-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CjRbIlD4HiAWPHO1D/3Igiw91UkeGj7YnTIRkfoH1bnj6Wj96uRiAzzAIJHwzrjP Bec1dwsNK3zpc1W+xg9Grw== 0000744822-96-000026.txt : 19960816 0000744822-96-000026.hdr.sgml : 19960816 ACCESSION NUMBER: 0000744822-96-000026 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960815 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY HASTINGS STREET TRUST CENTRAL INDEX KEY: 0000035348 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046026953 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00215 FILM NUMBER: 96616400 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6173300814 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAIL ZONE ZH-1 CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY FUND INC DATE OF NAME CHANGE: 19851205 N-30D 1 (2_FIDELITY_LOGOS)FIDELITY GLOBAL BOND FUND SEMIANNUAL REPORT JUNE 30, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 20 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 24 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although stocks have managed to post solid returns through the first six months of 1996, signs of strength in the economy have led to inflation fears, causing some uncertainty in bond markets so far this year. In 1995, both stock and bond markets posted strong results, while the year before, stocks posted below-average returns and bonds had one of the worst years in history. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, as well as reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value). You can also look at the fund's dividends and yields. CUMULATIVE TOTAL RETURNS PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 LIFE OF MONTHS YEAR YEARS FUND Global Bond -1.11% 0.26% 22.80% 90.54% Salomon Brothers World Government -1.48% 0.37% 67.59% n/a Bond Index, Unhedged General World Income Funds Average 1.69% 8.67% 49.35% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on December 30, 1986. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Salomon Brothers World Government Bond Index, Unhedged - a market-capitalization weighted index that includes debt issues traded in 14 world government bond markets. Issues included in the Index have fixed-rate coupons and maturities of at least one year. To measure how the fund's performance stacked up against its peers, you can compare it to the general world income funds average, which reflects the performance of 170 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past six months. Both benchmarks reflect reinvestment of dividends and capital gains, if any, but do not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Global Bond 0.26% 4.19% 7.01% Salomon Brothers World Government 0.37% 10.88% n/a Bond Index, Unhedged General World Income Funds Average 8.67% 8.27% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960630 19960725 114826 S00000000000001 Global Bond Fund SB World Gov't. 00451 SB006 1986/12/31 10000.00 10000.00 1987/01/31 10311.24 10300.19 1987/02/28 10451.57 10461.77 1987/03/31 10698.66 10703.84 1987/04/30 10786.19 10826.47 1987/05/31 10625.67 10719.17 1987/06/30 10585.27 10632.94 1987/07/31 10339.13 10420.90 1987/08/31 10556.94 10578.02 1987/09/30 10392.69 10280.39 1987/10/31 10975.54 10972.73 1987/11/30 11449.59 11354.03 1987/12/31 11913.69 11840.71 1988/01/31 11584.23 11776.20 1988/02/29 11669.26 11879.03 1988/03/31 11956.20 12091.08 1988/04/30 11945.58 12032.32 1988/05/31 11892.44 11919.27 1988/06/30 11764.91 11659.32 1988/07/31 11775.53 11588.43 1988/08/31 11690.51 11458.77 1988/09/30 11828.67 11754.49 1988/10/31 12190.02 12297.37 1988/11/30 12413.20 12485.79 1988/12/31 12350.32 12358.69 1989/01/31 12315.76 12177.94 1989/02/28 12212.07 12186.24 1989/03/31 12177.51 12016.99 1989/04/30 12338.80 12176.02 1989/05/31 12131.43 11919.27 1989/06/30 12384.89 12158.78 1989/07/31 12788.12 12712.52 1989/08/31 12603.78 12285.24 1989/09/30 12753.55 12518.36 1989/10/31 12926.37 12623.11 1989/11/30 13064.62 12737.43 1989/12/31 13329.59 12893.27 1990/01/31 13293.50 12722.74 1990/02/28 13125.08 12527.30 1990/03/31 13281.47 12403.40 1990/04/30 13281.47 12365.08 1990/05/31 13461.93 12775.76 1990/06/30 13750.66 13010.16 1990/07/31 14231.87 13417.64 1990/08/31 14147.66 13312.90 1990/09/30 14328.11 13461.71 1990/10/31 14664.96 14063.36 1990/11/30 14821.35 14296.48 1990/12/31 14966.02 14437.63 1991/01/31 15294.80 14798.49 1991/02/28 15439.46 14802.96 1991/03/31 15229.04 14265.18 1991/04/30 15439.46 14484.89 1991/05/31 15623.57 14466.37 1991/06/30 15439.46 14315.00 1991/07/31 15597.48 14620.94 1991/08/31 15744.37 14903.88 1991/09/30 16105.47 15487.00 1991/10/31 16323.48 15649.23 1991/11/30 16241.73 15893.85 1991/12/31 16877.42 16720.32 1992/01/31 16707.23 16423.33 1992/02/29 16778.14 16331.99 1992/03/31 16749.97 16158.91 1992/04/30 16977.66 16274.51 1992/05/31 17290.75 16773.97 1992/06/30 17505.10 17243.41 1992/07/31 17767.43 17645.14 1992/08/31 18025.90 18138.85 1992/09/30 17774.98 18320.88 1992/10/31 17659.43 17823.34 1992/11/30 17394.30 17540.40 1992/12/31 17619.52 17645.14 1993/01/31 17823.07 17952.99 1993/02/28 18097.52 18306.19 1993/03/31 18496.21 18587.21 1993/04/30 18672.10 18980.01 1993/05/31 19015.32 19170.34 1993/06/30 19397.07 19129.46 1993/07/31 19692.25 19183.75 1993/08/31 20189.71 19760.49 1993/09/30 20304.78 19994.89 1993/10/31 20830.76 19961.04 1993/11/30 20764.44 19817.97 1993/12/31 21479.33 19986.59 1994/01/31 21713.86 20147.54 1994/02/28 20531.66 20015.97 1994/03/31 19053.47 19987.23 1994/04/30 18678.26 20010.22 1994/05/31 18782.43 19834.58 1994/06/30 17973.21 20120.71 1994/07/31 18300.43 20281.02 1994/08/31 18527.75 20210.77 1994/09/30 18528.69 20357.03 1994/10/31 18613.12 20683.40 1994/11/30 18690.13 20399.18 1994/12/31 17975.74 20455.39 1995/01/31 17818.85 20884.59 1995/02/28 17768.50 21419.17 1995/03/31 17884.41 22691.45 1995/04/30 18186.00 23111.71 1995/05/31 18734.45 23761.90 1995/06/30 18909.95 23901.77 1995/07/31 18874.86 23957.97 1995/08/31 18291.87 23134.70 1995/09/30 18608.17 23651.40 1995/10/31 18836.41 23827.68 1995/11/30 18963.79 24097.21 1995/12/31 19172.22 24349.49 1996/01/31 18934.57 24048.67 1996/02/29 18942.90 23926.04 1996/03/31 18905.61 23892.83 1996/04/30 18838.01 23797.66 1996/05/31 18850.84 23802.77 1996/06/30 18959.13 23989.91 IMATRL PRASUN SHR__CHT 19960630 19960725 114831 R00000000000123 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Global Bond Fund on December 31, 1986, shortly after the fund started. As the chart shows, by June 30, 1996, the value of the investment would have grown to $18,959 - an 89.59% increase on the initial investment. For comparison, look at how the Salomon Brothers World Government Bond Index, Unhedged, did over the same period. With dividends reinvested, the same $10,000 would have grown to $23,990 - a 139.90% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. (checkmark) DIVIDENDS AND YIELD PERIODS ENDED JUNE 30, 1996 PAST PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 4.48(cents) 27.87(cents) 57.27(cents) Annualized dividend rate 5.74% 5.79% 5.87% 30-day annualized yield 4.77% - - DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on the fund's average share price of $9.50 over the past month, $9.66 over the past six months and $9.76 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. It does not reflect the cost of hedging and other currency gains and losses. FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Effective February 26, 1996, Ian Spreadbury became responsible for managing the fund's international investments and Christine Thompson for its U.S. investments. The following is an interview with Ian Spreadbury on the fund's performance, its international components and its outlook, and with Christine Thompson on the fund's U.S. investments. Q. IAN, HOW HAS THE FUND PERFORMED OVER THE PAST SIX MONTHS? I.S. All things considered, pretty well. For the six months ended June 30, 1996, the fund had a return of -1.11%. Global Bond outperformed the Salomon Brothers World Government Bond Index, Unhedged - which had a return of - -1.48% for the period - but lagged the general world income funds average, as tracked by Lipper Analytical Services, which had a six-month return of 1.69%. For the 12-month period ended June 30, 1996, the fund had a return of 0.26%, while the Salomon Brothers index and the Lipper average posted returns of 0.37% and 8.67%, respectively. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE RELATIVE TO THE INDEX AND THE PEER GROUP? I.S. It's important to realize that because we manage the fund with an eye toward the composition of the Salomon Brothers index, we feel the index is a more accurate comparison than the peer group when tracking Global Bond's performance. Many funds within the peer group are partly hedged back into U.S. dollars. This fund, on the other hand, has stopped using this technique in order to provide a broad foreign currency exposure and to try to reduce volatility relative to the index. With the dollar being extremely strong over the past six months, funds with a heavy weighting of dollar-denominated holdings were able to benefit. Relative to the peer group, the fund's positions in Japan proved to be detrimental to performance as well. Q. IAN, WE UNDERSTAND THERE WERE SOME INVESTMENT POLICY CHANGES . . . I.S. As of June 24, 1996, the fund reserves the right to invest up to 5% of its assets - down from 35% - in below-investment-grade securities. The fund does not intend to seek out the lower-quality, below-investment-grade bonds. Instead, this change helps the fund maintain a degree of flexibility under unusual circumstances. Further, the fund now uses two additional agencies to determine the credit quality of it's bonds. Ratings from Duff & Phelps Rating Co. and Fitch Investors Service, L.P. may be used, along with those from Moody's Investors Service and Standard & Poor's which the fund had been using previously. Q. YOU MENTIONED JAPAN EARLIER AS HAVING HAD A NEGATIVE IMPACT ON THE FUND'S PERFORMANCE. WHAT HAPPENED THERE? I.S. One of our strategies is to try to construct the portfolio in accordance with the composition of the global bond market and, correspondingly, the fund's index. Since Japan accounts for a sizable portion of the global bond market, we have held a similarly large weighting in yen-denominated bonds. While the bonds themselves produced a positive return, this was more than offset by the negative impact from the fund's yen exposure, as the yen weakened considerably during the period. Q. WERE THERE ANY INTERNATIONAL MARKET TRENDS THAT HAD AN IMPACT ON YOUR INVESTMENT STRATEGY? I.S. Because the fund is so diversified across regions and currencies, we were able to participate in the "convergence trade" in Europe, where yield spreads tightened between such smaller markets as Sweden, Italy and Spain compared to the larger markets of Germany and the U.S. This convergence resulted from the belief that the European Monetary Union (EMU) actually will happen. In order to take part in the EMU, the Maastricht Treaty set forth certain economic requirements that a country must fulfill. In rushing to meet this criteria, we've seen a convergence in economic policy among many European countries as well as a convergence in yields. This has increased the attractiveness of smaller country bonds and is happening all over Europe. Q. HOW WILL THIS FUND REACT WHEN THE DOLLAR IS STRONG? WHEN IT IS WEAK? I.S. When the U.S. dollar is weak, dollar-based investors in an unhedged, diversified fund like Global Bond tend to benefit; that's because nearly two-thirds of the fund is invested in securities denominated in various currencies. Conversely, when the dollar is strong, the fund most likely will underperform for the same reasons. It's important for shareholders to remember that markets can change dramatically overnight. While the fund may increase its foreign currency risk exposure by not hedging, these risks are spread across a diverse range of currencies. Q. CHRIS, CAN YOU CHARACTERIZE THE U.S. BOND MARKET ENVIRONMENT AND YOUR STRATEGY DURING THE PERIOD? C.T. Of the major regions monitored by the fund's Salomon Brothers index, the U.S. return was the poorest as strong U.S. economic growth raised concerns of inflation. In addition, bond prices dropped as market sentiment shifted from uncertainty over whether the Federal Reserve Board would ease or tighten rates to the expectation that the federal funds rate will be increased. In managing the U.S. portion of the fund, I try to take advantage of relative price changes within the investment-grade bond market. I've increased the fund's corporate and mortgage-related holdings as I feel these sectors offer the potential to outperform Treasury securities in the coming period. Q. TURNING BACK TO YOU, IAN, WHAT'S YOUR OUTLOOK? I.S. Real yields should continue to offer value; however, with the U.S. economy going so well and the upbeat employment information released toward the end of the period, there is a concern of an uptick in inflation. On balance, we would expect bonds to continue to trade in a fairly narrow range. Some regions will continue to offer good value, but we're not too optimistic about Japan, given the low level of yields. As with any global portfolio, political and economic factors can affect the fund, and the performance of the dollar versus other currencies will also affect performance. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: high total return by investing in investment-grade debt securities from around the world START DATE: December 30, 1986 SIZE: as of June 30, 1996 more than $132 million MANAGER: Ian Spreadbury, since February 1996; joined Fidelity in 1995; Christine Thompson, since February 1996; also manager, Fidelity U.S. Bond Index Fund, since 1990; Fidelity Intermediate Bond Fund, since 1995; Fidelity Target Timeline Funds, since 1996; joined Fidelity in 1985 (checkmark) IAN SPREADBURY ON CURRENCY HEDGING: "An example may help illustrate the mechanics of currency hedging. If you're a dollar-denominated investor and you wish to invest in Germany, you have to use deutsche marks to buy those bonds. The deutsche marks give you foreign currency exposure, meaning that the currency could rise or fall in value relative to the dollar. To neutralize this exposure, the fund would sell the deutsche marks through forward currency contracts, effectively nullifying this exposure. The fund no longer engages in this practice; thus it will tend to outperform its peers when the dollar is weak and underperform when the dollar is strong. Following this new strategy reflects our realization of the difficulty in predicting currency or interest rate movements on a consistent basis. Too many things - be they economic or political in nature - can happen to quickly change investor perception." INVESTMENT CHANGES The charts below highlight three different aspects of the fund's investments: the country where they were issued, their sensitivity to interest rate changes, and their currency exposure. The top countries in each table differ because some securities have more interest rate risk than others, and because securities issued in one country may be denominated in another country's currency. TOP COUNTRIES AS OF JUNE 30, 1996 (EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS SIX MONTHS AGO United States 33 32 Germany 16 17 France 8 7 United Kingdom 6 6 Japan 5 0 TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY, INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS. PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF APPLICABLE. TOP INTEREST RATE EXPOSURES AS OF JUNE 30, 1996 (ESTIMATED, BY COUNTRY) % OF FUND'S % OF INTEREST TOTAL INTEREST RATE EXPOSURE RATE EXPOSURE SIX MONTHS AGO United States 33 34 Japan 22 18 Germany 10 9 France 8 7 United Kingdom 7 6 FIDELITY ESTIMATES INTEREST-RATE EXPOSURES BASED ON THE DURATION, OR INTEREST RATE SENSITIVITY, OF THE FUND'S HOLDINGS. AS OF JUNE 30, 1996, THE FUND WAS MOST SENSITIVE TO INTEREST RATE MOVEMENTS IN THE U.S., WHICH ACCOUNT FOR APPROXIMATELY 33% OF THE FUND'S INTEREST RATE EXPOSURE. TOP CURRENCY EXPOSURES AS OF JUNE 30, 1996 (ESTIMATED, BY CURRENCY) % OF FUND'S % OF NET ASSETS NET ASSETS SIX MONTHS AGO U.S. dollar 32 34 Japanese yen 19 19 German deutsche mark 11 11 French franc 7 7 Italian lira 6 6 THE JAPANESE YEN, AT APPROXIMATELY 19% OF NET ASSETS, WAS THE FUND'S LARGEST FOREIGN CURRENCY EXPOSURE AS OF JUNE 30, 1996. INVESTMENTS JUNE 30, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities CORPORATE BONDS - 28.9% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) AUSTRALIA - 1.0% Queensland Treasury Corp.: 8%, 8/14/01 Aaa AUD 1,390,000 $ 1,066,231 8%, 5/14/03 Aaa AUD 350,000 264,064 1,330,295 CANADA - 1.1% British Columbia Hydro & Power Authority yankee 12 1/2%, 1/15/14 Aa2 140,000 163,474 Ford Credit Ltd. 8 3/4%, 3/20/00 A1 CAD 1,000,000 764,914 Methanex Corp. 8 7/8%, 11/15/01 A3 480,000 516,125 1,444,513 FINLAND - 0.3% Merita Bank Ltd. yankee 6 1/2%, 1/15/06 A3 350,000 325,374 GERMANY - 6.0% Deutsche Bank Finance NV 4 1/8%, 11/15/99 Aaa JPY 375,000,000 3,645,572 Lake Baden Wuerttemberg Finance NV euro 3 3/4%, 6/21/99 Aaa JPY 300,000,000 2,887,745 Treuhandanstalt 6 5/8%, 7/9/03 AAA DEM 1,750,000 1,175,123 7,708,440 JAPAN - 5.2% Export-Import Bank of Japan euro 2 7/8%, 7/28/05 Aaa JPY 750,000,000 6,682,695 KOREA (SOUTH) - 0.3% Korea Development Bank: 9.29%, 3/13/98 A1 120,000 125,478 9 1/4%, 6/15/98 A1 150,000 156,936 yankee 7%, 7/15/99 A1 150,000 150,720 433,134 NETHERLANDS - 0.3% Ford Capital BV: yankee 9 3/8%, 1/1/98 A1 100,000 104,193 gtd. 9%, 8/15/98 A1 250,000 261,968 366,161 CORPORATE BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) UNITED KINGDOM - 2.2% Ford Credit Europe PLC: euro 8 5/8%, 11/21/97 A1 GBP 200,000 $ 317,844 11.70%, 11/18/98 (b) A1 ITL 1,185,000 820,237 Lloyds Bank PLC 7 3/8%, 3/11/04 Aa3 GBP 500,000 727,509 Midland Bank PLC yankee 7 5/8%, 6/15/06 A1 120,000 121,577 Rolls-Royce PLC 11 5/8, 7/30/98 A3 GBP 250,000 422,239 Severn Trent PLC 11 1/2%, 7/12/99 A1 GBP 235,000 405,387 2,814,793 UNITED STATES OF AMERICA - 12.5% AMR Corp. 7 3/4%, 12/1/97 Baa3 200,000 203,168 Aristar, Inc. 7 1/2%, 7/1/99 Baa1 250,000 255,243 Bank of Boston Corp. 9 1/2%, 8/15/97 Baa1 320,000 330,998 Banponce Financial Corp. 6.34%, 3/29/99 Baa1 70,000 69,138 Banponce Corp.: 5 3/4%, 3/1/99 Baa1 130,000 126,494 6.378%, 4/8/99 Baa1 120,000 118,325 Columbia Gas System, Inc. 6.61%, 11/28/02 Baa3 130,000 126,684 Comdisco, Inc.: 6 1/2%, 6/15/00 Baa2 600,000 591,792 5 3/4%, 2/15/01 Baa2 200,000 190,948 Enron Corp.: 10%, 6/1/98 Baa2 100,000 105,566 8 1/2%, 2/1/00 Baa2 90,000 91,254 First Fidelity Bancorporation: 8 1/2%, 4/1/98 A2 240,000 247,759 9 5/8%, 8/15/99 A2 40,000 43,112 First Hawaiian, Inc. 6 1/4%, 8/15/00 Baa1 270,000 262,386 First Tennessee National Corp. 6 3/4%, 11/15/05 Baa1 100,000 95,019 Firstar Corp. 7.15%, 9/1/00 A3 320,000 321,616 Fleet Financial Group, Inc. 7 5/8%, 12/1/99 A3 40,000 40,704 Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 604,733 602,088 General Electric Capital Corp.: 6 1/2%, 2/8/99 Aaa SEK 3,750,000 561,558 7 3/8%, 2/8/99 (b) Aaa ITL 2,150,000 1,378,242 Golden West Financial Corp. 9.15%, 5/23/98 A3 150,000 156,735 Green Tree Financial Corp.: 6.45%, 5/15/27 Aaa 160,000 158,339 6.65%, 7/15/27 Aaa 180,000 180,562 CORPORATE BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - CONTINUED Green Tree Securitized Net Interest Margin Trust, Series 1994-A, 6.90%, 2/15/04 Baa3 $ 130,859 $ 129,591 InterNorth, Inc. 9 5/8%, 3/15/06 Baa2 230,000 264,068 KFW International Finance, Inc. euro 6%, 11/29/99 Aaa JPY 220,000,000 2,269,085 Kansallis-Osake-Pankki 10%, 5/1/02 A3 100,000 112,807 MBNA Master Credit Card Trust 7 1/4%, 6/15/99 Aaa 390,000 393,413 MCN Investment Corp.: 5.84%, 2/1/99 Baa2 210,000 206,214 6.03%, 2/1/01 Baa2 280,000 270,026 Manufacturers Hanover Corp. 8 1/2%, 2/15/99 A2 130,000 135,772 Morgan Guaranty Trust Co. 11 3/8%, 10/6/97 (b) Aa1 ITL 3,200,000 2,153,485 Occidental Petroleum Corp.: 9.20%, 8/15/97 Baa3 190,000 196,124 5.85%, 11/9/98 Baa3 90,000 88,432 5.93%, 11/9/98 Baa3 130,000 127,959 6 3/4%, 9/16/99 Baa3 120,000 119,759 6.09%, 11/29/99 Baa3 150,000 146,622 Premier Auto Trust 6%, 5/6/00 Aaa 110,000 109,347 Provident Bank 6 1/8%, 12/15/00 A3 510,000 491,650 Quaker Oats Co.: 6.91%, 5/15/03 A3 80,000 79,010 9 1/8%, 7/15/04 A3 30,000 33,458 7.51%, 5/2/05 A3 80,000 80,938 7.30%, 8/29/05 A3 80,000 78,850 Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 155,000 158,038 Shawmut National Corp. 8 5/8%, 12/15/99 A3 290,000 304,633 Southwest Gas Corp., Series F, 9 3/4%, 6/15/02 Baa3 90,000 100,431 Standard Credit Card Master Trust I: 6 1/4%, 9/7/98 A2 650,000 649,695 participation certificates 5 1/2%, 9/7/98 A2 85,000 84,203 Tenneco Credit Corp. 10.05%, 8/17/98 Baa2 330,000 352,113 360 Degrees Communications Co. 7 1/8%, 3/1/03 Ba2 200,000 191,252 CORPORATE BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - CONTINUED Union Planters Corp. 6 3/4%, 11/1/05 Baa3 $ 200,000 $ 189,806 WFS Financial Owner Trust 7.05%, 11/20/03 Aaa 270,000 270,338 16,044,849 TOTAL CORPORATE BONDS (Cost $37,516,515) 37,150,254 U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 2.1% FEDERAL HOME LOAN GUARANTY CORPORATION - 0.1% 7%, 2/1/98 to 6/1/01 Aaa 151,100 151,714 FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.0% 6%, 4/1/11 Aaa 1,672,625 1,581,668 6 1/2%, 4/1/26 Aaa 1,070,631 1,001,372 2,583,040 TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES (Cost $2,682,264) 2,734,754 COMMERCIAL MORTGAGE SECURITIES - 0.6% Resolution Trust Corp. commercial Series 1995-C2 Class A-1B, 6 1/4%, 5/25/27 Aaa 190,000 184,570 Structured Asset Securities Corp. commercial: Series 1995-C4 Class A-1A, 6.90%, 6/25/26 AAA 193,166 191,476 Series 1996 Class A-1A, 5.711%, 2/25/28 AAA 206,308 204,245 Series 1996 Class A-1B, 5.751%, 2/25/28 AAA 166,000 162,421 TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $755,917) 742,712 GOVERNMENT OBLIGATIONS (F) - 61.8% ARGENTINA - 2.3% Province of Chaco, Argentina 11 7/8%, 9/10/97 (e) - 2,700,000 2,906,285 AUSTRIA - 3.6% Republic of Austria euro: 11%, 12/16/97 (b) Aaa ITL 1,700,000 1,144,593 4 1/2%, 9/28/05 Aaa JPY 340,000,000 3,423,089 4,567,682 GOVERNMENT OBLIGATIONS (F) - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) BELGIUM - 2.6% Kingdom of Belgium: 8 3/4%, 6/25/02 AAA BEF 15,000,000 $ 544,094 5.10%, 11/21/04 (d) AAA BEF 50,000,000 1,626,142 7 1/2%, 7/29/08 AAA BEF 35,000,000 1,157,161 3,327,397 CANADA - 2.6% Canadian Government: 8 1/2%, 3/1/00 Aa1 CAD 500,000 387,408 8 1/2%, 4/1/02 Aa1 CAD 1,450,000 1,129,332 7 1/2%, 12/1/03 Aa1 CAD 1,410,000 1,032,514 7%, 12/1/06 Aa1 CAD 1,200,000 836,053 3,385,307 DENMARK - 1.8% Kingdom of Denmark: Bullet: 9%, 11/15/00 Aaa DKK 3,250,000 613,660 8%, 5/15/03 Aaa DKK 2,700,000 486,826 9%, 11/15/98 Aaa DKK 2,500,000 461,533 8%, 3/15/06 Aaa DKK 4,000,000 707,537 2,269,556 FRANCE - 7.6% French Government: OAT: 9.70%, 12/13/97 Aaa FRF 12,250,000 2,549,331 9 1/2%, 1/25/01 Aaa FRF 15,500,000 3,476,450 5 1/2%, 4/25/04 Aaa FRF 3,000,000 552,978 8 1/2%, 12/26/12 Aaa FRF 14,000,000 3,141,377 9,720,136 GERMANY - 10.0% Federal Republic of Germany: 6 1/8%, 3/20/98 Aaa DEM 5,250,000 3,554,641 8 3/8%, 5/21/01 Aaa DEM 4,650,000 3,409,492 8%, 1/21/02 Aaa DEM 7,000,000 5,063,693 6%, 6/20/16 Aaa DEM 1,500,000 873,434 12,901,260 GOVERNMENT OBLIGATIONS (F) - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) IRELAND - 0.0% Republic of Ireland 7.64%, 1/2/02 Aa2 $ 60,000 $ 61,813 ITALY - 2.4% Republic of Italy 10 1/2%, 9/1/05 (b) A1 ITL 4,400,000 3,088,602 NETHERLANDS - 3.9% Netherland Government: 6 3/4%, 2/15/99 AAA NLG 3,000,000 1,847,868 7%, 6/15/05 AAA NLG 2,500,000 1,524,244 8 1/4%, 2/15/07 AAA NLG 2,500,000 1,647,950 5,020,062 SPAIN - 2.4% Kingdom of Spain: 11.45%, 8/30/98 AAA ESP 120,000,000 1,007,871 10.90%, 8/30/03 AAA ESP 200,000,000 1,748,430 10 1/2%, 10/30/03 AAA ESP 35,000,000 300,433 3,056,734 SWEDEN - 1.2% Kingdom of Sweden 10 1/4%, 5/5/03 Aa1 SEK 9,300,000 1,573,269 UNITED KINGDOM - 4.0% United Kingdom, Great Britain & Northern Ireland: 10 1/2%, 2/21/97 Aaa GBP 250,000 399,365 9 3/4%, 8/27/02 Aaa GBP 450,000 773,871 13 1/2, 3/26/08 Aaa GBP 850,000 1,742,461 9%, 10/13/08 Aaa GBP 500,000 835,601 8 3/4%, 8/25/17 Aaa GBP 900,000 1,466,098 5,217,396 UNITED STATES OF AMERICA - 17.4% Farm Credit System Financial Assistance Corp., Series A, 9 3/8%, 7/21/03 Aaa 370,000 422,203 Federal Farm Credit Bank: 6.56%, 8/5/02 Aaa 140,000 138,666 6.20%, 9/23/02 Aaa 210,000 204,454 8.06%, 1/4/05 Aaa 1,000,000 1,067,060 Federal Home Loan Bank: 7.70%, 9/20/04 Aaa 460,000 481,634 7.59%, 3/10/05 Aaa 200,000 208,156 Federal Home Loan Mortgage Corp. 6.55%, 1/4/00 Aaa 230,000 230,000 GOVERNMENT OBLIGATIONS (F) - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - CONTINUED Government Trust Certificates: (assets of Trust guaranteed by U.S. Government through Defense Security Assistance Agency): Class 1-C 9 1/4%, 11/15/01 Aaa $ 598,000 $ 638,694 Class 2-E 9.40%, 5/15/02 Aaa 730,000 782,648 (assets of Trust guaranteed by U.S. Government through Export-Import Bank): Series 1993-C, 5.20%, 10/15/04 Aaa 71,022 67,116 Series 1993-D, 5.23%, 5/15/05 Aaa 122,553 115,430 Series 1994-A, 7.12%, 4/15/06 Aaa 132,933 134,013 Series 1994-A, 7.39%, 6/26/06 Aaa 33,333 34,019 Series 1994-C, 6.61%, 9/15/99 Aaa 44,623 44,833 Series 1994-F, 8.187%, 12/15/04 Aaa 198,965 208,050 Israel Export Trust Certificate Series 1994-1 (assets of Trust guaranteed by U.S. Government through Export-Import Bank): 6.88%, 1/26/03 Aaa 140,000 140,438 6 1/8%, 3/15/03 Aaa 162,000 155,850 Overseas Private Investment Corp. (U.S. Government guaranteed participation certificates) Series 1994-195, 6.08%, 8/15/04 Aaa 230,000 219,441 Private Export Funding Corp. secured: Series SS, 5.80%, 2/1/04 Aaa 160,000 153,286 6.90%, 1/31/03 Aaa 100,000 100,367 8 3/4%, 6/30/03 Aaa 880,000 971,291 State of Israel (guaranteed by U.S. Government through Agency for International Development) 8%, 11/15/01 Aaa 740,000 781,351 U.S. Treasury: 8 7/8%, 11/15/97 Aaa 1,000,000 1,037,340 9 1/4%, 8/15/98 Aaa 1,670,000 1,770,467 8 7/8%, 2/15/99 Aaa 220,000 233,715 7 3/4%, 12/31/99 Aaa 2,404,000 2,504,655 6 7/8%, 3/31/00 Aaa 259,000 262,763 11 7/8%, 11/15/03 Aaa 560,000 728,347 8 3/4%, 5/15/20 Aaa 7,195,000 8,602,486 22,438,773 TOTAL GOVERNMENT OBLIGATIONS (Cost $82,071,857) 79,534,272 SUPRANATIONAL OBLIGATIONS - 5.2% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) African Development Bank 7 3/4%, 12/15/01 Aa1 $ 340,000 $ 350,458 InterAmerica Development Bank euro 6%, 10/30/01 Aaa JPY 500,000,000 5,318,810 International Bank Reconstruction & Development 4 3/4%, 1/15/04 Aaa JPY 100,000,000 1,027,939 TOTAL SUPRANATIONAL OBLIGATIONS (Cost $8,429,022) 6,697,207 REPURCHASE AGREEMENTS - 1.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.46%, dated 6/28/96 due 7/1/96 $ 1,783,811 1,783,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $133,238,575) $ 128,642,199 CURRENCY ABBREVIATIONS AUD - Australian dollar BEF - Belgian franc CAD - Canadian dollar DEM - German deutsche mark DKK - Danish krone ESP - Spanish peseta FRF - French franc GBP - British pound ITL - Italian lira JPY - Japanese yen NLG - Dutch guilder SEK - Swedish krona LEGEND 1. Principal amount is stated in United States dollars unless otherwise noted. 2. Principal amount in thousands. 3. Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 4. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 5. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Province of Chaco, Argentina 11 7/8%, 9/10/97 3/9/94 $ 2,919,869 6. Some foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows: MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 82.2% AAA, AA, A 89.0% Baa 3.7% BBB 5.4% Ba 0.3% BB 0.2% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% For some foreign government obligations, FMR has assigned the ratings of the sovereign credit of the issuing government. The percentage not rated by either S&P or Moody's amounted to 2.3% including long-term debt categorized as other securities. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.3% Basic Industries 0.4 Commercial Mortgage Securities 0.6 Energy 0.5 Finance 24.5 Government Obligations 63.9 Nondurables 0.3 Repurchase Agreements 1.4 Services 1.0 Supranational Obligations 5.2 Technology 0.6 Transportation 0.2 Utilities 1.1 100.0% INCOME TAX INFORMATION At June 30, 1996, the aggregate cost of investment securities for income tax purposes was $133,240,273. Net unrealized depreciation aggregated $4,598,074, of which $2,375,691 related to appreciated investment securities and $6,973,765 related to depreciated investment securities. At December 31, 1995, the fund had a capital loss carryforward of approximately $94,677,000 of which $81,883,000 and $12,794,000 will expire on December 31, 2002 and 2003, respectively. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 128,642,199 agreements of $1,783,000) (cost $133,238,575) - See accompanying schedule Cash 793 Receivable for investments sold 3,331,734 Interest receivable 3,317,812 TOTAL ASSETS 135,292,538 LIABILITIES Payable for investments purchased $ 2,338,574 Payable for fund shares redeemed 152,624 Distributions payable 27,621 Accrued management fee 77,688 Other payables and accrued expenses 106,874 TOTAL LIABILITIES 2,703,381 NET ASSETS $ 132,589,157 Net Assets consist of: Paid in capital $ 237,051,878 Distributions in excess of net investment income (382,771) Accumulated undistributed net realized gain (loss) on (99,859,526) investments and foreign currency transactions Net unrealized appreciation (depreciation) on (4,220,424) investments and assets and liabilities in foreign currencies NET ASSETS, for 13,887,951 shares outstanding $ 132,589,157 NET ASSET VALUE, offering price and redemption price per $9.55 share ($132,589,157 (divided by) 13,887,951 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) INVESTMENT INCOME $ 6,458,506 Interest Less foreign taxes withheld (24,015) TOTAL INCOME 6,434,491 EXPENSES Management fee $ 581,776 Transfer agent fees 236,127 Accounting fees and expenses 58,490 Non-interested trustees' compensation 368 Custodian fees and expenses 25,635 Registration fees 13,713 Audit 41,221 Legal 384 Interest 5,799 Miscellaneous 4,648 Total expenses before reductions 968,161 Expense reductions (3,222) 964,939 NET INVESTMENT INCOME 5,469,552 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (4,850,076) Foreign currency transactions (165,740) (5,015,816) Change in net unrealized appreciation (depreciation) on: Investment securities (2,997,703) Assets and liabilities in foreign currencies 21,489 (2,976,214) NET GAIN (LOSS) (7,992,030) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (2,522,478) FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED JUNE DECEMBER 31, 30,1996 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 5,469,552 $ 15,711,403 Net investment income Net realized gain (loss) (5,015,816) (4,219,694) Change in net unrealized appreciation (depreciation) (2,976,214) 1,926,842 NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,522,478) 13,418,551 FROM OPERATIONS Distributions to shareholders (4,799,966) (13,319,937) From net investment income Return of capital - (1,562,828) TOTAL DISTRIBUTIONS (4,799,966) (14,882,765) Share transactions 27,058,577 156,242,005 Net proceeds from sales of shares Reinvestment of distributions 4,174,035 13,157,522 Cost of shares redeemed (88,182,872) (353,875,967) NET INCREASE (DECREASE) IN NET ASSETS RESULTING (56,950,260) (184,476,440) FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS (64,272,704) (185,940,654) NET ASSETS Beginning of period 196,861,861 382,802,515 End of period (including distributions in excess of net $ 132,589,157 $ 196,861,861 investment income of $382,771 and $1,052,357, respectively) OTHER INFORMATION Shares Sold 2,795,404 15,810,366 Issued in reinvestment of distributions 432,580 1,337,071 Redeemed (9,152,038) (36,076,255) Net increase (decrease) (5,924,054) (18,928,818)
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED DECEMBER 31, TWO MONTHS YEARS ENDED OCTOBER 31, ENDED JUNE 30, ENDED 1996 DECEMBER 31, SELECTED PER-SHARE DATA (UNAUDITED) 1995 1994 G 1993 F 1992 1992 E 1991
Net asset value, beginning of period $ 9.940 $ 9.880 $ 12.610 $ 11.340 $ 11.830 $ 11.980 $ 12.190 Income from Investment Operations .304 .685 .158 .731 .145 .839 .740 Net investment income Net realized and unrealized gain (loss) (.415) (.049) (2.178) 1.648 (.173) .110 .520 Total from investment operations (.111) .636 (2.020) 2.379 (.028) .949 1.260 Less Distributions (.279) (.516) (.225) (.629) (.332) (1.099) (1.030) From net investment income In excess of net investment income - - (.054) - - - - From net realized gain - - - (.280) (.130) D - (.440) D In excess of net realized gain - - (.020) (.200) - - - Return of capital - (.060) (.411) - - - - Total distributions (.279) (.576) (.710) (1.109) (.462) (1.099) (1.470) Net asset value, end of period $ 9.550 $ 9.940 $ 9.880 $ 12.610 $ 11.340 $ 11.830 $ 11.980 TOTAL RETURN B, C (1.11)% 6.66 (16.31)% 21.91% (.23)% 8.18% 11.31% % RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 132,589 $ 196,862 $ 382,803 $ 686,252 $ 279,204 $ 332,333 $ 160,083 Ratio of expenses to average net assets 1.17% A 1.16 1.14% 1.17% 1.37% 1.23% 1.35% % A Ratio of expenses to average net assets after expense 1.16% A, 1.16 1.14% 1.17% 1.37% 1.23% 1.35% reductions H % A Ratio of net investment income to average net assets 6.58% A 6.19 6.50% 6.79% 6.92% 8.02% 7.92% % A Portfolio turnover rate 79% A 322 367% 198% 142% 81% 228% % A
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. E EFFECTIVE JULY 1, 1992, DIVIDENDS FROM NET INVESTMENT INCOME WERE DECLARED DAILY AND PAID MONTHLY. F EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. G AMOUNTS HAVE BEEN ADJUSTED TO CONFORM WITH PRESENT PERIOD ACCOUNTING POLICIES. H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended June 30, 1996 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Global Bond Fund (the fund) is a fund of Fidelity Investment Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to U.S. federal income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The fund may be subject to foreign taxes on income, gains on investments or currency repatriation. The fund accrues such taxes as applicable. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Interest income, which includes accretion of original issue discount, is accrued as earned. Interest income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, market discount, capital loss carryforwards and losses deferred due to wash sales 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). Distributions in excess of net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences that will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. For the period ended December 31, 1995, the fund's distributions exceeded the aggregate amount of taxable income and net realized gains resulting in a return of capital. This was due to certain foreign currency losses which decreased taxable income available for distribution after certain distributions had been made. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset 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. 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. RESTRICTED SECURITIES. The fund is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, restricted securities (excluding 144A issues) amounted to $2,906,285 or 2.2% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $62,489,306 and $118,541,066, respectively, of which U.S. government and government agency obligations aggregated $31,137,628 and $45,222,767, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .55%. For the period, the management fee was equivalent to an annualized rate of .70% of average net assets. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory agreements with Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research Far East Inc., and Fidelity International Investment Advisors (FIIA). In addition, FIIA entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. a fee based on costs incurred for either service. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC 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 .28% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. 5. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $7,136,000 and $6,179,167, respectively. The weighted average interest rate was 5.63%. 6. EXPENSE REDUCTIONS. The fund has entered into arrangements with its custodian and transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $1,535 and $1,687, respectively, under these arrangements. 7. LITIGATION. The fund is engaged in litigation against the obligor on the inflation adjusted debt of Siderurgica Brasileiras SA, contesting the calculation of the principal adjustment. As of period end, the fund no longer holds Siderurgica Brasileiras SA debt securities. The probability of success of this litigation cannot be predicted and the amount of recovery cannot be estimated. Any recovery from this litigation would inure to the benefit of the fund. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan Fidelity International Investment Advisors Fidelity International Investment Advisors (U.K.) Ltd. OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Fred L. Henning, Jr., Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN The Chase Manhattan Bank New York, NY FIDELITY'S TAXABLE BOND FUNDS Capital & Income Fund Ginnie Mae Fund Global Bond Fund Government Securities Fund Intermediate Bond Fund Investment Grade Bond Fund Mortgage Securities Fund New Markets Income Fund Short-Intermediate Government Fund Short-Term Bond Fund Short-Term World Bond Fund Spartan(registered trademark) Ginnie Mae Fund Spartan Government Income Fund Spartan High Income Fund Spartan Investment Grade Bond Fund Spartan Limited Maturity Government Fund Spartan Short-Intermediate Government Fund Spartan Short-Term Bond Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)FIDELITY NEW MARKETS INCOME FUND SEMIANNUAL REPORT JUNE 30, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 17 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 21 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although stocks have managed to post solid returns through the first six months of 1996, signs of strength in the economy have led to inflation fears, causing some uncertainty in bond markets so far this year. In 1995, both stock and bond markets posted strong results, while the year before, stocks posted below-average returns and bonds had one of the worst years in history. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells securities that have grown in value). You can also look at the fund's income to measure performance. If Fidelity had not reimbursed certain expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND New Markets Income 13.95% 33.73% 42.55% J.P. Morgan Emerging Markets Bond Index Plus 15.47% 33.84% n/a Emerging Markets Debt Funds Average 15.16% 33.18% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, or since the fund started on May 4, 1993. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to those of the J.P. Morgan Emerging Markets Bond Index Plus - a market-capitalization weighted total return index which includes U.S. dollar- and other external currency-denominated Brady bonds, loans and Eurobonds, and local market debt instruments traded in emerging markets. To measure how the fund's performance stacked up against its peers, you can compare it to the emerging markets debt funds average, which reflects the performance of 16 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past six months. Both benchmarks include reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JUNE 30, 1996 PAST 1 LIFE OF YEAR FUND New Markets Income 33.73% 11.86% J.P. Morgan Emerging Markets Bond Index Plus 33.84% n/a Emerging Markets Debt Funds Average 33.18% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960630 19960717 092757 S00000000000001 New Markets Income JP Emg Mkt Bond Index 00331 JP001 1993/05/04 10000.00 10000.00 1993/05/31 10300.87 10325.01 1993/06/30 10710.66 10686.13 1993/07/31 11253.11 11131.72 1993/08/31 11586.74 11355.12 1993/09/30 11955.99 11503.86 1993/10/31 12900.58 12473.37 1993/11/30 13042.02 12348.51 1993/12/31 13883.68 13102.58 1994/01/31 14404.11 13138.08 1994/02/28 12954.23 12044.93 1994/03/31 11006.80 10667.16 1994/04/30 10542.95 10672.05 1994/05/31 11095.86 11408.99 1994/06/30 10464.54 10490.27 1994/07/31 10752.29 10747.95 1994/08/31 11938.20 11516.10 1994/09/30 12528.12 11629.33 1994/10/31 12291.04 11300.04 1994/11/30 12238.94 11415.11 1994/12/31 11585.89 10654.91 1995/01/31 10244.50 10286.45 1995/02/28 9514.84 9750.28 1995/03/31 9213.43 9474.84 1995/04/30 9862.05 10492.10 1995/05/31 10518.02 11416.33 1995/06/30 10659.69 11637.90 1995/07/31 10678.43 11646.47 1995/08/31 11026.21 11921.29 1995/09/30 11455.38 12331.99 1995/10/31 11377.65 12205.29 1995/11/30 11743.18 12632.51 1995/12/31 12509.53 13589.79 1996/01/31 13426.92 14786.39 1996/02/29 12701.78 13747.70 1996/03/31 12839.61 14100.26 1996/04/30 13515.35 14809.65 1996/05/31 13894.84 14993.88 1996/06/28 14254.79 15408.86 IMATRL PRASUN SHR__CHT 19960630 19960717 092759 R00000000000041 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity New Markets Income Fund on May 4, 1993, when the fund started. As the chart shows, by June 30, 1996, the value of the investment would have grown to $14,255 - a 42.55% increase on the initial investment. For comparison, look at how the J.P. Morgan Emerging Markets Bond Index, a market-capitalization weighted total return index which includes U.S. dollar-denominated sovereign restructured debt issues, did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $15,409 - a 54.09% increase. (Data for the fund's comparative index, the J.P. Morgan Emerging Markets Bond Index Plus, is available only from December 31, 1993. Data for a related index is therefore more suitable for this comparison.) 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) DIVIDENDS AND YIELD PERIODS ENDED JUNE 30, 1996 PAST PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 6.67(cents) 42.15(cents) 94.93(cents) Annualized dividend rate 7.63% 8.15% 9.66% 30-day annualized yield 9.58% - - DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $10.64 over the past month, $10.37 over the past six months and $9.83 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all bond funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. It does not reflect the cost of hedging and other currency gains and losses. FUND TALK: THE MANAGER'S OVERVIEW An interview with John Carlson, Portfolio Manager of Fidelity New Markets Income Fund Q. HOW DID THE FUND PERFORM, JOHN? A. For the six months ended June 30, 1996, the fund returned 13.95%. That compares to a total return of 15.47% for the J.P. Morgan Emerging Markets Bond Index Plus over the same period, and 15.16% for the emerging markets debt funds average, according to Lipper Analytical Services. For the 12 months ended June 30, 1996, the fund returned 33.73%, while the index had a total return of 33.84% and the Lipper average returned 33.18%. Q. THE EMERGING DEBT MARKET RALLIED STRONGLY LATE LAST YEAR. HOW WAS IT ABLE TO SUSTAIN THAT STRENGTH IN THE FIRST HALF OF 1996? A. I think that a couple of factors helped to set the stage for a continuation of the rally. First, the dealer community wasn't holding much emerging market debt coming into the period, and spreads remained attractive relative to U.S. Treasuries even after the initial phase of the rally. There was also the perception that much new money was poised to enter the market. These factors, combined with the fact that the rally was touched off by good economic news coming out of Latin America, put some of the other emerging areas in position to fuel the rally's next stage. That's what we saw in the first quarter, as investment performance in countries such as Ecuador, Bulgaria, Nigeria and Venezuela caught up to the major Latin American nations. Additionally, just as the rally appeared to be losing steam, Moody's Investors Service re-rated all Brady bonds - which had been rated a notch below the issuing country's Eurobond external debt - up to the level of the sovereign issuer. This made Poland the first country to have its Brady bonds rated as investment-grade, and gave the entire market a lift. Another boost to the market was provided by rumors that Russia planned an issuance of Eurobonds prior to the first round of its presidential elections, even though the country didn't proceed with the issuance. Q. HOW DID THE RISE IN INTEREST RATES IN THE U.S. AFFECT THE EMERGING DEBT MARKET? A. Well, it certainly provided a breather for the rally and, in fact, gave investors a chance to step back and consider the global backdrop of the rate environment. As they did, there was a move toward two areas in particular: pre-Brady, non-performing loans and floating-rate Eastern Europe debt. The fund was able to take advantage of both of these areas during the period. Q. ALTHOUGH THE FUND'S HEAVIEST WEIGHTINGS ARE STILL IN BRAZIL AND ARGENTINA, THOSE TWO COUNTRIES TRADED POSITIONS DURING THE PERIOD. WHY DID BRAZIL OVERTAKE ARGENTINA AS THE FUND'S TOP GEOGRAPHIC AREA? A. As two of the most developed countries in the market, Brazil and Argentina have done something of a tango in terms of relative economic performance and, therefore, in the fund's holdings. Some of it is simply due to market fluctuations; the Argentinean market is more closely tied to the U.S. interest-rate environment than Brazil, which relies more heavily on internal debt financing. The other reason is that Argentina has not had the growth that many had expected so far this year. Brazil has its own issues to grapple with, including getting on track toward pension and tax reform, but the fundamentals of both countries remained strong at the end of the period. Q. HOW DID THE FUND'S SMALLER POSITIONS IN AREAS SUCH AS SOUTH AFRICA AND SOUTHEAST ASIA FARE? A. Pretty well, in general. We were fortunate to have taken profits in late 1995 and invest further down the yield curve in South Africa in 1996. So we were relatively well positioned when the South African rand was devalued early in the year, and its agricultural and mineral exports helped its economic performance. The fund's investments in countries such as Vietnam and Indonesia have performed on a fairly stable and predictable basis, and they've continued to be good areas of diversification for the fund. Q. WERE THERE ANY DISAPPOINTMENTS OVER THE PERIOD? A. I'd say that the two biggest ones both took place in the first quarter. Although we expected Poland's Brady bonds to be upgraded to investment-grade at some point, I had actually reduced the fund's position in the country after the communist party won the presidency. I felt that situation created political uncertainty that would, if anything, delay the upgrade. In fact, virtually all of the appreciation happened in one day, so there was no second chance at that particular opportunity. My other regret was that, even though I recognized the steepness in the emerging market credit curve that existed at the beginning of the year, I did not invest more heavily in the high-yield end of the market, especially Bulgaria and Nigeria, to capture more fully the strong gains in those areas. Q. SO, JOHN, WHAT'S AHEAD? A. Even in this event-driven market, it's been an extraordinary 12 months. We've had to digest the lingering effects of the Mexican peso crisis, elections in Argentina, Russia and Ecuador, and hard work with the International Monetary Fund in Venezuela, to name a few. I look for a more stable political scene globally, which will give the market time to sort out the fundamental economic issues that remain to be addressed in many emerging market areas. Given all that, I think there are both absolute and relative areas of value within the market, and we'll continue to look for opportunity credit by credit. 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 total return by investing in investment-grade debt securities from around the world START DATE: December 30, 1986 SIZE: as of June 30, 1996 more than $132 million MANAGER: Ian Spreadbury, since February 1996; joined Fidelity in 1995; Christine Thompson, since February 1996; also manager, Fidelity U.S. Bond Index Fund, since 1990; Fidelity Intermediate Bond Fund, since 1995; Fidelity Target Timeline Funds, since 1996; joined Fidelity in 1985 (checkmark) IAN SPREADBURY ON CURRENCY HEDGING: "An example may help illustrate the mechanics of currency hedging. If you're a dollar-denominated investor and you wish to invest in Germany, you have to use deutsche marks to buy those bonds. The deutsche marks give you foreign currency exposure, meaning that the currency could rise or fall in value relative to the dollar. To neutralize this exposure, the fund would sell the deutsche marks through forward currency contracts, effectively nullifying this exposure. The fund no longer engages in this practice; thus it will tend to outperform its peers when the dollar is weak and underperform when the dollar is strong. Following this new strategy reflects our realization of the difficulty in predicting currency or interest rate movements on a consistent basis. Too many things - be they economic or political in nature - can happen to quickly change investor perception." INVESTMENT CHANGES TOP COUNTRIES AS OF JUNE 30, 1996 (EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Brazil 22.7 19.8 Argentina 20.9 25.1 Venezuela 10.5 4.8 Russia 6.6 4.5 Mexico 6.3 9.6 TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY, INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS. PERCENTAGES ARE ADJUSTED FOR THE EFFECTS OF OPEN FUTURES CONTRACTS, IF ANY. TOP FIVE FIXED-INCOME SECURITIES AS OF JUNE 30, 1996
(BY ISSUER, WITH MATURITIES % OF FUND'S % OF FUND'S OF MORE THAN ONE YEAR) INVESTMENTS INVESTMENTS IN THESE SECURITIES 6 MONTHS AGO Federative Republic of Brazil (various 20.0 18.3 issues) Argentina Republic (various issues) 17.6 22.7 Republic of Venezuela (various issues) 10.5 4.8 Bank for Foreign Economic Affairs of 6.3 4.5 Russia (Vnesheconombank) Mexican Government (various issues) 5.2 7.7
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996 6 MONTHS AGO Years 14.0 13.5 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. ASSET ALLOCATION AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995 Corporate bonds 9.7% Government obligations 67.7% Stocks 0.1% Other 16.3% Short-term investments 6.2% Corporate bonds 7.9% Government obligations 67.2% Stocks 0.0% Other 13.0% Short-term investments 11.9% Row: 1, Col: 1, Value: 6.2 Row: 1, Col: 2, Value: 16.3 Row: 1, Col: 3, Value: 2.1 Row: 1, Col: 4, Value: 67.7 Row: 1, Col: 5, Value: 9.699999999999999 Row: 1, Col: 1, Value: 11.9 Row: 1, Col: 2, Value: 13.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 67.2 Row: 1, Col: 5, Value: 7.9 INVESTMENTS JUNE 30, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities CORPORATE BONDS - 9.7% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) CONVERTIBLE BONDS - 0.8% GRAND CAYMAN - 0.4% Ashanti Capital Ltd. 5 1/2%, 3/15/03 - $ 750,000 $ 700,313 THAILAND - 0.4% Robinson Department Store PCL (Reg.) 3 1/4%, 7/27/00 - 750,000 817,500 TOTAL CONVERTIBLE BONDS 1,517,813 NONCONVERTIBLE BONDS - 8.9% ARGENTINA - 3.3% Alpargatas SA Industrial y Comercial: euro 10 1/2%, 10/21/96 - 2,000,000 1,985,000 9%, 11/26/96 - 2,620,000 2,583,975 Invergas SA 12 1/2%, 12/16/99 - 1,650,000 1,765,500 6,334,475 BRAZIL - 2.7% Abril SA: euro 12%, 10/25/03 - 1,395,000 1,433,363 12%, 10/25/03 (e) - 400,000 411,000 Opp Petroquimica SA 11 1/2%, 2/23/04 (e) - 3,300,000 3,279,375 5,123,738 COLOMBIA - 0.7% Comunicaciones Celulares SA yankee 0%, 11/15/03 (d) B3 2,090,000 1,243,550 INDONESIA - 1.1% Matahari International Finance Co. BV 11 1/4%, 3/15/01 (e) BB 2,050,000 2,137,125 MEXICO - 1.1% Grupo Televisa SA de CV yankee 0%, 5/15/08 (d)(e) Ba3 3,750,000 2,034,375 TOTAL NONCONVERTIBLE BONDS 16,873,263 TOTAL CORPORATE BONDS (Cost $18,176,754) 18,391,076 GOVERNMENT OBLIGATIONS (G) - 68.6% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) ARGENTINA - 17.6% Argentina Republic: BOCON: 3.57%, 4/1/01 (j) BBB ARS 6,070,058 $ 4,778,242 3.57%, 4/1/07 (j) BB- ARS 4,138,674 2,445,144 Brady euro: 6.3125%, 3/31/05 (j) B1 15,741,000 12,277,980 5 1/4%, 3/31/23 (i) B2 25,215,000 13,805,213 33,306,579 BRAZIL - 20.0% Federative Republic of Brazil: exit bond 6%, 9/15/13 B1 3,000,000 1,876,875 par 5%, 4/15/24 (i) B1 3,980,000 2,186,513 Brady: eligible interest 6.50%, 4/15/06 (j) B1 5,125,000 4,103,203 debt conversion bond euro 6.5625%, 4/15/12 (j) B1 14,175,000 9,621,281 capitalization bond 8%, 4/15/14 B1 21,865,086 13,488,025 new money 6.5625%, 4/15/09 (j) B1 9,125,000 6,695,469 37,971,366 BULGARIA - 0.5% Republic of Bulgaria FLIRB 2%, 7/28/12 (j) - 2,800,000 924,000 ECUADOR - 4.7% Republic of Ecuador Brady: past due interest euro 6.0625%, 2/28/15 (j) - 14,005,082 6,232,261 par euro 3 1/4%, 2/28/25 (i) - 5,000,000 1,796,875 discount euro 6.0625%, 2/28/25 (j) - 1,600,000 902,000 8,931,136 MEXICO - 5.2% Mexico Value recovery rights (a) 12,194,000 122 Mexican Government Brady: par 6 1/4%, 12/31/19 Ba2 2,270,000 1,466,988 discount 6.4531%, 12/31/19 (j) Ba2 2,300,000 1,804,063 discount 6.3984%, 12/31/19 (j) Ba2 4,150,000 3,255,156 United Mexican States global bond 11 1/2%, 5/15/26 Ba2 3,605,000 3,294,069 9,820,398 GOVERNMENT OBLIGATIONS (G) - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) PHILIPPINES - 1.5% Republic of the Philippines FLIRB 5%, 6/1/08 (j) Ba2 $ 3,250,000 $ 2,912,813 RUSSIA - 6.3% Bank for Foreign Economic Affairs of Russia (Vnesheconombank) interest note 0%, 12/31/16 (e)(f) - 22,500,000 12,037,500 SOUTH AFRICA - 1.4% Republic of South Africa: 12%, 2/28/05 Baa1 ZAR 10,875,000 2,183,994 13%, 8/31/10 Baa1 ZAR 2,600,000 530,660 2,714,654 TURKEY - 0.9% Republic of Turkey Treasury Bills (h) 0%, 7/10/96 to 8/14/96 - TRL 143,227,500 1,628,398 VENEZUELA - 10.5% Republic of Venezuela (oil recovery rights) (a) 3,037,000 - Republic of Venezuela: par A euro 6.75%, 3/31/20 Ba2 5,150,000 3,154,375 par B euro 6.75%, 3/31/20 Ba3 5,250,000 3,215,625 Brady: FLIRB A, 7%, 3/31/07 (j) Ba2 4,750,000 3,422,969 FLIRB B, 7%, 3/31/07 (j) Ba2 3,250,000 2,342,031 debt conversion bond 6.625%, 12/18/07 (j) Ba2 10,975,000 7,744,234 19,879,234 TOTAL GOVERNMENT OBLIGATIONS (Cost $127,169,281) 130,126,078 COMMON STOCKS - 0.1% SHARES COLOMBIA - 0.1% Comunicaciones Celulares SA (warrants) (a)(e) (Cost $0) 2,090 104,500 INDEXED SECURITIES - 0.8% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - 0.8% Goldman Sachs Group L.P. 4.87%, 8/20/96 (indexed to Philippine peso) (Cost $1,520,000) $ 1,520,000 $ 1,547,056 PURCHASED BANK DEBT - 15.2% IVORY COAST - 2.1% Ivory Coast Restructured Loans (a) 20,250,000 3,999,375 MOROCCO - 2.9% Kingdom of Morocco, Series A loan participation 6.4375%, 1/1/09 (j) 7,650,000 5,498,438 PANAMA - 4.9% Republic of Panama loan participation refinanced under credit agreement (k) 9,250,000 9,342,500 PERU - 4.6% Republic of Peru loan participation under 1983 agreement (a) 9,400,000 8,624,500 VIETNAM - 0.7% Socialist Republic of Vietnam loans restructured under 1985 agreement (a) DEM 2,400,000 1,353,887 TOTAL PURCHASED BANK DEBT (Cost $23,016,789) 28,818,700 COMMERCIAL PAPER - 0.4% INDONESIA - 0.4% Polysindo Eka Perkasa PT 0%, 11/14/96 (h) (Cost $799,688) IDR 2,000,000 802,578 REPURCHASE AGREEMENTS - 4.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.46%, dated 6/28/96 due 7/1/96 $ 9,393,272 9,389,000 PURCHASED OPTIONS - 0.3% EXPIRATION DATE/ UNDERLYING FACE VALUE STRIKE PRICE AMOUNT AT VALUE (NOTE 1) RUSSIA - 0.3% Chase Manhattan Bank, N.A. Call Option on $8,000,000 notional amount of Bank for Foreign Economic Affairs of the U.S.S.R. (Vnesheconombank) (Cost $370,000) Sept. 96/44 $ 3,870,000 $ 480,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $180,441,512) $ 189,658,988 SECURITY TYPE ABBREVIATIONS FLIRB - Front Loaded Interest Reduction Bonds CURRENCY ABBREVIATIONS ARS - Argentine peso DEM - German deutsche mark IDR - Indonesian rupiah ZAR - South African rand TRL - Turkish lira LEGEND 1. Non-income producing 2. Principal amount is stated in United States dollars unless otherwise noted. 3. Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 4. Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. 5. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $20,003,875 or 10.4% of net assets. 6. Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). 7. Some foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. 8. Principal amount in thousands. 9. Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. 10. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 11. Partial interest payment received on the last interest payment date. OTHER INFORMATION 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 1.4% BBB 4.0% Ba 18.3% BB 24.0% B 34.4% B 31.1% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% For some foreign government obligations, FMR has assigned the ratings of the sovereign credit of the issuing government.The percentage not rated by either S&P or Moody's amounted to 33.6% including long-term debt categorized as other securities. FMR has determined that unrated debt securities that are lower quality account for 33.6% of the total value of investment in securities. INCOME TAX INFORMATION At June 30, 1996, the aggregate cost of investment securities for income tax purposes was $180,475,512. Net unrealized appreciation aggregated $9,183,476 of which $10,482,963 related to appreciated investment securities and $1,299,487 related to depreciated investment securities. At December 31,1995, the fund had a capital loss carryforward of approximately $51,234,000 of which $6,130,000 and $45,104,000 will expire on December 31, 2002 and 2003, respectively. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Basic Industries 1.7% Durables 2.8 Finance 1.5 Government Obligations 68.6 Indexed Securities 0.8 Media & Leisure 2.1 Other 15.2 Purchased Options 0.3 Retail & Wholesale 0.4 Repurchase Agreements 4.9 Utilities 1.7 100.0% FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 189,658,988 agreements of $9,389,000) (cost $180,441,512) - See accompanying schedule Receivable for investments sold 40,098,812 Receivable for fund shares sold 311,862 Interest receivable 2,726,291 Redemption fees receivable 95 TOTAL ASSETS 232,796,048 LIABILITIES Payable for investments purchased $ 28,308,423 Regular delivery Delayed delivery 11,886,750 Distributions payable 95,461 Accrued management fee 107,068 Other payables and accrued expenses 99,969 TOTAL LIABILITIES 40,497,671 NET ASSETS $ 192,298,377 Net Assets consist of: Paid in capital $ 211,930,402 Undistributed net investment income 5,283,866 Accumulated undistributed net realized gain (loss) on (34,134,071) investments and foreign currency transactions Net unrealized appreciation (depreciation) on 9,218,180 investments and assets and liabilities in foreign currencies NET ASSETS, for 17,658,439 shares outstanding $ 192,298,377 NET ASSET VALUE, offering price and redemption price per $10.89 share ($192,298,377 (divided by) 17,658,439 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) INVESTMENT INCOME $ 8,955,184 Interest Less foreign taxes withheld (2,867) TOTAL INCOME 8,952,317 EXPENSES Management fee $ 661,517 Transfer agent fees 178,178 Accounting fees and expenses 71,583 Non-interested trustees' compensation 358 Custodian fees and expenses 61,559 Registration fees 28,900 Audit 44,259 Legal 330 Interest 5,856 Miscellaneous 2,486 Total expenses before reductions 1,055,026 Expense reductions (1,390) 1,053,636 NET INVESTMENT INCOME 7,898,681 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 17,460,188 Foreign currency transactions (51,093) 17,409,095 Change in net unrealized appreciation (depreciation) on: Investment securities (2,857,196) Assets and liabilities in foreign currencies 3,595 (2,853,601) NET GAIN (LOSS) 14,555,494 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 22,454,175 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED JUNE DECEMBER 31, 30,1996 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 7,898,681 $ 15,583,912 Net investment income Net realized gain (loss) 17,409,095 (31,111,821) Change in net unrealized appreciation (depreciation) (2,853,601) 27,836,979 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 22,454,175 12,309,070 FROM OPERATIONS Distributions to shareholders (5,016,810) (16,705,028) From net investment income In excess of net investment income (2,700,453) - TOTAL DISTRIBUTIONS (7,717,263) (16,705,028) Share transactions 87,808,890 196,063,449 Net proceeds from sales of shares Reinvestment of distributions 6,956,967 15,014,270 Cost of shares redeemed (94,139,450) (209,771,056) Redemption fees 435,581 474,977 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,061,988 1,781,640 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 15,798,900 (2,614,318) NET ASSETS Beginning of period 176,499,477 179,113,795 End of period (including undistributed net investment $ 192,298,377 $ 176,499,477 income of $5,283,866 and $5,102,448, respectively) OTHER INFORMATION Shares Sold 8,453,021 22,179,711 Issued in reinvestment of distributions 668,384 1,656,239 Redeemed (9,198,655) (23,674,517) Net increase (decrease) (77,250) 161,433
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED DECEMBER MAY 4, 1993 ENDED JUNE 30, 31, (COMMENCEME 1996 NT OF OPERATIONS) TO DECEMBER 31, (UNAUDITED) 1995 1994 1993
SELECTED PER-SHARE DATA Net asset value, $ 9.950 $ 10.190 $ 13.070 $ 10.000 beginning of period Income from Investment Operations .433 1.222 .573 E .486 D Net investment income Net realized and unrealized .905 (.583) (2.687) 3.302 gain (loss) Total from investment operations 1.338 .639 (2.114) 3.788 Less Distributions From net investment income (.274) (.916) (.529) (.486) In excess of net investment (.148) - (.057) (.062) income From net realized gain - - (.180) (.170) Total distributions (.422) (.916) (.766) (.718) Redemption fees added to .024 .037 - - paid in capital Net asset value, end of period $ 10.890 $ 9.950 $ 10.190 $ 13.070 TOTAL RETURN B, C 13.95% 7.97% (16.55)% 38.84% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 192,298 $ 176,499 $ 179,114 $ 286,593 (000 omitted) Ratio of expenses to average 1.12% A 1.17% 1.28% F, 1.24% A, net assets G G Ratio of net investment income to 8.37% A 9.51% 5.87% 6.29% A average net assets Portfolio turnover rate 469% A 306% 409% 324% A
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INCLUDES INTEREST EXPENSE OF $.008 PER SHARE. F INCLUDES INTEREST EXPENSE OF .08% OF AVERAGE NET ASSETS. G 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. NOTES TO FINANCIAL STATEMENTS For the period ended June 30, 1996 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity New Markets Income Fund (the fund) is a fund of Fidelity Investment Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to U.S. federal income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The fund may be subject to foreign taxes on income, gains on investments or currency repatriation. The fund accrues such taxes as applicable. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 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 investment income. Distributions to shareholders from realized capital gains on investments, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for paydown gains/losses on certain securities, foreign currency transactions, market discount, capital loss carryforwards and losses deferred due to wash sales 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 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. REDEMPTION FEES. Shares held in the fund less than 180 days are subject to a redemption fee equal to 1% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the fund to borrow from, or lend money to, other participating funds. DELAYED DELIVERY TRANSACTIONS. The 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. The 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. The 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. The underlying face amount at value is shown in the schedule of investments under the caption "Purchased Options." This amount reflects each contract's exposure to the underlying instrument at the 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. 2. OPERATING POLICIES - CONTINUED FUTURES CONTRACTS AND OPTIONS - CONTINUED 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. LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. At the end of the period, these investments amounted to $28,818,700 or 15.2% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $402,679,382 and $402,376,687, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .55%. For the period, the management fee was equivalent to an annualized rate of .70% of average net assets. SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory agreements with Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research Far East Inc., Fidelity International Investment Advisors (FIIA), and Fidelity Investments Japan Ltd. In addition, FIIA entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. a fee based on costs incurred for either service. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED TRANSFER AGENT FEES - CONTINUED type of account. FSC 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 .19% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. 5. INTERFUND LENDING PROGRAM. The fund participated in the interfund lending program as a borrower. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $7,822,000 and $4,020,556, respectively. The weighted average interest rate was 5.83%. Interest expense includes $5,856 paid under the interfund lending program. 6. EXPENSE REDUCTIONS. The fund has entered into an arrangement with its transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's transfer agent fees were reduced by $1,390 under this arrangement. 7. CREDIT RISK. The fund's relatively large investment in countries with limited or developing capital markets may involve greater risks than investments in more developed markets and the prices of such investments may be volatile. The yields of emerging market debt obligations reflect, among other things, perceived credit risk. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of the fund's investments and the income they generate, as well as the fund's ability to repatriate such amounts. 8. LITIGATION. The fund is engaged in litigation against the obligor on the inflation adjusted debt of Siderurgica Brasileiras SA, contesting the calculation of the principal adjustment. As of period end, the fund no longer holds Siderurgica Brasileiras SA debt securities. The probability of success of this litigation cannot be predicted and the amount of recovery cannot be estimated. Any recovery from this litigation would inure to the benefit of the fund. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. 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Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan Fidelity International Investment Advisors Fidelity International Investment Advisors (U.K.) Limited Fidelity Investments Japan Ltd. OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Robert A. Lawrence, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN The Chase Manhattan Bank New York, NY FIDELITY'S TAXABLE BOND FUNDS Capital & Income Fund Ginnie Mae Fund Global Bond Fund Government Securities Fund Intermediate Bond Fund Investment Grade Bond Fund Mortgage Securities Fund New Markets Income Fund Short-Intermediate Government Fund Short-Term Bond Fund Short-Term World Bond Fund Spartan(registered trademark) Ginnie Mae Fund Spartan Government Bond Fund Spartan High Income Fund Spartan Investment Grade Bond Fund Spartan Limited Maturity Government Fund Spartan Short-Intermediate Government Fund Spartan Short-Term Bond Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)FIDELITY SHORT-TERM WORLD BOND FUND SEMIANNUAL REPORT JUNE 30, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 17 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 21 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although stocks have managed to post solid returns through the first six months of 1996, signs of strength in the economy have led to inflation fears, causing some uncertainty in bond markets so far this year. In 1995, both stock and bond markets posted strong results, while the year before, stocks posted below-average returns and bonds had one of the worst years in history. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, as well as reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value). You can also look at the fund's dividends and yield. If Fidelity had not reimbursed certain fund expenses, life of fund figures would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Short-Term World Bond 1.96% 6.44% 23.56% Salomon Bros. World Govt. Bond Index 2.66% 7.57% n/a 1-3 Yrs. Hdgd. Short World Multi-Market Funds Average 3.45% 8.55% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, or since the fund started on October 4, 1991. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Salomon Brothers World Government Bond Index 1-3 Years Currency-Hedged into U.S. Dollar Terms, which is a market-capitalization weighted index that includes debt issues traded in 14 world government bond markets. To measure how the fund's performance stacked up against its peers, you can compare it to the short world multi-market funds average, which reflects the performance of 34 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past six months. Both benchmarks include reinvested dividends and capital gains, if any, and exclude sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JUNE 30, 1996 PAST 1 LIFE OF YEAR FUND Short-Term World Bond 6.44% 4.56% Salomon Bros. World Govt. Bond Index 7.57% n/a 1-3 Yrs. Hdgd. Short World Multi-Market Funds Average 8.55% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960630 19960730 093927 S00000000000001 Short Term World SB 1-3 World Govt. 00465 SB030 1991/10/31 10000.00 10000.00 1991/11/30 9953.55 10076.49 1991/12/31 10013.89 10199.32 1992/01/31 10073.94 10218.30 1992/02/29 10167.77 10248.45 1992/03/31 10203.63 10241.75 1992/04/30 10340.52 10322.15 1992/05/31 10393.30 10394.73 1992/06/30 10450.55 10475.69 1992/07/31 10563.77 10567.25 1992/08/31 10594.04 10623.64 1992/09/30 10348.11 10729.72 1992/10/31 10510.46 10755.96 1992/11/30 10442.45 10753.73 1992/12/31 10497.71 10827.98 1993/01/31 10595.46 10916.76 1993/02/28 10718.75 10997.71 1993/03/31 10825.83 11027.86 1993/04/30 10901.95 11086.48 1993/05/31 11019.75 11100.44 1993/06/30 11203.34 11198.70 1993/07/31 11348.48 11238.35 1993/08/31 11487.08 11319.30 1993/09/30 11471.74 11355.59 1993/10/31 11633.27 11410.31 1993/11/30 11676.59 11431.52 1993/12/31 11819.14 11497.40 1994/01/31 11890.79 11532.58 1994/02/28 11700.76 11463.35 1994/03/31 11369.94 11436.55 1994/04/30 11247.98 11423.15 1994/05/31 11417.32 11437.11 1994/06/30 11157.58 11431.52 1994/07/31 11239.08 11505.22 1994/08/31 11320.82 11505.22 1994/09/30 11380.60 11523.09 1994/10/31 11421.99 11567.75 1994/11/30 11462.67 11590.08 1994/12/31 11134.20 11612.42 1995/01/31 11064.33 11748.65 1995/02/28 11083.40 11867.01 1995/03/31 11111.02 11960.81 1995/04/30 11246.96 12077.49 1995/05/31 11436.96 12273.46 1995/06/30 11496.19 12319.25 1995/07/31 11569.38 12414.72 1995/08/31 11640.73 12504.61 1995/09/30 11724.49 12588.91 1995/10/31 11798.75 12688.29 1995/11/30 11911.99 12813.91 1995/12/31 12001.21 12908.83 1996/01/31 12090.61 13021.61 1996/02/29 12057.57 12998.72 1996/03/31 12079.75 13035.01 1996/04/30 12128.07 13109.82 1996/05/31 12163.11 13167.89 1996/06/30 12236.88 13252.19 IMATRL PRASUN SHR__CHT 19960630 19960730 093932 R00000000000117 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Short-Term World Bond Fund on October 31, 1991, shortly after the fund started. As the chart shows, by June 30, 1996, the value of the investment would have grown to $12,237 - a 22.37% increase on the initial investment. For comparison, look at how the Salomon Brothers World Government Bond Index 1-3 Years Currency-Hedged into U.S. Dollar Terms did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $13,252 - a 32.52% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, generally move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) DIVIDENDS AND YIELD PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 4.40(cents) 27.44(cents) 55.00(cents) Annualized dividend rate 6.02% 6.15% 6.15% 30-day annualized yield 4.99% - - DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on the fund's average share price of $8.89 over the past month, $8.95 over the past six months and $8.95 over the past year, you can compare the fund's income distributions over these three periods. The 30-day annualized YIELD is a standard formula for all bond funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. It does not reflect the cost of hedging and other currency gains and losses. FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Effective February 26, 1996, Charles Morrison (right photo) and Luc Huyghebaert became co-managers of the fund. Charles Morrison joined Fidelity in 1987 and also manages Fidelity Advisor Short Fixed-Income Fund, Fidelity Short-Term Bond Fund and Spartan Short-Term Bond Fund. He will manage the U.S. portion of the fund. Luc Huyghebaert, who is based in London and will manage the international portion of the fund, joined Fidelity International, Limited, a sister company of Fidelity Investments, in 1994. He manages several funds for FIL, including International Bond Fund, European Bond Fund, Yen Bond Fund and DM Short Term Bond Fund. The following is their discussion of the fund's performance over the past six months and their outlook for the future. Q. CHARLIE, HOW HAS THE FUND PERFORMED? C.M. For the six months ended June 30, 1996, the fund had a total return of 1.96%. That lagged the short world multi-market funds average tracked by Lipper Analytical Services, Inc., which posted a return of 3.45%, and the Salomon Brothers World Government Bond Index 1-3 Years Currency-Hedged into U.S. Dollar Terms, which returned 2.66% during the same period. For the 12 months ended June 30, 1996, the fund had a total return of 6.44%, while the short world multi-market funds average and the Salomon Brothers index returned 8.55% and 7.57%, respectively. Q. LUC, WHY DID THE FUND'S PERFORMANCE TRAIL THAT OF THE INDEX AND THE AVERAGE? L.H. The main reason that the fund underperformed was that it had a heavier weighting of U.S. assets than the index and the Lipper average. As a result of a reversal in the interest-rate trend, the U.S. market has been one of the weaker performers in the universe in which the fund invests. The more attractive performance of other markets mainly resulted from strong contributions from three countries - Italy, Sweden and Spain. The fund did not participate more aggressively in the positive performance of these markets because they too often have experienced unexpected volatility. Q. CHARLIE, THE U.S. MARKET STRUGGLED DURING THE PAST SIX MONTHS. CAN YOU GIVE US AN IDEA WHY? C.M. Back in March, the employment growth statistics for the month of February were reported at a much higher level than the market had previously been expecting. Whereas the Federal Reserve Board had been in an easing mode at the time and had lowered the fed funds rate - the rate banks charge each other for overnight loans - in December 1995 and then again in January 1996, expectations regarding the direction of interest rates flip-flopped following the strength seen in the February employment report. Since that report, the economy has continued to show many signs of strength. As a result, interest rates have continued their climb. The yield on the two-year Treasury note reached a low of 4.8% in early February, but rose to 6.3% at the end of the period. Q. WHAT CHANGES HAVE YOU MADE TO THE U.S. PORTION OF THE FUND? C.M. The most significant changes to the fund have come in the corporate sector, as I have changed the composition of the corporate exposure within the U.S. portion of the fund. Most notably, I have significantly reduced investments in the finance sector, while I have increased exposure to the asset-backed and industrial sectors. These changes were made to more broadly diversify the fund. The industrial corporate bonds largely came from the tobacco, cable, entertainment and airline sectors - and consisted of very short-term bonds that offered enhanced yield. The asset-backed securities - bonds issued by financial institutions that are backed by loans or credit payments - also were attractive because they offered both higher quality and additional yield relative to other alternatives. Q. WHAT'S YOUR OUTLOOK ON THE DOMESTIC SIDE? C.M. The U.S. portion of the fund is positioned defensively at this time. Many sectors in the short end of the U.S. market continue to trade at very high valuations. It makes sense to be patient in this environment and be very selective adding new positions to the fund. With that said, however, there are opportunities to outperform, and I will continue to seek out attractive corporate and mortgage-backed securities. Q. TURNING BACK TO YOU, LUC, WHAT CAN YOU TELL US ABOUT THE PERFORMANCE OF FOREIGN MARKETS OVER THE PERIOD? L.H. Besides the performance of Italy, Sweden and Spain that I already mentioned, the performances of the other markets have all, to a certain degree, been restrained by the trend in the United States. Even though the core of Europe had a very different outlook and expectations than the U.S., those markets have clearly slowed unexpectedly due to the influence of the reversal in the U.S. Overall, European economies remained flat. While French rates have converged with those in Germany, short-term rates in the United Kingdom remained relatively high. That's partly because the U.K. had a slightly more buoyant economy and an element of political uncertainty due to upcoming elections. Japan remained unattractive as current yields remained low. Q. WHAT'S YOUR OUTLOOK FOR THE FOREIGN MARKETS OVER THE NEXT SIX MONTHS? L.H. Investors probably will keep a close eye on the U.S. market, as that market tends to influence the others. If the Federal Reserve Board increases interest rates, it might have repercussions in the other developed markets. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: high total return by investing in investment-grade debt securities from around the world START DATE: December 30, 1986 SIZE: as of June 30, 1996 more than $132 million MANAGER: Ian Spreadbury, since February 1996; joined Fidelity in 1995; Christine Thompson, since February 1996; also manager, Fidelity U.S. Bond Index Fund, since 1990; Fidelity Intermediate Bond Fund, since 1995; Fidelity Target Timeline Funds, since 1996; joined Fidelity in 1985 (checkmark) IAN SPREADBURY ON CURRENCY HEDGING: "An example may help illustrate the mechanics of currency hedging. If you're a dollar-denominated investor and you wish to invest in Germany, you have to use deutsche marks to buy those bonds. The deutsche marks give you foreign currency exposure, meaning that the currency could rise or fall in value relative to the dollar. To neutralize this exposure, the fund would sell the deutsche marks through forward currency contracts, effectively nullifying this exposure. The fund no longer engages in this practice; thus it will tend to outperform its peers when the dollar is weak and underperform when the dollar is strong. Following this new strategy reflects our realization of the difficulty in predicting currency or interest rate movements on a consistent basis. Too many things - be they economic or political in nature - can happen to quickly change investor perception." INVESTMENT CHANGES The charts below highlight three different aspects of the fund's investments: the country where they were issued, their sensitivity to interest rate changes, and their currency exposure. The top countries in each table differ because some securities have more interest rate risk than others, because securities issued in one country may be denominated in another country's currency, and because of the effects of currency hedging. TOP COUNTRIES AS OF JUNE 30, 1996 (EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO United States 58 41 Italy 8 12 Germany 7 6 France 4 5 Netherlands Antilles 4 0 TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY, INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS. PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF APPLICABLE. TOP INTEREST RATE EXPOSURES AS OF JUNE 30, 1996 (ESTIMATED, BY COUNTRY) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE SECURITIES 6 MONTHS AGO United States 60 40 Japan 9 16 Germany 7 6 Italy 7 10 France 5 6 FIDELITY ESTIMATES INTEREST-RATE EXPOSURES BASED ON THE DURATION, OR INTEREST RATE SENSITIVITY, OF THE FUND'S HOLDINGS. AS OF JUNE 30, 1996, THE FUND WAS MOST SENSITIVE TO INTEREST RATE MOVEMENTS IN THE U.S., WHICH ACCOUNTED FOR APPROXIMATELY 60% OF THE FUND'S INTEREST RATE EXPOSURE. TOP CURRENCY EXPOSURES AS OF JUNE 30, 1996 (ESTIMATED, BY COUNTRY) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE SECURITIES 6 MONTHS AGO U.S. dollar 99 99 THE U.S. DOLLAR EXPOSURE ABOVE INCLUDES THE EFFECTS OF FOREIGN INVESTMENTS WHOSE CURRENCY RISK IS FULLY HEDGED. THERE WERE NO FOREIGN CURRENCY EXPOSURES IN EXCESS OF 0.5% AS OF JUNE 30, 1996. INVESTMENTS JUNE 30, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities NONCONVERTIBLE BONDS - 37.0% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) AUSTRALIA - 0.7% New South Wales Treasury Corp. 7 1/2%, 2/1/98 Aa2 AUD 800,000 $ 625,315 CANADA - 1.6% Ford Credit Canada Ltd. 8.90%, 2/23/98 A1 CAD 1,000,000 762,715 General Motors Acceptance Corp. of Canada Ltd. 8.30%, 4/12/98 A3 CAD 1,000,000 755,528 1,518,243 FRANCE - 1.8% Credit Local De France 5 5/8%, 1/4/99 Aaa FRF 9,000,000 1,770,669 GERMANY - 1.7% Rheinische Hypothekenbank AG, Series 499, 5 1/2%, 12/20/99 Aaa DEM 2,500,000 1,660,380 NETHERLANDS - 0.2% Ford Capital BV yankee 9 3/8%, 1/1/98 A1 150,000 156,290 NETHERLANDS ANTILLES - 4.3% Deutsche Bank Finance NV 4 3/8%, 7/16/98 Aaa JPY 425,000,000 4,100,656 UNITED KINGDOM - 0.9% Abbey National Treasury Services PLC 7 3/4%, 6/23/98 Aa2 GBP 550,000 870,185 UNITED STATES OF AMERICA - 25.8% AMR Corp. 7 3/4%, 12/1/97 Baa3 600,000 609,504 Advanta National Bank 6.41%, 4/30/98 Baa2 300,000 298,329 Aristar, Inc. 7 1/2%, 7/1/99 Baa1 300,000 306,291 BankAmerica Corp. 6%, 7/15/97 A1 1,000,000 999,260 Banponce Financial Corp.: 6.34%, 3/29/99 Baa1 80,000 79,014 6.88%, 6/16/00 Baa1 80,000 79,690 Banponce Corp. 6.378%, 4/8/99 Baa1 130,000 128,185 Beneficial Corp.: 8.26%, 8/20/96 A2 1,000,000 1,003,100 8.80%, 6/15/98 A2 1,600,000 1,666,096 Capital One Bank: 8 1/8%, 2/27/98 Baa3 530,000 541,830 6.66%, 8/17/98 Baa3 650,000 648,694 Caterpillar Financial Asset Trust 6.55%, 5/22/02 A3 280,000 278,732 Chase Manhattan Corp.: 6 5/8%, 1/15/98 A1 1,000,000 1,003,320 8%, 6/15/99 A2 1,000,000 1,033,400 NONCONVERTIBLE BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - CONTINUED Comdisco, Inc.: 5.76%, 1/19/99 Baa2 $ 1,000,000 $ 981,200 7 1/4%, 4/15/98 Baa2 1,000,000 1,012,050 Delta Air Lines, Inc. 9 7/8%, 1/1/98 Baa3 160,000 167,229 Discover Card Trust 7 1/2%, 6/16/00 A2 290,000 294,167 Finova Capital Corp.: 5.98%, 10/31/97 Baa1 480,000 478,618 6.14%, 11/2/98 Baa1 100,000 99,113 First Chicago Corp. 9 7/8%, 7/1/1999 A2 1,000,000 1,085,120 First Interstate Bancorp. 8 5/8%, 4/1/99 A2 1,000,000 1,047,140 First USA Bank: 6 1/8%, 10/30/97 Baa3 200,000 199,912 8.20%, 2/15/98 Baa3 1,000,000 1,023,460 General Motors Acceptance Corp.: 5 3/4%, 12/10/97 A3 720,000 715,874 6.40%, 6/8/98 A3 1,000,000 1,000,140 Green Tree Financial Corp.: 5 1/2%, 1/31/00 Aaa 52,012 51,118 6 1/2%, 6/15/27 Aaa 120,000 119,474 6.65%, 7/15/27 Aaa 260,000 260,811 Household Finance Corp. 7.55%, 3/16/98 A2 560,000 570,606 Nationsbank Corp. 5 1/8%, 9/15/98 A2 1,000,000 972,750 Northwest Financial, Inc. 6%, 8/15/97 Aa3 1,100,000 1,095,490 Premier Auto Trust: 8.05%, 4/4/00 Aaa 130,000 133,413 6%, 5/6/00 Aaa 250,000 248,515 6.35%, 7/6/00 A3 240,000 237,900 RJR Nabisco, Inc.: 8%, 1/15/00 Baa3 180,000 180,005 8%, 7/15/01 Baa3 280,000 277,060 Structured Asset Securities Corp. commercial Series 1995-C4 Class A1A, 6.90%, 6/25/26 AAA 231,799 229,771 Time Warner, Inc. 7.45%, 2/1/98 Ba1 1,180,000 1,192,779 WFS Financial Grantor Trust: 6.05%, 6/1/00 Aaa 740,000 736,994 7.05%, 11/20/03 Aaa 650,000 650,813 Wells Fargo & Co. 8.20%, 11/1/96 A1 1,000,000 1,007,140 24,744,107 TOTAL NONCONVERTIBLE BONDS (Cost $36,325,327) 35,445,845 GOVERNMENT OBLIGATIONS (E) - 57.6% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) ARGENTINA - 1.7% Province of Chaco 11 7/8%, 9/10/97 (d) - $ 1,549,999 $ 1,668,422 BELGIUM - 1.7% Kingdom of Belgium 5.10%, 11/21/04 (c) Aa BEF 50,000,000 1,626,142 DENMARK - 1.1% Kingdom of Denmark: 6 1/4%, 2/10/97 Aaa DKK 2,000,000 344,813 9%, 11/15/98 Aaa DKK 4,000,000 738,453 1,083,266 FRANCE - 2.6% French Government: B-Tan 8 1/2%, 11/12/97 Aaa FRF 10,000,000 2,045,626 OAT 8 1/8%, 5/25/99 Aaa FRF 2,000,000 419,942 2,465,568 GERMANY - 5.5% Federal Republic of Germany: 6 1/8%, 7/21/97 Aaa DEM 5,000,000 3,360,446 6 3/4%, 8/20/98 Aaa DEM 2,700,000 1,855,553 5,215,999 ITALY - 7.5% Republic of Italy (f): 8 1/2%, 8/01/97 A1 ITL 5,000,000 3,255,375 8 1/2%, 1/1 /99 A1 ITL 6,000,000 3,934,986 7,190,361 NETHERLANDS - 1.0% Dutch Government 6 3/4%, 2/15/99 Aaa NLG 1,600,000 985,530 SPAIN - 2.2% Kingdom of Spain (f): 11.60%, 1/15/97 AAA ESP 50,000 398,416 11.45%, 8/30/98 AAA ESP 200,000 1,679,785 2,078,201 SWEDEN - 1.0% Swedish Government 11%, 1/21/99 Aa1 SEK 5,500,000 911,151 GOVERNMENT OBLIGATIONS (E) - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (A) (NOTE 1) UNITED KINGDOM - 0.9% United Kingdom, Great Britain & Northern Ireland 14%, 5/22/01 Aaa GBP 500,000 $ 879,503 UNITED STATES OF AMERICA - 32.4% Federal Home Loan Mortgage Corporation: 7.00% 11/1/97 to 6/1/01 Aaa 309,100 310,355 Federal Home Loan Bank 4.83% 9/21/98 callable Aaa 275,000 267,223 Government Trust Certificates (assets of Trust guaranteed by U.S. Government through Defense Security Assistance Agency): Class 1-C, 9 1/4%, 11/15/01 Aaa 166,000 177,296 Class T-2 9 5/8%, 5/15/02 Aaa 80,000 85,672 U.S. Treasury Notes: 8 1/2%, 5/15/97 Aaa 420,000 429,647 8 3/4%, 10/15/97 Aaa 8,600,000 8,895,582 8 7/8%, 11/15/97 Aaa 1,692,000 1,755,179 6.125%, 3/31/98 Aaa 12,820,000 12,830,000 9 1/4%, 8/15/98 Aaa 333,000 353,033 8 7/8%, 2/15/99 Aaa 100,000 106,234 7 3/4%, 12/31/99 Aaa 4,740,000 4,938,464 6 7/8%, 3/31/00 Aaa 870,000 882,641 31,031,326 TOTAL GOVERNMENT OBLIGATIONS (Cost $54,868,344) 55,135,469 SUPRANATIONAL OBLIGATIONS - 5.4% Eurofima euro 11 3/8%, 11/30/99 Aaa GBP 200,000 348,658 International Bank for Reconstruction & Development Worldbank 4 1/2%, 12/22/97 (f) Aaa JPY 500,000 4,790,119 TOTAL SUPRANATIONAL OBLIGATIONS (Cost $5,962,595) $ 5,138,777 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $97,156,266) $ 95,720,091 FORWARD FOREIGN CURRENCY CONTRACTS SETTLEMENT UNREALIZED DATE VALUE GAIN/(LOSS) CONTRACTS TO BUY 2,064,525 DKK 7/17/96 $ 351,762 $ 1,129 1,720,000 SEK 7/17/96 258,663 827 TOTAL CONTRACTS TO BUY (Payable amount $608,469) $ 610,425 $ 1,956 THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 0.6% CONTRACTS TO SELL 764,331 AUD 7/31/96 $ 600,769 $ (769) 50,000,000 BEF 9/27/96 1,603,520 (8,878) 1,360,114 GBP 7/31/96 2,110,742 (59,690) 2,019,298 CAD 7/29/96 1,481,884 (1,442) 8,258,017 DKK 7/17/96 1,407,033 13,505 1,622,394 NLG 8/13/96 952,119 11,871 22,009,465 FRF 7/09/96 4,271,673 102,661 10,738,313 DEM 7/31/96 7,057,626 14,008 11,000,000 ITL 9/27/96 7,111,456 3,680 965,700,000 JPY 7/31/96 8,844,771 405,229 270,106 ESP 8/13/96 2,101,581 13,700 7,358,661 SEK 7/17/96 1,106,638 (21,450) TOTAL CONTRACTS TO SELL (Receivable amount $39,122,237) $ 38,649,812 $ 472,425 THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 40.4% CURRENCY ABBREVIATIONS AUD - Australian dollar BEF - Belgian franc GBP - British pound CAD - Canadian dollar DKK - Danish krone NLG - Dutch guilder FRF - French franc DEM - German deutsche mark ITL - Italian lira JPY - Japanese yen ESP - Spanish peseta SEK - Swedish krona LEGEND 1. Principal amount is stated in United States dollars unless otherwise noted. 2. Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 3. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 4. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Province of Chaco 11 7/8%, 9/10/97 3/9/94 $ 2,207,850 5. Some foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. 6. Principal amount in thousands. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 84.4% AAA, AA, A 86.8% Baa 7.4% BBB 9.0% Ba 1.3% BB 0.8% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% For some foreign government obligations, FMR has assigned the ratings of the sovereign credit of the issuing government. The percentage not rated by either S&P or Moody's amounted to 1.7% including long-term debt categorized as other securities. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities (Unaudited) Commercial Mortgage Securities 0.2 Finance 31.5 Foreign Government Obligations 25.2 U.S. Government Obligations 32.4 Media & Leisure 1.2 Nondurables 0.5 Services 0.7 Supranational Obligations 5.4 Technology 2.1 Transportation 0.8 100.0% INCOME TAX INFORMATION At June 30, 1996, the aggregate cost of invest- ment securities for income tax purposes was $97,156,266. Net unrealized depreciation aggregated $1,436,175, of which $1,248,125 related to appreciated investment securities and $(2,684,300) related to depreciated investment securities. At December 31, 1995, the fund had a capital loss carryforward of approximately $32,196,000 of which $349,000, $2,324,000, $13,718,000 and $15,805,000 will expire on December 31, 1999, 2000, 2002 and 2003, respectively. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED) ASSETS Investment in securities, at value (cost $97,156,266) - $ 95,720,091 See accompanying schedule Receivable for investments sold 1,420,449 Unrealized appreciation on foreign currency contracts 566,898 Receivable for closed foreign currency contracts 2,568 Interest receivable 2,419,568 TOTAL ASSETS 100,129,574 LIABILITIES Payable to custodian bank $ 123,056 Payable for investments purchased 1,220,086 Unrealized depreciation on foreign currency contracts 92,517 Payable for closed foreign currency contracts 404 Payable for fund shares redeemed 101,761 Distributions payable 91,490 Accrued management fee 49,113 Other payables and accrued expenses 63,875 TOTAL LIABILITIES 1,742,302 NET ASSETS $ 98,387,272 Net Assets consist of: Paid in capital $ 132,478,063 Distributions in excess of net investment income (1,229,692) Accumulated undistributed net realized gain (loss) on (32,177,973) investments and foreign currency transactions Net unrealized appreciation (depreciation) on (683,126) investments and assets and liabilities in foreign currencies NET ASSETS, for 11,044,424 shares outstanding $ 98,387,272 NET ASSET VALUE, offering price and redemption price per $8.91 share ($98,387,272 (divided by) 11,044,424 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) INVESTMENT INCOME 3,951,167 Interest Less foreign taxes withheld (76,983) TOTAL INCOME 3,874,184 EXPENSES Management fee $ 325,773 Transfer agent fees 97,829 Accounting fees and expenses 38,179 Non-interested trustees' compensation 210 Custodian fees and expenses 16,201 Registration fees 13,141 Audit 41,646 Legal 242 Miscellaneous 1,981 Total expenses before reductions 535,202 Expense reductions (1,993) 533,209 NET INVESTMENT INCOME 3,340,975 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (1,181,925) Foreign currency transactions 1,199,863 17,938 Change in net unrealized appreciation (depreciation) on: Investment securities (1,489,339) Assets and liabilities in foreign currencies 250,737 (1,238,602) NET GAIN (LOSS) (1,220,664) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 2,120,311 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED JUNE DECEMBER 31, 30,1996 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 3,340,975 $ 10,659,268 Net investment income Net realized gain (loss) 17,938 (9,940,229) Change in net unrealized appreciation (depreciation) (1,238,602) 10,030,355 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,120,311 10,749,394 FROM OPERATIONS Distributions to shareholders (2,954,784) (10,715,310) From net investment income In excess of net investment income (393,408) - TOTAL DISTRIBUTIONS (3,348,192) (10,715,310) Share transactions 6,424,676 27,319,850 Net proceeds from sales of shares Reinvestment of distributions 2,758,082 8,969,845 Cost of shares redeemed (31,501,268) (179,797,316) NET INCREASE (DECREASE) IN NET ASSETS RESULTING (22,318,510) (143,507,621) FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS (23,546,391) (143,473,537) NET ASSETS Beginning of period 121,933,663 265,407,200 End of period (including distributions in excess $ 98,387,272 $ 121,933,663 of net investment income of $(1,229,692) and $(1,222,475), respectively) OTHER INFORMATION Shares Sold 716,344 3,087,868 Issued in reinvestment of distributions 308,351 1,012,063 Redeemed (3,518,176) (20,354,972) Net increase (decrease) (2,493,481) (16,255,041)
SIX MONTHS YEARS ENDED DECEMBER 31, TWO MONTHS YEAR ENDED OCTOBER 4, 1991 FINANCIAL HIGHLIGHTS ENDED JUNE 30, ENDED OCTOBER 31, (COMMENCEMENT 1996 DECEMBER 31, OF OPERATIONS) TO OCTOBER 31, (UNAUDITED) 1995 1994 1993 D 1992 1992 1991
SELECTED PER-SHARE DATA Net asset value, beginning of period $ 9.010 $ 8.910 $ 10.190 $ 9.680 $ 9.800 $ 10.040 $ 10.000 Income from Investment Operations .253 .619 .644 .564 .191 .835 .061 Net investment income Net realized and unrealized gain (loss) (.079) .049 (1.218) .621 (.203) (.338) .037 Total from investment operations .174 .668 (.574) 1.185 (.012) .497 .098 Less Distributions From net investment income (.242) (.568) (.199) (.543) (.108) (.737) (.058) In excess of net investment income (.032) - (.050) (.132) - - - Return of capital - - (.457) - - - - Total distributions (.274) (.568) (.706) (.675) (.108) (.737) (.058) Net asset value, end of period $ 8.910 $ 9.010 $ 8.910 $ 10.190 $ 9.680 $ 9.800 $ 10.040 TOTAL RETURN B, C 1.96% 7.79% (5.80)% 12.59% (.12)% 5.10% .98% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 98,387 $ 121,934 $ 265,407 $ 422,602 $ 458,846 $ 648,448 $ 44,318 Ratio of expenses to average net assets .98% 1.06% 1.01% 1.00% 1.20% A, 1.09% 1.00% A A E , E Ratio of net investment income to average 6.15% 6.42% 7.54% 8.00% 8.63% A 9.04% 9.07% A net assets A Portfolio turnover rate 180% 284% 134% 160% 117% A 154% 62% A A
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. E 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. NOTES TO FINANCIAL STATEMENTS For the period ended June 30, 1996 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Short-Term World Bond Fund (the fund) is a fund of Fidelity Investment Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Interest income, which includes accretion of original issue discount, is accrued as earned. Interest income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 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. Distributions to shareholders from realized capital gains on investments, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures and options transactions, foreign currency transactions, market discount, capital loss carryforwards, and losses deferred due to wash sales, futures and options, 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). Distributions in excess of net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences that will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. These contracts involve market risk in excess of the unrealized gain or loss reflected in the fund's Statement of Assets and Liabilities. The U.S. dollar value of the currencies the fund has committed to buy or sell is shown in the schedule of investments under the caption "Forward Foreign Currency Contracts." This amount represents the aggregate exposure to each currency the fund has acquired or hedged through currency contracts at period end. 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 2. OPERATING POLICIES - CONTINUED FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED of offset; otherwise, gain (loss) is recognized on settlement date. Contracts that have been offset with different counterparties are reflected as both a contract to buy and a contract to sell in the schedule of investments under the caption "Forward Foreign Currency Contracts." JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the bond market and to fluctuations in interest rates. 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. 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. INDEXED SECURITIES. The fund may invest in indexed securities whose values are linked either directly or inversely to changes in foreign currencies, interest rates, commodities, indices, or other underlying instruments. The fund uses these securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets that might be difficult to invest in through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. 2. OPERATING POLICIES - CONTINUED RESTRICTED SECURITIES. The fund is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, restricted securities (excluding 144A issues) amounted to $1,668,422 or 1.7% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $41,763,791 and $62,894,670, respectively, of which U.S. government and government agency obligations aggregated $50,596,168 and $46,621,036, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management & Research Company (FMR) receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .45%. For the period, the management fee was equivalent to an annualized rate of .60% of average net assets. SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory agreements with Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research Far East Inc., and Fidelity International Investment Advisors (FIIA). In addition, FIIA entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. a fee based on costs incurred for either service. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC 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 .18% of average net assets. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. 5. EXPENSE REDUCTIONS. The fund has entered into an arrangement with its custodian whereby interest earned on uninvested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's custodian fees were reduced by $1,993. 6. PROPOSED REORGANIZATION. The Board of Trustees of Fidelity Short-Term World Bond Fund has approved an Agreement and Plan of Reorganization ("Agreement") between the fund and Fidelity Short-Term Bond Fund ("Reorganization"). The Agreement provides for the transfer of substantially all of the assets and the assumption of substantially all of the liabilities of the fund to Fidelity Short-Term Bond Fund in exchange solely for the number of shares of Fidelity Short-Term Bond Fund having the same aggregate net asset value as the outstanding shares of the fund at the close of business on the day that the Reorganization is effective. The Reorganization can be consummated only if, among other things, it is approved by the vote of a majority (as defined by the Investment Company Act of 1940) of outstanding voting securities of the fund. A Special Meeting of Shareholders ("Meeting") of the fund will be held on October 11, 1996 to vote on the Agreement. A detailed description of the proposed transaction and voting information will be sent to shareholders of the fund in August 1996. If the Agreement is approved at the Meeting, the Reorganization is expected to become effective on or about October 31, 1996. Effective July 16, 1996, the fund's shares are no longer available for purchase or exchange for new accounts of the fund. However, existing shareholders of the fund can continue to purchase shares of the fund up to the close of business on August 14, 1996, at which time the fund will be closed to all share purchases except for reinvestment of dividends or other distributions. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 950 Northgate Drive San Rafael, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT 29 South Main Street West Hartford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company, Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan Fidelity International Investment Advisors Fidelity International Investment Advisors (U.K.) Limited OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Fred L. Henning, Jr., Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S TAXABLE BOND FUNDS Capital & Income Ginnie Mae Global Bond Government Securities Intermediate Bond Investment Grade Bond Mortgage Securities New Markets Income Short-Intermediate Government Short-Term Bond Short-Term World Bond Spartan(Registered trademark) Ginnie Mae Spartan Government Income Spartan High Income Spartan Investment Grade Bond Spartan Limited Maturity Government Spartan Short-Intermediate Government Spartan Short-Term Bond THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----