-----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, UvmxgtcyfdGnifZhMooeU+bfj7B1ffWmswroNM7P1OQ9tWDrfElLm86O0U95nye+ VO1zr11f04ZfI/E780IiTg== 0000729218-96-000003.txt : 19960221 0000729218-96-000003.hdr.sgml : 19960221 ACCESSION NUMBER: 0000729218-96-000003 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960220 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY INVESTMENT TRUST CENTRAL INDEX KEY: 0000744822 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04008 FILM NUMBER: 96523362 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391269 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAIL ZONE ZH1 CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY OVERSEAS FUND DATE OF NAME CHANGE: 19861228 N-30D 1 (2_FIDELITY_LOGOS)FIDELITY GLOBAL BOND FUND ANNUAL REPORT DECEMBER 31, 1995 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 21 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 25 Notes to the financial statements. REPORT OF INDEPENDENT 30 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 31 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 the markets were fairly positive in 1995, no one can predict what lies ahead for investors. The previous year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. 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 DECEMBER 31, 1995 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Global Bond 6.66% 28.11% 92.68% Salomon Brothers World Government Bond Index 19.04% 68.65% n/a Average General World Income Fund 18.05% 47.85% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, 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 - a widely used world government bond indicator. To measure how the fund's performance stacked up against its peers, you can compare it to the average general world income fund, which reflects the performance of 135 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. Both benchmarks include reinvested dividends and capital gains, if any, and exclude sales charges. Recent U.S. Consumer Price Index (CPI) information is not available from the U.S. Department of Labor. Therefore, the CPI comparison has not been included in this report. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED DECEMBER 31, 1995 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Global Bond 6.66% 5.08% 7.55% Salomon Brothers World Government Bond Index 19.04% 11.02% n/a Average General World Income Fund 18.05% 8.09% 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 Global Bond FundSB World Governme 12/31/86 10000.00 10000.00 01/31/87 10311.24 10300.19 02/28/87 10451.57 10461.77 03/31/87 10698.66 10703.84 04/30/87 10786.19 10826.47 05/31/87 10625.67 10719.17 06/30/87 10585.27 10632.94 07/31/87 10339.13 10420.90 08/31/87 10556.94 10578.02 09/30/87 10392.69 10280.39 10/31/87 10975.54 10972.73 11/30/87 11449.59 11354.03 12/31/87 11913.69 11840.71 01/31/88 11584.23 11776.20 02/29/88 11669.26 11879.03 03/31/88 11956.20 12091.08 04/30/88 11945.58 12032.32 05/31/88 11892.44 11919.27 06/30/88 11764.91 11659.32 07/31/88 11775.53 11588.43 08/31/88 11690.51 11458.77 09/30/88 11828.67 11754.49 10/31/88 12190.02 12297.37 11/30/88 12413.20 12485.79 12/31/88 12350.32 12358.69 01/31/89 12315.76 12177.94 02/28/89 12212.07 12186.24 03/31/89 12177.51 12016.99 04/30/89 12338.80 12176.02 05/31/89 12131.43 11919.27 06/30/89 12384.89 12158.78 07/31/89 12788.12 12712.52 08/31/89 12603.78 12285.24 09/30/89 12753.55 12518.36 10/31/89 12926.37 12623.11 11/30/89 13064.62 12737.43 12/31/89 13329.59 12893.27 01/31/90 13293.50 12722.74 02/28/90 13125.08 12527.30 03/31/90 13281.47 12403.40 04/30/90 13281.47 12365.08 05/31/90 13461.93 12775.76 06/30/90 13750.66 13010.16 07/31/90 14231.87 13417.64 08/31/90 14147.66 13312.90 09/30/90 14328.11 13461.71 10/31/90 14664.96 14063.36 11/30/90 14821.35 14296.48 12/31/90 14966.02 14437.63 01/31/91 15294.80 14798.49 02/28/91 15439.46 14802.96 03/31/91 15229.04 14265.18 04/30/91 15439.46 14484.89 05/31/91 15623.57 14466.37 06/30/91 15439.46 14315.00 07/31/91 15597.48 14620.94 08/31/91 15744.37 14903.88 09/30/91 16105.47 15487.00 10/31/91 16323.48 15649.23 11/30/91 16241.73 15893.85 12/31/91 16877.42 16720.32 01/31/92 16707.23 16423.33 02/29/92 16778.14 16331.99 03/31/92 16749.97 16158.91 04/30/92 16977.66 16274.51 05/31/92 17290.75 16773.97 06/30/92 17505.10 17243.41 07/31/92 17767.43 17645.14 08/31/92 18025.90 18138.85 09/30/92 17774.98 18320.88 10/31/92 17659.43 17823.34 11/30/92 17394.30 17540.40 12/31/92 17619.52 17645.14 01/31/93 17823.07 17952.99 02/28/93 18097.52 18306.19 03/31/93 18496.21 18587.21 04/30/93 18672.10 18980.01 05/31/93 19015.32 19170.34 06/30/93 19397.07 19129.46 07/31/93 19692.25 19183.75 08/31/93 20189.71 19760.49 09/30/93 20304.78 19994.89 10/31/93 20830.76 19961.04 11/30/93 20764.44 19817.97 12/31/93 21479.33 19986.59 01/31/94 21713.86 20147.54 02/28/94 20531.66 20015.97 03/31/94 19053.47 19987.23 04/30/94 18678.26 20010.22 05/31/94 18782.43 19834.58 06/30/94 17973.21 20120.71 07/31/94 18300.43 20281.02 08/31/94 18527.75 20210.77 09/30/94 18528.69 20357.03 10/31/94 18613.12 20683.40 11/30/94 18690.13 20399.18 12/31/94 17975.74 20455.39 01/31/95 17818.85 20884.59 02/28/95 17768.50 21419.17 03/31/95 17884.41 22691.45 04/30/95 18186.00 23111.71 05/31/95 18734.45 23761.90 06/30/95 18909.95 23901.77 07/31/95 18874.86 23957.97 08/31/95 18291.87 23134.70 09/30/95 18608.17 23651.40 10/31/95 18836.41 23827.68 11/30/95 18963.79 24093.38 12/29/95 19172.22 24349.49 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Global Bond Fund on December 31, 1986, shortly after the fund started. As the chart shows, by December 31, 1995, the value of your investment would have grown to $19,172 - a 91.72% increase on your initial investment. For comparison, look at how the Salomon Brothers World Government Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $24,349 - a 143.49% 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 DECEMBER 31, 1995 PAST PAST 6 PAST 1 MONTH MONTHS YEAR A Dividends per share 4.86(cents) 29.40(cents) 57.63(cents) Annualized dividend rate 5.76% 5.92% 5.87% 30-day annualized yield 4.56% - - 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 $9.93 over the past month, $9.86 over the past six months and $9.82 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. A DIVIDENDS PAID ARE BASED ON THE FUND'S INVESTMENT INCOME AND DO NOT REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS PAID DURING 1995 OF APPROXIMATELY 6(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF CAPITAL. FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Both developed and emerging fixed-income markets recorded strong returns in 1995. For the 12 months ended December 31, 1995, the Salomon Brothers World Government Bond Index - a proxy of government bond market performance in developed nations including the U.S. - rose 19.04%. Emerging markets shrugged off the fallout from December 1994's Mexican peso devaluation to record strong returns. The J.P. Morgan Emerging Markets Bond Index posted a 27.54% return for the year. To compare, the Lehman Brothers Aggregate Bond Index - a broad measure of taxable bonds in the U.S. market - had a total return of 18.47%. Bond markets in developed countries benefited from slow economic growth and relatively low inflation pressures. This led to a more favorable interest rate environment, as the central banks of the U.S., Germany and Great Britain all lowered their respective short-term interest rates. Record low interest rates in Japan and a strengthening dollar pushed a significant amount of money into the U.S., as overseas investors in 1995 purchased a record net $99.4 billion in U.S. Treasury securities - helping fuel the U.S. rally. The bulk of emerging markets' total return came from a springtime rally following the announcement of a $50 billion bailout package for Mexico by the U.S. Treasury and the International Monetary Fund. An interview with Jonathan Kelly, Portfolio Manager of Fidelity Global Bond Fund Q. HOW DID THE FUND PERFORM, JONATHAN? A. For the 12 months ended December 31, 1995, the fund had a total return of 6.66%. During the same period, the average general world income fund tracked by Lipper Analytical Services returned 18.05% and the Salomon Brothers World Government Bond Index had a return of 19.04%. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? A. The fund had a disappointing year. Its 12-month return suffered most on a relative basis in the first quarter. During that period, the fund's structure was characterized by hedging most of its foreign currency exposure and investing in emerging market debt. Both hurt the fund, as the dollar depreciated rapidly and emerging market debt suffered a market sell-off. In March, the fund changed its focus, removing its foreign currency hedges and deciding, for the time being, not to invest in emerging markets. Subsequently, the fund has done much better, delivering returns that are essentially in line with the world government bond market, as represented by the Salomon Brothers World Government Bond Index. Q. IN THE FUND'S SEMIANNUAL REPORT YOU DESCRIBE HOW THE FUND'S DURATION - OR INTEREST RATE SENSITIVITY - AND CURRENCY EXPOSURE WILL MIRROR THAT OF THE MARKET AS REPRESENTED BY THE SALOMON BROTHERS WORLD GOVERNMENT INDEX. HOW DOES THIS INVESTMENT APPROACH WORK? A. The idea is that while I keep the fund's interest rate and currency sensitivity relatively neutral to the market - as represented by the index - - I attempt to find undervalued securities that have the potential for outperforming it. There are three ways I do that: credit research, quantitative research and opportunistic trading. Q. CAN YOU GIVE SOME EXAMPLES? A. Sure. In terms of credit research, I've tried to take advantage of Fidelity's extensive research teams in Boston and London to find credit-worthy issuers with bonds offering attractive yield advantages relative to government issues. Recently, I've targeted both corporate and government agency bonds in the U.S., United Kingdom and Canada. In addition, our quantitative analysts have worked to identify price inefficiencies that are specific to certain countries. For example, in the United Kingdom, the fund emphasized high-coupon government bonds that traded at a discount to low-coupon bonds because of both withholding tax considerations and market structure. Finally, in terms of trading, we have sought to capitalize on wide disparities in bid and ask prices in various foreign markets. Q. WHAT FACTORS DO YOU CONSIDER WHEN DETERMINING THE FUND'S COUNTRY ALLOCATION? A. The investment approach I outlined above is more of a bottom-up, issuer-by-issuer approach. From time to time, however, I will notice a close correlation between two countries and try to use it to the fund's advantage. For example, Germany and the Netherlands have very closely related currencies and interest rate fluctuations. Earlier this year, shorter-term Dutch bonds appeared undervalued relative to shorter-term German bonds, while longer-term German bonds appeared undervalued relative to longer-term Dutch bonds. As a result, I concentrated the fund's exposure in shorter-term Dutch bonds and longer-term German bonds. Q. DID CURRENCIES HAVE AN EFFECT ON THE FUND'S DIVIDENDS THIS YEAR? A. Yes, currency-related losses caused part of this year's dividend to be non-taxable. Most of this resulted from losses carried over from 1994, however. But dividends are only part of the story. Overall, currencies helped the fund slightly in terms of total return, because foreign currencies generally strengthened versus the dollar over the course of the year. NOTE TO SHAREHOLDERS: EFFECTIVE FEBRUARY 26, 1996, CHRISTINE THOMPSON AND IAN SPREADBURY BECAME CO-MANAGERS OF THE FUND. MS. THOMPSON JOINED FIDELITY IN 1985 AND ALSO MANAGES FIDELITY U.S. BOND INDEX FUND AND FIDELITY INTERMEDIATE BOND FUND. SHE WILL MANAGE THE U.S. PORTION OF THE FUND. MR. SPREADBURY, WHO WILL MANAGE THE INTERNATIONAL PORTION OF THE FUND, JOINED FIDELITY INTERNATIONAL, LIMITED, A SISTER COMPANY OF FIDELITY INVESTMENTS, IN 1995, AND IS AN INVESTMENT DIRECTOR OF FIXED-INCOME. THE FOLLOWING IS THEIR COMMENT ON THE OUTLOOK FOR THE FUND. Q. WHAT'S YOUR OUTLOOK? A. We are cautiously optimistic. Economic fundamentals for fixed-income investments are generally positive, as economic growth is slowing and inflation is falling in most areas of the world. However, valuation levels are not as attractive as they were in early 1995 as interest rates have fallen quite sharply in much of the world. Additionally, foreign markets appear undervalued when compared to the U.S. As with any global portfolio, political and economic factors can affect the fund, and the performance of the dollar versus other currencies also will affect performance. FUND FACTS GOAL: high total return by investing in debt securities from around the world START DATE: December 30, 1986 SIZE: as of December 31, 1995, more than $196 million MANAGERS: Jonathan Kelly, from1993 to February 1996; Christine Thompson and Ian Spreadbury, since February 1996 (checkmark) IAN SPREADBURY ON CURRENCY AS A DIVERSIFICATION TOOL IN A GLOBAL PORTFOLIO: "Although currencies can be both volatile and unpredictable, when used properly they can be a good way to diversify a global bond portfolio. Typically, when the U.S. bond market goes down, the dollar also weakens. Therefore, when this happens, non-dollar denominated securities can provide diversification. Although the fund is managed in a more bottom-up style, I always try to be aware of these relationships." "Another way I value global bonds is by real yield. In other words, I take the yield of a bond and subtract the inflation rate to get its real return. For example, real yields are one reason why European fixed-income securities are currently an attractive investment relative to opportunities elsewhere in the world. In Europe, economic growth is slow, inflation is not a threat and many European bonds are trading at higher than average yields." 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. INVESTMENT CHANGES TOP COUNTRIES AS OF DECEMBER 31, 1995 (BY LOCATION OF ISSUER) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS SIX MONTHS AGO United States 33 34 Germany 17 13 France 7 7 United Kingdom 6 5 Austria 5 5 TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY, INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS. THE FUND'S LARGEST POSITION AS OF DECEMBER 31, 1995 WAS IN SECURITIES OF UNITED STATES ISSUERS. TOP INTEREST RATE EXPOSURES AS OF DECEMBER 31, 1995 (ESTIMATED, BY COUNTRY) % OF FUND'S TOTAL % OF INTEREST RATE INTEREST RATE EXPOSURE EXPOSURE SIX MONTHS AGO United States 34 33 Japan 18 23 Germany 9 11 France 7 7 United Kingdom 6 6 FIDELITY ESTIMATES INTEREST RATE EXPOSURES BASED ON THE DURATION, OR INTEREST RATE SENSITIVITY, OF THE FUND'S HOLDINGS. AS OF DECEMBER 31, 1995, THE FUND WAS MOST SENSITIVE TO INTEREST RATE MOVEMENTS IN THE U.S., WHICH ACCOUNTED FOR APPROXIMATELY 34% OF THE FUND'S INTEREST RATE EXPOSURE. ASSET ALLOCATION AS OF DECEMBER 31, 1995 AS OF JUNE 30, 1995 37 Row: 1, Col: 1, Value: 11.3 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 22.0 Row: 1, Col: 4, Value: 43.6 Row: 1, Col: 5, Value: 21.1 Row: 1, Col: 1, Value: 15.4 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 24.2 Row: 1, Col: 4, Value: 40.3 Row: 1, Col: 5, Value: 18.1 Corporate bonds 22.1% Foreign government obligations 43.6% U.S. government obligations 22.0% Short-term investments 1.0% Other 11.3% Corporate bonds 18.1% Foreign government obligations 40.6% U.S. government obligations 24.2% Short-term investments 1.7% Other 15.4% INVESTMENTS DECEMBER 31, 1995 Showing Percentage of Total Value of Investment in Securities NONCONVERTIBLE BONDS - 22.1% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) ARGENTINA - 1.8% Alto Parana: euro 12%, 3/4/05 (g) - $ 1,610,000 $ 1,207,500 12%, 3/4/05 (g)(h) - 3,000,000 2,250,000 3,457,500 AUSTRALIA - 0.9% Queensland Treasury Corp.: 8%, 7/14/99 Aaa AUD 965,000 725,892 8%, 8/14/01 Aaa AUD 1,390,000 1,033,889 1,759,781 CANADA - 1.8% British Columbia Hydro & Power Authority yankee 12 1/2%, 1/15/14 A2 140,000 170,932 Canada Mortgage & Housing Corp. 8.80%, 3/1/00 Aa1 CAD 2,400,000 1,900,685 Ford Credit CDA Ltd. 8 3/4%, 3/20/00 A1 CAD 1,000,000 775,017 Methanex Corp. 8 7/8%, 11/15/01 A3 480,000 532,003 3,378,637 GERMANY - 5.4% Deutsche Bank Finance NV 4 1/8%, 11/15/99 (b) Aaa JPY 600,000 6,324,952 Lake Baden Wuerttemberg Finance NV euro 3 3/4%, 6/21/99 (b) Aaa JPY 400,000 4,158,608 10,483,560 KOREA (SOUTH) - 0.3% Korea Development Bank: 9.29%, 3/13/98 A1 120,000 128,795 9.25%, 6/15/98 A1 150,000 160,800 9.48%, 4/2/01 A1 60,000 69,136 yankee, 7%, 7/15/99 A1 150,000 154,973 513,704 NETHERLANDS - 0.2% Ford Capital BV: yankee 9 3/8%, 1/1/98 A1 100,000 107,096 gtd. 9%, 8/15/98 A1 250,000 269,813 376,909 NONCONVERTIBLE BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) NETHERLANDS ANTILLES - 0.3% Deutsche Bank Finance NV 10 1/4%, 2/24/97 Aaa SEK 3,600,000 $ 551,233 UNITED KINGDOM - 1.8% ASDA Group PLC 10 7/8%, 4/20/10 A3 GBP 200,000 364,426 Ford Credit Europe PLC: euro 8 5/8%, 11/21/97 A1 GBP 200,000 319,455 11.70%, 11/18/98 (b) A1 ITL 1,185,000 768,609 Lloyds Bank PLC 7 3/8%, 3/11/04 Aa3 GBP 250,000 369,854 Rolls-Royce PLC 11 5/8, 7/30/98 A3 GBP 250,000 428,879 Royal Insurance Holdings PLC 9 5/8%, 3/25/03 A2 GBP 200,000 331,240 Severn Trent PLC 11 1/2%, 7/12/99 A1 GBP 235,000 413,396 Tesco PLC 8 3/4%, 2/20/03 Aa3 GBP 250,000 409,010 3,404,869 UNITED STATES OF AMERICA - 9.6% AMR Corp. 7 3/4%, 12/1/97 Baa 120,000 123,238 Bank of Boston Corp. 9 1/2%, 8/15/97 Baa 320,000 339,389 Banponce Corp. 6 3/4%, 12/15/05 Baa 160,000 162,016 Chrysler Financial Corp.: euro 9 1/2%, 4/12/96 BBB 150,000 151,515 10.34%, 5/15/08 A3 1,000,000 1,015,510 Citicorp 8.80%, 2/1/00 A1 180,000 185,823 Comdisco, Inc. 6 1/2%, 6/15/00 Baa 600,000 610,770 Continental Bank Mortgage Corp. 9 7/8%, 6/15/96 A2 190,000 193,268 Discover Card Trust 6 1/8%, 5/15/98 A2 170,000 169,946 Enron Corp: 10%, 6/1/98 Baa 100,000 109,376 8 1/2%, 2/1/00 Baa 90,000 92,511 First Bank Systems, Inc. 9.89%, 3/6/96 A3 140,000 141,268 First Fidelity Bancorporation: 8 1/2%, 4/1/98 A3 240,000 253,968 9 5/8%, 8/15/99 A3 40,000 44,946 First Tennessee National Corp. 6 3/4%, 11/15/05 Baa 100,000 102,046 Firstar Corp. 7.15%, 9/1/00 A3 320,000 331,949 Fleet Financial Group, Inc. 7 5/8%, 12/1/99 A3 40,000 42,236 Ford Credit Auto Loan Master Trust 7 3/8%, 4/15/99 Aaa 230,000 234,761 Ford Credit Grantor Trust 5.90%, 10/15/00 Aaa 739,249 742,599 NONCONVERTIBLE BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - CONTINUED Ford Motor Credit Co. 9 1/2%, 4/15/00 A1 $ 250,000 $ 283,025 General Electric Capital Corp.: 6 1/2%, 2/8/99 Aaa SEK 6,250,000 898,774 7 3/8%, 2/8/99 (b) Aaa ITL 2,950,000 1,704,424 Georgia-Pacific Corp. 9.85%, 6/15/97 Baa 270,000 284,664 Golden West Financial Corp. 9.15%, 5/23/98 A3 150,000 161,460 Green Tree Securitized Net Interest Margin Trust 6.90%, 2/15/04 Baa 147,396 148,409 Gulf States Utilities Co. 9.72%, 7/1/98 Ba1 262,000 273,248 Long Island Lighting Co.: 8 3/4%, 5/1/96 Baa 290,000 293,564 7.30%, 7/15/99 Ba1 175,000 176,533 MBNA Master Credit Card Trust 7 1/4%, 6/15/99 Aaa 390,000 399,017 Manufacturers Hanover Corp. 8 1/2%, 2/15/99 A2 130,000 140,005 Meridian Bancorp, Inc. 6%, 12/1/96 (e) Baa 445,000 444,226 Morgan Guaranty Trust Co. NY 11 3/8%, 10/6/97 (b) Aa1 ITL 4,000,000 2,544,080 Occidental Petroleum Corp.: 9.20%, 8/15/97 Baa 190,000 200,264 5.85%, 11/9/98 Baa 90,000 90,221 5.93%, 11/9/98 Baa 130,000 130,589 6 3/4%, 9/16/99 Baa 120,000 123,643 Premier Auto Trust 4.90%, 12/15/98 Aaa 240,525 239,209 Provident Bank 6 1/8%, 12/15/00 A3 270,000 271,142 Public Service Co. of New Hampshire 1st mtg. 8 7/8%, 5/15/96 Ba1 430,000 433,900 Quaker Oats Co.: 6.91%, 5/15/03 A3 80,000 83,738 9 1/8%, 7/15/04 A3 30,000 35,759 7.51%, 5/2/05 A3 80,000 86,900 7.30%, 8/29/05 A3 80,000 85,268 Ralcorp Holdings, Inc. 8 3/4%, 9/15/04 Ba1 155,000 174,375 Shawmut Corp. 8 1/8%, 2/1/97 A2 370,000 379,398 Shawmut National Corp. 8 5/8%, 12/15/99 A3 290,000 317,269 Southwest Gas Co. 9 3/4%, 6/15/02 Baa 90,000 105,742 Standard Credit Card Master Trust I: 9%, 8/7/97 A2 360,000 366,638 5 1/2%, 9/7/98 A2 85,000 84,708 6 1/4%, 9/7/98 A2 650,000 655,891 Tenneco Credit Corp. 10.05%, 8/17/98 Baa 330,000 362,848 NONCONVERTIBLE BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - CONTINUED Texas Gas Transmission Corp. 8 5/8%, 4/1/04 Baa $ 110,000 $ 124,359 Transcontinental Gas Pipe Line Corp.: 9%, 11/15/96 Baa 750,000 769,868 8 7/8%, 9/15/02 Baa 90,000 101,861 Union Planters Corp. 6 3/4%, 11/1/05 Baa 200,000 203,504 Valassis Inserts, Inc. 9 3/8%, 3/15/99 Ba2 290,000 292,674 18,518,332 TOTAL NONCONVERTIBLE BONDS (Cost $44,408,962) 42,444,525 U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 1.2% Federal National Mortgage Association 7%, 11/1/25 to 12/1/25 (Cost $2,259,924) Aaa 2,277,002 2,292,584 COMMERCIAL MORTGAGE SECURITIES - 0.2% Resolution Trust Corp. commercial Series 1995-C2 Class A-1B, 6 1/4%, 5/25/27 Aaa 190,000 190,356 Structured Asset Securities Corp. commercial Series 1995-C4 Class A1A, 6.90%, 6/25/26 AAA 200,000 202,500 TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $390,469) 392,856 GOVERNMENT OBLIGATIONS (D) - 64.4% ARGENTINA - 1.9% Province of Chaco, Argentina 11 7/8%, 9/10/97 (f) - 3,600,000 3,737,160 AUSTRALIA - 0.2% Commonwealth of Australia 9 3/4%, 3/15/02 A2 AUD 475,000 383,504 AUSTRIA - 4.6% Republic of Austria euro (b): 11%, 12/16/97 Aaa ITL 3,800,000 2,413,289 4 1/2%, 9/28/05 Aaa JPY 600,000 6,493,230 8,906,519 GOVERNMENT OBLIGATIONS (D) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) BELGIUM - 2.8% Kingdom of Belgium: 8 3/4%, 6/25/02 Aa1 BEF 20,000,000 $ 772,310 5.10%, 11/21/04 (e) Aa1 BEF 74,000,000 2,506,181 7 1/2%, 7/29/08 Aaa BEF 60,000,000 2,087,920 5,366,411 CANADA - 1.7% Canadian Government: 8 1/2%, 4/1/02 Aa1 CAD 1,540,000 1,226,379 7 1/2%, 12/1/03 Aa1 CAD 1,410,000 1,064,256 9%, 12/1/04 Aaa CAD 1,120,000 924,338 3,214,973 DENMARK - 1.7% Kingdom of Denmark: 9%, 11/15/98 Aaa DKK 7,500,000 1,467,980 8%, 3/15/06 Aaa DKK 4,000,000 757,911 Bullet: 9%, 11/15/00 Aaa DKK 2,000,000 399,799 8%, 5/15/03 Aaa DKK 3,500,000 668,580 3,294,270 FRANCE - 6.8% French Government: OAT: 9.70%, 12/13/97 Aaa FRF 16,500,000 3,636,625 9 1/2%, 1/25/01 Aaa FRF 17,500,000 4,102,059 5 1/2%, 4/25/04 Aaa FRF 4,000,000 759,727 8 1/2%, 12/26/12 Aaa FRF 20,000,000 4,635,891 13,134,302 GERMANY - 11.1% Federal Republic of Germany: 6 1/8%, 3/20/98 Aaa DEM 8,000,000 5,808,067 8 3/8%, 5/21/01 Aaa DEM 6,000,000 4,775,382 8%, 1/21/02 Aaa DEM 11,000,000 8,627,121 6%, 6/20/16 Aaa DEM 3,500,000 2,242,142 21,452,712 ITALY - 2.2% Republic of Italy (b): 9%, 10/1/03 A1 ITL 2,500,000 1,448,363 8 1/2%, 4/1/04 A1 ITL 5,000,000 2,790,930 4,239,293 GOVERNMENT OBLIGATIONS (D) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) NETHERLANDS - 3.3% Netherland Government: 6 1/4%, 7/15/98 Aaa NLG 3,750,000 $ 2,443,563 7%, 6/15/05 Aaa NLG 2,500,000 1,662,935 8 1/4%, 2/15/07 Aaa NLG 3,100,000 2,236,126 6,342,624 SPAIN - 2.4% Kingdom of Spain: 11.45%, 8/30/98 A2 ESP 300,000,000 2,589,704 10.90%, 8/30/03 A2 ESP 200,000,000 1,747,504 10 1/2%, 10/30/03 A2 ESP 35,000,000 300,202 4,637,410 SWEDEN - 1.0% Kingdom of Sweden 10 1/4%, 5/5/03 Aa1 SEK 11,000,000 1,823,498 UNITED KINGDOM - 3.9% United Kingdom, Great Britain & Northern Ireland: 13 1/4%, 1/22/97 Aaa GBP 350,000 581,943 9 3/4%, 8/27/02 Aaa GBP 1,500,000 2,640,879 13 1/2, 3/26/08 Aaa GBP 850,000 1,808,732 9%, 10/13/08 Aaa GBP 500,000 865,028 8 3/4%, 8/25/17 Aaa GBP 900,000 1,542,657 7,439,239 UNITED STATES OF AMERICA - 20.8% Federal Farm Credit Bank: 6.56%, 8/05/02 Aaa 140,000 146,300 6.20%, 9/23/02 Aaa 210,000 215,420 Federal Home Loan Bank 5.40%, 8/3/98 (callable) Aaa 220,000 218,658 Federal National Mortgage Association: 5.45%, 10/10/03 Aaa 170,000 166,255 7.40%, 7/1/04 Aaa 340,000 374,296 Financing Corp. 8.60%, 9/26/19 Aaa 240,000 307,313 Government Trust Certificates: (assets of Trust guaranteed by U.S. Government through Export-Import Bank): Series 1993-C 5.20%, 10/15/04 Aaa 75,200 73,720 Series 1993-D 5.23%, 5/15/05 Aaa 129,362 126,289 Series 1994-A 7.39%, 6/26/06 Aaa 35,000 37,455 Series 1994-C 6.61%, 9/15/99 Aaa 51,623 52,556 Series 1994-F 8.178%, 12/15/04 Aaa 424,106 461,288 GOVERNMENT OBLIGATIONS (D) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) UNITED STATES OF AMERICA - CONTINUED Government Trust Certificates: - continued (assets of Trust guaranteed by U.S. government through Defense Security Assistance Agency): Class 1-C 9 1/4%, 11/15/01 Aaa $ 708,000 $ 786,517 Class 2-E 9.40%, 5/15/02 Aaa 280,000 312,388 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 150,000 155,250 Overseas Private Investment Corp. (U.S. Government guarantee Ovd participation certificate) Series 1994-195, 6.08%, 8/15/04 Aaa 230,000 232,939 Private Export Funding Corp. secured: 9 1/2%, 3/31/99 Aaa 100,000 111,834 6.90%, 1/31/03 Aaa 100,000 106,290 8 3/4%, 6/30/03 Aaa 200,000 234,781 5.80%, 2/1/04 Aaa 40,000 40,028 State of Israel (guaranteed by U.S. Government through Agency for International Development): 6%, 2/15/99 Aaa 170,000 172,656 8%, 11/15/01 Aaa 240,000 266,172 6 1/4%, 8/15/02 Aaa 660,000 680,380 6 1/8%, 3/15/03 Aaa 100,000 102,063 U.S. Treasury: 5 5/8%, 1/31/98 Aaa 1,340,000 1,351,095 9 1/4%, 8/15/98 Aaa 500,000 548,435 9 1/8%, 5/15/99 Aaa 2,139,000 2,386,996 7 3/4%, 12/31/99 Aaa 270,000 292,993 6 1/4%, 2/15/03 Aaa 4,710,000 4,913,849 10 3/4%, 5/15/03 Aaa 370,000 485,222 11 1/4%, 8/15/03 Aaa 210,000 281,793 5 7/8%, 11/15/05 Aaa 70,000 71,575 11 3/4%, 2/15/10 Aaa 7,170,000 10,223,990 12 3/4%, 11/15/10 Aaa 240,000 365,549 13 7/8%, 5/15/11 Aaa 430,000 699,894 8 1/8%, 8/15/19 Aaa 690,000 867,565 8 3/4%, 5/15/20 Aaa 9,100,000 12,188,267 40,058,071 TOTAL GOVERNMENT OBLIGATIONS (Cost $120,266,579) 124,029,986 SUPRANATIONAL OBLIGATIONS - 11.1% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (C) AMOUNT (A) (NOTE 1) European Investment Bank 5 7/8%, 11/26/99 (b) Aaa JPY 145,000 $ 1,628,095 InterAmerica Development Bank euro 6%, 10/30/01 (b) Aaa JPY 775,000 8,956,722 International Bank for Reconstruction & Development (b): 4 1/2%, 12/22/97 Aaa JPY 30,000 311,460 euro 6%, 10/30/01 Aaa JPY 800,000 9,292,070 4 3/4%, 1/15/04 Aaa JPY 100,000 1,111,702 TOTAL SUPRANATIONAL OBLIGATIONS (Cost $24,732,739) 21,300,049 REPURCHASE AGREEMENTS - 1.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88% dated 12/29/95 due 1/2/96 $ 2,043,334 2,042,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $194,100,673) $ 192,502,000 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. Principal amount in thousands. 3. Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 4. 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. 5. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 6. 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 $3,844,189 7. Non-income producing - Issuer in default of principal and interest payments. 8. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,250,000 or 1.1% of net assets. 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 85.6% AAA, AA, A 85.0% Baa 2.6% BBB 3.5% Ba 0.7% BB 0.7% 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 3.7% including long-term debt categorized as other securities. INCOME TAX INFORMATION At December 31, 1995, the aggregate cost of investment securities for income tax purposes was $194,170,557. Net unrealized depreciation aggregated $1,668,557, of which $6,606,035 related to appreciated investment securities and $8,274,592 related to depreciated investment securities. At December 31, 1995, the fund had a capital loss carryforward of approximately $94,602,000 of which $81,883,000 and $12,719,000 will expire on December 31, 2002 and 2003, respectively. The fund intends to elect to defer to its fiscal year ending December 31,1996 approximately $76,000 of losses recognized during the period November 1, 1995 to December 31, 1995. MARKET SECTOR DIVERSIFICATION As a Percentage of Total Value of Investment in Securities (Unaudited) Aerospace & Defense 0.2% Basic Industries 2.2 Commercial Mortgage Securities 0.2 Energy 0.3 Finance 14.7 Government Obligations 65.6 Nondurables 0.2 Repurchase Agreements 1.0 Retail & Wholesale 0.4 Services 2.1 Supranational Obligations 11.1 Technology 0.3 Transportation 0.1 Utilities 1.6 100.0% FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 ASSETS Investment in securities, at value (including repurchase $ 192,502,000 agreements of $2,042,000) (cost $194,100,673) - See accompanying schedule Cash 513 Interest receivable 5,162,071 TOTAL ASSETS 197,664,584 LIABILITIES Payable for fund shares redeemed $ 478,189 Distributions payable 46,963 Accrued management fee 116,744 Other payables and accrued expenses 160,827 TOTAL LIABILITIES 802,723 NET ASSETS $ 196,861,861 Net Assets consist of: Paid in capital $ 294,002,138 Distributions in excess of net investment income (1,052,357) Accumulated undistributed net realized gain (loss) on (94,843,710) investments and foreign currency transactions Net unrealized appreciation (depreciation) on (1,244,210) investments and assets and liabilities in foreign currencies NET ASSETS, for 19,812,005 shares outstanding $ 196,861,861 NET ASSET VALUE, offering price and redemption price per $9.94 share ($196,861,861 (divided by) 19,812,005 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 INVESTMENT INCOME $ 18,696,831 Interest Less foreign taxes withheld (46,842) TOTAL INCOME 18,649,989 EXPENSES Management fee $ 1,785,715 Transfer agent fees 770,394 Accounting fees and expenses 155,301 Non-interested trustees' compensation 1,480 Custodian fees and expenses 99,271 Registration fees 29,051 Audit 87,254 Legal 2,417 Interest 719 Miscellaneous 6,984 TOTAL EXPENSES 2,938,586 NET INVESTMENT INCOME 15,711,403 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (2,651,732) Foreign currency transactions (1,567,962) (4,219,694) Change in net unrealized appreciation (depreciation) on: Investment securities 4,801,386 Assets and liabilities in foreign currencies (2,874,544) 1,926,842 NET GAIN (LOSS) (2,292,852) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 13,418,551 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1995 1994 INCREASE (DECREASE) IN NET ASSETS Operations $ 15,711,403 $ 36,075,353 Net investment income Net realized gain (loss) (4,219,694) (109,647,947) Change in net unrealized appreciation (depreciation) 1,926,842 (39,772,490) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 13,418,551 (113,345,084) FROM OPERATIONS Distributions to shareholders (13,319,937) (11,242,839) From net investment income In excess of net investment income - (2,708,940) In excess of net realized gain - (1,579,995) Return of capital (1,562,828) (20,501,873) TOTAL DISTRIBUTIONS (14,882,765) (36,033,647) Share transactions 156,242,005 657,341,508 Net proceeds from sales of shares Reinvestment of distributions 13,157,522 32,369,334 Cost of shares redeemed (353,875,967) (843,781,261) NET INCREASE (DECREASE) IN NET ASSETS RESULTING (184,476,440) (154,070,419) FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS (185,940,654) (303,449,150) NET ASSETS Beginning of period 382,802,515 686,251,665 End of period (including distributions in excess of net $ 196,861,861 $ 382,802,515 investment income of $1,052,357 and $8,617,556, respectively) OTHER INFORMATION Shares Sold 15,810,366 58,056,699 Issued in reinvestment of distributions 1,337,071 2,994,322 Redeemed (36,076,255) (76,721,130) Net increase (decrease) (18,928,818) (15,670,109)
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER TWO MONTH YEARS ENDED PERIOD ENDED OCTOBER 31, DECEMBER 31,
1995 1994 F 1993 E 1992 1992 D 1991 SELECTED PER-SHARE DATA Net asset value, $ 9.880 $ 12.610 $ 11.340 $ 11.830 $ 11.980 $ 12.190 beginning of period Income from .685 .158 .731 .145 .839 .740 Investment Operations Net investment income Net realized and (.049) (2.178) 1.648 (.173) .110 .520 unrealized gain (loss) Total from investment .636 (2.020) 2.379 (.028) .949 1.260 operations Less Distributions (.516) (.225) (.629) (.332) (1.099) (1.030) From net investment income In excess of net - (.054) - - - - investment income From net realized - - (.280) (.130) C - (.440) gain C In excess of net - (.020) (.200) - - - realized gain Return of capital (.060) (.411) - - - - Total distributions (.576) (.710) (1.109) (.462) (1.099) (1.470) Net asset value, end $ 9.940 $ 9.880 $ 12.610 $ 11.340 $ 11.830 $ 11.980 of period TOTAL RETURN B 6.66% (16.31) 21.91% (.23)% 8.18% 11.31% % RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 196,862 $ 382,803 $ 686,252 $ 279,204 $ 332,333 $ 160,083 period (000 omitted) Ratio of expenses to 1.16% 1.14% 1.17% 1.37% 1.23% 1.35% average net assets A Ratio of net investment 6.19% 6.50% 6.79% 6.92% 8.02% 7.92% income to average A net assets Portfolio turnover rate 322% 367% 198% 142% 81% 228% A
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. D EFFECTIVE JULY 1, 1992, DIVIDENDS FROM NET INVESTMENT INCOME WERE DECLARED DAILY AND PAID MONTHLY. E 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. F AMOUNTS HAVE BEEN ADJUSTED TO CONFORM WITH PRESENT PERIOD ACCOUNTING POLICIES. NOTES TO FINANCIAL STATEMENTS For the period ended December 31, 1995 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 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 futures and options transactions, foreign currency transactions, market discount, capital loss carryforwards and losses deferred due to wash sales. 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 which 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. (The tax treatment of distributions for the 1995 calendar year will be reported to shareholders prior to February 1, 1996.) 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 2. OPERATING POLICIES - CONTINUED FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED 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 with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying U.S. Treasury or Federal Agency securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. FMR, the 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. 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. 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 $3,737,160 or 1.9% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $744,683,274 and $872,218,426, respectively, of which U.S. government and government agency obligations aggregated $195,937,316 and $255,232,245, 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 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED 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 .1200% 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 annual rate of .70% of average net assets. The Board of Trustees has approved a new group fee rate schedule with rates ranging from .1100% to .3700%. Effective January 1, 1996, FMR voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory agreements with affiliates of FMR. In addition, one of the sub-advisors, Fidelity International Investment Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. a fee based on costs incurred for either service. DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or the fund's distributor, Fidelity Distributors Corporation (FDC), an affiliate of FMR, may use their resources to pay administrative and promotional expenses related to the sale of the fund's shares. Subject to the approval of the Board of Trustees, the Plan also authorizes payments to third parties that assist in the sale of the fund's shares or render shareholder support services. FMR or FDC has informed the fund that payments made to third parties under the Plan amounted to $19,211 for the period. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. Effective January 1, 1995, the Board of Trustees approved a revised transfer agent contract pursuant to which 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 annual rate of .30% of average net assets. ACCOUNTING FEES. FSC maintains the funds' 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 $1,881,000 and $1,417,333, respectively. The weighted average interest rate was 6.0865%. 6. 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. The probability of success cannot be predicted and the amount of recovery cannot be estimated. Any recovery from this litigation would inure to the benefit of the fund. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Investment Trust and the Shareholders of Fidelity Global Bond Fund: We have audited the accompanying statement of assets and liabilities of Fidelity Investment Trust: Fidelity Global Bond Fund, including the schedule of portfolio investments, as of December 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period then ended, for the two month period ended December 31, 1992 and for each of the two years in the period ended October 31, 1992. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Investment Trust: Fidelity Global Bond Fund as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, for the two month period ended December 31, 1992 and for each of the two years in the period ended October 31, 1992, in conformity with generally accepted accounting principles. /s/COOPERS & LYBRAND L.L.P. Boston, Massachusetts February 9, 1996 DISTRIBUTIONS A total of 24.54% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. The fund will notify shareholders in February 1996 of the applicable percentage for use in preparing 1995 income tax returns. 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 * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Chase Manhattan Bank, N.A. 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 Long-Term Government Bond 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 (FORMERLY FIDELITY SHORT-TERM WORLD INCOME FUND) ANNUAL REPORT DECEMBER 31, 1995 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. REPORT OF INDEPENDENT 26 The auditors' opinion. ACCOUNTANTS 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 the markets were fairly positive in 1995, no one can predict what lies ahead for investors. The previous year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. 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 DECEMBER 31, 1995 PAST 1 LIFE OF YEAR FUND Short-Term World Bond 7.79% 21.18% Lehman Brothers 1-3 Year Government Bond Index 10.84% n/a Salomon Brothers 1-3 Year World Government Bond 11.17% n/a Index Average Short World Multi-Market Income Fund 7.80% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, 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 Lehman Brothers 1-3 Year Government Bond Index - a broad gauge of the performance of short-term U.S. government bonds or to the Salomon Brothers 1-3 Year World Government Bond Index which includes both U.S. and foreign government bonds (with foreign currency exposure hedged into U.S. dollars). To measure how the fund's performance stacked up against its peers, you can compare it to the average short world multi-market income fund, which reflects the performance of 43 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. Both benchmarks include reinvested dividends and capital gains, if any, and exclude sales charges. Recent U.S. Consumer Price Index information is not available from the U.S. Department of Labor. Therefore, the CPI comparison has not been included in this report. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED DECEMBER 31, 1995 PAST 1 LIFE OF YEAR FUND Short-Term World Bond 7.79% 4.63% Lehman Brothers 1-3 Year Government Bond Index 10.84% n/a Salomon Brothers 1-3 Year World Government Bond 11.17% n/a Index Average Short World Multi-Market Income Fund 7.80% 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 Short-Term WorldSalomon Brothers 10/31/91 10000.00 10000.00 11/30/91 9953.55 10076.49 12/31/91 10013.89 10199.32 01/31/92 10073.94 10218.30 02/29/92 10167.77 10248.45 03/31/92 10203.63 10241.75 04/30/92 10340.52 10322.15 05/31/92 10393.30 10394.73 06/30/92 10450.55 10475.69 07/31/92 10563.77 10567.25 08/31/92 10594.04 10623.64 09/30/92 10348.11 10729.72 10/31/92 10510.46 10755.96 11/30/92 10442.45 10753.73 12/31/92 10497.71 10827.98 01/31/93 10595.46 10916.76 02/28/93 10718.75 10997.71 03/31/93 10825.83 11027.86 04/30/93 10901.95 11086.48 05/31/93 11019.75 11100.44 06/30/93 11203.34 11198.70 07/31/93 11348.48 11238.35 08/31/93 11487.08 11319.30 09/30/93 11471.74 11355.59 10/31/93 11633.27 11410.31 11/30/93 11676.59 11431.52 12/31/93 11819.14 11497.40 01/31/94 11890.79 11532.58 02/28/94 11700.76 11463.35 03/31/94 11369.94 11436.55 04/30/94 11247.98 11423.15 05/31/94 11417.32 11437.11 06/30/94 11157.58 11431.52 07/31/94 11239.08 11505.22 08/31/94 11320.82 11505.22 09/30/94 11380.60 11523.09 10/31/94 11421.99 11567.75 11/30/94 11462.67 11590.08 12/31/94 11134.20 11612.42 01/31/95 11064.33 11748.65 02/28/95 11083.40 11867.01 03/31/95 11111.02 11960.81 04/30/95 11246.96 12077.49 05/31/95 11436.96 12273.46 06/30/95 11496.19 12319.25 07/31/95 11569.38 12414.72 08/31/95 11640.73 12504.61 09/30/95 11724.49 12588.91 10/31/95 11798.75 12688.29 11/30/95 11911.99 12813.91 12/29/95 12001.21 12908.83 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Short-Term World Bond Fund on October 31, 1991, shortly after the fund started. As the chart shows, by December 31, 1995, the value of your investment would have grown to $12,001 - a 20.01% increase on your initial investment. For comparison, look at how the Salomon Brothers 1-3 Year World Government Bond Index did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $12,909 - a 29.09% increase. Henceforth, the fund will compare its performance to the Salomon Brothers 1-3 Year World Government Bond Index rather than the Lehman Brothers 1-3 Year Government Bond Index. The Salomon Brothers Index includes both U.S. and foreign government bonds (with foreign currency exposure hedged into U.S. dollars), which is more reflective of the fund's range of permitted investments. For comparison purposes, both indexes are shown on Page 4. 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 DECEMBER 31, 1995 PAST 1 PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 4.73(cents) 27.56(cents) 56.84(cents) Annualized dividend rate 6.19% 6.12% 6.40% 30-day annualized yield 4.86% - - 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 $8.99 over the past month, $8.94 over the past six months and $8.88 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 MARKET RECAP Both developed and emerging fixed-income markets recorded strong returns in 1995. For the 12 months ended December 31, 1995, the Salomon Brothers World Government Bond Index - a proxy of government bond market performance in developed nations including the U.S. - rose 19.04%. Emerging markets shrugged off the fallout from December 1994's Mexican peso devaluation to record strong returns. The J.P. Morgan Emerging Markets Bond Index posted a 27.54% return for the year. To compare, the Lehman Brothers Aggregate Bond Index - a broad measure of taxable bonds in the U.S. market - had a total return of 18.47%. Bond markets in developed countries benefited from slow economic growth and relatively low inflation pressures. This led to a more favorable interest rate environment, as the central banks of the U.S., Germany and Great Britain all lowered their respective short-term interest rates. Record low interest rates in Japan and a strengthening dollar pushed a significant amount of money into the U.S., as overseas investors in 1995 purchased a record net $99.4 billion in U.S. Treasury securities - helping fuel the U.S. rally. The bulk of emerging markets' total return came from a springtime rally following the announcement of a $50 billion bailout package for Mexico by the U.S. Treasury and the International Monetary Fund. An interview with Scott Kuldell, Portfolio Manager of Fidelity Short-Term World Bond Fund Q. SCOTT, HOW HAS THE FUND PERFORMED? A. For the 12 months ended December 31, 1995, the fund's total return was 7.79%. The average short world multi-market income fund tracked by Lipper Analytical Services returned 7.80% during the same period. And the Salomon Brothers 1-3 Year World Government Bond Index posted an 11.17% return during the 12-month period. Q. WHY DID THE FUND'S PERFORMANCE TRAIL THAT OF THE INDEX? A. The fund held emerging markets investments in the first three months of the period. At that time, those markets saw sharp sell-offs, largely as a result of the Mexican peso devaluation in late 1994. Since then, the fund's stategy has changed in a number of ways, including no longer actively investing in emerging markets. My main strategy now is to outperform the return of the global short-term government bond market - which includes only developed countries with consistent records of paying debt - by exploiting anomalies and inefficiencies in the market, and by using Fidelity's worldwide credit research. Q. WHAT HAS THE INVESTING ENVIRONMENT BEEN LIKE OVER THE PAST SIX MONTHS? A. Short-term fixed-income investments overseas have provided better opportunities than similar investments in the U.S. That's because of the difference between the shapes of the yield curve - the graphical representation of the yields of various bond maturities - in the U.S. and abroad. In most countries, the yield curve has remained upward sloping. That is, the longer-term the bond, the higher the yield. In the U.S., we've had an inverted yield curve in the short end. That is, yields on three-month bank deposits have been higher than yields on two-year Treasury issues. Q. WHY HAS THAT PROVIDED AN OPPORTUNITY? A. In a normally shaped, upward-sloping yield curve, the yield on two-year bonds goes down - and the price goes up - as their maturities get shorter. That's because the bonds are priced off of the lower end of the yield curve as they age. In the U.S., the inverted yield curve has created the opposite effect for two-year bonds that are in the process of aging. As a result, foreign bonds on the short end of the curve generally have performed better than comparable U.S. bonds with similar maturities. Q. WHERE HAVE YOU FOUND INVESTMENT OPPORTUNITIES? A. One of the advantages of investing in foreign bond markets is that there are more price inefficiencies to take advantage of than in the U.S. The U.S market is the most highly analyzed market in the world. While the flow of information in foreign markets is less efficient, Fidelity uses its strong research base to try to find hidden opportunities. Let me give you an example of one such opportunity that the fund took advantage of over the period. The Kingdom of Belgium issues two different types of bonds: Olos are issued to institutional investors, and Philippe bonds are issued to individual retail investors. In the fall, the government issued a new Philippe bond with a nine-year maturity. The bond came with a reset feature which, every three years, provides the holder with the option to reset the coupon rate at either the then-prevailing three-year interest rate or 6.75%, whichever is higher. In addition to this valuable option, the bonds were priced cheaper than three-year Olos without the option. At the end of the period, the bonds still were trading cheaply, but at some point, investors will realize the value of the coupon reset option and they should outperform comparable bonds. The Belgian government was surprised at how much interest these bonds generated. In fact, they canceled an Olo auction because they sold so many of these Philippe bonds. NOTE TO SHAREHOLDERS: EFFECTIVE FEBRUARY 26, 1996, CHARLES MORRISON AND LUC HUYGHEBAERT BECAME CO-MANAGERS OF THE FUND. MR. MORRISON JOINED FIDELITY IN 1987 AND ALSO MANAGES FIDELITY ADVISOR SHORT FIXEDINCOME FUND, FIDELITY SHORT-TERM BOND PORTFOLIO AND FIDELITY SPARTAN SHORT-TERM INCOME FUND. HE WILL MANAGE THE U.S. PORTION OF THE FUND. MR. 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 COMMENT ON THE OUTLOOK FOR THE FUND. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. In addition to looking for opportunities such as the Belgian bonds, the fund probably will increase its investments in U.S. corporate securities. The fundamentals and technicals of the domestic corporate market are strong, and compensate for the high valuations within that market. In general, the world-wide government bond market environment also is favorable relative to money markets although yields are lower than they were a year ago. Short rates have continued to fall, as economic growth has slowed and inflation has not posed any significant problems. This should provide a good backdrop for short-term bond investing. 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 current income and preservation of capital by investing mainly in short-term debt securities around the world START DATE: October 4, 1991 SIZE: as of December 31, 1995, more than $121 million MANAGERS: Scott Kuldell, from April 1994 to February 1996; Charles Morrison and Luc Huyghebaert, since February 1996 (checkmark) LUC HUYGHEBAERT ON DIVERSIFICATION AND HEDGED BOND FUNDS: "While economic and political factors can affect the fund, in one sense it has less volatility than a fund that invests in a single country. That's because it is invested in several countries that don't have perfect correlations between them. Diversification of interest rate risk helps lower the overall volatility of the fund. And keeping the overall credit quality of the portfolio high helps to keep event risk to a minimum. "In addition, in this fund, every country's returns are hedged into dollars. We use techniques to limit the fund's exposure to currency risk, or the risk that movements in the currency of the country in which an investment is made will reduce the returns from the investment. Therefore, we can translate the excess returns from one country into another. Excess returns are the returns generated from the bonds you own - generally two- or three-year bonds - in excess of the money market rate. If we can translate excess returns in Germany, for example, into excess returns in the U.S., then the degree to which we outperform money market funds in Germany directly translates into the fund's outperformance of a U.S. money market fund. This has been especially beneficial this year, when short-term bonds have yielded less than money market instruments in the U.S." INVESTMENT CHANGES TOP COUNTRIES AS OF DECEMBER 31, 1995 (BY LOCATION OF ISSUER) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO United States 41 51 Italy 12 9 Canada 7 7 Germany 6 5 France 5 2 TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY, INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS. THE FUND'S LARGEST POSITION AS OF DECEMBER 31 WAS IN SECURITIES OF UNITED STATES ISSUERS. TOP INTEREST RATE EXPOSURES AS OF DECEMBER 31, 1995
(ESTIMATED, BY COUNTRY) % OF FUND'S TOTAL INTEREST % OF FUND'S TOTAL RATE EXPOSURE INTEREST RATE EXPOSURE 6 MONTHS AGO United States 40 44 Japan 16 17 Italy 10 9 Germany 6 6 France 6 5
FIDELITY ESTIMATES INTEREST-RATE EXPOSURES BASED ON THE DURATION, OR INTEREST RATE SENSITIVITY, OF THE FUND'S HOLDINGS. AS OF DECEMBER 31, THE FUND WAS MOST SENSITIVE TO INTEREST RATE MOVEMENTS IN THE U.S., WHICH ACCOUNT FOR APPROXIMATELY 40% OF THE FUND'S INTEREST RATE EXPOSURE. ASSET ALLOCATION AS OF DECEMBER 31, 1995 AS OF JUNE 30, 1995 1 Corporate bonds 16.9% Foreign Government obligations 42.1% U.S. Government obligations 24.2% Other 13.3% Short-term investments 3.5% Corporate bonds 10.3% Foreign Government obligations 32.8% U.S. Government obligations 33.9% Other 12.3% Short-term investments 10.7% Row: 1, Col: 1, Value: 3.5 Row: 1, Col: 2, Value: 13.3 Row: 1, Col: 3, Value: 24.2 Row: 1, Col: 4, Value: 42.1 Row: 1, Col: 5, Value: 16.9 Row: 1, Col: 1, Value: 10.7 Row: 1, Col: 2, Value: 12.3 Row: 1, Col: 3, Value: 33.9 Row: 1, Col: 4, Value: 32.8 Row: 1, Col: 5, Value: 10.3 INVESTMENTS DECEMBER 31, 1995 Showing Percentage of Total Value of Investments in Securities NONCONVERTIBLE BONDS - 16.9% MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (A) AUSTRALIA - 0.7% New South Wales Treasury Corp. 7 1/2%, 2/1/98 Aa2 AUD 1,200,000 $ 893,412 CANADA - 6.5% Ford Motor Credit Co. of Canada Ltd.: 10 1/2%, 5/17/96 Aa3 CAD 4,300,000 3,198,014 8.90%, 2/23/98 A1 CAD 1,676,000 1,287,388 General Motors Acceptance Corp. of Canada Ltd.: 8.30%, 4/12/98 A3 CAD 1,000,000 759,043 8 1/2%, 5/27/99 A3 CAD 1,350,000 1,036,483 Household Financial Ltd. 7 1/4%, 9/17/98 A2 CAD 2,000,000 1,489,940 TOTAL CANADA 7,770,868 NETHERLANDS - 0.1% Ford Capital BV yankee 9 3/8%, 1/1/98 A1 150,000 160,644 UNITED STATES OF AMERICA - 9.6% Associates Corp. North America 8 3/8%, 6/1/96 Aa3 1,310,000 1,324,030 Beneficial Corp.: 8.26%, 8/20/96 A2 1,000,000 1,015,340 8.22%, 6/15/98 A2 225,000 237,994 8.80%, 6/15/98 A2 1,600,000 1,713,328 Discover Card Trust 7 1/2%, 6/16/00 A2 210,000 217,875 Finova Capital Corp. 5.98%, 10/31/97 Baa 480,000 480,778 General Motors Acceptance Corp.: 8.80%, 3/20/96 A3 1,000,000 1,006,140 7%, 5/27/97 A3 1,003,000 1,022,288 5 3/4%, 12/10/97 A3 720,000 722,275 6.40%, 6/8/98 A3 1,000,000 1,017,040 Household Finance Corp. 7.55%, 3/16/98 A2 560,000 581,375 Northwest Financial, Inc. 6%, 8/15/97 Aa3 1,100,000 1,109,705 Wells Fargo & Co. 8.20%, 11/1/96 A2 1,000,000 1,020,580 TOTAL UNITED STATES OF AMERICA 11,468,748 TOTAL NONCONVERTIBLE BONDS (Cost $20,517,594) 20,293,672 GOVERNMENT OBLIGATIONS (G) - 66.3% MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (A) ARGENTINA - 1.8% Province of Chaco 11 7/8%, 9/10/97 (d) - $ 2,066,666 $ 2,145,406 BELGIUM - 4.3% Kingdom of Belgium (c): 6 1/4%, 11/25/96 AAA BEF 100,000 3,453,788 5.10%, 11/21/04 (e) AAA BEF 50,000 1,693,365 TOTAL BELGIUM 5,147,153 DENMARK - 1.3% Kingdom of Denmark: 6 1/4%, 2/10/97 Aaa DKK 4,000,000 728,802 9%, 11/15/98 Aaa DKK 4,000,000 782,923 TOTAL DENMARK 1,511,725 FRANCE - 5.3% French Government OAT: 8 1/2%, 11/12/97 Aaa FRF 24,150,000 5,209,982 8 1/8%, 5/25/99 Aaa FRF 5,000,000 1,096,199 TOTAL FRANCE 6,306,181 GERMANY - 6.1% Federal Republic of Germany: 6 1/8%, 7/21/97 Aaa DEM 6,000,000 4,318,081 6 3/8%, 8/14/98 Aaa DEM 4,100,000 3,005,146 TOTAL GERMANY 7,323,227 ITALY - 11.8% Republic of Italy (c): 8 1/2%, 1/1/97 A1 ITL 7,000,000 4,356,044 8 1/2%, 8/01/97 A1 ITL 9,000,000 5,542,821 8 1/2%, 1/1/99 A1 ITL 7,000,000 4,243,638 TOTAL ITALY 14,142,503 GOVERNMENT OBLIGATIONS (G) - CONTINUED MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (A) NETHERLANDS - 3.1% Netherland Government 6 1/4%, 7/15/98 Aaa NLG 5,700,000 $ 3,714,216 SPAIN - 2.8% Kingdom of Spain (c): 11.85%, 8/30/96 AAA ESP 100,000 830,122 11.60%, 1/15/97 Aa2 ESP 100,000 841,379 11.45%, 8/30/98 AAA ESP 200,000 1,726,470 TOTAL SPAIN 3,397,971 SWEDEN - 2.0% Kingdom of Sweden 10 3/4%, 1/23/97 Aa1 SEK 16,000,000 2,463,869 UNITED KINGDOM - 3.6% United Kingdom, Great Britian & Northern Ireland: 10 1/2%, 2/21/97 Aaa GBP 1,000,000 1,622,957 14%, 5/22/01 Aaa GBP 1,500,000 2,711,389 TOTAL UNITED KINGDOM 4,334,346 UNITED STATES OF AMERICA - 24.2% Federal Home Loan Bank 4.83%, 9/21/98 (callable) Aaa 275,000 270,789 Federal Home Loan Mortgage Corp. 4.78%, 2/10/97 (callable) Aaa 210,000 208,368 Federal National Mortgage Association 3%, 7/13/98 (h) Aaa 300,000 309,891 Government Trust Certificates (assets of trust guaranteed by U.S. Government through Defense Security Assistance Agency): Class T-2 9.40%, 11/15/96 Aaa 448,480 457,198 Class 3-B 8.55%, 11/15/97 Aaa 283,912 290,490 Class 1-C 9 1/4%, 11/15/01 Aaa 176,000 195,518 State of Israel (guaranteed by U.S. Government through Agency for International Development) 5 1/4%, 3/15/98 Aaa 220,000 219,519 Private Export Funding Corp. secured: 9.10%, 10/30/98 Aaa 60,000 65,588 9 1/2%, 3/31/99 Aaa 230,000 257,218 Tennessee Valley Authority 4.60%, 12/15/96 Aaa 260,000 258,014 GOVERNMENT OBLIGATIONS (G) - CONTINUED MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (A) UNITED STATES OF AMERICA - CONTINUED U.S. Treasury Notes: 4 3/8%, 11/15/96 Aaa $ 4,940,000 $ 4,903,740 8 1/2%, 5/15/97 Aaa 370,000 385,840 5 1/8%, 3/31/98 Aaa 4,045,000 4,038,043 9%, 5/15/98 Aaa 310,000 335,671 9 1/4%, 8/15/98 Aaa 6,240,000 6,844,469 9 1/8%, 5/15/99 Aaa 1,538,000 1,716,316 7 3/4%, 12/31/99 Aaa 7,630,000 8,279,771 TOTAL UNITED STATES OF AMERICA 29,036,443 TOTAL GOVERNMENT OBLIGATIONS (Cost $77,768,424) 79,523,040 SUPRANATIONAL OBLIGATIONS - 9.8% Eurofima euro 11 3/8%, 11/30/99 Aaa GBP 200,000 355,509 International Bank for Reconstruction & Development Worldbank 4 1/2%, 12/22/97 (c) Aaa JPY 1,100,000 11,420,213 TOTAL SUPRANATIONAL OBLIGATIONS (Cost $13,470,852) 11,775,722 INTEREST INDEXED SECURITIES - 3.5% UNITED STATES OF AMERICA - 3.5% Citibank Nassau 8.5625%, 3/13/96 (coupon inversely indexed to JPY LIBOR and principal indexed to value of 3-year Japanese securities) (Cost $4,000,000) (f) 4,000,000 4,217,600 REPURCHASE AGREEMENTS - 3.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 12/29/95 due 1/2/96 $ 4,152,711 4,150,000 TOTAL INVESTMENT IN SECURITIES - 100.0% (Cost $119,906,870) $ 119,960,034 FORWARD FOREIGN CURRENCY CONTRACTS SETTLEMENT UNREALIZED DATE VALUE GAIN/(LOSS) CONTRACTS TO BUY 1,614,426 FRF 1/8/96 $ 329,104 $ (896) 144,120 DEM 2/1/96 100,398 398 30,273,000 JPY 2/1/96 294,248 (5,752) 655,830 SEK 1/17/96 98,387 (1,613) TOTAL CONTRACTS TO BUY (Payable amount $830,000) $ 822,137 $ (7,863) THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 0.7% CONTRACTS TO SELL 1,182,389 AUD 2/1/96 $ 876,702 $ 20,731 151,404,945 BEF 3/27/96 5,150,054 7,142 3,064,550 GBP 2/1/96 4,748,531 78,136 10,374,095 CAD 1/29/96 7,603,942 (51,730) 8,258,017 DKK 1/17/96 1,484,525 997 5,791,609 NLG 2/12/96 3,611,381 42,630 31,991,286 FRF 1/8/96 6,521,480 (76,950) 10,776,540 DEM 2/1/96 7,507,264 192,155 22,866,360,000 ITL 3/27/96 14,233,178 (78,824) 1,219,160,000 JPY 2/1/96 11,850,004 314,856 414,185,207 ESP 2/12/96 to 3/27/96 3,379,574 (24,559) 18,320,016 SEK 1/17/96 2,748,354 (122,095) TOTAL CONTRACTS TO SELL (Receivable amount $70,017,478) $ 69,714,989 $ 302,489 THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 58.1% 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 Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 3. Principal amount in thousands. 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. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 6. Coupon is inversely indexed to a floating interest rate multiplied by a specified factor. If the floating rate is high enough, the coupon rate may be zero or be a negative amount that is carried forward to reduce future interest and/or principal payments. The price may be considerably more volatile than the price of a comparable fixed rate security. The rate shown is the rate at period end. 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. Debt obligation initially issued at one coupon which converts to a higher coupon at a specified 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 84.4% AAA, AA, A 84.5% Baa 0.4% BBB 2.8% Ba 0.0% BB 0.0% 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 1.8% including long-term debt categorized as other securities. INCOME TAX INFORMATION At December 31, 1995, the aggregate cost of investment securities for income tax purposes was $119,906,870. Net unrealized appreciation aggregated $53,164, of which $2,698,618 related to appreciated investment securities and $2,645,454 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. MARKET SECTOR DIVERSIFICATION (Unaudited) As a Percentage of Total Value of Investments Finance 16.2% Foreign Government Obligations 42.1 Indexed Securities 3.5 Repurchase Agreements 3.5 Supranational Obligations 9.8 Services 0.7 U.S. Government Obligations 24.2 100.0% FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 ASSETS Investment in securities, at value (including repurchase $ 119,960,034 agreements of $4,150,000) (cost $119,906,870) - See accompanying schedule Unrealized appreciation on foreign currency contracts 660,776 Interest receivable 2,811,292 TOTAL ASSETS 123,432,102 LIABILITIES Payable to custodian bank $ 83,541 Unrealized depreciation on foreign currency contracts 366,150 Payable for fund shares redeemed 766,018 Distributions payable 116,358 Accrued management fee 62,695 Other payables and accrued expenses 103,677 TOTAL LIABILITIES 1,498,439 NET ASSETS $ 121,933,663 Net Assets consist of: Paid in capital $ 154,796,573 Distributions in excess of net investment income (1,222,475) Accumulated undistributed net realized gain (loss) on (32,195,911) investments and foreign currency transactions Net unrealized appreciation (depreciation) on 555,476 investments and assets and liabilities in foreign currencies NET ASSETS, for 13,537,905 shares outstanding $ 121,933,663 NET ASSET VALUE, offering price and redemption price per $9.01 share ($121,933,663 (divided by) 13,537,905 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 INVESTMENT INCOME $ 12,495,833 Interest Less foreign taxes withheld (70,743) TOTAL INCOME 12,425,090 EXPENSES Management fee $ 1,001,348 Transfer agent fees 435,424 Accounting fees and expenses 101,506 Non-interested trustees' compensation 1,000 Custodian fees and expenses 66,354 Registration fees 25,568 Audit 116,650 Legal 1,699 Interest 14,106 Miscellaneous 2,167 TOTAL EXPENSES 1,765,822 NET INVESTMENT INCOME 10,659,268 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (12,488,210) Foreign currency transactions 2,547,981 (9,940,229) Change in net unrealized appreciation (depreciation) on: Investment securities 14,548,595 Assets and liabilities in foreign currencies (4,518,240) 10,030,355 NET GAIN (LOSS) 90,126 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 10,749,394 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1995 1994 INCREASE (DECREASE) IN NET ASSETS Operations $ 10,659,268 $ 24,839,382 Net investment income Net realized gain (loss) (9,940,229) (33,931,861) Change in net unrealized appreciation (depreciation) 10,030,355 (13,418,051) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,749,394 (22,510,530) FROM OPERATIONS Distributions to shareholders (10,715,310) (6,841,239) From net investment income In excess of net investment income - (1,710,314) Return of capital - (15,696,807) TOTAL DISTRIBUTIONS (10,715,310) (24,248,360) Share transactions 27,319,850 192,214,787 Net proceeds from sales of shares Reinvestment of distributions 8,969,845 20,522,507 Cost of shares redeemed (179,797,316) (323,172,774) NET INCREASE (DECREASE) IN NET ASSETS RESULTING (143,507,621) (110,435,480) FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS (143,473,537) (157,194,370) NET ASSETS Beginning of period 265,407,200 422,601,570 End of period (including distributions in excess of $ 121,933,663 $ 265,407,200 net investment income of $1,222,475 and $4,188,209, respectively) OTHER INFORMATION Shares Sold 3,087,868 20,004,614 Issued in reinvestment of distributions 1,012,063 2,165,313 Redeemed (20,354,972) (33,838,814) Net increase (decrease) (16,255,041) (11,668,887)
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, TWO MONTH YEAR OCTOBER 4, 1991 PERIOD ENDED (COMMENCEME ENDED OCTOBER NT OF DECEMBER 31, OPERATIONS) TO 31, OCTOBER 31, 1995 1994 1993 D 1992 1992 1991
SELECTED PER-SHARE DATA Net asset value, $ 8.910 $ 10.190 $ 9.680 $ 9.800 $ 10.040 $ 10.000 beginning of period Income from .619 .644 .564 .191 .835 .061 Investment Operations Net investment income Net realized and .049 (1.218) .621 (.203) (.338) .037 unrealized gain (loss) Total from .668 (.574) 1.185 (.012) .497 .098 investment operations Less Distributions (.568) (.199) (.543) (.108) (.737) (.058) From net investment income In excess of net - (.050) (.132) - - - investment income Return of capital - (.457) - - - - Total distributions (.568) (.706) (.675) (.108) (.737) (.058) Net asset value, end $ 9.010 $ 8.910 $ 10.190 $ 9.680 $ 9.800 $ 10.040 of period TOTAL RETURN B, C 7.79% (5.80) 12.59% (.12)% 5.10% .98% % RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 121,934 $ 265,407 $ 422,602 $ 458,846 $ 648,448 $ 44,318 period (000 omitted) Ratio of expenses to 1.06% 1.01% 1.00% 1.20% A, 1.09% 1.00% A, average net assets E E Ratio of net 6.42% 7.54% 8.00% 8.63% A 9.04% 9.07% A investment income to average net assets Portfolio turnover rate 284% 134% 160% 117% A 154% 62% A
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 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 VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. NOTES TO FINANCIAL STATEMENTS For the period ended December 31, 1995 1. SIGNIFICANT ACCOUNTING POLICIES. On December 14, 1995, the Board of Trustees approved a change in the fund's name from Fidelity Short-Term World Income Fund to Fidelity Short-Term World Bond Fund. The fund's name change will be effective in 1996 with the next prospectus revision. 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 following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities 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 and foreign currency options, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. 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. 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 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, 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. 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 of offset; otherwise, gain (loss) is recognized on settlement date. Contracts that have been offset with 2. OPERATING POLICIES - CONTINUED FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED 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, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying U.S. Treasury or Federal Agency securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. FMR, the 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 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. 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. 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 2. OPERATING POLICIES - CONTINUED RESTRICTED SECURITIES - CONTINUED 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 $2,145,406 or 1.8% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $455,371,759 and $379,028,862, respectively, of which U.S. government and government agency obligations aggregated $124,807,391 and $108,185,595, 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 .1200% 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 annual rate of .60% of average net assets. The Board of Trustees has approved a new group fee rate schedule with rates ranging from .1100% to .3700%. Effective January 1, 1996, FMR voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory agreements with affiliates of FMR. In addition, one of the sub-advisers, Fidelity International Investment Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. a fee based on costs incurred for either service. DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or the fund's distributor, Fidelity Distributors Corporation (FDC), an affiliate of FMR, may use their resources to pay administrative and promotional expenses related to the sale of the fund's shares. Subject to the approval of the Board of Trustees, the Plan also authorizes 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED DISTRIBUTION AND SERVICE PLAN - CONTINUED payments to third parties that assist in the sale of the fund's shares or render shareholder support services. No payments were made to third parties under the Plan during the period. 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. 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 $7,546,000 and $2,449,438, respectively. The weighted average interest rate was 6.48%. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Investment Trust and the Shareholders of Fidelity Short-Term World Income Fund: We have audited the accompanying statement of assets and liabilities of Fidelity Investment Trust: Fidelity Short-Term World Income Fund, including the schedule of portfolio investments, as of December 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period ended December 31, 1995, for the two month period ended December 31, 1992, for the year ended October 31, 1992 and for the period October 4, 1991(commencement of operations) to October 31, 1991. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Investment Trust: Fidelity Short-Term World Income Fund, as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period ended December 31, 1995, for the two month period ended December 31, 1992, for the year ended October 31, 1992 and for the period October 4, 1991(commencement of operations) to October 31, 1991, in conformity with generally accepted accounting principles. /s/COOPERS & LYBRAND L.L.P. Boston, Massachusetts February 8, 1996 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)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)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 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 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, 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 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)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (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)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.) 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 * 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 Long-Term Government Bond 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 (2_FIDELITY_LOGOS)FIDELITY NEW MARKETS INCOME FUND ANNUAL REPORT DECEMBER 31, 1995 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 16 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 20 Notes to the financial statements. REPORT OF INDEPENDENT 25 The auditors' opinion. ACCOUNTANTS 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 the markets were fairly positive in 1995, no one can predict what lies ahead for investors. The previous year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. 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 DECEMBER 31, 1995 PAST 1 LIFE OF YEAR FUND New Markets Income 7.97% 25.10% J.P. Morgan Emerging Markets Bond Index 27.54% n/a J.P. Morgan Emerging Markets Bond Index Plus 26.78% n/a Average Emerging Markets Debt Fund 20.12% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, 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 - a broad measure of bond performance in developing countries available at month end. You also can compare the fund's returns to those of the J.P. Morgan Emerging Markets Bond Index Plus, which includes corporate bonds and local currency bonds, and is more representative of the fund's investable universe. To measure how the fund's performance stacked up against its peers, you can compare it to the average emerging markets debt fund, which reflects the performance of 12 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. Both benchmarks include reinvested dividends and capital gains, if any. Recent U.S. Consumer Price Index information is not available from the U.S. Department of Labor. Therefore, the CPI comparison has not been included in this report. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED DECEMBER 31, 1995 PAST 1 LIFE OF YEAR FUND New Markets Income 7.97% 8.77% J.P. Morgan Emerging Markets Bond Index 27.54% n/a J.P. Morgan Emerging Markets Bond Index Plus 26.78% n/a Average Emerging Markets Debt Fund 20.12% 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 Fidelity New MarkJP Morgan Emerging M 05/31/93 10000.00 10000.00 06/30/93 10397.82 10349.75 07/31/93 10924.43 10781.31 08/31/93 11248.31 10997.69 09/30/93 11606.78 11141.74 10/31/93 12523.77 12080.74 11/30/93 12661.08 11959.81 12/31/93 13478.16 12690.14 01/31/94 13983.39 12724.52 02/28/94 12575.86 11665.78 03/31/94 10685.31 10331.38 04/30/94 10235.00 10336.12 05/31/94 10771.77 11049.85 06/30/94 10158.89 10160.06 07/31/94 10438.23 10409.63 08/31/94 11589.51 11153.60 09/30/94 12162.19 11263.26 10/31/94 11932.04 10944.34 11/30/94 11881.46 11055.78 12/31/94 11247.49 10319.52 01/31/95 9945.27 9962.65 02/28/95 9236.93 9443.36 03/31/95 8944.32 9176.60 04/30/95 9574.00 10161.84 05/31/95 10210.80 11056.97 06/30/95 10348.34 11271.56 07/31/95 10366.53 11279.86 08/31/95 10704.15 11546.03 09/30/95 11120.78 11943.80 10/31/95 11045.33 11821.09 11/30/95 11400.18 12234.87 12/29/95 12144.14 13162.01 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity New Markets Income Fund on May 31, 1993, shortly after the fund started. As the chart shows, by December 31, 1995, the value of your investment would have grown to $12,144 - a 21.44% increase on your initial investment. For comparison, look at how the J.P. Morgan Emerging Markets Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $13,162 - a 31.62% 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 DECEMBER 31, 1995 PAST PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 20.19(cents) 52.78(cents) 91.62(cents) Annualized dividend rate 24.38% 11.26% 10.28% 30-day annualized yield 10.76% - - 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 $9.75 over the past month, $9.30 over the past six months and $8.91 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 MARKET RECAP Both developed and emerging fixed-income markets recorded strong returns in 1995. For the 12 months ended December 31, 1995, the Salomon Brothers World Government Bond Index - a proxy of government bond market performance in developed nations including the U.S. - rose 19.04%. Emerging markets shrugged off the fallout from December 1994's Mexican peso devaluation to record strong returns. The J.P. Morgan Emerging Markets Bond Index posted a 27.54% return for the year. To compare, the Lehman Brothers Aggregate Bond Index - - a broad measure of taxable bonds in the U.S. market - had a total return of 18.47%. Bond markets in developed countries benefited from slow economic growth and relatively low inflation pressures. This led to a more favorable interest rate environment, as the central banks of the U.S., Germany and Great Britain all lowered their respective short-term interest rates. Record low interest rates in Japan and a strengthening dollar pushed a significant amount of money into the U.S., as overseas investors in 1995 purchased a record net $99.4 billion in U.S. Treasury securities - helping fuel the U.S. rally. The bulk of emerging markets' total return came from a springtime rally following the announcement of a $50 billion bailout package for Mexico by the U.S. Treasury and the International Monetary Fund. An interview with John Carlson, Portfolio Manager of Fidelity New Markets Income Fund Q. HOW DID THE FUND PERFORM, JOHN? A. For the 12 months ended December 31, 1995, the fund returned 7.97%. For comparison purposes, the J.P. Morgan Emerging Markets Bond Index Plus returned 26.78% and the average emerging markets debt fund, according to Lipper Analytical Services, returned 20.12%. In stark contrast to the first six months of 1995, however, for the past six months the fund posted a 17.35% gain. For the same period, the index returned 15.91% and the average emerging markets debt fund returned 15.82%. Q. WOULD YOU DESCRIBE WHAT THE EMERGING DEBT MARKET WAS LIKE THIS PAST YEAR? A. Sure. As described in the fund's semiannual report in June, we came into 1995 with the Mexican peso devaluation having cast a pall over most emerging markets. The emerging debt markets rebounded, however, with a springtime rally following the announcement of a support package from the international community for Argentina and Mexico. In general, all fixed-income markets benefited from slow economic growth, stable interest rates and relatively low inflation pressures. This became particularly evident when the central banks of the U.S., Germany and Great Britain all lowered their respective short-term interest rates. Although returns in emerging debt markets remained positive, performance was more moderate from May to the middle of November. Finally, from November to the end of the year, emerging market bonds rallied, spurred by international investors seeking higher yields. Q. SO HOW WAS THE FUND MANAGED IN THIS DYNAMIC ENVIRONMENT? A. When I began managing the fund in June, it had a significant cash position. I put that cash to work in Latin American corporate bonds. As investors recognized the value of these bonds, they appreciated in value and their spreads - the difference in yield compared to U.S. Treasury bonds - - tightened. I then sold these corporates and bought Brady bonds of Brazil. Country rotation from Brazil to Argentina to Mexico became the theme for the rest of the year. Q. SHOULD ONE ASSUME THAT BECAUSE YOU SOLD SOME OF THE SOUTH AMERICAN POSITIONS AT A PROFIT, THAT YOU ARE NO LONGER OPTIMISTIC ABOUT THIS AREA OF THE WORLD? A. Absolutely not. I always look at individual securities on a relative value basis. That said, the fund's largest positions are still in Argentina and Brazil. These countries have embarked on ambitious privatization programs of state industries as well as fiscal reforms. Of course, these markets have certain additional risks, including political and economic changes. Q. WHAT WERE SOME OTHER APPEALING AREAS OF THE MARKET FOR THE FUND? A. Although the fund had a very small position in Southeast Asia, loans from Vietnam and bonds from Indonesia performed well during the period. Additionally, the fund participated in this year's rally in South African bonds. Aside from bonds the fund is allowed to own, it also has a significant interest in loan participations. Loans generally performed well, with those from Panama, Peru and Russia particularly benefiting the fund. Q. WERE THERE ANY DISAPPOINTMENTS? A. There were very few. The largest was the fact that the fund held a large cash position during the emerging debt market rally this past spring. Thus, the fund did not fully participate in the market's rebound earlier in the year. Q. WHAT'S YOUR OUTLOOK? A. I am optimistic about emerging market debt. Stable interest rates in the developed world coupled with tight fiscal and monetary policies in emerging countries may attract more capital. However, I will continue to monitor the economies, politics and interest rates that can radically effect the emerging markets. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: high current income, followed by capital appreciation, by investing in debt securities and other instruments of issuers in emerging markets around the world START DATE: May 4, 1993 SIZE: as of December 31, 1995, more than $176 million MANAGER: John Carlson, since June 1995; manager, Fidelity Advisor Strategic Income since October 1995; manager, Fidelity Advisor Emerging Markets Income since June 1995; joined Fidelity in June 1995 (checkmark) JOHN CARLSON ON BRADY BONDS: "Brady bonds - which are named after former Bush administration Treasury Secretary Nicholas Brady - are U.S. dollar-denominated bonds of developing countries. The Brady bond is a unique security in that it has an extremely long duration - or price sensitivity to changes in interest rates - and significant credit exposure. Of course, one is compensated for its higher risks with a higher potential return. "In general, being successful in emerging markets means doing your homework. First, you need to consider a country's monetary policy, fiscal policy and economic reform programs. You also have to look at the demographics of the country. What's the strength of its local capital markets? How good is a country's savings rate or education level? What are the country's infrastructure needs? How fast can it create jobs?" INVESTMENT CHANGES TOP COUNTRIES AS OF DECEMBER 31, 1995 (EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Argentina 25.1 17.3 Brazil 19.8 32.8 Mexico 9.6 6.4 Panama 4.9 1.1 Venezuela 4.8 0.0 TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY, INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS. THE FUND'S LARGEST POSITION AS OF DECEMBER 31, 1995, WAS IN SECURITIES OF ARGENTINEAN ISSUERS. TOP FIVE FIXED-INCOME SECURITIES AS OF DECEMBER 31, 1995 (BY ISSUER, WITH MATURITIES % OF FUND'S % OF FUND'S OF MORE THAN ONE YEAR) INVESTMENTS INVESTMENTS IN THESE SECURITIES 6 MONTHS AGO Argentina Republic (various issues) 22.7 17.3 Brazil Federative Republic (various issues) 18.3 22.6 Mexican Government (various issues) 7.7 4.4 Republic of Panama (various issues) 4.9 1.2 Republic of Venezuela (various issues) 4.8 0.0 AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1995 6 MONTHS AGO Years 13.5 12.8 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. ASSET ALLOCATION AS OF DECEMBER 31, 1995 AS OF JUNE 30, 1995 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 Row: 1, Col: 1, Value: 22.8 Row: 1, Col: 2, Value: 5.6 Row: 1, Col: 3, Value: 2.1 Row: 1, Col: 4, Value: 65.5 Row: 1, Col: 5, Value: 4.0 Corporate bonds 7.9% Foreign government obligations 67.2% Stocks 0.0% Other 13.0% Short-term investments 11.9% Corporate bonds 4.1% Foreign government obligations 67.4% Stocks 0.1% Other 5.6% Short-term investments 22.8% INVESTMENTS DECEMBER 31, 1995 Showing Percentage of Total Value of Investment in Securities NONCONVERTIBLE BONDS - 7.9% MOODY'S RATINGS (C) PRINCIPAL VALUE (UNAUDITED) AMOUNT (J) (NOTE 1) ARGENTINA - 2.4% Invergas SA 12 1/2%, 12/16/99 - $ 1,750,000 $ 1,732,500 Sodigas Pampeana SA 10 1/2%, 7/6/99 - 1,500,000 1,470,000 Telecom Argentina Stet-France Telecom SA 12%, 11/15/02 (e) B1 1,070,000 1,139,550 4,342,050 BRAZIL - 0.3% Abril SA 12%, 10/25/03 (e) - 600,000 603,750 COLOMBIA - 0.6% Comunicaciones Celulares SA Unit 0%, 11/15/03 (e)(k) B3 2,090,000 1,186,075 CZECH REPUBLIC - 1.8% BV Finance of Prague 11%, 6/23/97 AAA CZK 45,000,000 1,698,511 Coca-Cola Amatil Ltd. 12%, 10/25/03 A2 CZK 40,800,000 1,530,038 3,228,549 INDONESIA - 1.2% Tjiwi Kimia International Finance Co. 13 1/4%, 8/1/01 Ba3 2,050,000 2,214,000 MEXICO - 0.8% Empaques Ponderosa SA euro 8 3/4%, 12/6/96 - 420,000 411,075 Grupo Condumex SA de CV: 6 1/4%, 7/27/96 (e) - 500,000 490,000 euro 6 1/4%, 7/27/96 - 620,000 607,600 1,508,675 SOUTH AFRICA - 0.8% ESKOM (Electricity Supply Commission) 12%, 5/1/96 Baa3 ZAR 5,400,000 1,468,984 TOTAL NONCONVERTIBLE BONDS (Cost $14,303,454) 14,552,083 FOREIGN GOVERNMENT OBLIGATIONS (I) - 67.2% MOODY'S RATINGS (C) PRINCIPAL VALUE (UNAUDITED) AMOUNT (J) (NOTE 1) ARGENTINA - 22.7% Argentina Republic: BOCON (g): 5.8359%, 4/1/01 B1 $ 8,753,499 $ 6,864,730 3.5916%, 9/1/02 - ARS 3,023,680 1,627,744 Brady euro: floating rate bond 6.8125%, 3/31/05 (g) B2 20,100,000 14,321,250 par 5%, 3/31/23 (d) B2 33,325,000 19,016,078 41,829,802 BRAZIL - 19.5% Brazil Federative Republic Brady: eligible interest 6 7/8%, 4/15/06 (g) B1 15,500,000 10,675,625 debt conversion bond euro 6 7/8%, 4/15/12 (g) B1 15,750,000 8,977,500 capitalization bond 8%, 4/15/14 B1 20,693,595 11,834,150 par 4 1/4%, 4/15/24 (d) B1 4,250,000 2,255,156 Siderurgica Brasileiras SA inflation indexed 6%, 8/15/99 (h) - BRL 15,026,000 2,170,488 35,912,919 BULGARIA - 3.4% Republic of Bulgaria Brady discount 6 3/4%, 7/28/24 (g) - 11,850,000 6,295,313 ECUADOR - 1.9% Republic of Ecuador Brady par euro 3%, 2/28/25 (d) - 9,750,000 3,510,000 MEXICO - 8.8% Mexican Government Brady: discount 6.54688%, 12/31/19 (g) Ba3 2,200,000 1,588,125 par 6 1/4%, 12/31/19 Ba2 19,300,000 12,569,332 Mexico Value oil recovery rights (a) - 20,686,000 - United Mexican States 0%, 11/27/96 (return indexed to higher of 28-day Cetes rate or 1-year LIBOR) (e) - 2,000,000 2,037,500 16,194,957 PANAMA - 1.2% Republic of Panama interest reduction bond (e)(f) - 4,650,000 2,104,125 FOREIGN GOVERNMENT OBLIGATIONS (I) - CONTINUED MOODY'S RATINGS (C) PRINCIPAL VALUE (UNAUDITED) AMOUNT (J) (NOTE 1) PHILIPPINES - 2.8% Philippine Government Brady par 6 1/4%, 12/1/17 (d) Ba2 $ 7,000,000 $ 5,232,500 POLAND - 1.3% Polish Government Treasury Bills: 0%, 9/4/96 - PLN 3,500,000 1,216,731 0%, 10/30/96 - PLN 3,350,000 1,126,540 2,343,271 SOUTH AFRICA - 0.8% Republic of South Africa 12%, 2/28/05 Baa ZAR 6,000,000 1,462,891 VENEZUELA - 4.8% Republic of Venezuela oil recovery rights (a) - 31,750 - Republic of Venezuela Brady: debt conversion bond 7 3/8%, 12/18/07 (g) Ba2 9,500,000 5,189,375 par A euro 6 3/4%, 3/31/20 Ba2 6,350,000 3,627,438 8,816,813 TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $116,789,416) 123,702,591 PURCHASED BANK DEBT - 13.0% MOROCCO - 3.4% Kingdom of Morocco, Series A loan participation 6.59375%, 1/1/09 (f)(g) 9,300,000 6,231,000 PANAMA - 3.7% Republic of Panama loan participation refinanced under credit agreement (a)(f) 9,250,000 6,845,000 PERU - 1.4% Republic of Peru loan participation under 1983 agreement (a)(f) 3,390,000 2,461,988 RUSSIA - 4.5% Bank for Foreign Economic Affairs of the USSR (Vnesheconombank) loan participation (a)(f) 24,550,000 8,347,000 TOTAL PURCHASED BANK DEBT (Cost $18,951,798) 23,884,988 COMMERCIAL PAPER - 0.5% PRINCIPAL VALUE AMOUNT (J) (NOTE 1) INDONESIA - 0.5% Tjiwi Kimia International Finance Co. BV 0%, 1/24/96 (b) (Cost $885,794) IDR 2,000,000 $ 865,472 REPURCHASE AGREEMENTS - 11.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88% dated 12/29/95 due 1/2/96 $ 20,972,693 20,959,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $171,889,462) $ 183,964,134 CURRENCY ABBREVIATIONS ARS - Argentine peso BRL - Brazilian real CZK - Czech koruna IDR - Indonesian rupiah PLN - Polish zloty ZAR - South African rand LEGEND 1. Non-income producing 2. Principal amount in thousands. 3. Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 4. Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. 5. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $7,561,000 or 4.3% of net assets. 6. Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). 7. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 8. Principal amount shown is original face amount and does not reflect the inflation adjustments. 9. 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. 10. Principal amount is stated in United States dollars unless otherwise noted. 11. Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and 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 0.8% AAA, AA, A 1.7% Baa 1.6% BBB 0.8% Ba 16.3% BB 33.7% B 40.9% B 20.7% 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 25.5% including long-term debt categorized as other securities. FMR has determined that unrated debt securities that are lower quality account for 23.4% of the total value of investment in securities. INCOME TAX INFORMATION At December 31, 1995, the aggregate cost of investment securities for income tax purposes was $172,440,068. Net unrealized appreciation aggregated $11,524,066, of which $11,634,469 related to appreciated investment securities and $110,403 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 As a Percentage of Total Value of Investment in Securities (Unaudited) Basic Industries 1.5% Commercial Paper 0.5 Finance 0.9 Government Obligations 67.2 Media & Leisure 0.3 Nondurables 0.8 Purchased Bank Debt 13.0 Repurchase Agreements 11.4 Technology 0.6 Utilities 3.8 100.0% FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 ASSETS Investment in securities, at value (including repurchase $ 183,964,134 agreements of $20,959,000) (cost $171,889,462) - See accompanying schedule Cash 910 Receivable for investments sold 551,015 Regular delivery Delayed delivery 228,750 Interest receivable 2,980,501 Redemption fees receivable 127 TOTAL ASSETS 187,725,437 LIABILITIES Payable for investments purchased $ 1,980,452 Regular delivery Delayed delivery 8,424,375 Payable for fund shares redeemed 339,096 Distributions payable 319,699 Accrued management fee 97,288 Other payables and accrued expenses 65,050 TOTAL LIABILITIES 11,225,960 NET ASSETS $ 176,499,477 Net Assets consist of: Paid in capital $ 210,868,414 Undistributed net investment income 5,102,448 Accumulated undistributed net realized gain (loss) on (51,543,166) investments and foreign currency transactions Net unrealized appreciation (depreciation) on 12,071,781 investments and assets and liabilities in foreign currencies NET ASSETS, for 17,735,689 shares outstanding $ 176,499,477 NET ASSET VALUE, offering price and redemption price per $9.95 share ($176,499,477 (divided by) 17,735,689 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 INVESTMENT INCOME $ 17,640,398 Interest Less foreign taxes withheld (131,315) TOTAL INCOME 17,509,083 EXPENSES Management fee $ 1,149,541 Transfer agent 432,480 Fees Redemption fees (19,917) Accounting fees and expenses 98,972 Non-interested trustees' compensation 824 Custodian fees and expenses 141,087 Registration fees 53,134 Audit 60,305 Legal 1,142 Interest 704 Miscellaneous 6,899 TOTAL EXPENSES 1,925,171 NET INVESTMENT INCOME 15,583,912 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (29,536,984) Foreign currency transactions (1,574,837) (31,111,821) Change in net unrealized appreciation (depreciation) on: Investment securities 27,966,972 Assets and liabilities in foreign currencies (129,993) 27,836,979 NET GAIN (LOSS) (3,274,842) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 12,309,070 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1995 1994 INCREASE (DECREASE) IN NET ASSETS Operations $ 15,583,912 $ 13,936,916 Net investment income Net realized gain (loss) (31,111,821) (14,958,712) Change in net unrealized appreciation (depreciation) 27,836,979 (36,994,200) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 12,309,070 (38,015,996) FROM OPERATIONS Distributions to shareholders (16,705,028) (11,818,195) From net investment income In excess of net investment income - (1,279,408) From net realized gain - (4,749,230) TOTAL DISTRIBUTIONS (16,705,028) (17,846,833) Share transactions 196,063,449 898,437,029 Net proceeds from sales of shares Reinvestment of distributions 15,014,270 15,556,080 Cost of shares redeemed (209,771,056) (965,609,596) Redemption fees 474,977 - NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,781,640 (51,616,487) FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS (2,614,318) (107,479,316) NET ASSETS Beginning of period 179,113,795 286,593,111 End of period (including under (over) distribution of net $ 176,499,477 $ 179,113,795 investment income of $5,102,448 and ($323,538), respectively) OTHER INFORMATION Shares Sold 22,179,711 81,572,692 Issued in reinvestment of distributions 1,656,239 1,354,349 Redeemed (23,674,517) (87,272,908) Net increase (decrease) 161,433 (4,345,867)
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, MAY 4, 1993 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995 1994 1993 SELECTED PER-SHARE DATA Net asset value, beginning of period $ 10.190 $ 13.070 $ 10.000 Income from Investment Operations 1.222 .573 E .486 D Net investment income Net realized and unrealized gain (loss) (.583) (2.687) 3.302 Total from investment operations .639 (2.114) 3.788 Less Distributions (.916) (.529) (.486) From net investment income In excess of net investment income - (.057) (.062) From net realized gain - (.180) (.170) Total distributions (.916) (.766) (.718) Redemption fees added to paid in capital .037 - - Net asset value, end of period $ 9.950 $ 10.190 $ 13.070 TOTAL RETURN B, C 7.97% (16.55)% 38.84% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 176,499 $ 179,114 $ 286,593 Ratio of expenses to average net assets 1.17% 1.28% 1.24% F, G A, G Ratio of net investment income to average 9.51% 5.87% 6.29% A net assets Portfolio turnover rate 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. 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 VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. NOTES TO FINANCIAL STATEMENTS For the period ended December 31, 1995 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 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. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. 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. 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 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 that 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 1.00% of the proceeds of the redeemed shares. A portion of the fee is accounted for as a reduction of transfer agent expenses. This portion of the redemption fee is used to offset the transaction costs and other expenses that short-term trading imposes on the fund and its shareholders. The remainder of the redemption fee 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. 2. OPERATING POLICIES - CONTINUED FORWARD FOREIGN CURRENCY CONTRACTS - 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, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying U.S. Treasury or Federal Agency securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on a 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. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract. 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 $23,884,988 or 13.5% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $411,890,832 and $411,332,603, 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 .1200% 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 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED 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 annual rate of .70% of average net assets. The Board of Trustees has approved a new group fee rate schedule with rates ranging from .1100% to .3700%. Effective January 1, 1996, FMR voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory agreements with Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Far East) Inc., Fidelity International Investment Advisors (FIIA), and Fidelity Investments Japan Ltd. In addition, FIIA entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. a fee based on costs incurred for either service. DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or the fund's distributor, Fidelity Distributors Corporation (FDC), an affiliate of FMR, may use their resources to pay administrative and promotional expenses related to the sale of the fund's shares. Subject to the approval of the Board of Trustees, the Plan also authorizes payments to third parties that assist in the sale of the fund's shares or render shareholder support services. No payments were made to third parties under the Plan during the period. 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 fee was equivalent to an annual rate of .25% 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 5. BANK BORROWINGS - CONTINUED rate, as revised from time to time. The maximum loan and the average daily loan balance during the period for which loans were outstanding amounted to $2,653,000 and $1,992,000, respectively. The weighted average interest rate was 6.37%. 6. CONCENTRATION OF RISK The fund's relatively large investment in countries with limited or developing capital markets may involve greater risks than investments in more developed markets and the prices of such investments may be volatile. The yields of emerging market debt obligations reflect, among other things, perceived credit risk. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of the fund's investments and the income they generate, as well as the fund's ability to repatriate such amounts. 7. 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. The probability of success cannot be predicted and the amount of recovery cannot be estimated. Any recovery from this litigation would inure to the benefit of the fund. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Investment Trust and the Shareholders of Fidelity New Markets Income Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments (except for Moody's and Standard & Poor's ratings), and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity New Markets Income Fund (a fund of Fidelity Investment Trust) at December 31, 1995, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the periods indicated in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity New Markets Income Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1995 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. /s/PRICE WATERHOUSE LLP Boston, Massachusetts February 9, 1996 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)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)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)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (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)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.) Limited Fidelity Investments Japan Limited 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* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Chase Manhattan Bank, N.A. 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 Long-Term Government Bond 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 -----END PRIVACY-ENHANCED MESSAGE-----