - 4.0%
Grand Casinos, Inc.
10 1/8%, 12/1/03 Ba3 450,000 469,125
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
HMH Properties, Inc.,
9 1/2%, 5/15/05 B1 $ 210,000 $ 214,200
Mohegan Tribal Gaming
Authority 13 1/2%,
11/15/02 (e) - 290,000 314,650
Players International, Inc.
10 7/8%, 4/15/05 Ba3 680,000 637,500
1,635,475
RESTAURANTS - 2.3%
SC International Services, Inc.
13%, 10/1/05 B3 880,000 932,800
TOTAL MEDIA & LEISURE 5,394,550
NONDURABLES - 7.8%
AGRICULTURE - 0.9%
Hines Horticulture, Inc.
11 3/4%, 10/15/05 (e) B3 360,000 376,200
FOODS - 3.6%
Chiquita Brands International, Inc.:
11 1/2%, 6/1/01 B3 500,000 516,250
9 1/8%, 3/1/04 B1 450,000 443,250
Specialty Foods Corp.:
11 1/8%, 10/1/02 B3 100,000 97,000
11 1/4%, 8/15/03 Caa 500,000 445,000
1,501,500
HOUSEHOLD PRODUCTS - 3.3%
McAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 50,000 50,250
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 1,000,000 1,025,000
Revlon Worldwide Corp.
secured 0%, 3/15/98 B3 370,000 274,263
1,349,513
TOTAL NONDURABLES 3,227,213
RETAIL & WHOLESALE - 8.6%
APPAREL STORES - 0.4%
Apparel Retailers, Inc.
0%, 8/15/05 (c) Caa 40,000 23,200
Mothers Work, Inc.
12 5/8%, 8/1/05 B3 130,000 127,725
150,925
DRUG STORES - 1.8%
Thrifty Payless Holdings, Inc.
pay-in-kind 11 5/8%,
4/15/06 (e) - 870,000 761,929
GROCERY STORES - 2.9%
Brunos, Inc. 10 1/2%, 8/1/05 B3 210,000 207,900
Dominick's Finer Foods, Inc.
10 7/8%, 5/1/05 B3 200,000 213,000
Ralph's Grocery Co.
11%, 6/15/05 B3 410,000 405,900
Star Markets, Inc. 13%,
11/1/04 B3 370,000 376,475
1,203,275
PRINCIPAL VALUE
AMOUNT (NOTE 1)
RETAIL & WHOLESALE, MISCELLANEOUS - 3.5%
Alliance Entertainment Corp.
11 1/4%, 7/15/05 B3 $ 320,000 $ 322,000
Corporate Expess, Inc.
9 1/8%, 3/15/04 B3 1,100,000 1,108,250
1,430,250
TOTAL RETAIL & WHOLESALE 3,546,379
SERVICES - 6.6%
ADVERTISING - 0.7%
Outdoor Systems, Inc.
10 3/4%, 8/15/03 B2 290,000 279,850
LEASING & RENTAL - 2.7%
GPA Delaware, Inc. gtd.
8 3/4%, 12/15/98 Caa 700,000 652,750
GPA Holland 8.94%, 2/16/99 - 500,000 450,000
1,102,750
PRINTING - 3.2%
Herff Jones, Inc.
11%, 8/15/05 B2 260,000 278,200
Sullivan Graphics, Inc.
12 3/4%, 8/1/05 Caa 1,090,000 1,060,025
1,338,225
TOTAL SERVICES 2,720,825
TECHNOLOGY - 2.2%
COMMUNICATIONS EQUIPMENT - 2.2%
Echostar Communications Corp.
0%, 6/1/04 (c) Caa 1,340,000 897,800
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.3%
Trans World Airlines, Inc.
12%, 11/3/98 - 20,000 17,500
US Air, Inc.:
9 5/8%, 2/1/01 B3 70,000 61,425
10%, 7/1/03 B3 40,000 35,000
113,925
UTILITIES - 10.2%
CELLULAR - 9.4%
Comcast Cellular Corp.:
Series A, 0% 3/5/00 B2 170,000 129,200
Series B, 0%, 3/5/00 B2 1,500,000 1,140,000
Fonorola, Inc.
12 1/2%, 8/15/02 B2 1,020,000 1,071,000
Mobilemedia Corp.
9 3/8%, 11/1/07 B3 250,000 255,625
Pagemart Nationwide, Inc.
0%, 2/1/05
exchangeable (c) - 1,070,000 695,500
Paging Network, Inc.
10 1/8%, 8/1/07 B2 520,000 566,150
3,857,475
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.8%
Call-Net Enterprises, Inc.
yankee 0%, 12/1/04 (c) B2 $ 140,000 $ 100,100
Peoples Telephone Co. 12 1/4%,
7/15/02 B2 300,000 240,000
340,100
TOTAL UTILITIES 4,197,575
TOTAL NONCONVERTIBLE BONDS
(Cost $32,050,547) 32,491,628
COMMERCIAL MORTGAGE SECURITIES - 2.2%
Lennar Central Partners LP
commercial Series 1995-1
Class F, 11.70%, 5/15/05 (e) - 100,000 100,750
Resolution Trust Corp.:
commercial Series 1994-C1
Class E, 8%, 6/25/26 BB 373,899 327,161
sequential pay Series 1994-C1
Class F, 8%, 6/25/26 B 267,700 226,583
Whitehall Partners commercial
Series 1995-C1 Class E,
8.01%, 7/20/25 (e) - 272,000 259,420
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $893,085) 913,914
COMMON STOCKS - 0.4%
SHARES
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
MVE, Inc. (warrants) (a) 230 3,450
HOLDING COMPANIES - 0.1%
SDW Holdings Corp. (warrants) (a) 3,889 19,445
TECHNOLOGY - 0.3%
COMMUNICATIONS EQUIPMENT - 0.3%
Echostar Communications Corp.
Class A 5,535 134,224
TOTAL COMMON STOCKS
(Cost $24,571) 157,119
PREFERRED STOCKS - 6.1%
CONVERTIBLE PREFERRED STOCKS - 0.1%
UTILITIES - 0.1%
GAS - 0.1%
Columbia Gas System, Inc. (DECS) 638 26,078
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 6.0%
BASIC INDUSTRIES - 0.3%
PAPER & FOREST PRODUCTS - 0.3%
SD Warren Co. exchangeable
pay-in-kind 3,889 $ 122,504
FINANCE - 0.9%
SAVINGS & LOANS - 0.9%
First Nationwide Bank 11 1/2%, 1,778 199,581
Greater New York Savings Bank
Series B, 12% 5,660 162,725
362,306
MEDIA & LEISURE - 3.9%
BROADCASTING - 3.9%
Cablevision System Corp.,
Series G, exchangeable
pay-in-kind (e) 6,234 645,219
PanAmSat Corp. 12 3/4%
pay-in-kind 878 983,360
1,628,579
NONDURABLES - 0.1%
HOUSEHOLD PRODUCTS - 0.1%
Revlon Group, Inc., Series B,
$14.875 exchangeable 310 30,690
TECHNOLOGY - 0.8%
ELECTRONICS - 0.8%
Berg Electronics Holding Corp.,
Series E, $3.4687 pay-in-kind 11,650 326,200
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas System, Inc. 1,043 25,684
TOTAL NONCONVERTIBLE PREFERRED STOCKS 2,495,963
TOTAL PREFERRED STOCKS
(Cost $2,419,113) 2,522,041
REPURCHASE AGREEMENTS - 12.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 5,178,398 5,175,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $40,562,316) $ 41,259,702
LEGEND
1. Non-income producing
2. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
3. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
4. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
5. 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 $4,919,318 or 11.9% of net
assets.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $47,835,694 and $12,777,097, respectively.
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 11.9% BB 15.0%
B 48.4% B 48.5%
Caa 11.6% CCC 6.2%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 7.7%. FMR has
determined that unrated debt securities that are lower quality account for
7.7% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 89.8%
Canada 3.2
United Kingdom 3.0
Ireland 1.6
Netherlands 1.6
Others (individually less than 1%) 0.8
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $40,562,316. Net unrealized appreciation aggregated
$697,386, of which $1,034,267 related to appreciated investment securities
and $336,881 related to depreciated investment securities.
FIDELITY ADVISOR ANNUITY FUND: HIGH YIELD FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $5,175,000) (cost $40,562,316) - See $ 41,259,702
accompanying schedule
Cash 2,464
Receivable for fund shares sold 620,529
Dividends receivable 20,507
Interest receivable 634,017
TOTAL ASSETS 42,537,219
LIABILITIES
Payable for investments purchased $ 1,275,364
Accrued management fee 27,315
Other payables and accrued expenses 11,032
TOTAL LIABILITIES 1,313,711
NET ASSETS $ 41,223,508
Net Assets consist of:
Paid in capital $ 40,500,753
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 25,369
Net unrealized appreciation (depreciation) on investments 697,386
NET ASSETS, for 3,560,826 shares outstanding $ 41,223,508
NET ASSET VALUE, offering price $11.58
and redemption price per share ($41,223,508 (divided by) 3,560,826 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
INVESTMENT INCOME $ 100,525
Dividends
Interest 1,344,418
TOTAL INCOME 1,444,943
EXPENSES
Management fee $ 84,269
Transfer agent fees 7,991
Accounting fees and expenses 44,637
Non-interested trustees' compensation 38
Custodian fees and expenses 10,891
Audit 16,236
Legal 35
Miscellaneous 78
Total expenses before reductions 164,175
Expense reductions (22,881 141,294
)
NET INVESTMENT INCOME 1,303,649
REALIZED AND UNREALIZED GAIN (LOSS) 124,375
Net realized gain (loss) on
investment securities
Change in net unrealized appreciation (depreciation) 697,386
on investment securities
NET GAIN (LOSS) 821,761
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,125,410
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
<CAPTION>
<S> <C>
Operations $ 1,303,649
Net investment income
Net realized gain (loss) 124,375
Change in net unrealized appreciation (depreciation) 697,386
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,125,410
Distributions to shareholders (1,337,415)
From net investment income
From net realized gain (65,240)
TOTAL DISTRIBUTIONS (1,402,655)
Share transactions 40,127,909
Net proceeds from sales of shares
Reinvestment of distributions 1,402,655
Cost of shares redeemed (1,029,811)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 40,500,753
TOTAL INCREASE (DECREASE) IN NET ASSETS 41,223,508
NET ASSETS
Beginning of period -
End of period $ 41,223,508
OTHER INFORMATION
Shares
Sold 3,529,704
Issued in reinvestment of distributions 121,758
Redeemed (90,636)
Net increase (decrease) 3,560,826
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C>
Net asset value, beginning of period $ 10.000
Income from Investment Operations .410
Net investment income
Net realized and unrealized gain (loss) 1.600
Total from investment operations 2.010
Less Distributions (.410)
From net investment income
From net realized gain (.020)
Total distributions (.430)
Net asset value, end of period $ 11.580
TOTAL RETURN B, C 20.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 41,224
Ratio of expenses to average net assets 1.00% A,
D
Ratio of net investment income to average net assets 9.23% A
Portfolio turnover rate 98% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
TOTAL RETURN DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE
TOTAL RETURN SHOWN.
D FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE
RATIO WOULD HAVE BEEN HIGHER
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
</TABLE>
FIDELITY ADVISOR ANNUITY FUND: INCOME & GROWTH FUND
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells stocks
that have grown in value). If the advisor had not reimbursed certain fund
expenses, the total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND
Income & Growth Fund 13.92%
S&P 500 37.56%
Lehman Brothers Aggregate Bond Index 18.47%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 3,
1995.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of growth in the long run and volatility
in the short run. In turn, the share price and return
of a fund that invests in stocks will vary. That
means if you sell your shares during a market
downturn, you might lose money. But if you can
ride out the market's ups and downs, you may
have a gain.
(checkmark)
You can compare the fund's return to the performance of the Standard &
Poor's Composite Index of 500 Stocks- a common proxy for the U.S. stock
market - and the performance of the Lehman Brothers Aggregate Bond Index, a
broad measure of the bond market. These benchmarks include reinvested
dividends and capital gains, if any.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
FA Annuity Inc & Grwth SP Standard & Poor 500 LB
Aggregate Bond
01/03/95 10000.00 10000.00
10000.00
01/31/95 9990.00 10258.23
10197.90
02/28/95 10190.00 10658.00
10440.37
03/31/95 10260.00 10972.51
10504.42
04/30/95 10390.00 11295.66
10651.15
05/31/95 10610.00 11747.14
11063.32
06/30/95 10740.00 12020.03
11144.43
07/31/95 10880.00 12418.61
11119.54
08/31/95 10920.00 12449.78
11253.74
09/30/95 11020.00 12975.16
11363.22
10/31/95 10890.00 12928.84
11511.00
11/30/95 11210.00 13496.42
11683.49
12/29/95 11391.59 13756.36
11847.46
Let's say you invested $10,000 in Income & Growth Fund on January 3, 1995,
when the fund started. By December 31, 1995, your investment would have
grown to $11,392 - a 13.92% increase. For comparison, look at how both the
S&P 500 and Lehman Brothers Aggregate Bond Index did over the same period.
With dividends reinvested, the same $10,000 investment in the S&P 500 would
have grown to $13,756 - a 37.56% increase. If you had put $10,000 in the
bond index, it would have grown to $11,847 - an 18.47% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Bell Atlantic Corp. 2.3
Occidental Petroleum Corp. Indexed $3.00 1.2
Caterpillar, Inc. 1.1
Reynolds Metals Co. 1.1
Sekisui Chemical Co. Ltd. 1.0
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Basic Industries 8.6
Technology 6.4
Utilities 5.2
Industrial Machinery & Equipment 4.6
Energy 3.8
ASSET ALLOCATION AS OF DECEMBER 31, 1995*
Row: 1, Col: 1, Value: 2.4
Row: 1, Col: 2, Value: 8.300000000000001
Row: 1, Col: 3, Value: 46.6
Row: 1, Col: 4, Value: 42.7
Stocks and
equity futures 44.7%
Bonds 46.6%
Short-term investments 8.3%
Other investments
0.4%
FOREIGN INVESTMENTS 17.5%
*
FIDELITY ADVISOR ANNUITY FUND: INCOME & GROWTH FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Robert Haber, Portfolio Manager of Fidelity Advisor
Annuity Income & Growth Fund
Q. HOW HAS THE FUND PERFORMED, BOB?
A. When analyzing the fund's performance, it's important to remind
shareholders of the following. Because the fund invests in both stocks and
bonds, in theory, its total return should fall somewhere between its two
benchmark indexes, the Standard & Poor's Composite Index of 500 Stocks and
the Lehman Brothers Aggregate Bond Index - a broad measure of the
performance of U.S. taxable bonds. However, the fund's total return from
its inception on January 3, 1995, through December 31, 1995, trailed both
the S&P 500, which returned 37.56% during the same period, and the Lehman
Brothers Bond index, which returned 18.47%.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. Throughout my tenure on the fund, I have focused on maximizing rewards
and managing risk. Going into the period, I found stocks to be high-priced.
As a result, I put more of the fund's assets into bonds, as a defensive
move. That turned out to be a move that hurt the fund's performance, as
stocks continued to perform very well. In addition, within the context of
this strategy, I made some tactical moves that detracted from performance.
First of all, while I positioned the fund's bond investments aggressively -
increasing their duration, or sensitivity to interest rates - I wasn't
aggressive enough. That is, I anticipated this year's drop in interest
rates - and rise in bond prices - but didn't foresee the magnitude of that
drop; the fund would have done better with an even longer duration. This
year's rally was unusual in that rates in the market started dropping
before the Federal Reserve Board even finished raising short-term rates in
early 1995. I could have responded more quickly. So while the fund's bonds
have been good contributors, they weren't aggressively positioned enough to
fully take advantage of the market rally.
Q. WHAT CHANGES HAVE YOU MADE TO THE FUND'S BOND INVESTMENTS?
A. Lately, I positioned them more aggressively than they had been earlier
in the period. That is, I increased their overall duration, or sensitivity
to interest rates. Faced with a weakening economy, I like the prospects for
bonds. In terms of security selection, almost all of the fund's
fixed-income investments are Treasury issues. Yield spreads - the
difference in yield between bonds with the same maturity but different
credit quality - are quite narrow, meaning there is little incentive to
invest in lower credit issues or other options such as mortgage-backed
securities.
Q. WHAT ABOUT THE FUND'S EQUITY INVESTMENTS?
A. On the stock side, the fund was heavily invested in cyclicals - stocks
that tend to rise and fall with the economy - which lagged the market, even
though many of these companies posted strong earnings. Reynolds Metals, for
example, showed strong earnings growth but its stock did not respond. Signs
of an economic slowdown, I believe, detracted from investors' interest in
these stocks.
Q. WHICH STOCK INVESTMENTS HELPED THE FUND'S PERFORMANCE?
A. Two investments that contributed well were Bell Atlantic and Chrysler.
Bell Atlantic had a strong dividend yield, with earnings that grew steadily
regardless of the economic climate. Chrysler benefited from a solid product
line, had a good balance sheet, and I found its stock to be very cheap. In
addition, it had a high dividend relative to the market, one of the aspects
I focused on as a defensive measure in this market.
Q. LET'S TAKE A LOOK AT THE NEXT SIX MONTHS. WHAT'S YOUR OUTLOOK?
A. I'm concerned about the stock market because I still find valuations to
be high and expect earnings to decelerate as the economy slows further.
With the economic slowdown, I anticipate that lower interest rates will
ensue. As a result, I'm looking to use the fund's bond investments both
defensively - investing more there to insulate the fund from exposure to a
suspect stock market - and offensively - as a way to take advantage of
falling rates. On the stock side, I'm sticking with cyclicals.
Historically, when cyclical stocks get as cheap as they have, and when
rates start falling, investors start to think about the next economic
expansion and migrate toward cyclical issues. As a result, I'm focusing on
cyclical stocks that have strong earnings potential and attractive prices.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to provide income and growth of capital
by investing in a diversified portfolio of stocks
and bonds
START DATE: January 3, 1995
SIZE: as of December 31, 1995, more than
$43 million
MANAGER: Robert Haber, since January 1995;
joined Fidelity in 1985
(checkmark)
FIDELITY ADVISOR ANNUITY FUND: INCOME & GROWTH FUND
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 38.9%
SHARES
AEROSPACE & DEFENSE - 1.1%
AEROSPACE & DEFENSE - 0.3%
Aviall, Inc. 800 $ 7,500
Flightsafety International, Inc. 1,200 60,300
Teleflex, Inc. 1,400 57,400
125,200
DEFENSE ELECTRONICS - 0.8%
Litton Industries, Inc. (a) 7,300 325,082
TOTAL AEROSPACE & DEFENSE 450,282
BASIC INDUSTRIES - 7.7%
CHEMICALS & PLASTICS - 2.8%
Albemarle Corp. 3,600 69,750
Fuller (H.B.) Co. 300 10,425
IMC Fertilizer Group, Inc. 500 20,438
International Specialty Products, Inc. 3,300 35,888
Kemira OY 8,400 70,287
Nippon Shokubai Co. Ltd. 10,000 97,679
Praxair, Inc. 6,700 225,288
Rohm & Haas Co. 1,900 122,313
Sekisui Chemical Co. Ltd. 30,000 441,006
Valspar Corp. 1,900 84,788
Witco Corp. 500 14,625
1,192,487
IRON & STEEL - 0.4%
Kobe Steel (a) 34,000 104,894
NKK Corp. (a) 13,000 34,952
Nucor Corp. 800 45,700
185,546
METALS & MINING - 4.4%
Alcan Aluminium Ltd. 1,100 34,165
Aluminum Co. of America 600 31,725
Capral Aluminum Ltd. 46,100 112,995
Comalco Ltd. 29,200 156,373
Eramet SA 1,288 84,003
Falconbridge Ltd. 5,300 111,105
Falconbridge Ltd.
1st installment receipt (f) 39,500 343,799
IMCO Recycling, Inc. 900 22,050
Inco Ltd. 6,200 205,061
Kaiser Aluminum Corp. (a) 4,700 61,100
Pechiney SA (warrants) (a) 1,600 3
QNI Ltd. 79,200 165,770
Reynolds Metals Co. 8,000 453,000
Sherritt, Inc. 4,700 57,420
Wolverine Tube, Inc. (a) 1,200 45,000
1,883,569
PAPER & FOREST PRODUCTS - 0.1%
Albany International Corp. Class A 2,200 39,875
TOTAL BASIC INDUSTRIES 3,301,477
CONGLOMERATES - 0.5%
Harris Corp. 2,000 109,250
Mark IV Industries, Inc. 5,100 100,725
Textron, Inc. 200 13,500
223,475
CONSTRUCTION & REAL ESTATE - 1.9%
BUILDING MATERIALS - 0.3%
Kurimoto 2,000 20,309
Masco Corp. 200 6,275
Sherwin-Williams Co. 2,000 81,500
108,084
SHARES
CONSTRUCTION - 0.8%
American Buildings Co. (a) 2,000 $ 45,000
Castle & Cooke, Inc. 133 1,963
Daiwa House Industry Co. Ltd. 3,000 49,323
Daiwa House Industry Co. Ltd.
(warrants) (a) 200 75,000
Webb (Del E.) Corp. 7,800 156,975
328,261
REAL ESTATE INVESTMENT TRUSTS - 0.8%
CBL & Associates Properties, Inc. 500 10,875
CenterPoint Properties Corp. 600 13,875
Colonial Properties Trust (SBI) 400 10,200
Equity Residential Properties Trust (SBI) 1,600 49,000
Franchise Finance Corp. of America 1,600 36,200
Highwoods Properties, Inc. 300 8,475
LTC Properties, Inc. 2,400 36,000
Liberty Property Trust (SBI) 700 14,525
National Golf Properties, Inc. 1,800 41,175
Shurgard Storage Centers, Inc. 600 16,200
Sovran Self Storage, Inc. 300 7,913
Speiker Properties, Inc. 3,500 87,938
Starwood Lodging Trust combined
certificate (SBI) 500 14,875
Weeks Corp. 200 5,025
352,276
TOTAL CONSTRUCTION & REAL ESTATE 788,621
DURABLES - 1.8%
AUTOS, TIRES, & ACCESSORIES - 1.4%
Borg-Warner Automotive, Inc. 2,200 70,400
Chrysler Corp. 2,200 121,825
Dana Corp. 400 11,700
General Motors Corp. 1,800 95,175
Johnson Controls, Inc. 2,800 192,500
Snap-on Tools Corp. 2,100 95,025
586,625
HOME FURNISHINGS - 0.2%
Leggett & Platt, Inc. 1,900 46,075
Heilig-Meyers Co. 1,200 22,050
Herman Miller, Inc. 1,100 33,000
101,125
TEXTILES & APPAREL - 0.2%
Guilford Mills, Inc. 800 16,300
Kellwood Co. 1,200 24,450
Mohawk Industries, Inc. (a) 4,000 62,500
103,250
TOTAL DURABLES 791,000
ENERGY - 2.2%
ENERGY SERVICES - 0.8%
Nabors Industries, Inc. (a) 8,400 93,450
Newpark Resources, Inc. 1,100 24,475
Petroleum Helicopters, Inc. (non-vtg.) 1,200 17,100
Production Operators Corp. 1,300 42,900
Transocean Drilling AS (a) 3,750 64,722
Weatherford Enterra, Inc. (a) 3,600 103,950
346,597
OIL & GAS - 1.4%
Atlantic Richfield Co. 1,900 210,425
British Petroleum PLC ADR 14 1,430
Chieftain International, Inc. (a) 2,000 35,182
COMMON STOCKS - CONTINUED
SHARES
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Coastal Corp. (The) 3,400 $ 126,650
Kerr-McGee Corp. 100 6,350
Santa Fe Energy Resources, Inc. (a) 12,300 118,388
Wascana Energy, Inc. (a) 8,800 83,043
581,468
TOTAL ENERGY 928,065
FINANCE - 2.6%
BANKS - 0.4%
Fuji Bank 3,000 66,151
Sakura Bank Ltd. 6,000 76,015
142,166
INSURANCE - 1.1%
ACE Ltd. 4,300 170,925
Allmerica Financial Corp. 100 2,700
Capital RE Corp. 200 6,150
Liberty Corp. (The) 1,600 54,000
MMI Companies, Inc. 500 12,000
Old Republic International Corp. 2,100 74,550
USLIFE Corp. 5,500 164,313
484,638
SECURITIES INDUSTRY - 1.1%
Daiwa Securities Co. Ltd. 23,000 351,451
Kokusai Securities Co. Ltd. 2,000 31,915
New Japan Securities 5,000 32,205
Wako Securities 6,000 53,153
468,724
TOTAL FINANCE 1,095,528
HEALTH - 1.0%
DRUGS & PHARMACEUTICALS - 0.1%
Pharmacia & Upjohn, Inc. 580 22,475
MEDICAL EQUIPMENT & SUPPLIES - 0.3%
Advanced Technology
Laboratories, Inc. (a) 900 22,050
Bergen Brunswig Corp. Class A 3,300 82,088
Cardinal Health, Inc. 400 21,900
St. Jude Medical, Inc. (a) 600 25,800
151,838
MEDICAL FACILITIES MANAGEMENT - 0.6%
Foundation Health Corp. (a) 1,700 73,100
Integrated Health Services, Inc. 300 7,500
Summit Care Corp. (a) 700 16,013
Tenet Healthcare Corp. (a) 900 18,675
United HealthCare Corp. 2,100 137,550
252,838
TOTAL HEALTH 427,151
INDUSTRIAL MACHINERY & EQUIPMENT - 3.8%
ELECTRICAL EQUIPMENT - 1.6%
Allen Group, Inc. (The) 3,600 80,550
California Microwave Corp. (a) 1,700 28,263
Mitsubishi Electric Co. Ord. 20,000 143,714
Omron Corp. 19,000 437,331
689,858
INDUSTRIAL MACHINERY & EQUIPMENT - 1.9%
Allied Products Corp. 700 16,800
Caterpillar, Inc. 7,800 458,250
Dover Corp. 100 3,688
SHARES
FSI International, Inc. (a) 2,000 $ 40,500
IDEX Corp. 400 16,400
Parker-Hannifin Corp. 2,900 99,325
Timken Co. 2,800 107,100
Toro Co. 2,100 69,038
811,101
POLLUTION CONTROL - 0.3%
Browning-Ferris Industries, Inc. 4,500 132,750
Safety Kleen Corp. 300 4,688
137,438
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,638,397
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.1%
American Telecasting, Inc. (a) 2,500 36,250
CAI Wireless Systems, Inc. (a) 2,400 23,100
59,350
LEISURE DURABLES & TOYS - 0.6%
Brunswick Corp. 10,400 249,600
PUBLISHING - 0.1%
Banta Corp. 200 8,800
Belo (A.H.) Corp. Class A 900 31,275
40,075
TOTAL MEDIA & LEISURE 349,025
NONDURABLES - 1.5%
BEVERAGES - 0.5%
Anheuser-Busch Companies, Inc. 1,300 86,938
Brahma (Cia Cervejaria) PN Class B
(Pfd. Reg.) 111,600 45,929
Panamerican Beverages, Inc. Class A 2,500 80,000
212,867
FOODS - 0.1%
Chiquita Brands International, Inc. 3,000 41,250
Dole Food, Inc. 400 14,000
55,250
HOUSEHOLD PRODUCTS - 0.5%
First Brands Corp. 2,900 138,113
Stanhome, Inc. 2,200 64,075
202,188
TOBACCO - 0.4%
Philip Morris Companies, Inc. 1,500 135,750
RJR Nabisco Holdings Corp. 1,300 40,138
175,888
TOTAL NONDURABLES 646,193
PRECIOUS METALS - 1.4%
Barrick Gold Corp. 2,400 63,327
Coeur d'Alene Mines Corp. 1,900 32,538
Echo Bay Mines Ltd. 15,746 164,460
Free State Consolidated Gold Mines Ltd.:
ADR 3,500 25,375
Ord. 2,400 17,940
Hecla Mining Co. (a) 5,300 36,438
Pegasus Gold, Inc. (a) 6,900 96,090
Vaal Reefs Exploration & Mining Co.
Ltd. ADR 2,900 18,488
Western Mining Holdings Ltd. 24,400 156,584
611,240
COMMON STOCKS - CONTINUED
SHARES
RETAIL & WHOLESALE - 2.3%
DRUG STORES - 0.1%
Rite Aid Corp. 1,200 $ 41,100
GENERAL MERCHANDISE STORES - 0.5%
Consolidated Stores Corp. (a) 1,800 39,150
Ito-Yokado Co. Ltd. 2,000 123,017
Proffitts, Inc. (a) 1,500 39,375
201,542
GROCERY STORES - 0.3%
Vons Companies, Inc. (a) 5,000 141,250
RETAIL & WHOLESALE, MISCELLANEOUS - 1.4%
Duty Free International, Inc. 2,100 33,600
Fingerhut Companies, Inc. 5,600 77,700
Pier 1 Imports, Inc. 13,500 153,563
Tandy Corp. 3,800 157,700
Uny Co. Ltd. 6,000 112,573
Waban, Inc. (a) 3,700 69,375
604,511
TOTAL RETAIL & WHOLESALE 988,403
SERVICES - 0.4%
PRINTING - 0.2%
Deluxe Corp. 3,000 87,000
SERVICES - 0.2%
CDI Corp. (a) 2,000 36,000
Interim Services, Inc. (a) 1,000 34,750
70,750
TOTAL SERVICES 157,750
TECHNOLOGY - 4.9%
COMPUTER SERVICES & SOFTWARE - 1.6%
BancTec, Inc. (a) 5,900 109,150
Black Box Corp. (a) 2,000 32,750
ECI Telecom Ltd. 10,300 234,969
FTP Software, Inc. (a) 2,900 84,100
Landmark Graphics Corp. (a) 1,700 39,525
Policy Management Systems Corp. (a) 1,600 76,200
SunGard Data Systems, Inc. (a) 4,100 116,850
693,544
COMPUTERS & OFFICE EQUIPMENT - 1.7%
Canon, Inc. 15,000 271,277
Compaq Computer Corp. 1,400 67,200
Pitney Bowes, Inc. 1,800 84,600
Read Rite Corp. (a) 1,500 34,875
Ricoh Co. Ltd. Ord. 26,000 284,139
742,091
ELECTRONICS - 1.6%
AMP, Inc. 2,600 99,775
Nitto Denko Corp. 16,000 247,582
Nichicon Corp. 4,000 58,801
Rohm Co. Ltd. 4,000 225,532
Wako Electric Co. Ltd. 2,000 46,422
678,112
TOTAL TECHNOLOGY 2,113,747
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.2%
Alaska Air Group, Inc. (a) 1,400 22,750
Atlantic Southeast Airlines, Inc. 3,800 81,700
104,450
SHARES
RAILROADS - 0.5%
Illinois Central Corp., Series A 3,500 $ 134,313
Union Pacific Corp. 900 59,400
193,713
TOTAL TRANSPORTATION 298,163
UTILITIES - 4.3%
GAS - 0.1%
Aquila Gas Pipeline Corp. 1,600 20,600
Questar Corp. 600 20,100
40,700
TELEPHONE SERVICES - 4.2%
Ameritech Corp. 2,900 171,100
Bell Atlantic Corp. 14,700 983,063
Frontier Corp. 3,300 99,000
Pacific Telesis Group 6,400 215,200
Sprint Corp. 2,000 79,750
Telebras sponsored ADR 1,000 47,375
Telebras PN (Pfd. Reg.) 4,601,900 221,584
1,817,072
TOTAL UTILITIES 1,857,772
TOTAL COMMON STOCKS
(Cost $16,192,947) 16,666,289
PREFERRED STOCKS - 2.4%
CONVERTIBLE PREFERRED STOCKS - 2.4%
BASIC INDUSTRIES - 0.6%
METALS & MINING - 0.6%
Alumax, Inc., Series A, $4.00 1,100 141,350
Kaiser Aluminum Corp. $0.96 5,200 66,950
Reynolds Metals Co. $3.31 900 45,563
253,863
ENERGY - 1.4%
OIL & GAS - 1.4%
Occidental Petroleum Corp.
Indexed $3.00 8,200 509,425
Santa Fe Energy Resources, Inc. $.732 3,900 38,513
Unocal Corp. $3.50 (b) 1,300 70,200
618,138
FINANCE - 0.1%
SAVINGS & LOANS - 0.1%
Glendale Federal Bank,
Series E, $2.1875 700 31,675
NONDURABLES - 0.3%
TOBACCO - 0.3%
RJR Nabisco Holdings Corp.,
Series C, depositary shares
representing 1/10 pfd 22,800 145,350
TOTAL CONVERTIBLE PREFERRED STOCKS 1,049,026
PREFERRED STOCKS - CONTINUED
SHARES
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
FINANCE - 0.0%
SAVINGS & LOANS - 0.0%
Greater New York Savings Bank
Series B, perpetual 12% 231 $ 6,641
TOTAL PREFERRED STOCKS
(Cost $1,037,832) 1,055,667
CORPORATE BONDS - 6.0%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT
CONVERTIBLE BONDS - 2.6%
BASIC INDUSTRIES - 0.3%
METALS & MINING - 0.3%
Inco Ltd. 5 3/4%, 7/1/04 Baa $ 110,000 145,200
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Liberty Property exchangeable
8%, 7/1/01 - 31,000 31,814
ENERGY - 0.2%
OIL & GAS - 0.2%
Horsham Corp. 3 1/4%,
12/10/18 Ba2 75,000 69,375
FINANCE - 0.1%
CREDIT & OTHER FINANCE - 0.1%
Huntingdon International
Holdings PLC:
7 1/2%, 9/25/06 - 70,000 51,800
euro 7 1/2%, 9/25/06 - 5,000 3,850
55,650
RETAIL & WHOLESALE - 0.2%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.2%
Lowe's Companies, Inc. 3%,
7/22/03 A3 57,000 74,385
TECHNOLOGY - 1.5%
COMPUTERS & OFFICE EQUIPMENT - 0.9%
Acer, Inc. euro 4%, 6/10/01 - 50,000 145,000
Canon, Inc. 1.30%,
12/19/08 A JPY 18,000,000 221,083
366,083
ELECTRONICS - 0.6%
Nitto Denko Corp.
3.90%, 3/30/ 01 Baa JPY 13,000,000 160,803
United Microelectronics Corp.
euro 1 1/4%, 6/8/04 - 85,000 106,250
267,053
TOTAL TECHNOLOGY 633,136
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.2%
AMR Corp. 6 1/8%,
11/1/24 Ba2 76,000 78,850
TOTAL CONVERTIBLE BONDS 1,088,410
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - 3.4%
AEROSPACE & DEFENSE - 0.0%
Alliant Techsystems, Inc.
11 3/4%, 3/1/03 B2 $ 13,000 $ 14,365
BASIC INDUSTRIES - 0.0%
CHEMICALS & PLASTICS - 0.0%
NL Industries, Inc. 0%,
10/15/05 (c) B2 20,000 15,400
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Lear Seating Corp. 8 1/4%,
2/1/02 B2 40,000 39,200
ENERGY - 0.0%
OIL & GAS - 0.0%
Wainoco Oil Corp. 12%,
8/1/02 B1 10,000 9,675
FINANCE - 0.0%
INSURANCE - 0.0%
American Life Holdings
11 1/4%, 9/15/04 B1 4,000 4,200
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
Tenneco, Inc. 7 7/8%,
10/1/02 Baa 300,000 327,651
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Stratosphere Corp. 14 1/4%,
5/15/02 B2 10,000 11,300
NONDURABLES - 1.3%
FOODS - 1.2%
Chiquita Brands International, Inc.
9 5/8%, 1/15/04 B1 4,000 4,030
Nabisco, Inc. 6.70%, 6/15/02 Baa 250,000 254,223
Quaker Oats Co.:
9.05%, 12/15/03 A3 100,000 118,175
9.10%, 12/15/03 A3 100,000 118,486
494,914
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 15,000 15,375
Revlon Worldwide Corp.
secured 0%, 3/15/98 B3 20,000 14,825
30,200
TOTAL NONDURABLES 525,114
RETAIL & WHOLESALE - 0.3%
DRUG STORES - 0.1%
Thrifty Payless, Inc. 12 1/4%,
4/15/04 B3 27,000 28,755
GROCERY STORES - 0.2%
Pathmark Stores, Inc.
0%, 11/1/03 (c) B3 170,000 104,125
TOTAL RETAIL & WHOLESALE 132,880
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
US Air, Inc.:
9 5/8%, 2/1/01 B3 $ 2,000 $ 1,755
10%, 7/1/03 B3 10,000 8,750
10,505
UTILITIES - 0.9%
GAS - 0.9%
Columbia Gas System, Inc.
6.61%, 11/28/02 Baa 379,000 385,864
TOTAL NONCONVERTIBLE BONDS 1,476,154
TOTAL CORPORATE BONDS
(Cost $2,592,492) 2,564,564
U.S. TREASURY OBLIGATIONS - 38.5%
7 1/4%, 11/15/96 Aaa 196,000 199,246
6 1/2%, 5/15/97 Aaa 140,000 142,341
8 1/2%, 5/15/97 Aaa 1,390,000 1,449,506
5 7/8% 7/31/97 Aaa 868,000 876,680
7 3/4%, 12/31/99 Aaa 410,000 444,916
7 7/8%, 8/15/01 Aaa 500,000 558,435
8 1/8%, 8/15/19 Aaa 443,000 557,002
7 1/2%, 11/15/24 Aaa 2,105,000 2,530,273
7 5/8%, 2/15/25 Aaa 5,336,000 6,524,914
6 7/8%, 8/15/25 (e) Aaa 2,865,000 3,231,176
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $15,976,534) 16,514,489
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 2.1%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
7%, 10/15/23 to 12/15/25 Aaa 594,001 600,976
7%, 1/15/26 (d) Aaa 300,000 303,468
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $896,189) 904,444
REPURCHASE AGREEMENTS - 11.7%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 5,000,281 4,997,000
PURCHASED OPTIONS - 0.4%
EXPIRATION DATE/ UNDERLYING FACE VALUE
STRIKE PRICE AMOUNT AT VALUE (NOTE 1)
1,350,000 J. Aron and
Co. OTC Put Options March 96/
on Japanese Yen 93.10 $ 1,214,231 $ 124,355
400,000 Swiss Bank
Corp. OTC Put
Options on March 96/
Japanese Yen 93.58 361,627 34,250
250,000 Swiss Bank
Corp. OTC Put Options April 96/
on Japanese Yen 95.33 230,243 17,850
1,100,000 Goldman Sachs
and Co. Put Options
on U.S. Treasury
bonds, 6 7/8%, Jan. 96/
8/15/25 109.078125 1,239,117 688
1,100,000 Lehman
Brothers Put Options
on U.S. Treasury
bonds, 7 5/8%, Jan. 96/
2/15/25 118.125 1,342,330 258
TOTAL PURCHASED OPTIONS
(Cost $125,354) 177,401
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $41,818,348) $ 42,879,854
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
5 Midcap 400 Stock
Index Contracts March 96 $ 545,125 $ (6,869)
9 Nikkei 225 Stock
Index Contracts March 96 902,700 10,968
$ 4,099
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.4%
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
JPY - Japanese yen
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $70,200 or 0.2% of net
assets.
3. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
4. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
5. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $1,127,810.
6. Purchased on an installment basis. Market value reflects only those
payments made through December 31, 1995. The remaining installments
aggregating CAD 750,500 are due July 31, 1996 and January 31, 1997.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $69,250,761 and $31,038,604, respectively, of which U.S.
government and government agency obligations aggregated $33,672,341 and
$15,265,334, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms amounted to $12,251 for the
period (see Note 4 of Notes to Financial Statements).
The market value of futures contracts opened and closed during the period
amounted to $12,372,461 and $11,034,588, respectively.
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 41.9% AAA, AA, A 39.8%
Baa 3.0% BBB 2.6%
Ba 0.3% BB 0.2%
B 0.6% B 0.6%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.8%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 82.5%
Japan 9.7
Canada 3.3
Australia 1.3
Others (individually less than 1%) 3.2
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $41,832,392. Net unrealized appreciation aggregated
$1,047,462, of which $1,563,477 related to appreciated investment
securities and $516,015 related to depreciated investment securities.
The fund hereby designates $64,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
At December 31, 1995, the fund was required to defer $3,096 of losses on
futures contracts and options.
FIDELITY ADVISOR ANNUITY FUND: INCOME & GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $4,997,000) (cost $41,818,348) - See $ 42,879,854
accompanying schedule
Cash 695
Receivable for investments sold 698,218
Receivable for fund shares sold 732,800
Dividends receivable 30,912
Interest receivable 367,234
Receivable for daily variation on futures contracts 5,887
TOTAL ASSETS 44,715,600
LIABILITIES
Payable for investments purchased $ 1,199,097
Regular delivery
Delayed delivery 302,631
Accrued management fee 32,722
Other payables and accrued expenses 25,916
TOTAL LIABILITIES 1,560,366
NET ASSETS $ 43,155,234
Net Assets consist of:
Paid in capital $ 41,917,692
Undistributed net investment income 2,907
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 169,093
Net unrealized appreciation (depreciation) on investments 1,065,542
and assets and liabilities in
foreign currencies
NET ASSETS, for 3,863,221 shares outstanding $ 43,155,234
NET ASSET VALUE, offering price $11.17
and redemption price per share ($43,155,234 (divided by) 3,863,221 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
INVESTMENT INCOME $ 150,862
Dividends
Interest 586,460
TOTAL INCOME 737,322
EXPENSES
Management fee $ 75,801
Transfer agent fees 7,710
Accounting fees and expenses 46,084
Non-interested trustees' compensation 39
Custodian fees and expenses 67,718
Audit 19,316
Legal 38
Miscellaneous 22
Total expenses before reductions 216,728
Expense reductions (6,469 210,259
)
NET INVESTMENT INCOME 527,063
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 354,101
Foreign currency transactions (17,624
)
Futures contracts 105,853 442,330
Change in net unrealized appreciation (depreciation) on:
Investment securities 996,491
Assets and liabilities in foreign currencies 64,952
Futures contracts 4,099 1,065,542
NET GAIN (LOSS) 1,507,872
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,034,935
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
<CAPTION>
<S> <C>
Operations $ 527,063
Net investment income
Net realized gain (loss) 442,330
Change in net unrealized appreciation (depreciation) 1,065,542
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,034,935
Distributions to shareholders (507,432)
From net investment income
From net realized gain (289,961)
TOTAL DISTRIBUTIONS (797,393)
Share transactions 42,321,007
Net proceeds from sales of shares
Reinvestment of distributions 797,393
Cost of shares redeemed (1,200,708)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 41,917,692
TOTAL INCREASE (DECREASE) IN NET ASSETS 43,155,234
NET ASSETS
Beginning of period -
End of period (including undistributed net investment income of $2,907) $ 43,155,234
OTHER INFORMATION
Shares
Sold 3,901,795
Issued in reinvestment of distributions 71,902
Redeemed (110,476)
Net increase (decrease) 3,863,221
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SELECTED PER-SHARE DATA JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
<CAPTION>
<S> <C>
Net asset value, beginning of period $ 10.00
Income from Investment Operations
Net investment income .14
Net realized and unrealized gain (loss) 1.25
Total from investment operations 1.39
Less Distributions (.14)
From net investment income
From net realized gain (.08)
Total distributions (.22)
Net asset value, end of period $ 11.17
TOTAL RETURN B 13.92%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 43,155
Ratio of expenses to average net assets 1.42% A
Ratio of net investment income to average net assets 3.56%
Portfolio turnover rate 248%
A FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE
NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS). TOTAL
RETURN DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN SHOWN.
</TABLE>
FIDELITY ADVISOR ANNUITY FUND: GROWTH OPPORTUNITIES FUND
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells stocks
that have grown in value). If the advisor had not reimbursed certain fund
expenses the total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND
GROWTH OPPORTUNITIES 32.52%
S&P 500 37.56%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 3,
1995.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of growth in the long run and volatility
in the short run. In turn, the share price and return
of a fund that invests in stocks will vary. That
means if you sell your shares during a market
downturn, you might lose money. But if you can
ride out the market's ups and downs, you may
have a gain.
(checkmark)
You can compare the fund's return to the performance of the Standard &
Poor's Composite Index of 500 Stocks- a common proxy for the U.S. stock
market. This benchmark includes reinvested dividends and capital gains, if
any.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
FA Annuity Growth Opport SP Standard & Poor 500
01/03/95 10000.00 10000.00
01/31/95 10060.00 10258.23
02/28/95 10370.00 10658.00
03/31/95 10560.00 10972.51
04/30/95 10930.00 11295.66
05/31/95 11440.00 11747.14
06/30/95 11790.00 12020.03
07/31/95 12180.00 12418.61
08/31/95 12260.00 12449.78
09/30/95 12470.00 12975.16
10/31/95 12560.00 12928.84
11/30/95 12920.00 13496.42
12/29/95 13251.81 13756.36
Let's say you invested $10,000 in Growth Opportunities Fund on January 3,
1995, when the fund started. By December 31, 1995, your investment would
have grown to $13,252 - a 32.52% increase. That compares to $10,000
invested in the S&P 500, which would have grown to $13,756 over the same
period - a 37.56% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 6.1
General Motors Corp. 4.9
Federal National Mortgage Association 3.9
Compaq Computer Corp. 3.8
Fleet Financial Group, Inc. 2.9
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Finance 14.2
Technology 9.9
Durables 9.4
Nondurables 7.3
Utilities 7.0
ASSET ALLOCATION AS OF DECEMBER 31, 1995
Row: 1, Col: 1, Value: 1.5
Row: 1, Col: 2, Value: 10.7
Row: 1, Col: 3, Value: 16.5
Row: 1, Col: 4, Value: 50.7
Row: 1, Col: 5, Value: 20.6
Stocks 72.7%
Bonds 16.5%
Short-term investments 10.7%
Other investments
0.1%
FIDELITY ADVISOR ANNUITY FUND: GROWTH OPPORTUNITIES FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
George A. Vanderheiden, Portfolio Manager of Fidelity Advisor Annuity
Growth Opportunities Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. From the fund's inception on January 3, 1995 through December 31, 1995,
it lagged the S&P 500, which returned 37.56% during the period.
Q. HOW DO YOU EXPLAIN THE FUND'S PERFORMANCE DURING THE PAST SIX MONTHS?
A. The economy slowed down during 1995 and there was a change in leadership
in the second half. Technology, which performed spectacularly in the first
half, faltered in the second half. Consumer staples, health care and
interest-sensitive securities did well in the latter part of the year, as
investors became more concerned about a recession in 1996. My investment
approach over the past 15 years has been to try to identify and invest in
themes and trends early and stay with them as long as I feel comfortable.
When they become very extended, I begin to sell. Sometimes I may sell too
early and the stocks may continue to make spectacular gains, but I'm
willing to sacrifice that if bone-crushing declines are on the other side
of those gains.
Q. HOW HAS THIS STRATEGY WORKED IN THE PAST?
A. Very well. If the groups that were sold keep going up, the fund
underperforms. However, when the group corrects, I'm protected by being
either out of the sector entirely, or being underweighted. So while the
portfolio may not show some of the spectacular gains of other growth funds
this year, the risk level going into the inevitable correction is also
less.
Q. WHAT INVESTMENTS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund was modestly overweighted in technology and holdings in Intel,
Compaq, IBM, Microsoft, Solectron, Hewlett-Packard, Motorola and SCI
Systems helped the fund. Another important area was financial stocks, which
benefited from the decline in long-term interest rates. The
mortgage-related sector, including the fund's holdings of Fannie Mae and
Freddie Mac, was up 30% during the past 12 months. The banks, in which the
fund has important holdings in the regionals and money centers, were up in
excess of 30%. Aerospace and defense was also very strong with a gain of
47%. This group is represented by the fund's holdings in Boeing, Raytheon
and Loral. Philip Morris, the largest position in the fund, also had a good
year with a gain in excess of 36%.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. A couple. The healthcare sector and consumer staples - such as
McDonald's, Coca-Cola, and Johnson & Johnson - performed well during the
period, but were underweighted in the fund. On the other hand, the fund had
a relatively stronger weighting in some cyclical companies - particularly
in the retail and auto sectors - which underperformed during the period.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The two fundamental factors driving this bull market since it started in
October 1990 have been rising earnings and falling interest rates. Treasury
bonds were yielding 9% when this bull move started five years ago. At the
current level of 6.0%, I think yields still have room to move lower given
the sluggish domestic and international economies and the current low
inflation rates. This is bullish for equities, especially
interest-rate-sensitive stocks. The outlook for earnings, however, is not
as hopeful. The past five years have seen one of the strongest earnings
gains in the post World War II period. However, profit margins and return
on equity are back to record levels and industrial capacity is being added
so rapidly that it is forcing down operating rates. This means that profit
margins should contract and earnings growth should come to a screeching
halt by the first quarter of 1996. My opinion is that the economic slowdown
will last into the second quarter of 1996, the earnings slowdown will last
longer and that the market will show no net gain over the next six months.
I expect growth to resume in the second half of 1996. As always, remember
that it is a market of stocks rather than a stock market and all of our
resources at Fidelity are geared to finding and investing in the best
stocks for whatever market lies ahead.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing primarily in common
stocks with long-term growth potential
START DATE: January 3, 1995
SIZE: as of December 31, 1995, more than
$164 million
MANAGER: George Vanderheiden, since
January 1995; joined Fidelity in 1971
(checkmark)
FIDELITY ADVISOR ANNUITY FUND: GROWTH OPPORTUNITIES FUND
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 72.7%
SHARES
AEROSPACE & DEFENSE - 1.6%
AEROSPACE & DEFENSE - 0.5%
Boeing Co. 9,900 $ 775,905
C A E Industries Ltd. 5,700 43,345
819,250
DEFENSE ELECTRONICS - 1.1%
Loral Corp. 10,500 371,438
Raytheon Co. 29,100 1,374,964
1,746,402
TOTAL AEROSPACE & DEFENSE 2,565,652
BASIC INDUSTRIES - 2.6%
CHEMICALS & PLASTICS - 1.1%
Betz Laboratories, Inc. 1,700 69,700
du Pont (E.I.) de Nemours & Co. 3,900 272,513
Raychem Corp. 15,800 898,625
Union Carbide Corp. 12,600 472,500
1,713,338
IRON & STEEL - 0.1%
Nucor Corp. 3,900 222,788
METALS & MINING - 0.7%
Aluminum Co. of America 2,900 153,338
Reynolds Metals Co. 18,600 1,053,225
1,206,563
PACKAGING & CONTAINERS - 0.7%
Corning, Inc. 5,000 160,000
Owens-Illinois, Inc. (a) 70,200 1,017,900
1,177,900
TOTAL BASIC INDUSTRIES 4,320,589
CONSTRUCTION & REAL ESTATE - 1.0%
BUILDING MATERIALS - 0.3%
Armstrong World Industries, Inc. 3,200 198,400
Masco Corp. 6,200 194,525
Tecumseh Products Co. Class A 3,500 181,125
574,050
CONSTRUCTION - 0.3%
Centex Corp. 3,000 104,250
Daito Trust Construction 7,500 88,491
Kaufman & Broad Home Corp. 11,600 172,550
Ryland Group, Inc. 1,600 22,400
Schuler Homes, Inc. 3,600 28,125
Sekisui House Ltd. 8,000 102,128
517,944
ENGINEERING - 0.4%
Fluor Corp. 9,400 620,400
TOTAL CONSTRUCTION & REAL ESTATE 1,712,394
DURABLES - 9.4%
AUTOS, TIRES, & ACCESSORIES - 8.5%
Chrysler Corp. 55,400 3,067,775
Cummins Engine Co., Inc. 900 33,300
Dana Corp. 14,900 435,825
Discount Auto Parts, Inc. (a) 7,000 217,875
Federal-Mogul Corp. 11,400 223,725
General Motors Corp. 153,000 8,089,875
Gentex Corp. (a) 3,700 81,400
Magna International, Inc. Class A 35,900 1,545,883
Superior Industries International, Inc. 17,700 466,838
14,162,496
SHARES
CONSUMER ELECTRONICS - 0.5%
Black & Decker Corp. 2,300 $ 81,075
Matsushita Electric Industrial Co. Ltd. 14,000 227,466
Whirlpool Corp. 9,400 500,550
809,091
HOME FURNISHINGS - 0.1%
Haverty Furniture Companies, Inc. 10,000 138,750
TEXTILES & APPAREL - 0.3%
Burlington Industries, Inc. (a) 35,500 465,938
TOTAL DURABLES 15,576,275
ENERGY - 5.0%
ENERGY SERVICES - 0.3%
Baker Hughes, Inc. 6,300 153,563
Dresser Industries, Inc. 1,000 24,375
McDermott International, Inc. 6,700 147,400
Schlumberger Ltd. 3,200 221,600
546,938
OIL & GAS - 4.7%
Amerada Hess Corp. 8,800 466,400
Amoco Corp. 5,300 380,938
Apache Corp. 3,900 115,050
Atlantic Richfield Co. 5,100 564,825
British Petroleum PLC ADR 17,839 1,821,808
Burlington Resources, Inc. 21,700 851,725
Canada Occidental Petroleum Ltd. 9,100 298,478
Elf Aquitaine sponsored ADR 4,800 176,400
Kerr-McGee Corp. 6,300 400,050
Louisiana Land & Exploration Co. 20,600 883,225
Mobil Corp. 500 56,000
Noble Affiliates, Inc. 4,300 128,463
Pennzoil Co. 1,400 59,150
Santa Fe Energy Resources, Inc. (a) 15,400 148,225
Seagull Energy Corp. (a) 1,800 40,050
Texaco, Inc. 900 70,650
Tosco Corp. 14,500 552,813
Union Pacific Resources Group, Inc. 4,000 101,500
Unocal Corp. 18,100 527,163
7,642,913
TOTAL ENERGY 8,189,851
FINANCE - 14.2%
BANKS - 3.9%
Bank of Boston Corp. 1,700 78,625
Barnett Banks, Inc. 4,900 289,100
BayBanks, Inc. 1,500 147,375
Chemical Banking Corp. 4,300 252,625
First Interstate Bancorp 3,400 464,100
Fleet Financial Group, Inc. 116,182 4,734,417
NationsBank Corp. 2,500 174,063
State Street Boston Corp. 7,400 333,000
6,473,305
FEDERAL SPONSORED CREDIT - 5.4%
Federal Home Loan Mortgage Corporation 29,200 2,438,200
Federal National Mortgage Association 51,600 6,404,850
8,843,050
INSURANCE - 3.4%
Allmerica Financial Corp. 6,200 167,400
Allstate Corp. 48,159 1,980,539
American International Group, Inc. 14,300 1,322,750
CIGNA Corp. 1,200 123,900
COMMON STOCKS - CONTINUED
SHARES
FINANCE - CONTINUED
INSURANCE - CONTINUED
Chubb Corp. (The) 200 $ 19,350
General Re Corp. 7,800 1,209,000
GCR Holdings Ltd. (Cayman Islands) 2,400 54,000
Providian Corp. 6,900 281,175
Prudential Reinsurance Holdings, Inc. 2,100 49,088
Torchmark Corp. 8,000 362,000
5,569,202
SAVINGS & LOANS - 0.8%
Ahmanson (H.F.) & Co. 12,600 333,900
Golden West Financial Corp. 18,800 1,038,700
1,372,600
SECURITIES INDUSTRY - 0.7%
Merrill Lynch & Co., Inc. 1,100 56,100
Morgan Stanley Group, Inc. 1,700 137,063
Nomura Securities Co. Ltd. 33,000 718,085
United Asset Management Corp. 6,500 249,438
1,160,686
TOTAL FINANCE 23,418,843
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.7%
Allergan, Inc. 2,200 71,500
Carter-Wallace, Inc. 9,000 102,375
Pharmacia & Upjohn, Inc. 17,400 674,250
Schering-Plough Corp. 4,900 268,275
1,116,400
MEDICAL EQUIPMENT & SUPPLIES - 0.4%
Baxter International, Inc. 13,900 582,063
MEDICAL FACILITIES MANAGEMENT - 1.8%
American Medical Response (a) 8,400 273,000
Columbia/HCA Healthcare Corp. 54,300 2,755,725
3,028,725
TOTAL HEALTH 4,727,188
HOLDING COMPANIES - 0.2%
U.S. Industries, Inc. (a) 19,400 356,475
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
ELECTRICAL EQUIPMENT - 0.6%
Antec Corp. (a) 2,300 41,400
Emerson Electric Co. 1,900 155,325
General Electric Co. 8,000 576,000
Mitsubishi Electric Co. Ord. 4,000 28,743
Omron Corp. 4,000 92,070
Scientific-Atlanta, Inc. 10,200 153,000
1,046,538
INDUSTRIAL MACHINERY & EQUIPMENT - 1.2%
Caterpillar, Inc. 22,700 1,333,625
Deere & Co. 12,900 454,725
Exide Corp. 3,000 137,625
MSC Industrial Direct, Inc. 300 8,250
1,934,225
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,980,763
MEDIA & LEISURE - 2.1%
BROADCASTING - 0.0%
People's Choice TV Corp. (a) 1,500 28,500
SHARES
ENTERTAINMENT - 0.4%
Cedar Fair LP (depositary units) 1,000 $ 37,000
Royal Carribean Cruises Ltd. 27,000 594,000
631,000
LEISURE DURABLES & TOYS - 0.6%
Fleetwood Enterprises, Inc. 32,200 829,150
Outboard Marine Corp. 9,100 185,413
1,014,563
LODGING & GAMING - 0.5%
Circus Circus Enterprises, Inc. (a) 30,000 836,250
PUBLISHING - 0.0%
American Media, Inc. Class A 1,100 4,675
Knight-Ridder, Inc. 800 50,000
54,675
RESTAURANTS - 0.6%
Bertucci's, Inc. (a) 6,800 34,000
Brinker International, Inc. (a) 8,900 134,613
Darden Restaurants, Inc. 10,400 123,500
McDonald's Corp. 15,500 699,438
991,551
TOTAL MEDIA & LEISURE 3,556,539
NONDURABLES - 7.3%
BEVERAGES - 0.1%
Kirin Brewery Co. Ltd. 20,000 235,977
HOUSEHOLD PRODUCTS - 0.1%
Kao Corp. 12,000 148,549
TOBACCO - 7.1%
Philip Morris Companies, Inc. 112,300 10,163,150
RJR Nabisco Holdings Corp. 50,160 1,548,690
11,711,840
TOTAL NONDURABLES 12,096,366
PRECIOUS METALS - 0.2%
Homestake Mining Co. 3,000 46,875
Santa Fe Pacific Gold Corp. 18,300 221,888
268,763
RETAIL & WHOLESALE - 6.3%
APPAREL STORES - 0.2%
Limited, Inc. (The) 1,100 19,113
TJX Companies, Inc. 19,600 369,950
389,063
GENERAL MERCHANDISE STORES - 2.5%
Aoyama Trading Co. Ord. 6,400 204,255
Federated Department Stores, Inc. (a) 66,900 1,839,750
Value City Department Stores, Inc. (a) 5,500 37,125
Wal-Mart Stores, Inc. 96,800 2,165,900
4,247,030
GROCERY STORES - 0.1%
Stop & Shop Companies, Inc. (a) 4,200 97,125
RETAIL & WHOLESALE, MISCELLANEOUS - 3.5%
Circuit City Stores, Inc. 64,400 1,779,050
Good Guys, Inc. 9,100 81,900
Home Depot, Inc. (The) 37,400 1,790,525
Lowe's Companies, Inc. 23,900 800,650
Officemax, Inc. (a) 28,250 632,094
Office Depot, Inc. (a) 12,300 242,925
Petsmart, Inc. (a) 7,000 217,000
COMMON STOCKS - CONTINUED
SHARES
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Rex Stores Corp.(a) 6,400 $ 113,600
Staples, Inc. (a) 3,500 85,313
5,743,057
TOTAL RETAIL & WHOLESALE 10,476,275
SERVICES - 0.0%
ADVERTISING - 0.0%
CKS Group, Inc. 100 3,900
Interpublic Group of Companies, Inc. 500 21,688
25,588
SERVICES - 0.0%
Supercuts, Inc. (a) 3,800 30,400
TOTAL SERVICES 55,988
TECHNOLOGY - 9.9%
COMMUNICATIONS EQUIPMENT - 0.4%
Cisco Systems, Inc. (a) 8,300 619,388
General Instrument Corp. (a) 2,100 49,088
668,476
COMPUTER SERVICES & SOFTWARE - 0.7%
Automatic Data Processing, Inc. 11,600 430,650
DST Systems, Inc. (a) 1,000 28,500
General Motors Corp. Class E 1,300 67,600
Microsoft Corp. (a) 3,900 342,225
MicroAge, Inc. (a) 8,300 67,438
Policy Management Systems Corp. (a) 2,900 138,113
1,074,526
COMPUTERS & OFFICE EQUIPMENT - 6.4%
Bay Networks, Inc. (a) 4,650 191,231
Canon, Inc. 20,000 361,702
Compaq Computer Corp. (a) 132,000 6,336,000
Digital Equipment Corp. (a) 9,400 602,775
Hewlett-Packard Co. 8,200 686,750
International Business Machines Corp. 21,000 1,926,750
SCI Systems, Inc. (a) 100 3,100
Silicon Graphics, Inc. (a) 2,300 63,250
Tech Data Corp. (a) 22,700 340,500
Xerox Corp. 500 68,500
10,580,558
ELECTRONICS - 2.4%
Intel Corp. 39,300 2,230,275
Methode Electronics, Inc. Class A 22,200 316,350
Molex, Inc. 4,775 146,234
Nitto Denko Corp. 13,000 201,161
Solectron Corp. (a) 24,100 1,063,413
3,957,433
TOTAL TECHNOLOGY 16,280,993
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.1%
Southwest Airlines Co. 4,700 109,275
RAILROADS - 1.1%
Burlington Northern Santa Fe Corp. 13,700 1,068,600
CSX Corp. (a) 5,400 246,375
Southern Pacific Rail Corp. 22,187 532,488
1,847,463
SHARES
TRUCKING & FREIGHT - 0.0%
Roadway Services, Inc. 1,600 $ 78,200
TOTAL TRANSPORTATION 2,034,938
UTILITIES - 7.0%
CELLULAR - 2.8%
AirTouch Communications, Inc. 27,400 774,050
Vodafone Group PLC sponsored ADR (a) 109,800 3,870,450
4,644,500
ELECTRIC UTILITY - 0.0%
Southern Co. 2,900 71,413
TELEPHONE SERVICES - 4.2%
Ameritech Corp. 27,300 1,610,700
Bell Atlantic Corp. 13,200 882,750
BellSouth Corp. 24,200 1,052,700
NYNEX Corp. 18,800 1,015,200
SBC Communications, Inc. 31,600 1,817,000
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 16,200 516,375
6,894,725
TOTAL UTILITIES 11,610,638
TOTAL COMMON STOCKS
(Cost $111,446,717) 120,228,530
U.S. TREASURY OBLIGATIONS - 16.5%
PRINCIPAL
AMOUNT
8 1/8%, 8/15/19
(Cost $25,704,000) $ 21,674,000 27,251,587
REPURCHASE AGREEMENTS - 10.7%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 17,699,615 17,688,000
PURCHASED OPTIONS - 0.1%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
1,960,000 J. Aron and
Co. OTC Put Options
on Japanese Yen
(Cost $103,586) April 96/98.04 $ 1,856,424 102,508
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $154,942,303) $ 165,270,625
LEGEND
1. Non-income producing
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $154,276,515 and $18,580,629, respectively, of which U.S.
government and government agency obligations aggregated $28,009,480 and
$2,459,281, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms amounted to $40,458 for the
period (see Note 4 of Notes to Financial Statements).
The market value of futures contracts opened and closed during the period
amounted to $14,076,797 and $14,130,138, respectively.
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $154,980,257. Net unrealized appreciation
aggregated $10,290,368, of which $12,536,174 related to appreciated
investment securities and $2,245,806 related to depreciated investment
securities.
The fund hereby designates $32,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FIDELITY ADVISOR ANNUITY FUND: GROWTH OPPORTUNITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $17,688,000) (cost $154,942,303) - $ 165,270,625
See accompanying schedule
Cash 977
Receivable for investments sold 23,978
Receivable for fund shares sold 2,331,828
Dividends receivable 329,073
Interest receivable 660,380
TOTAL ASSETS 168,616,861
LIABILITIES
Payable for investments purchased $ 4,212,927
Accrued management fee 75,488
Other payables and accrued expenses 25,794
TOTAL LIABILITIES 4,314,209
NET ASSETS $ 164,302,652
Net Assets consist of:
Paid in capital $ 153,355,481
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 618,886
Net unrealized appreciation (depreciation) on investments 10,328,285
and assets and liabilities in
foreign currencies
NET ASSETS, for 12,568,860 shares outstanding $ 164,302,652
NET ASSET VALUE, offering price $13.07
and redemption price per share ($164,302,652 (divided by) 12,568,860 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
INVESTMENT INCOME $ 881,640
Dividends
Interest 808,633
TOTAL INCOME 1,690,273
EXPENSES
Management fee $ 311,959
Transfer agent fees 25,521
Accounting fees and expenses 52,050
Non-interested trustees' compensation 127
Custodian fees and expenses 44,362
Audit 17,413
Legal 117
Miscellaneous 12
Total expenses before reductions 451,561
Expense reductions (26,868 424,693
)
NET INVESTMENT INCOME 1,265,580
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,451,355
Foreign currency transactions (16,741
)
Futures contracts 53,341 1,487,955
Change in net unrealized appreciation (depreciation) on:
Investment securities 10,329,400
Assets and liabilities in (1,115 10,328,285
foreign currencies )
NET GAIN (LOSS) 11,816,240
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 13,081,820
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
<CAPTION>
<S> <C>
Operations $ 1,265,580
Net investment income
Net realized gain (loss) 1,487,955
Change in net unrealized appreciation (depreciation) 10,328,285
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 13,081,820
Distributions to shareholders (1,304,508)
From net investment income
From net realized gain (830,141)
TOTAL DISTRIBUTIONS (2,134,649)
Share transactions 152,442,844
Net proceeds from sales of shares
Reinvestment of distributions 2,134,649
Cost of shares redeemed (1,222,012)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 153,355,481
TOTAL INCREASE (DECREASE) IN NET ASSETS 164,302,652
NET ASSETS
Beginning of period -
End of period $ 164,302,652
OTHER INFORMATION
Shares
Sold 12,503,896
Issued in reinvestment of distributions 164,965
Redeemed (100,001)
Net increase (decrease) 12,568,860
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C>
Net asset value, beginning of period $ 10.00
Income from Investment Operations
Net investment income .11
Net realized and unrealized gain (loss) 3.14
Total from investment operations 3.25
Less Distributions (.11)
From net investment income
From net realized gain (.07)
Total distributions (.18)
Net asset value, end of period $ 13.07
TOTAL RETURN A 32.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 164,303
Ratio of expenses to average net assets .85% B
Ratio of expenses to average net assets after
expense reductions .83% C
Ratio of net investment income to average net assets 2.49%
Portfolio turnover rate 38%
A THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS). TOTAL
RETURN DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN SHOWN.
B FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER (SEE
NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
C FMR DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
</TABLE>
FIDELITY ADVISOR ANNUITY FUND: OVERSEAS FUND
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells stocks
that have grown in value). If the advisor had not reimbursed certain fund
expenses, the total return would be lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1995 LIFE OF
FUND
Overseas 10.20%
Morgan Stanley EAFE Index 11.20%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on January 3,
1995.
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.
(checkmark)
You can compare the fund's return to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australasia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
FA Annuity Overseas Fund MS EAFE Index
01/03/95 10000.00 10000.00
01/31/95 9920.00 9615.02
02/28/95 9930.00 9587.43
03/31/95 10230.00 10185.41
04/30/95 10460.00 10568.47
05/31/95 10470.00 10442.49
06/30/95 10610.00 10259.36
07/31/95 10960.00 10898.07
08/31/95 10670.00 10482.34
09/30/95 10790.00 10687.07
10/31/95 10580.00 10399.80
11/30/95 10710.00 10689.16
12/29/95 11020.16 11119.83
Let's say you invested $10,000 in Overseas Fund on January 3, 1995, when
the fund started. By December 31, 1995, your investment would have grown to
$11,020 - a 10.20% increase. That compares to $10,000 invested in the
Morgan Stanley EAFE Index, which would have grown to $11,120 over the same
period - an 11.20% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
C.S. Holdings (Reg.) 1.9
Unilever NV Ord. 1.3
Nomura Securities Co. Ltd. 1.2
ING Groep NV 1.1
Banco Bilbao Vizcaya SA Ord. (Reg.) 1.1
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Finance 24.7
Utilities 8.5
Nondurables 7.8
Durables 6.9
Technology 5.2
GEOGRAPHIC DIVERSIFICATION AS OF DECEMBER 31, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 20.2
United Kingdom 11.2
Switzerland 7.6
Netherlands 6.1
France 4.9
FIDELITY ADVISOR ANNUITY FUND: OVERSEAS FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Fidelity Advisor
Annuity Overseas Portfolio
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. Since inception, the fund's performance slightly trailed that of the
Morgan Stanley EAFE Index - a broad measure of stocks in Europe,
Australasia and the Far East. The index had a total return of 11.20% for
the period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. I think the main factor was that I thought the effects of slowing
economic growth on earnings estimates would have an impact on stock prices
somewhat before their effect was really felt. For example, I avoided
cyclical stocks - those that tend to rise and fall with the economy, such
as paper and forest product companies - but they didn't start to come down
until the fourth quarter. Instead, I focused the fund on what I would call
defensive stocks. These investments included Unilever, a consumer
nondurable stock that tends to post solid earnings regardless of the
economic climate, and financial investments such as ING, which generally
benefit from the interest rate declines we've seen during the year. These
stocks helped the fund, but not until the fourth quarter.
Q. LET'S TAKE A CLOSER LOOK AT HOW YOU POSITIONED THE FUND DURING THE PAST
YEAR.
A. Most of 1995 was frustrating because, historically, markets around the
world have shown a higher correlation to the U.S. market than we've seen
this year. In addition, foreign stock market performance generally did not
coincide with the strong performance seen in many bond markets. The
slowdown experienced by many economies led to lower interest rates, an
environment that generally is supportive for stock markets as well. That's
because lower rates can reduce companies' borrowing costs and make
alternatives to stock investing less attractive. Furthermore, the good
performance in several foreign markets was narrow, driven by the strength
of only a few stocks. Looking specifically at the fund, more investments
were in Japan than elsewhere - 20.2% at the end of the period - although
the fund held less there than is included in the EAFE index. This is a
market that struggled through most of the year, although it rebounded in
the fourth quarter. The Japanese banking sector performed well through the
first part of the year and in the fourth quarter. However, the fund didn't
participate, because its Japanese investments were focused on exporters;
companies with electronics or technology-oriented businesses, such as
Matsushita Electric, Hitachi and Omron; and financial stocks such as Nomura
Securities. In the second half of the year, though, some of these stocks
rebounded, because the yen started to weaken versus the dollar, making
these companies' products less expensive abroad.
Q. YOU ALSO INVESTED A FAIR AMOUNT IN THE UNITED KINGDOM . . .
A. That's right, 11.2%, about as much as is included in the EAFE Index.
This has been one of the best performing markets outside of the U.S., led,
for the most part, by financial stocks including Barclays and National
Westminster Bank. In the early part of 1995, a number of consumer
nondurable stocks helped the fund, including brewers Bass and Whitbread.
Q. LET'S TURN TO EMERGING MARKETS . . .
A. I started adding some emerging market stocks in May, including Mexican
banks as well as investments in Brazil, Chile and Southeast Asia. One stock
that turned in a very good performance was Sampoerna, an Indonesian
cigarette company. One of the main reasons I owned this stock and Matahari,
an Indonesian retailer, was that the standard of living for many
Indonesians has been on the rise. With wages and disposable income growing,
demand for items such as cigarettes, beer, toothpaste and clothing has been
increasing. The fund's investments in Unilever and Nestle also gave it some
exposure to this growth in consumer nondurable spending in emerging
markets.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. At the end of the year, overseas markets started to catch up to the U.S.
market. Investors have started to become more actively interested in
opportunities abroad, attracted by, among other things, cheap stock
valuations. Prospects for foreign markets seem to be improving, in absolute
terms and relative to the U.S. After the mixed performance we've seen from
international markets over the past few years, a contrarian investor might
become more interested in foreign markets from a risk/reward perspective.
I'm hoping we'll see some signs of a rebound in overseas markets, with
investors finding better buys abroad than domestically.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in
Europe, the Far East, and the Pacific Basin
START DATE: January 3, 1995
SIZE: as of December 31, 1995, more than
$17 million
MANAGER: John Hickling, since January 1995;
joined Fidelity in 1982
(checkmark)
FIDELITY ADVISOR ANNUITY FUND: OVERSEAS FUND
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 81.4%
SHARES
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 500 $ 10,313
Perez Companc Class B 4,000 21,197
Telecom Argentina:
Class B sponsored ADR 1,500 71,438
Stet France Telecom SA 1,300 6,174
YPF Sociedad Anonima sponsored ADR
representing Class D shares 2,000 43,250
152,372
AUSTRALIA - 2.1%
Amcor Ltd. 2,500 17,640
Brambles Industries Ltd. 3,900 43,451
FAI Insurance Ltd. Ord. 26,000 14,097
Fosters Brewing Group Ltd. 10,600 17,400
Lend Lease Corp. Ltd. 1,400 20,277
Pioneer International Ltd. 7,000 18,041
Qantas Airways Ltd. sponsored
ADR (b) 200 3,350
TNT Ltd. 14,100 18,642
Western Mining Holdings Ltd. 6,300 40,429
Westpac Banking Corp. 38,100 168,661
Woolworths Ltd. 12,200 29,359
391,347
AUSTRIA - 0.4%
EVN (Energie-Versor Nieder) 200 27,405
VA Technologie AG 300 37,992
65,397
BELGIUM - 1.3%
Bekaert SA 165 135,931
Delhaize Freres & Cie Le Lion SA 1,850 76,814
Petrofina SA 100 30,718
243,463
BERMUDA - 0.0%
Consolidated Electric Power Asia Ltd.
sponsored ADR (b) 300 5,288
BRAZIL - 0.7%
Brahma (Cia Cervejaria) PN
Class B (Pfd. Reg.) 41,400 17,038
Coteminas PN 30,000 10,031
Telebras sponsored ADR 1,000 47,375
Telebras PN (Pfd. Reg.) 1,021,600 49,191
123,635
CANADA - 0.4%
Midland Walwyn, Inc. 3,200 20,523
Noranda, Inc. 2,300 47,413
67,936
CHILE - 0.3%
Santa Isabel SA sponsored ADR 1,300 31,200
Vina Concha Stet y Toro SA
sponsored ADR 1,200 21,600
52,800
FINLAND - 0.7%
Cultor OY, Series 1 900 37,138
Pohjola Class B 4,600 59,054
Valmet OY Class A 1,000 24,988
121,180
SHARES
FRANCE - 4.9%
Accor SA 890 $ 115,003
Alcatel Alsthom Cie Generale
d'Electricite SA 1,100 94,654
Axa SA 2,108 141,779
Club Mediterranee SA Ord. 400 31,876
Compagnie Bancaire Ord. 910 101,637
Elf Aquitaine 200 14,707
Generale des Eaux 805 80,213
IMETAL SA Ord. 500 59,615
Lafarge Coppee SA 630 40,511
Michelin SA Cie Generale
des Etablissements Class B 1,700 67,667
Total SA Class B 1,970 132,698
Vallourec SA 800 28,371
908,731
GERMANY - 4.0%
Asko 50 26,078
Bayer AG 200 52,643
Bayerische Vereinsbank AG Ord. 1,400 41,474
Continental Gummi-Werke AG 3,400 47,288
Daimler-Benz AG Ord. 100 50,209
Deutsche Bank AG 3,700 174,888
Hoechst AG Ord. 150 40,577
Kaufhof Holding AG 230 69,896
Mannesmann AG Ord. 200 63,519
Metallgesellschaft AG Ord. 2,500 54,590
Veba AG Ord. 1,900 80,466
Volkswagen AG 100 33,352
734,980
HONG KONG - 2.9%
Amoy Properties Ltd. 30,000 29,874
Consolidated Electric Power Asia Ltd. 20,200 36,704
Dickson Concepts International Ltd. 36,000 33,521
Great Eagle Holdings Ltd. 12,000 31,038
HSBC Holdings PLC 11,100 167,953
Hong Kong Telecommunications Ltd. 26,800 47,829
Hong Kong Land Holdings Ltd. 36,000 66,600
Hopewell Holdings Ltd. 47,000 27,048
Hysan Development Co. Ltd. 20,000 52,894
Peregrine Investments Holdings Ltd. 20,000 25,865
Sun Hung Kai Properties Ltd. 2,000 16,360
535,686
INDIA - 0.1%
Reliance Industries Ltd. GDS 1,200 16,056
INDONESIA - 1.6%
Astra International PT (For. Reg.) 19,500 40,510
Bank International Indonesia PT Ord. 11,000 36,442
Bank Niaga PT 7,000 13,930
Gudang Garam PT Perusahaan 4,000 41,811
Jakarta International Hotels &
Development Ord. 22,000 26,941
Matahari Putra Prima PT (For. Reg.) 12,000 21,124
Sampoerna Hanjaya Mandala
(For. Reg.) 9,500 98,885
Semen Gresik (For. Reg.) 4,500 12,596
292,239
COMMON STOCKS - CONTINUED
SHARES
IRELAND - 0.9%
Bank of Ireland 12,800 $ 93,293
Fyffes PLC 18,300 29,230
Independent Newspapers PLC 6,800 41,126
163,649
ITALY - 1.6%
Assicurazioni Generali Spa 2,700 65,305
Benetton Group Spa 1,900 22,503
Bulgari Spa 1,700 14,500
Fiat Spa 5,600 18,165
Istituto Mobiliare Italiano 4,000 25,189
Istituto Nazionale Delle
Assicurazioni Spa 14,700 19,486
Italgas Spa 7,500 22,831
Magneti Marelli Spa 14,300 17,209
Montedison Spa Ord. 16,200 10,854
Olivetti Ing C & Co. Spa Ord. 59,500 48,110
SAI (Sta Assieuratrice Industriale) Spa 3,200 32,675
296,827
JAPAN - 20.2%
ADO Electronic Industrial Co. Ltd. 1,000 25,629
Aida Engineering Ltd. Ord. 4,000 30,638
Amada Metrecs Co. Ltd. 1,000 15,957
Amadasonoike Co. Ltd. 4,000 25,648
Amway Japan Ltd. 1,500 63,250
Aoyama Trading Co. Ord. 1,500 47,872
Bridgestone Corp. 5,000 79,304
Canon, Inc. 7,000 126,596
Citizen Watch Co. Ltd. Ord. 7,000 53,482
Daiwa House Industry Co. Ltd. 3,000 49,323
East Japan Railway Co. Ord. 9 43,694
Fanuc Ltd. 1,200 51,876
Fuji Bank 2,000 44,101
Fuji Photo Film Co. Ltd. 4,000 115,280
Fujitsu Ltd. 5,000 55,609
Futaba Industrial Co. Ltd. 2,000 32,689
Hanshin Department Store Ltd. 1,000 7,689
Hitachi Ltd. 16,000 160,928
Honda Motor Co. Ltd. 8,000 164,797
Izumi Co. Ord. 2,000 44,101
Ishihara Sangyo Kaisha Ltd. 4,000 12,959
Isetan Co. Ltd. 4,000 65,764
Japan Airlines Co. Ltd. 5,000 33,124
Kao Corp. 2,000 24,758
Kobe Steel 15,000 46,277
Komatsu Ltd. Ord. 5,000 41,103
Marubeni Corp. 5,000 27,031
Matsushita Electric Industrial Co. Ltd. 3,000 48,743
Minebea Co. Ltd. 7,000 58,627
Mitsubishi Estate Co. Ltd. 3,000 37,427
Mitsubishi Heavy Industries Ltd. 7,000 55,716
Mitsubishi Trust & Banking Corp. 3,000 49,903
Mitsui Trust and Banking 6,000 65,571
Mitsukoshi Ltd. 4,000 37,524
Murata Manufacturing Co. Ltd. 2,000 73,501
Nikko Securities Co. Ltd. 7,000 90,039
Nichido Fire & Marine Insurance Co. Ltd. 8,000 64,217
Nintendo Co. Ltd. Ord. 1,000 75,919
Nissan Motor Co. Ltd. Ord. 7,000 53,685
Nitto Denko Corp. 1,000 15,474
Nomura Securities Co. Ltd. 10,000 217,602
Omron Corp. 2,000 46,035
SHARES
Onward Kashiyama & Co. Ltd. 4,000 $ 64,990Orix Corp. 3,000 123,308
Rohm Co. Ltd. 1,000 56,383
Sakura Bank Ltd. 3,000 38,008
Sankyo Co. Ltd. 1,000 22,437
Seino Transpotation Co. Ltd. 2,000 33,462
Sekisui Chemical Co. Ltd. 5,000 73,501
Sony Corp. 1,900 113,743
Sumitomo Marine and Fire
Insurance Co. Ltd. 5,000 41,006
Sumitomo Realty & Development Co. Ltd. 9,000 63,540
Sumitomo Trust & Banking Co. Ltd. 4,000 56,480
TDK Corp. 1,000 50,967
Takashimaya Co. Ltd. 4,000 63,830
Takeda Chemical Industries Ltd. 7,000 115,087
Tokio Marine & Fire
Insurance Co. Ltd. (The) 14,000 182,785
Toshiba Corp. 8,000 62,592
Toyota Motor Corp. 1,000 21,180
Tsugami Corp. 2,000 11,141
Uny Co. Ltd. 1,000 18,762
Yamanouchi Pharmaceutical Co. Ltd. 1,000 21,470
3,714,134
KOREA (SOUTH) - 0.6%
Cho Hung Bank Co. Ltd. 400 5,033
Korea Electric Power Corp. 2,100 90,131
Kyungki Bank 1,200 11,756
Seoul Securities Co. 800 9,694
116,614
MEXICO - 1.2%
Banacci SA de CV:
Class B 6,000 10,074
Class L 50 74
Cemex SA, Series B 16,000 58,220
Cifra SA Class C 24,000 24,327
Empresas Ica Sociedad Controladora
SA de CV sponsored ADR
representing Ord.
(participation certificates) 3,500 35,875
Grupo Carso SA de CV Class A-1 (a) 3,000 16,218
Grupo Financiero Bancomer SA de CV:
Class B 85,000 23,749
sponsored ADR, Series C (b) 800 4,400
Series L 2,222 578
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 1,700 54,188
227,703
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD 2,000 2,292
Magnum Corp. BHD 7,000 13,234
Malayan Banking BHD 2,000 16,857
Resorts World BHD 6,000 32,139
Tenega Nasional BHD 4,000 15,754
Time Engineering BHD 1,000 2,324
Telekom Malaysia BHD 11,000 85,782
168,382
NETHERLANDS - 6.1%
ABN-AMRO Holdings NV 600 27,276
AKZO NV 1,400 161,592
IHC Caland NV 1,700 57,090
ING Groep NV 3,112 207,467
COMMON STOCKS - CONTINUED
SHARES
NETHERLANDS - CONTINUED
KLM Royal Dutch Airlines Ord. 1,536 $ 53,875
Koninklijke PPT Nederland 2,800 101,517
Oce Van der Grinten NV 2,200 133,532
Pirelli Tyre Holdings NV Ord. 6,900 60,075
Royal Dutch Petroleum Co. Ord. 390 54,086
Unilever NV Ord. 1,690 236,999
Vendex International NV 1,000 29,664
1,123,173
NORWAY - 1.6%
Bergesen Group:
Class A 100 1,986
Class B 3,400 66,452
Christiania Bank Free shares Ord. 18,100 41,938
Den Norske Bank Class A Free shares 12,300 31,795
Norsk Hydro AS 1,100 46,119Orkla AS Class B (non-vtg.) 700 33,321
Saga Petroleum AS Class B 3,300 41,091
Unitor AS 2,200 30,168
292,870
PAKISTAN - 0.0%
Hub Power Co. Ltd. GDR 300 5,220
PHILIPPINES - 0.2%
Philippine Long Distance Telephone Co.
sponsored ADR 600 32,475
POLAND - 0.1%
Bank Gdanski SA GDR (b) 1,200 11,676
SINGAPORE - 0.4%
Kim Engineering Holdings Ltd. 31,000 28,495
Overseas Union Bank Ltd. (Reg.) 4,000 27,575
Van Der Horst Ltd. 2,000 10,111
66,181
SPAIN - 4.7%
Banco Bilbao Vizcaya SA Ord. (Reg.) 5,500 197,486
Banco de Santander SA Ord. (Reg.) 700 35,027
Banco Intercontinental Espanol 800 77,565
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 2,600 145,056
Repsol SA Ord. 1,600 52,258
Tabacalera SA, Series A 3,000 113,389
Telefonica de Espana SA Ord. 13,800 190,493
Union Electrica Fenosa SA 10,300 61,781
873,055
SWEDEN - 2.6%
Investor AB Class B Free shares 3,800 125,051
Mo Och Domsjoe AB Class B 300 12,758
SKF AB Ord. 1,500 28,626
Skandia Foersaekrings AB 800 21,578
Skandinaviska Enskilda Banken
Class A Free shares 12,400 102,481
Volvo AB Class B 8,800 179,837
470,331
SWITZERLAND - 7.6%
Adia SA (Bearer) 265 43,172
Alusuisse-Lonza Holding AG (Reg.) 175 138,605
Baloise Holding (Reg.) 55 114,385
CIBA-GEIGY AG (Reg.) 222 195,260
C.S. Holdings (Reg.) 3,385 346,860
Nestle SA (Reg.) 156 172,492
SHARES
Roche Holdings Ltd.
(participation certificates) 22 $ 173,960
Surveillance, Societe Generale (Bearer) 13 25,797
Swiss Bank Corp. (Bearer) 459 187,339
1,397,870
THAILAND - 1.2%
Bank of Asia PCL (For. Reg.) 1,800 4,145
Krung Thai Bank:
(For. Reg.) 16,810 69,402 (Loc. Reg.) 2,100 8,670
Phatra Thanakit PCL (For. Reg.) 200 1,715
Ruam Pattana Fund II (For. Reg.) 18,100 10,958
Ruang Khao Unit Trust (For. Reg.) 17,700 10,540
Siam City Bank PCL:
(For. Reg.) 82,800 95,324
(Loc. Reg.) 5,200 5,212
Telecomasia Corp. PCL (For. Reg.) 5,500 16,703
222,669
TURKEY - 0.1%
Aksigorta 2,625 209
Tofas Turk Otomobil Fabrikasi AS 128,000 12,682
12,891
UNITED KINGDOM - 11.2%
Allied Lyons PLC 4,300 34,941
Argyll Group PLC Ord. 3,200 16,872
BTR PLC Ord. 6,600 33,571
Barclays PLC Ord. 2,000 22,889
Barratt Developments PLC 14,800 56,574
Bass PLC Ord. 7,900 88,023
Berkeley Group PLC 7,400 57,722
Booker PLC 4,000 22,517
Boots Co. PLC (The) 3,800 34,355
British Airways PLC Ord. 7,000 50,585
British Land Ord. 4,433 26,192
Burmah Oil 1,209 17,502
Cable & Wireless PLC Ord. 4,500 32,170
Cadbury-Schweppes PLC Ord. 14,100 116,216
Christies International PLC 600 1,945
De la Rue PLC 3,200 32,305
Dixons Group PLC 13,400 92,263
Glaxo Holdings PLC 5,200 73,785
Grand Metropolitan PLC 16,200 116,441
Great Universal Stores PLC Ord.
Class A 5,100 54,136
Guinness PLC Ord. 17,200 126,296
Hanson Trust PLC Ord. 4,900 14,589
Lloyds Abbey Life PLC 8,000 55,827
Lloyds TSB Group PLC 6,760 34,751
MFI Furniture Group PLC 16,300 40,444
Mirror Group Newspaper PLC 20,500 55,951
National Westminster Bank PLC Ord. 11,400 114,645
North West Water Group PLC Ord. 5,600 53,495
Prudential Corp. PLC 9,200 59,136
Reuters Holdings PLC Ord. 5,000 45,708
Rolls Royce PLC Ord. 11,600 33,819
Royal Insurance Holdings PLC 14,600 86,375
Scottish Power PLC ADR 13,400 76,886
Scottish Hydro-Electric PLC Ord. 10,600 59,094
South West Water PLC Ord. 5,300 42,656
Telegraph (The) PLC 6,000 38,614
Unigate Ltd. Ord. 4,100 26,100
Vodafone Group PLC 14,025 50,241
COMMON STOCKS - CONTINUED
SHARES
UNITED KINGDOM - CONTINUED
Whitbread Co. PLC Class A 3,600 $ 37,990
Wickes PLC 8,800 16,921
2,050,542
TOTAL COMMON STOCKS
(Cost $14,356,030) 14,957,372
NONCONVERTIBLE PREFERRED STOCKS - 1.6%
AUSTRIA - 0.3%
Creditanstalt Bankverein 1,200 61,499
GERMANY - 0.3%
Porsche AG Ord. 100 52,017
ITALY - 1.0%
Fiat Spa 11,000 20,054
SAI (Sta Assicuratrice Industriale) Spa 7,100 29,478
Stet (Societa Finanziaria Telefonica) Spa 64,000 130,406
179,938
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $304,590) 293,454
REPURCHASE AGREEMENTS - 17.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.91%
dated 12/29/95 due 1/2/96 $ 3,135,057 3,133,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $17,793,620) $ 18,383,826
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $24,714 or 0.1% of net
assets.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $17,030,560 and $2,323,641, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms amounted to $1,311 for the
period (see Note 4 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $17,797,647. Net unrealized appreciation aggregated
$586,179, of which $934,290 related to appreciated investment securities
and $348,111 related to depreciated investment securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $42,000, all of which will expire on December 31, 2003.
MARKET SECTOR DIVERSIFICATION
As a Percentage of Total Value of Investment in Securities
Aerospace & Defense 0.2%
Basic Industries 5.1
Conglomerates 0.2
Construction & Real Estate 4.3
Durables 6.9
Energy 2.8
Finance 24.7
Health 3.3
Holding Companies 0.2
Industrial Machinery & Equipment 2.8
Media & Leisure 2.3
Nondurables 7.8
Precious Metals 0.2
Retail & Wholesale 5.0
Services 1.6
Repurchase Agreements 17.0
Technology 5.2
Transportation 1.9
Utilities 8.5
100.0%
FIDELITY ADVISOR ANNUITY FUND: OVERSEAS FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $3,133,000) (cost $17,793,620) - See $ 18,383,826
accompanying schedule
Cash 441
Receivable for investments sold 79,784
Receivable for fund shares sold 194,296
Dividends receivable 20,295
TOTAL ASSETS 18,678,642
LIABILITIES
Payable for investments purchased $ 1,054,061
Accrued management fee 2,037
Other payables and accrued expenses 27,652
TOTAL LIABILITIES 1,083,750
NET ASSETS $ 17,594,892
Net Assets consist of:
Paid in capital $ 17,065,329
Distributions in excess of net investment income (14,210
)
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (46,332
)
Net unrealized appreciation (depreciation) on investments 590,105
and assets and liabilities in
foreign currencies
NET ASSETS, for 1,605,868 shares outstanding $ 17,594,892
NET ASSET VALUE, offering price $10.96
and redemption price per share ($17,594,892 (divided by) 1,605,868 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
INVESTMENT INCOME $ 97,300
Dividends
Interest 87,668
184,968
Less foreign taxes withheld (12,193
)
TOTAL INCOME 172,775
EXPENSES
Management fee $ 48,214
Transfer agent fees 3,442
Accounting fees and expenses 44,824
Non-interested trustees' compensation 18
Custodian fees and expenses 68,609
Audit 18,228
Legal 18
Miscellaneous 24
Total expenses before reductions 183,377
Expense reductions (88,472 94,905
)
NET INVESTMENT INCOME 77,870
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (46,299
)
Foreign currency transactions (1,090 (47,389
) )
Change in net unrealized appreciation (depreciation) on:
Investment securities 590,206
Assets and liabilities in foreign currencies (101 590,105
)
NET GAIN (LOSS) 542,716
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 620,586
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS JANUARY 3, 1995
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
<CAPTION>
<S> <C>
Operations $ 77,870
Net investment income
Net realized gain (loss) (47,389)
Change in net unrealized appreciation (depreciation) 590,105
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 620,586
Distributions to shareholders (77,870)
From net investment income
In excess of net investment income (13,153)
TOTAL DISTRIBUTIONS (91,023)
Share transactions 17,966,550
Net proceeds from sales of shares
Reinvestment of distributions 91,023
Cost of shares redeemed (992,244)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 17,065,329
TOTAL INCREASE (DECREASE) IN NET ASSETS 17,594,892
NET ASSETS
Beginning of period -
End of period (including distributions in excess of net investment income of $14,210) $ 17,594,892
OTHER INFORMATION
Shares
Sold 1,690,464
Issued in reinvestment of distributions 8,327
Redeemed (92,923)
Net increase (decrease) 1,605,868
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SELECTED PER-SHARE DATA JANUARY 3, 1995
(COMMENCEMENT
OF
OPERATIONS) TO
DECEMBER 31,
1995
<TABLE>
<CAPTION>
<S> <C>
Net asset value, beginning of period $ 10.00
Income from Investment Operations
Net investment income .05
Net realized and unrealized gain (loss) .97
Total from investment operations 1.02
Less Distributions (.05)
From net investment income
In excess of net investment income (.01)
Total distributions (.06)
Net asset value, end of period $ 10.96
TOTAL RETURN B 10.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 17,595
Ratio of expenses to average net assets 1.50% A
Ratio of net investment income to average net assets 1.23%
Portfolio turnover rate 43%
A FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS). TOTAL RETURN
DOES NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL
RETURN SHOWN.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Fund, Government Investment Fund, High Yield Fund, Income
& Growth Fund, Growth Opportunities Fund and Overseas Fund (the funds) are
funds of Fidelity Advisor Annuity Fund (the trust). 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. Each fund is authorized to issue an unlimited number of
shares. Shares of each fund may be purchased only by certain separate
accounts of Nationwide Life Insurance Company to serve as the underlying
investment vehicles for variable annuity policies issued by Nationwide Life
Insurance Company. The following summarizes the significant accounting
policies of the funds:
SECURITY VALUATION:
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
GOVERNMENT INVESTMENT FUND AND HIGH YIELD FUND. Securities are valued based
upon a computerized matrix system and/or appraisals by a pricing service,
both of which consider market transactions and dealer-supplied valuations.
Short-term securities maturing within sixty days of their purchase date are
valued either at amortized cost or original cost plus accrued interest,
both of which approximate current value. Securities for which quotations
are not readily available through the pricing service are valued at their
fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
INCOME & GROWTH FUND AND GROWTH OPPORTUNITIES FUND. Securities for which
exchange quotations are readily available are valued at the last sale
price, or if no sale price, at the closing bid price. Securities for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
OVERSEAS FUND. Securities for which quotations are readily available are
valued at the last sale price, or if no sale price, at the closing bid
price in the principal market in which such securities are normally traded.
Securities for which quotations are not readily available are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts and foreign currency options, disposition of foreign currencies,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of net
investment income accrued and the U.S. dollar amount actually received. The
effects of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or loss
on investment securities.
INCOME TAXES. Each fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. By so qualifying,
each fund will not be subject to income taxes to the extent that it
distributes substantially all of its taxable income for the fiscal year.
The schedules of investments include information regarding income taxes
under the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET FUND. Interest income, which includes amortization of premium
and accretion of discount, is accrued as earned.
GOVERNMENT INVESTMENT, HIGH YIELD, INCOME & GROWTH, GROWTH OPPORTUNITIES,
AND OVERSEAS FUNDS. 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 funds are informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Fund. Distributions
are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
may result in distribution reclassifications, are primarily due to
differing treatments for paydown gains/losses on certain securities,
futures and options transactions, foreign currency transactions, passive
foreign investment companies (PFICs), defaulted bonds, market discount,
capital loss carryforwards and losses deferred due to wash sales, futures
and options, and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income,
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 which
will reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. Each fund, except the Money Market
Fund, may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the fund's currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the fund's investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying U.S. Treasury or Federal Agency
securities, the market value of which is required to be at least equal to
the repurchase price. For term repurchase agreement transactions, the
underlying securities are marked-to-market daily and maintained at a value
at least equal to the repurchase price. FMR, the funds' investment adviser,
is responsible for determining that the value of the underlying securities
remains in accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. Each fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. Each fund, except for the Money Market Fund,
may use futures and options contracts to manage its exposure to the stock
and bond markets and to fluctuations in interest rates and currency values.
Buying futures, writing puts, and buying calls tend to increase the fund's
exposure to the underlying instrument. Selling futures, buying puts, and
writing calls tend to decrease the fund's exposure to the underlying
instrument, or hedge other fund investments. Futures contracts involve, to
varying degrees, risk of loss in excess of the futures variation margin
reflected in the Statement of Assets and Liabilities. The underlying face
amount at value of any open futures contracts at period end, is shown in
the schedule of investments under the caption "Futures Contracts." 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.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities) is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
For the Money Market Fund, FMR receives a monthly fee that is calculated on
the basis of a basic fund fee rate of .03% of the fund's average net
assets, plus a fixed income group fee rate and an income based fee. The
group fee rate is the weighted average of a series of rates ranging from
.1200% to .3700% and is based on the monthly average net assets of all the
mutual funds advised by FMR. The income-based fee is added only when the
fund's gross yield exceeds 5%. At that time the income-based fee would
equal 6% of that portion of the fund's gross income that represents a gross
yield of more than 5% per year. The maximum income based component is .24%
of average net assets. For the period, the management fee was equivalent to
an annualized rate of .24% of average net assets.
For all other funds, 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 each 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 .2700% to
.5200% for the period for the Income & Growth, Growth Opportunities and
Overseas funds. The rates ranged from .1200% to .3700% for the period, for
the Government Investment and High Yield Funds. In the event that these
rates were lower than the contractual rates in effect during those periods,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .20% for
the Income & Growth Fund, .30% for the Government Investment and Growth
Opportunities funds, and .45% for the High Yield and Overseas funds,
respectively. For the period, the management fees were equivalent to annual
rates of .45%(annualized), .60%(annualized), .51%, .61%, and .76%, of
average net assets, for the Government Investment, High Yield, Income &
Growth, Growth Opportunities, and Overseas funds, respectively.
The Board of Trustees has approved a new group fee rate schedule with rates
ranging from .2500% to .5200% for the Income & Growth, Growth
Opportunities, and Overseas funds, and .1100% to .3700% for the Money
Market, Government Investment, and High Yield funds. Effective January 1,
1996, FMR voluntarily agreed to implement this new group fee rate schedule
as it results in the same or a lower management fee.
SUB-ADVISER FEE. As the Money Market Fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
FMR, on behalf of the High Yield, Income & Growth, Growth Opportunities,
and Overseas Funds, entered into sub-advisory
agreements with affiliates of FMR. In addition, one of the sub-advisers,
Fidelity International Investment Advisors (FIIA), entered into a
sub-advisory agreement with its subsidiary, Fidelity International
Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory
arrangements, FMR may receive investment advice and research services and
may grant the sub-advisers investment management authority to buy and sell
securities. FMR pays its sub-advisers either a portion of its management
fee or a fee based on costs incurred for these services. FIIA pays FIIAL
U.K. a fee based on costs incurred for either service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives account fees and
asset-based fees that vary according to account size and type of account.
FIIOC pays for typesetting, printing and mailing of all shareholder
reports, except proxy statements.
For the period, the transfer agent fees were equivalent to an annualized
rate of .06% for Government Investment, High Yield, and Money Market funds
and an annual rate of .05% for Income & Growth, Growth Opportunities, and
Overseas funds of each fund's average net assets.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of the respective average net
assets for the Money Market, High Yield, and Government Investment Funds,
and 1.50% of the respective average net assets for the Income & Growth,
Growth Opportunities, and Overseas Funds. For the period, the reimbursement
under this arrangement reduced expenses by $42,405, $22,881, and $88,472
for Government Investment, High Yield, and Overseas funds, respectively. In
addition, FMR agreed to reimburse a portion of the Money Market, Income &
Growth, and Growth Opportunities funds' operating expenses. For the period,
the reimbursement reduced expenses by $5,383, $6,304, and $19,418,
respectively.
FMR has directed certain portfolio trades to brokers who paid a portion of
the funds' expenses. For the period, the expenses were reduced by $165 and
$7,450 for Income & Growth and Growth Opportunities funds, respectively.
6. BENEFICIAL INTEREST.
At the end of the period, an unaffiliated insurance company was record
owner of approximately 10% or more of the total outstanding shares of the
following funds:
BENEFICIAL INTEREST
PERCENT
FUND OF OWNERSHIP
Money Market 100
Government Investment 78
High Yield 95
Income & Growth 100
Growth Opportunities 100
Overseas 94
At the end of the period, an affiliate of FMR was record owner of
approximately 22% and 6% of the total outstanding shares for the Government
Investment and Overseas funds, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Annuity Fund and the Shareholders of
Money Market Fund, Government Investment Fund, High Yield Fund, Income &
Growth Fund, Growth Opportunities Fund and Overseas Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for Moody's and Standard &
Poor's ratings), 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 Money Market Fund, Government
Investment Fund, High Yield Fund, Income & Growth Fund, Growth
Opportunities Fund and Overseas Fund (funds of Fidelity Advisor Annuity
Fund) at December 31, 1995, the results of their operations, and the
changes in their net assets and the financial highlights for the periods
then ended 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
Annuity 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, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 20, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Advisor Annuity Fund voted to pay on
February 2, 1996, to shareholders of record at the opening of business on
February 2, 1996, the following distributions derived from capital gains
realized from sales of portfolio securities, and dividends derived from net
investment income:
DIVIDENDS CAPITAL GAINS
Money Market Fund - -
Government Investment Fund - -
High Yield Fund - $0.01
Income & Growth Fund - $0.05
Growth Opportunities Fund - $0.05
Overseas Fund $0.01 -
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
FMR Texas Inc., Irving, TX
MONEY MARKET FUND
Fidelity Management & Research (U.K.) Inc.,
London, England
INCOME & GROWTH, GROWTH OPPORTUNITIES,
HIGH YIELD AND OVERSEAS FUNDS
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
INCOME & GROWTH, GROWTH OPPORTUNITIES,
HIGH YIELD AND OVERSEAS FUNDS
Fidelity International Investment Advisors
Pembroke, Bermuda
OVERSEAS FUND
Fidelity International Investment Advisors (U.K.) Limited
Kent, England
OVERSEAS FUND
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Robert Haber, VICE PRESIDENT
Bob Litterst, VICE PRESIDENT
George A. Vanderheiden, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIANS
The Bank of New York, New York, NY
MONEY MARKET, GOVERNMENT INVESTMENT AND
HIGH YIELD FUNDS
The Chase Manhattan Bank, N.A., New York, NY
INCOME & GROWTH AND OVERSEAS FUNDS
Brown Brothers Harriman & Co., Boston, MA
GROWTH OPPORTUNITIES FUND
