-----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, Wub6ggOmguA6Ai44CIuOW7XdUv0YuPsAXB5soBK5UIOun/gjIetE/8Kaa7SN6XlC N4zQCtFqP6fcXp8I1dU6tg== 0000744822-95-000027.txt : 19951226 0000744822-95-000027.hdr.sgml : 19951226 ACCESSION NUMBER: 0000744822-95-000027 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951031 FILED AS OF DATE: 19951222 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: 95603914 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'S TARGETED INTERNATIONAL EQUITY FUNDS FIDELITY CANADA FUND FIDELITY EMERGING MARKETS FUND FIDELITY EUROPE FUND FIDELITY EUROPE CAPITAL APPRECIATION FUND FIDELITY FRANCE FUND* FIDELITY GERMANY FUND* FIDELITY HONG KONG AND CHINA FUND* FIDELITY JAPAN FUND FIDELITY JAPAN SMALL COMPANIES FUND* FIDELITY LATIN AMERICA FUND FIDELITY NORDIC FUND* FIDELITY PACIFIC BASIN FUND FIDELITY SOUTHEAST ASIA FUND FIDELITY UNITED KINGDOM FUND* ANNUAL REPORT FOR THE YEAR ENDING OCTOBER 31, 1995 AND PROSPECTUS DATED DECEMBER 30, 1995 * Prospectus only CONTENTS
MARKET RECAP A-4 A REVIEW OF WHAT HAPPENED IN WORLD MARKETS DURING THE LAST YEAR CANADA FUND PERFORMANCE A-6 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-9 INVESTMENTS A-12 FINANCIAL STATEMENTS EMERGING MARKETS FUND PERFORMANCE A-15 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-18 INVESTMENTS A-24 FINANCIAL STATEMENTS EUROPE FUND PERFORMANCE A-27 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-30 INVESTMENTS A-33 FINANCIAL STATEMENTS EUROPE CAPITAL APPRECIATION FUND PERFORMANCE A-36 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-39 INVESTMENTS A-41 FINANCIAL STATEMENTS JAPAN FUND PERFORMANCE A-44 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-47 INVESTMENTS A-50 FINANCIAL STATEMENTS LATIN AMERICA FUND A-52 PERFORMANCE A-53 FUND TALK: THE MANAGER'S OVERVIEW A-55 INVESTMENT CHANGES A-56 INVESTMENTS A-59 FINANCIAL STATEMENTS PACIFIC BASIN FUND PERFORMANCE A-62 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-65 INVESTMENTS A-70 FINANCIAL STATEMENTS SOUTHEAST ASIA FUND PERFORMANCE A-73 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-76 INVESTMENTS A-79 FINANCIAL STATEMENTS NOTES TO FINANCIAL STATEMENTS A-81 NOTES TO THE FINANCIAL STATEMENTS REPORTS OF INDEPENDENT ACCOUNTANTS A-85 THE AUDITORS' OPINION / COOPERS & LYBRAND L.L.P. A-86 THE AUDITORS' OPINION / PRICE WATERHOUSE LLP FIDELITY'S TARGETED INTERNATIONAL EQUITY FUNDS PROSPECTUS P-1
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS 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. MARKET RECAP Overseas stock markets have not turned in the same strong performance that the U.S. market has in 1995. Slow growth, a string of negative events in Japan, and Mexico's currency crisis in late 1994 helped spark a flight of capital to the U.S., in spite of positive news regarding interest rate declines in many markets. For the 12 months ended October 31, 1995, the Morgan Stanley EAFE Index - which measures stock performance in Europe, Australia and the Far East - had a total return of -0.37%. EUROPE: European markets produced fairly strong results. The Morgan Stanley Europe Index rose 13.21% during the 12 months ended October 31. The economic recovery in many European economies stalled in 1995, despite interest rate declines. Strong dollar-based returns in Switzerland were bolstered by the strength of the Swiss franc, as well as the solid performance of insurance companies and consumer nondurable stocks, such as pharmaceuticals. Strong performances by the Finnish and Swedish markets also were marked by a lack of breadth, as large-capitalization stocks that make up significant portions of local indexes posted strong returns. Italy and Austria produced negative returns; Norway fared a bit better; Belgium, Denmark, Germany, Ireland, the Netherlands, Spain and the United Kingdom posted solid, double-digit returns. JAPAN AND THE FAR EAST: Japan's stock market continued to struggle in 1995 as the country's economy stalled. According to Morgan Stanley Capital International, Japanese stocks fell 13.1% in U.S. dollars over the 12 months ended October 31. The drop was due to a number of factors that affected investor sentiment: the Barings debacle, the Kobe earthquake, the subway nerve gas attack, the strength of the yen versus other currencies, a lack of consumer confidence, political and banking scandals, and a weakening economy. A lack of foreign capital exacerbated the issue. The Morgan Stanley Far East ex-Japan Free Index - a measure of Far East markets excluding Japan - fell 7.54% during the period, in spite of strong returns in Hong Kong. A lack of investor interest, slowing economies and fears of interest rate increases spurred weakness in the Far East. EMERGING MARKETS: Emerging markets struggled in 1995, hurt by the flight of capital to the U.S. The Morgan Stanley Emerging Markets Free Index had a total return of -19.43% for the 12 months ended October 31. Rising interest rates in late 1994 and early 1995, as well as Mexico's peso devaluation in December 1994, contributed significantly to this exodus. While interest rates have declined in the U.S., they have not in Southeast Asia, adding to mounting trade deficits and making it more expensive for companies to borrow. Except for Peru and Venezuela, returns across Latin America were negative, even though Brazil and Chile took steps to alleviate inflation, increase savings, raise foreign exchange reserves and improve economic growth. The top performing markets through October 1995 were Turkey, Greece and South Africa. Other emerging markets making positive gains in 1995 included Israel and Jordan. U.S. AND CANADA: Strong corporate earnings and a favorable interest rate environment helped the U.S. stock market post robust returns during the period. The Standard & Poor's Composite Index of 500 Stocks was up 26.44% - well above its historical annual average of roughly 12%. With inflation posing little threat, interest rates fell during the first half of 1995. Technology companies - whose goods and services benefited from both corporate and consumer demand - posted the strongest earnings growth and stock price gains. Canadian stocks did not perform as well over the past 12 months. Stocks included in the Toronto Stock Exchange 300 Index returned 7.07% for the period. BONDS: Many global bond markets turned in strong performances during the 12 months ended October 31, 1995, sparked by declines in interest rates. In the U.S., yields fell - and prices rose - on most fixed-income investments. Indications of a slowing U.S. economy and a relative absence of inflation pressures helped to push interest rates down. In an effort to thwart the possibility of a recession, the Federal Reserve Board lowered U.S. short-term interest rates in July, after raising them seven successive times in 1994 and early 1995. Slowing economies in developed countries also helped push interest rates down. For the 12 months ended October 31, 1995, the Salomon Brothers Non-U.S. World Government Bond Index - which tracks the performance of government bonds in 13 developed countries excluding the U.S. - had a total return of 15.19%. That nearly matched the Lehman Brothers Government Bond Index - a broad measure of taxable bonds in the U.S. market - which returned 15.38%. For the same period, the J.P. Morgan Emerging Markets Bond Index had a total return of 8.01%. S&P 500 EAFE * YEAR TO DATE THROUGH OCTOBER 31, 1995. Row: 1, Col: 1, Value: 22.38 Row: 1, Col: 2, Value: 23.69 Row: 2, Col: 1, Value: 6.1 Row: 2, Col: 2, Value: 7.38 Row: 3, Col: 1, Value: 31.57 Row: 3, Col: 2, Value: 56.16 Row: 4, Col: 1, Value: 18.56 Row: 4, Col: 2, Value: 69.44000000000001 Row: 5, Col: 1, Value: 5.1 Row: 5, Col: 2, Value: 24.63 Row: 6, Col: 1, Value: 16.61 Row: 6, Col: 2, Value: 28.27 Row: 7, Col: 1, Value: 31.69 Row: 7, Col: 2, Value: 10.53 Row: 8, Col: 1, Value: -3.1 Row: 8, Col: 2, Value: -23.45 Row: 9, Col: 1, Value: 30.47 Row: 9, Col: 2, Value: 12.13 Row: 10, Col: 1, Value: 7.619999999999999 Row: 10, Col: 2, Value: -12.17 Row: 11, Col: 1, Value: 10.08 Row: 11, Col: 2, Value: 32.56 Row: 12, Col: 1, Value: -2.56 Row: 12, Col: 2, Value: 7.89 Row: 13, Col: 1, Value: 29.3 Row: 13, Col: 2, Value: 4.01 % CANADA 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND CANADA 2.22% 47.44% 113.81% CANADA (INCL. 3% SALES CHARGE) -0.85% 43.02% 107.40% TSE 300 (Toronto Stock Exchange 300) Index 7.07% 45.64% 90.40% 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 November 17, 1987. 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 Toronto Stock Exchange (TSE) 300 index - a broad measure of the performance of the Canadian stock market. This index includes reinvested dividends and capital gains, if any, and excludes the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND CANADA 2.22% 8.07% 10.01% CANADA (INCL. 3% SALES CHARGE) -0.85% 7.42% 9.59% TSE 300 (Toronto Stock Exchange 300) Index 7.07% 7.81% 8.42% 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 Canada (309Toronto Stoc 11/17/87 9700.00 10000.00 11/30/87 9767.90 10153.53 12/31/87 10446.90 10895.36 01/31/88 10340.20 10759.36 02/29/88 11048.30 11447.90 03/31/88 11737.00 12111.13 04/30/88 12008.60 12268.35 05/31/88 11436.30 11947.11 06/30/88 12319.00 12906.84 07/31/88 12144.40 12762.32 08/31/88 11562.40 12139.94 09/30/88 11804.90 12401.15 10/31/88 12357.80 12753.48 11/30/88 12212.30 12830.11 12/31/88 12480.81 13188.28 01/31/89 13422.57 14213.27 02/28/89 13045.87 13881.50 03/31/89 13263.96 14027.96 04/30/89 13531.62 14346.43 05/31/89 13987.63 14383.31 06/30/89 14661.73 14845.75 07/31/89 15553.93 15890.01 08/31/89 15633.23 16147.42 09/30/89 15534.10 15922.92 10/31/89 15316.01 15949.98 11/30/89 15405.23 16197.04 12/31/89 15849.10 16474.68 01/31/90 14563.76 15023.40 02/28/90 14646.68 14920.74 03/31/90 14895.46 15084.12 04/30/90 14180.23 13930.65 05/31/90 15113.14 14884.87 06/30/90 15465.57 14908.13 07/31/90 15589.96 15161.03 08/31/90 14688.15 14235.18 09/30/90 14449.74 13514.44 10/31/90 14066.21 13073.85 11/30/90 14522.30 13439.96 12/31/90 14978.60 14019.82 01/31/91 15045.02 14077.13 02/28/91 16428.85 15100.37 03/31/91 17148.44 15213.01 04/30/91 17281.29 15194.26 05/31/91 18045.17 15713.88 06/30/91 18067.31 15474.06 07/31/91 18011.95 15696.55 08/31/91 17856.97 15774.78 09/30/91 17259.15 15380.42 10/31/91 18023.03 16117.15 11/30/91 17347.72 15691.20 12/31/91 17627.42 15764.11 01/31/92 17945.14 15903.64 02/29/92 18051.04 15778.39 03/31/92 17545.05 15003.00 04/30/92 17333.24 14750.06 05/31/92 17486.21 14781.51 06/30/92 17392.07 14899.21 07/31/92 17839.23 15353.94 08/31/92 17568.58 15073.09 09/30/92 16815.48 14065.44 10/31/92 16744.87 14331.45 11/30/92 16697.80 13610.56 12/31/92 17121.47 14127.27 01/31/93 17027.21 13986.24 02/28/93 18087.72 14844.82 03/31/93 19077.54 15446.95 04/30/93 19572.45 16106.36 05/31/93 19843.47 16559.37 06/30/93 20856.85 16822.63 07/31/93 20102.71 16806.78 08/31/93 20609.40 17107.05 09/30/93 19596.02 16373.43 10/31/93 20998.26 17654.85 11/30/93 20515.13 17182.05 12/31/93 21482.47 18005.65 01/31/94 22427.27 18880.15 02/28/94 21470.66 18093.83 03/31/94 20679.39 17332.87 04/30/94 20525.86 17106.99 05/31/94 20620.34 17383.62 06/30/94 19486.57 16219.73 07/31/94 19864.49 16810.87 08/31/94 20608.53 17737.69 09/30/94 20714.82 18158.66 10/31/94 20289.65 17783.29 11/30/94 18813.40 16716.54 12/31/94 18907.95 16946.85 01/31/95 17584.40 16109.65 02/28/95 18305.26 16775.46 03/31/95 19451.56 17486.08 04/30/95 20042.43 17912.15 05/31/95 20668.76 18470.49 06/30/95 20952.38 18822.99 07/31/95 21673.24 19330.28 08/31/95 21401.44 19231.88 09/30/95 21708.69 19371.75 10/31/95 20739.66 19040.25 Let's say you invested $10,000 in Fidelity Canada Fund on November 17, 1987, when the fund started, and paid the 3% sales charge. By October 31, 1995, the value of your investment would have grown to $20,740 - a 107.40% increase on your initial investment. That compares to $10,000 invested in the Toronto Stock Exchange (TSE) 300 index, which would have grown to $19,040 over the same period - a 90.40% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) CANADA FUND TALK: THE MANAGER'S OVERVIEW An interview with George Domolky, Portfolio Manager of Fidelity Canada Fund Q. HOW DID THE FUND PERFORM, GEORGE? A. For the 12 months ended October 31, 1995, the fund had a 2.22% return. That lagged the Toronto Stock Exchange (TSE) 300 index's 7.07% return. Q. WHAT MADE THE PAST YEAR SO TOUGH ON CANADIAN STOCKS? A. Throughout the past year, the Canadian equity markets experienced a fair amount of turbulence as the threat of a Quebec separation cast a pall over the country's investment picture. This, coupled with a slowdown in the economic growth rate of the United States - Canada's largest trading partner - and a weak Canadian dollar, caused further uncertainty. The fact that North American inflation rates were at historical lows, hovering around 2 percent, was also a negative factor. That's because natural resources, which represent the majority of the Canadian market, tend to be better when inflation picks up and lag when inflation stays low. Q. WHAT CAUSED THE FUND TO LAG THE RETURNS OF THE BROAD MARKET? A. The fund was heavily weighted in energy, gold, and base metals, all of which suffered from the above and other factors. Q. LET'S TAKE THESE INDUSTRIES ONE AT A TIME, STARTING WITH ENERGY. A. Generally speaking, energy prices have been languishing for more than a year. An abundant supply and an unusually warm 1994-95 winter depressed prices of both natural gas and oil. While the price of natural gas picked up a bit during a brief period in the spring, it more or less decreased during the first three quarters of 1995. Excess supply resulting from the warmer-than-normal winter led to a build-up of natural gas inventories. At the same time, drilling was strong. New supply and excess inventory kept natural gas prices low. Meanwhile, oil suffered from the fact that worldwide economic growth began to moderate. Looking ahead, the supply and demand fundamentals could turn more favorable for both fuels. A normal winter could be enough to bring down supplies and send natural gas prices higher. At the same time, oil prices seem to be firming as OPEC nations exercise restraint in maintaining their production quotas. For those reasons, the fund is currently heavily weighted in the energy sector. Q. LOOKING AT GOLD, HOW DID THIS SECTOR FARE? A. Throughout the year, gold had a tough time breaking through the $400-an-ounce barrier, trading in a narrow range between $365 and $400 per ounce. Gold was unable to break out of that range mainly because of central bank selling and producer forward selling whenever the cash price approached $400 an ounce. Historically, the fortunes of gold have been closely tied to fears of inflation; when inflation is on the rise, so is the price of gold. That's because gold acts mainly as a hedge against inflation. But going forward, I think that the price of gold will be determined more by supply and demand fundamentals. The eventual disparity between supply and demand in favor of demand could boost gold past the $400 mark. That's why I continued to favor gold stocks like Barrick Gold. Recently it had impressive exploration successes in Nevada. Q. WHAT ABOUT THE BASE METAL STOCKS? A. The fund continues to have a relatively large weighting in these stocks, with large holdings in Alcan Aluminum and Noranda. Base metals - aluminum, copper, nickel, and zinc - started out the year well when world economies were in an expansionary phase and the demand for these metals increased as inventories were depleted. As world economic growth moved toward a more moderate pace, base metal prices, and base metal stocks, moderated as well. I anticipate that the demand for base metals - especially nickel and aluminum - could increase if the world economies pick up again. Since supply for these metals is relatively tight, that should be a positive for the sector. Q. WHICH STOCKS WERE STRONG CONTRIBUTORS TO THE FUND'S PERFORMANCE? A. Canadian Pacific (CP) Limited, proved to be a good turnaround story and one of the fund's leading performers during the past six months. In my view, the privatization of Canadian national railroads should continue to help the profitability of the country's railroad industry in general. Two of Canada's leading mutual fund companies, Trimark Financial Group and MacKenzie Financial Corp., were up significantly during the past six months. In my opinion, the Canadian mutual fund industry is just at the initial stages of a long growth period. Q. WHERE ARE YOU FINDING OPPORTUNITIES? A. Technology companies like Rand Technology is one recent addition to the fund. I believe this company is attractive because it offers relatively high rates of earnings growth and solid prospects. Q. WHAT'S YOUR OUTLOOK FOR THE CANADIAN STOCK MARKET? A. The threat that Quebec would separate from Canada has been an overwhelmingly negative backdrop for the country's equity markets. Now that the Quebec secession referendum is behind us, at least for the time being, investor jitters appear to have subsided. I believe we'll see a more orderly equity market driven by fundamentals and earnings growth next year. Many Canadian stocks are undervalued, in my view, relative to similar markets. That relative value could attract more investors to the country. I believe that the fund is very well positioned to take advantage of an eventual pickup in the North American economies, which I anticipate for the second half of 1996, and a continuing low interest rate environment. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of Canadian issuers START DATE: November 17, 1987 SIZE: as of October 31, 1995, more than $326 million MANAGER: George Domolky, since the fund's inception in 1987; manager, Fidelity Select Food and Agriculture Portfolio, 1985-1987; assistant, Fidelity Magellan Fund, 1983-1986; joined Fidelity in 1981 (checkmark) GEORGE DOMOLKY'S OUTLOOK FOR CANADIAN ECONOMY: "Growth in the domestic Canadian economy was projected to be about 2.3% for 1995, one of the strongest among the G-7 nations, and a reasonable GDP growth rate of 2.8% was projected for 1996. The federal provincial governments have started a program of balancing budgets and curtailing entitlements. This should have a positive effect on interest rates and the Canadian dollar." (solid bullet) Energy (28.1%), Basic Industries (16.9%) and Precious Metals (9.2%) were the top three market sectors represented in the Canada Fund as of October 31, 1995. They accounted for more than 54.2 of the fund's investments. 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. CANADA INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 United States 8.5% Row: 1, Col: 1, Value: 8.1 Row: 1, Col: 2, Value: 91.90000000000001 Canada 91.5% AS OF APRIL 30, 1995 United States 14.4% Row: 1, Col: 1, Value: 14.4 Row: 1, Col: 2, Value: 85.59999999999999 Canada 85.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks 96.8 95.9 Bonds 0.9 0.5 Short-term investments 2.3 3.6 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Renaissance Energy Ltd. 6.4 4.6 (Oil & Gas) Noranda, Inc. 4.6 3.2 (Metals & Mining) Canadian Pacific Ltd. Ord. 3.9 5.7 (Railroads) Pancanadian Petroleum Ltd. 3.8 2.2 (Oil & Gas) Alcan Aluminium Ltd. 3.7 5.5 (Metals & Mining) BCE Mobile Communications, Inc. 3.5 0.4 (Cellular) Northstar Energy Corp. 2.9 1.3 (Oil & Gas) Canadian Natural Resources Ltd. 2.8 2.7 (Oil & Gas) Torstar Corp. Class B 2.8 2.3 (Publishing) Seagram Co. Ltd. 2.7 0.0 (Beverages) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Energy 28.1 26.1 Basic Industries 16.9 15.7 Precious Metals 9.2 13.7 Finance 8.6 8.8 Transportation 5.5 5.7 Nondurables 5.2 4.9 Industrial Machinery & Equipment 4.2 2.8 Conglomerates 3.8 1.4 Media & Leisure 3.7 4.9 Utilities 3.5 3.0 CANADA INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.4% CAE, Inc. 180,000 $ 1,271,848 BASIC INDUSTRIES - 16.9% CHEMICALS & PLASTICS - 1.8% Betz Laboratories, Inc. 4,100 165,025 Dupont Canada Inc. Class A, Series 1 56,700 859,251 Engelhard Corp. 34,300 853,213 Intertape Polymer Group, Inc. 100,500 2,933,897 Maax, Inc. (a) 81,200 535,999 5,347,385 IRON & STEEL - 1.3% Linamar Corp. 218,700 3,415,917 Samuel Manu-Tech, Inc. 50,000 418,371 3,834,288 METALS & MINING - 12.4% Alcan Aluminium Ltd. 342,106 10,845,867 Bre-X Minerals Ltd. 10,000 342,927 Cominco Ltd. (a) 80,600 1,543,659 Falconbridge Ltd. 196,000 4,318,706 Falconbridge Ltd. first installment receipts (e) 15,400 143,454 Inco Ltd. 174,022 5,986,253 Noranda, Inc. 675,744 13,507,341 36,688,207 PAPER & FOREST PRODUCTS - 1.4% Merfin Hygenic Products Ltd. 436,200 1,906,043 Riverside Forest Products 124,400 1,688,583 St. Laurent Paperboard, Inc. 38,300 551,925 4,146,551 TOTAL BASIC INDUSTRIES 50,016,431 CONGLOMERATES - 3.8% Brascan Ltd. Class A 418,000 6,528,821 Suncor, Inc. first Installment receipts (g) 390,000 4,894,942 11,423,763 CONSTRUCTION & REAL ESTATE - 1.1% REAL ESTATE INVESTMENT TRUSTS - 1.1% Trizec Ltd. (a) 415,000 3,009,483 Trizec Ltd. Class A (warrants) (a) 100,000 185,943 3,195,426 DURABLES - 1.3% AUTOS, TIRES, & ACCESSORIES - 1.0% Magna International, Inc. Class A 70,700 3,076,199 UAP, Inc. Class A 50 581 3,076,780 CONSUMER DURABLES - 0.3% Unican Security Systems Ltd. Class B 45,000 920,417 TOTAL DURABLES 3,997,197 ENERGY - 28.1% ENERGY SERVICES - 2.7% Enserv Corp. (a) 94,700 757,177 Nowsco Well Service Ltd. 547,400 6,514,243 Precision Drilling Class A (a) 53,900 631,406 Veritas Energy Service, Inc. (a) 40,000 193,380 8,096,206 OIL & GAS - 25.4% Barrett Resources Corp. (a) 84,700 1,969,275 Barrington Petroleum Ltd. (a) 161,500 354,351 SHARES VALUE (NOTE 1) Blue Range Resource Corp. Class A (a) 46,900 $ 322,666 Blue Range Resource Corp. Class A (a)(b) 60,000 412,793 Canadian Natural Resources Ltd. (a) 713,600 8,425,732 Canada Occidental Petroleum Ltd. 54,000 1,586,463 Conwest Exploration Ltd. 53,200 934,808 Ensign Resource Service Group Ord. 68,100 240,591 Excel Energy, Inc. (warrants) (a) 25,000 186 Global Natural Resources, Inc. (a) 40,000 400,000 Inverness Petroleum Ltd. (a) 58,400 233,470 Morgan Hydrocarbons, Inc. (a) 347,000 1,032,354 Morrison Petroleums Ltd. 285,800 1,514,559 Newfield Exploration Co. (a) 70,400 2,076,800 Northstar Energy Corp. (a) 1,046,900 8,467,860 Pancanadian Petroleum Ltd. 341,000 11,413,165 Pan East Petroleum Corp., Inc. (a) 200,000 520,640 Paramount Resources Ltd. 331,400 3,142,692 Petro-Canada first installment receipts (a)(f) 74,000 357,754 Pinnacle Resources Ltd. (a) 50,000 548,531 Poco Petroleums Ltd. (a) 190,000 1,218,855 Renaissance Energy Ltd. (a) 856,022 18,861,772 Renaissance Energy Ltd. (a)(b) 15,000 330,513 Richland Petroleum Corp. Class A (a) 10,000 50,205 Rio Alto Exploration Ltd. (a) 715,300 2,101,476 Rio Alto Exploration Ltd. (a)(b) 11,000 32,317 Summit Resources Ltd. 168,300 1,079,649 Talisman Energy, Inc. (a) 85,000 1,533,098 Tarragon Oil & Gas Ltd. (a) 521,500 4,460,580 Tri Link Resources Ltd. Class A (a) 84,900 820,900 Ulster Petroleums Ltd. (a) 256,600 906,545 75,350,600 TOTAL ENERGY 83,446,806 FINANCE - 8.4% CREDIT & OTHER FINANCE - 3.1% Power Corporation of Canada 90,000 1,363,890 Trimark Financial Corp. 290,200 7,824,284 9,188,174 SECURITIES INDUSTRY - 5.3% First Marathon, Inc. Class A (non-vtg.) 176,900 1,809,130 Investors Group, Inc. 450,000 5,731,685 Mackenzie Financial Corp. 652,900 5,705,894 Pioneer Group, Inc. 84,500 2,218,125 Power Financial Corp. 18,100 410,599 15,875,433 TOTAL FINANCE 25,063,607 INDUSTRIAL MACHINERY & EQUIPMENT - 4.2% ELECTRICAL EQUIPMENT - 0.9% Leitch Technology (a) 149,800 2,729,713 INDUSTRIAL MACHINERY & EQUIPMENT - 3.3% ATS Automation 800 11,589 Enerflex Systems Ltd. 15,000 193,845 Exco Technologies Ltd. (a)(d) 977,800 6,636,240 Osmonics, Inc. (a) 47,400 805,800 Trojan Technologies Corp. (a) 290,400 1,619,933 Valmont Industries, Inc. 18,700 458,150 9,725,557 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 12,455,270 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDIA & LEISURE - 3.7% BROADCASTING - 0.5% Cogeco, Inc. 65,000 $ 338,416 Shaw Cablesystems Ltd. Class B (b) 193,500 953,468 Videotron Group Ltd. 36,800 273,708 1,565,592 PUBLISHING - 3.2% Thomson Corp. 93,198 1,256,388 Torstar Corp. Class B 509,000 8,186,779 9,443,167 TOTAL MEDIA & LEISURE 11,008,759 NONDURABLES - 5.2% AGRICULTURE - 0.0% DEKALB Genetics Corp. Class B 900 38,475 BEVERAGES - 2.7% Seagram Co. Ltd. 220,000 7,976,943 FOODS - 2.5% Corporate Foods Ltd. 45,300 496,969 GoodMark Foods, Inc. 70,300 1,300,550 RalCorp Holdings, Inc. (a) 14,000 322,000 Tootsie Roll Industries, Inc. 82,682 2,986,887 Weston George Ltd. 65,000 2,175,530 7,281,936 TOTAL NONDURABLES 15,297,354 PRECIOUS METALS - 9.1% Agnico Eagle Mines Ltd. 364,200 4,029,360 Barrick Gold Corp. 272,400 6,331,350 Battle Mountain Gold Co. 37,500 285,938 Euro-Nevada Mining Corp. 105,400 3,488,509 Franco Nevada Mining Corp. 45,600 2,475,865 Greenstone Resources Ltd. (a) 50,000 120,863 Kinross Gold Corp. (a) 457,000 3,399,033 Newmont Mining Corp. 60,000 2,265,000 Pan American Silver Corp. (a) 79,600 525,437 Placer Dome, Inc. 140,000 3,071,774 Prime Resources Group, Inc. (a) 95,300 691,093 Rayrock Yellowknife Resources, Inc. (a) 46,200 343,622 27,027,844 RETAIL & WHOLESALE - 2.1% GENERAL MERCHANDISE STORES - 0.6% Hudson's Bay Co. Ord. 51,000 953,049 Sears Canada, Inc. 166,500 835,906 1,788,955 GROCERY STORES - 1.5% Loblaw Companies Ltd. 91,800 1,920,324 Van Houtte (A.L.) 186,500 2,635,552 4,555,876 TOTAL RETAIL & WHOLESALE 6,344,831 SERVICES - 1.7% G & K Services, Inc. Class A 97,500 2,169,375 Loewen Group, Inc. 75,000 2,998,327 5,167,702 SHARES VALUE (NOTE 1) TECHNOLOGY - 1.6% COMMUNICATIONS EQUIPMENT - 0.1% Northern Telecom Ltd. 22 $ 792 SR Telecom, Inc. 30,000 331,908 332,700 COMPUTER SERVICES & SOFTWARE - 1.1% Rand A Technology Corp. (a) 189,000 2,706,025 Simware, Inc. (a) 2,600 24,375 Systems Xcellence, Inc. (warrants)(a) 100,000 410,004 3,140,404 COMPUTERS & OFFICE EQUIPMENT - 0.2% Beamscope Canada, Inc. (a) 50,000 595,017 ELECTRONIC INSTRUMENTS - 0.2% Mosaic Technologies, Inc. (a) 30,000 451,841 TOTAL TECHNOLOGY 4,519,962 TRANSPORTATION - 5.5% RAILROADS - 5.5% Bombardier, Inc. Class B 380,800 4,637,858 Canadian Pacific Ltd. Ord. 730,100 11,607,205 TOTAL TRANSPORTATION 16,245,063 UTILITIES - 3.5% CELLULAR - 3.5% BCE Mobile Communications, Inc. (a) 345,700 10,349,145 GAS - 0.0% Nova Corp. 451 3,480 TOTAL UTILITIES 10,352,625 TOTAL COMMON STOCKS (Cost $264,690,714) 286,834,488 PREFERRED STOCKS - 0.2% CONVERTIBLE PREFERRED STOCKS - 0.0% PRECIOUS METALS - 0.0% Battle Mountain Gold Co. $3.25 2,000 95,500 NONCONVERTIBLE PREFERRED STOCKS - 0.2% FINANCE - 0.2% SECURITIES INDUSTRY - 0.2% A G F Management Ltd. Class A 41,400 473,429 TOTAL PREFERRED STOCKS (Cost $584,121) 568,929 CONVERTIBLE BONDS - 0.9% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) DURABLES - 0.8% AUTOS, TIRES, & ACCESSORIES - 0.8% Magna International, Inc. 7 1/4%, 7/5/05 Baa3 CAD 2,750,000 2,301,041 CONVERTIBLE BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) PRECIOUS METALS - 0.1% Agnico Eagle Mines Ltd. yankee 3 1/2%, 1/27/04 B1 $ 220,000 $ 167,750 TOTAL CONVERTIBLE BONDS (Cost $2,298,869) 2,468,791 REPURCHASE AGREEMENTS - 2.3% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 6,964,137 6,963,000 TOTAL INVESTMENTS - 100% (Cost $274,536,704) $ 296,835,208 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,729,091 or 0.5% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Exco Technologies Ltd. $ 29,807 $ - $ - $ 6,636,240 Maax, Inc. 39,397 239,868 - - TOTALS $ 69,204 $ 239,868 $ - $ 6,636,240 5. Purchased on an installment basis. Market value reflects only those payments made through October 31, 1995. The remaining installments aggregating CAD $292,600 are due July 31, 1996 and January 31, 1997. 6. Purchased on an installment basis. Market value reflects only those payments made through October 31, 1995. The remaining installments aggregating CAD $629,000 are due September 23, 1996 and March 24, 1997. 7. Purchased on an installment basis. Market value reflects only those payments made through October 31, 1995. The remaining installments aggregating CAD $10,140,000 are due June 10, 1996 and December 31, 1996. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $251,142,180 and $321,844,515, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $120,137 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $5,448,000 and $3,832,000, respectively. The weighted average interest rate was 6.4% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $274,729,220. Net unrealized appreciation aggregated $22,105,988, of which $36,677,540 related to appreciated investment securities and $14,571,552 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $10,603,000 of which $5,787,000 and $4,816,000 will expire on October 31, 2002 and 2003, respectively. For the period, interest and dividends from foreign countries were $4,155,218 or $0.22 per share. Taxes accrued or paid to foreign countries were $599,499 or $0.03 per share. CANADA FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $6,963,000) (cost $274,536,704) - See $ 296,835,208 accompanying schedule Cash 902 Receivable for investments sold 36,513,084 Receivable for fund shares sold 3,185,126 Dividends receivable 213,945 Interest receivable 49,318 Redemption fees receivable 1,011 TOTAL ASSETS 336,798,594 LIABILITIES Payable for investments purchased $ 3,581,975 Payable for fund shares redeemed 6,110,391 Accrued management fee 188,616 Other payables and accrued expenses 154,594 TOTAL LIABILITIES 10,035,576 NET ASSETS $ 326,763,018 Net Assets consist of: Paid in capital $ 314,438,805 Undistributed net investment income 748,004 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (10,723,865 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 22,300,074 NET ASSETS for 18,621,671 $ 326,763,018 shares outstanding NET ASSET VALUE and redemption price per share ($326,763,018 (divided by) 18,621,671 shares) $17.55 Maximum offering price per share (100/97 of $17.55) $18.09
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 4,385,285 Dividends Interest 917,073 5,302,358 Less foreign taxes withheld (599,499 ) TOTAL INCOME 4,702,859 EXPENSES Management fee $ 2,666,061 Basic fee Performance adjustment (167,417 ) Transfer agent Fees 1,124,463 Redemption fees (764 ) Accounting fees and expenses 210,073 Non-interested trustees' compensation 2,204 Custodian fees and expenses 61,033 Registration fees 32,178 Audit 36,133 Legal 15,229 Interest 1,363 Miscellaneous 3,424 Total expenses before reductions 3,983,980 Expense reductions (201,478 3,782,502 ) NET INVESTMENT INCOME 920,357 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including (4,198,646 realized loss of $72,772 on sales of ) investments in affiliated issuers) Foreign currency transactions (26,778 (4,225,424 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities 10,766,839 Assets and liabilities in foreign currencies 2,216 10,769,055 NET GAIN (LOSS) 6,543,631 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,463,988 OTHER INFORMATION $872,526 Sales charges paid to FDC Deferred sales charges withheld $3,075 by FDC Accounting fees paid to FSC $209,005
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 920,357 $ (292,208) Net investment income (loss) Net realized gain (loss) (4,225,424) (5,844,101) Change in net unrealized appreciation (depreciation) 10,769,055 1,032,561 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,463,988 (5,103,748) Distributions to shareholders (211,418) - From net investment income In excess of net realized gain - (242,990) TOTAL DISTRIBUTIONS (211,418) (242,990) Share transactions 261,903,643 568,300,531 Net proceeds from sales of shares Reinvestment of distributions 205,156 238,390 Cost of shares redeemed (310,934,479) (290,839,654) Redemption fees 6,103 - NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (48,819,577) 277,699,267 TOTAL INCREASE (DECREASE) IN NET ASSETS (41,567,007) 272,352,529 NET ASSETS 368,330,025 95,977,496 Beginning of period End of period (including undistributed net investment income (loss) of $748,004 and $(11,337), respectively) $ 326,763,018 $ 368,330,025 OTHER INFORMATION Shares Sold 15,725,874 32,698,397 Issued in reinvestment of distributions 12,903 13,408 Redeemed (18,554,447) (16,658,932) Net increase (decrease) (2,815,670) 16,052,873
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 D 1993 1992 1991
Net asset value, beginning of period $ 17.18 $ 17.82 $ 14.23 $ 16.28 $ 13.57 Income from Investment Operations Net investment income (loss) .05 - (.15) (.02) C .03 C Net realized and unrealized gain (loss) .33 (.60) 3.76 (1.11) 3.59 Total from investment operations .38 (.60) 3.61 (1.13) 3.62 Less Distributions (.01) - (.02) - (.06) From net investment income From net realized gain - - - (.92) (.85) In excess of net realized gain - (.04) - - - Total distributions (.01) (.04) (.02) (.92) (.91) Redemption fees added to paid in capital .00 - - - - Net asset value, end of period $ 17.55 $ 17.18 $ 17.82 $ 14.23 $ 16.28 TOTAL RETURN A, B 2.22% (3.37)% 25.40% (7.09)% 28.13% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 326,763 $ 368,330 $ 95,977 $ 21,701 $ 23,327 Ratio of expenses to average net assets 1.09% 1.57% 2.00% 2.00% 2.01% E E E Ratio of expenses to average net assets after expense reductions 1.08% 1.57% 2.00% 2.00% 2.01% Ratio of net investment income (loss) to average net assets .26% (.14)% (.66)% (.11)% .17% Portfolio turnover rate 75% 59% 131% 55% 68% A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS.) C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D EFFECTIVE NOVEMBER 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.
EMERGING MARKETS 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND EMERGING MARKETS -21.17% 59.48% EMERGING MARKETS (INCL. 3% SALES CHARGE) -23.53% 54.69% Morgan Stanley Emerging Markets Free Index -19.43% 161.90% Average Emerging Markets Fund -18.99% 66.60% 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 November 1, 1990. 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 Morgan Stanley Emerging Markets Free Index - a broad measure of the performance of stocks in developing countries, weighted by each country's market capitalization (or the total value of its outstanding shares). Mexico, Malaysia, Brazil, and Thailand are most heavily weighted, and together account for over 60% of the index. Keep in mind that before February 1992, the fund's objective was more broadly defined, and did not focus specifically on emerging markets. However, to measure how the fund's performance stacked up against its peers, you can compare it to the average emerging markets fund, which reflects the performance of 46 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND EMERGING MARKETS -21.17% 9.78% EMERGING MARKETS (INCL. 3% SALES CHARGE) -23.53% 9.11% Morgan Stanley Emerging Markets Free Index -19.43% 21.23% Average Emerging Markets Fund -18.99% 10.74% 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 EmerginMorgan Stanley EMF 11/01/90 9700.00 10000.00 11/30/90 9564.20 9479.74 12/31/90 9777.33 9880.37 01/31/91 9709.16 10679.30 02/28/91 10118.17 12260.21 03/31/91 10108.44 12766.06 04/30/91 10332.42 12903.41 05/31/91 10332.42 13918.67 06/30/91 9972.10 13421.82 07/31/91 10186.34 14119.08 08/31/91 10108.44 14418.70 09/30/91 10225.30 13869.26 10/31/91 10127.91 14439.40 11/30/91 9991.58 14225.77 12/31/91 10438.08 15824.40 01/31/92 10517.68 17656.36 02/29/92 10826.15 18442.83 03/31/92 10806.24 19068.46 04/30/92 11064.96 18940.35 05/31/92 11542.58 18873.02 06/30/92 11522.68 17002.12 07/31/92 11144.56 17189.36 08/31/92 10865.95 16390.47 09/30/92 10796.29 16450.88 10/31/92 10995.30 17332.58 11/30/92 10905.75 17144.49 12/31/92 11048.91 17652.99 01/31/93 11201.38 17738.37 02/28/93 11770.60 18033.91 03/31/93 12095.86 18628.41 04/30/93 12482.12 19056.85 05/31/93 12756.56 19581.32 06/30/93 12919.19 20162.41 07/31/93 13142.82 20705.31 08/31/93 14057.63 22457.49 09/30/93 14372.73 23058.76 10/31/93 16446.31 25127.66 11/30/93 17096.84 26239.62 12/31/93 20082.32 30576.92 01/31/94 19501.26 31133.23 02/28/94 18950.78 30579.38 03/31/94 17115.84 27812.28 04/30/94 16952.74 27255.97 05/31/94 17391.08 28188.79 06/30/94 16167.79 27411.79 07/31/94 17401.28 29116.21 08/31/94 19613.39 32729.91 09/30/94 20112.90 33101.88 10/31/94 19623.58 32504.77 11/30/94 18267.77 30814.71 12/31/94 16480.81 28339.78 01/31/95 14212.53 25324.70 02/28/95 14376.01 24675.15 03/31/95 14089.92 24831.93 04/30/95 14386.23 25945.92 05/31/95 15837.11 27326.23 06/30/95 16021.03 27407.06 07/31/95 16828.21 28022.26 08/31/95 16317.33 27362.19 09/30/95 16245.81 27232.33 10/31/95 15469.28 26189.87 Let's say you invested $10,000 in Fidelity Emerging Markets Fund on November 1, 1990, when the fund started, and paid the 3% sales charge. By October 31, 1995, the value of your investment would have grown to $15,469 - - a 54.69% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley Emerging Markets Free Index, which would have grown to $26,190 over the same period - a 161.90% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) EMERGING MARKETS FUND TALK: THE MANAGER'S OVERVIEW An interview with Richard Hazlewood, Portfolio Manager of Fidelity Emerging Markets Fund Q. HOW DID THE FUND PERFORM, RICHARD? A. For the 12 months ended October 31, 1995, the fund had a total return of - -21.17%. During the same period, the Morgan Stanley Emerging Markets Free Index posted a return of -19.43%. The average emerging markets fund, as tracked by Lipper Analytical Services, had a total return of -18.99% for the 12-month period. Q. WAS THERE ANY PARTICULAR REASON THE FUND UNDERPERFORMED? A. The fund has generally underperformed in down markets and outperformed in up ones. This has a lot to do with the breadth of stocks I've selected for the portfolio. My large capitalization stocks have tended to do well, but the fund's overweighting in mid- and small-capitalization stocks has pulled it down. A stabilization of interest rates should benefit the smaller stocks. Smaller companies, rather than large ones, tend to be more sensitive to changes in interest rates - which impact their borrowing costs - - because they have a greater effect on a smaller company's balance sheet. Performance was considerably better over the past six months because of the solid returns of some of the fund's large-company stocks. Q. DO YOU THINK EMERGING MARKETS MAY BE ON THE UPSWING? A. I think the key thing is interest rates. Emerging markets have come through a difficult period that began when interest rates rose in early 1994 and included events like the Mexican peso devaluation - all of which caused a general flight of capital back to the U.S. Historically, emerging markets tend to do well when interest rates decline. All I can say is price-to-earnings multiples - a standard measure of valuation - generally have contracted and most stocks have become cheaper. In a stable or falling rate scenario, I believe the only real threat that could change the whole playing field is currency devaluation. Q. WHY DO SOUTHEAST ASIAN COMPANIES CURRENTLY MAKE UP THE LARGEST PART OF YOUR PORTFOLIO? A. First, I should point out that I've tended to overweight the regions where I've found the best stocks. Breaking it down by countries, that would be Malaysia and Thailand. Let me broaden out a bit, though. Long-term, Asia has the highest savings rate in the world. Also, most Southeast Asian markets have shown tremendous growth in recent years. That said, looking at a short-term horizon, one problem I see with Southeast Asia is that the economic cycle is out of kilter with the U.S. Interest rates in the U.S. have been falling for some time, but it appears they haven't peaked in Southeast Asia yet - thus detracting from its attractiveness as an investment location and causing mounting trade deficits. Q. YOU MENTIONED MALAYSIA AND THAILAND. WHAT STOCKS DO YOU LIKE IN THOSE COUNTRIES? A. Malaysia and Thailand are, in my opinion, the best places for stock picking. I've found good quality managements and fast-growing companies - many of which can offer reasonable valuations as well. Thai banks are currently about 12% of the fund. Basically, the Thai banking industry is very well managed with earnings growing at 20% to 30% per annum. I also favored many independent power producers (IPPs) from these countries. Currently, there is a trend away from traditional electric utilities to these private businesses. Some examples owned by the fund at the end of the period included YTL Corporation and Malakoff BHD, both of Malaysia. Q. MUCH HAS BEEN WRITTEN ABOUT THE ECONOMIC PROBLEMS OF MEXICO AND LATIN AMERICA - OR THE SO CALLED "TEQUILA EFFECT." WHAT'S YOUR VIEW OF THE SITUATION AND HAVE YOU BEEN ABLE TO FIND ANY BRIGHT SPOTS? A. I think the key problem with Latin America has been the lack of saving. Basically, many governments and individuals have been spending more than they are saving. It's the opposite of the high savings rates in Asia. My short-term view is that it's going to be tough going for many of these Latin American markets because local interest rates have gone up a great deal and many of their economies - especially Mexico - are in bad shape. Long term, however, I think there is a positive side. In Brazil, the administration of President Fernando Henrique Cardoso has taken steps necessary to improve the Brazilian economy, such as dampening inflation by introducing a new currency, raising huge foreign exchange reserves in excess of $50 billion, introducing an ambitious privatization program and encouraging savings. Chile also has taken steps to alleviate its savings problem. The best example of this is the country's large pension funds. Q. SO WHAT WERE SOME OF THE STOCKS YOU LIKED IN LATIN AMERICA? A. The fund remains underweighted in Latin America, but there are a few attractive situations I've found. In Brazil, I liked the telecommunications company Telebras. This company is basically a privatization play, but it has been growing its cellular phone business as well. In Mexico, I basically concentrated the fund's holdings in three companies: Grupo Carso, a conglomerate with a tobacco business; paper company Kimberly-Clark de Mexico; and Cifra, a Mexican version of Wal-Mart. Q. WHAT ARE SOME OF THE MAJOR SHIFTS IN HOLDINGS YOU'VE CARRIED OUT THIS YEAR. A. I've reduced commodity cyclical - or economically sensitive - stocks, such as chemicals, paper, iron and steel. These stocks tend to perform well at the beginning of a growth cycle rather than the mature phase of growth most emerging markets are in now. I've also reduced the fund's exposure to large telecommunications companies. In fact, I've all but eliminated exposure to long-distance companies. In my opinion, long-distance and international telephone rates are grossly overpriced everywhere in the world. I believe it's just a matter of time before pricing collapses and these stocks decline. At the end of the period, I only owned telecom companies that are involved in the cellular communications business, such as Telebras. Q. WERE THERE ANY MAJOR DISAPPOINTMENTS? A. Yes. Hong Kong-based construction and real estate development firm Hopewell Holdings had been disappointing. The company is involved with developing a highway that would link Hong Kong with the city of Guangzhou, located in the People's Republic of China. Unfortunately, the cost of the road greatly exceeded its projections. Thus, it has taken on a large amount of debt to finish the road. Q. WHAT'S YOUR OUTLOOK, RICHARD? A. As I said before, the performance of these markets is going to have a lot to do with interest rates. If rates peak or even begin to fall, you could see money flowing back into these economies. Global investors may also notice how attractive many emerging markets appear on a valuation basis relative to larger markets like the U.S. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of emerging market issuers which can be found in regions such as Southeast Asia, Latin America and Eastern Europe START DATE: November 1, 1990 SIZE: as of October 31, 1995, more than $1.0 billion MANAGER: Richard Hazlewood, since 1993; assistant Fidelity Low-Priced Stock Fund and Fidelity Contrafund, 1992-93; analyst, Japanese stocks, 1991-92; joined Fidelity in 1991 (checkmark) RICHARD HAZLEWOOD ON STOCK SELECTION IN EMERGING MARKETS: "The key story to this fund is stock selection. Basically, I take a bottom-up approach to picking individual stocks. I look for companies with strong potential growth that are trading at a discount. Quality management is also a must. I spend a great deal of time traveling the world visiting many of these companies, meeting with management and doing on-site fundamental research. I go where there is the best stock picking opportunities." (solid bullet) Major shifts: The fund's top holding on April 30, 1995, Telefonos de Mexico, which made up 2.8% of the fund, has been eliminated from the portfolio as of October 31, 1995. (solid bullet) The Mexico Bolsa Index, which is a common proxy for the Mexican market, was the worst performing index out of 53 world indices with a - -58.4% return for the year ended October 31, 1995, according to Bloomberg. (solid bullet) Krung Thai Bank was the largest contributor to the fund with a total return of 60.2% for the six months ended October 31, 1995. (solid bullet) The fund's top industry allocation, finance, consisted mainly of Thai and Malaysian banks. World-wide, however, the Asia/Pacific financial industry underperformed the rest of the world, according to Dow Jones. For the 10 months ended October 31, 1995, U.S. financial stocks, the world leader, returned 38.9%, while Asia/Pacfic financial stocks returned -9.9%. 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. EMERGING MARKETS INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 Sigapore 4.0% India 4.2% Row: 1, Col: 1, Value: 4.2 Row: 1, Col: 2, Value: 17.2 Row: 1, Col: 3, Value: 4.9 Row: 1, Col: 4, Value: 15.2 Row: 1, Col: 5, Value: 5.1 Row: 1, Col: 6, Value: 20.6 Row: 1, Col: 7, Value: 5.1 Row: 1, Col: 8, Value: 5.2 Row: 1, Col: 9, Value: 9.0 Row: 1, Col: 10, Value: 5.8 Row: 1, Col: 11, Value: 4.0 Row: 1, Col: 12, Value: 3.6 Argentina 3.6% Thailand 17.2 % Indonesia 5.8% Brazil 9.0% Philippines 4.9 % Hong Kong 5.2% Korea (South) 5.1% Other 15.2 % Mexico 5.2% Malaysia 20.6% AS OF APRIL 30, 1995 4.6.86.8 India 5.9% Argentina 4.3% Row: 1, Col: 1, Value: 5.9 Row: 1, Col: 2, Value: 16.3 Row: 1, Col: 3, Value: 3.8 Row: 1, Col: 4, Value: 17.3 Row: 1, Col: 5, Value: 3.8 Row: 1, Col: 6, Value: 7.4 Row: 1, Col: 7, Value: 20.3 Row: 1, Col: 8, Value: 4.5 Row: 1, Col: 9, Value: 9.6 Row: 1, Col: 10, Value: 6.8 Row: 1, Col: 11, Value: 4.3 Brazil 6.8% Thailand 16.3 % Hong Kong 9.6% Korea (South) 4.5% Philippines 3.8 % Other 17.3 % Malaysia 20.3% United States 3.8% Mexico 7.4% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks and closed-end investment companies 96.4 92.1 Bonds 1.1 4.3 Short-term investments 2.5 3.6 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Industrial Finance Corp. (For. Reg.) 3.4 2.5 (Thailand, Credit & Other Finance) Hong Leong Bank BHD 2.9 0.2 (Malaysia, Banks) Krung Thai Bank (For. Reg.) 2.5 2.3 (Thailand, Banks) Thai Militarty Bank Ltd. (For. Reg.) 2.4 1.4 (Thailand, Banks) Electrobras PN Class B 2.3 1.5 (Brazil, Electric Utility) Thai Farmers Bank PCL 2.2 2.2 (Thailand, Banks) Siam City Bank PCL (For. Reg.) 2.1 1.6 (Thailand, Banks) Bangkok Bank Ltd. 1.9 2.3 (Thailand, Banks) Hume Industries BHD 1.8 1.1 (Malaysia, Building Materials) Grupo Carso SA de CV Class A-1 1.8 2.2 (Mexico, Conglomerates) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 36.9 29.4 Construction & Real Estate 11.7 11.2 Basic Industries 10.7 12.7 Utilities 10.4 15.7 Nondurables 7.0 4.2 Holding Companies 4.7 6.6 Retail & Wholesale 3.7 2.9 Durables 3.0 3.0 Technology 2.2 1.8 Conglomerates 1.9 2.2 EMERGING MARKETS INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.9% SHARES VALUE (NOTE 1) ARGENTINA - 3.6% Astra Comp Argentina de Petroleum (Reg.) 2,034,270 $ 3,010,569 Banco de Galicia Y Buenos Aires SA sponsored ADR representing Class B shares 406,602 7,776,263 Banco Frances del Rio de la Plata SA ADR 229,200 5,013,750 Banco Frances del Rio de la Plata SA 344,459 2,504,217 Buenos Aires Embotelladora SA sponsored ADR 124,300 2,843,363 Central Costanera SA ADR (b) 109,700 2,989,325 Molinos Rio de La Plata SA Class B (Reg) 500,215 3,126,344 Perez Companc Class B 1,958,151 8,635,014 Telecom Argentina Stet France Telecom SA 876,779 3,375,430 39,274,275 AUSTRALIA - 0.0% Odin Mining & Investment Co. (a) 280,750 70,454 BANGLADESH - 0.2% Advanced Chemical Industries 150,000 485,890 Bangladesh Lamps Ltd. 322 22,788 Beximco Pharmaceuticals Ltd. 392,680 871,027 Padma Textile Mills Ltd. 74,250 710,613 2,090,318 BERMUDA - 0.4% AES China Generating Co. Class A (a) 10,000 100,000 Central European Media Class C (a) 51,000 1,173,000 Credicorp Ltd. 194,604 3,210,966 4,483,966 BRAZIL - 8.8% Acesita Cia Acos Especiais Itabira: Ord. 318,566,578 2,650,569 (warrants) (a) 18,324,626 191 Bradesco PN 848,608,724 7,766,806 Brahma (Cia Cervejaria): PN Class B (Pfd. Reg.) 17,457,373 6,662,252 PN (warrants) (a) 130,763 19,720 ON (warrants) (a) 1,676,255 331,241 Brasmotor PN 5,048,100 1,181,303 Casa Anglo PN Ord. 9,831,557 613,514 Compania Paulista de Forca Luz Ord. 34,602,260 1,707,262 Compania Vale do Rio Doce PN Ord. 74,572,600 12,021,580 Coteminas PN 10,656,252 3,324,884 Eletrobras PN Class B 86,989,300 24,789,463 Itaubanco PN (Pfd. Reg.) 12,670,000 3,755,539 Itausa Investimentos Itau SA 773,900 442,689 Iven SA (a) 2,320,000 1,302,940 Karsten PN 1,451,638 45,746 Klabin Industria de Papel e Celulose PN 1,413,887 1,323,451 Light Servicos de Electricidade SA Ord. 2,890,000 873,162 Lojas Americanas 165,754,800 3,965,021 Moinho Santista-Industrias Gerais SA Ord. (a) 343,700 228,776 Perdigao SA Comercio e Industria PDG (pfd shares) (a) 9,720,200 17,591 Souza Cruz Industria Comerico 631,600 4,519,405 Telebras PN (Pfd. Reg.) 207,071,000 8,396,978 Telesp PN (Pfd. Reg.) 48,411,308 6,948,770 Unibanco PN 51,278,034 1,797,264 Votorantim Celulose E Paper SA (Pfd. Reg.) 47,768,505 1,440,755 96,126,872 SHARES VALUE (NOTE 1) CANADA - 0.0% Bolivar Goldfields Ltd. (a) 51,750 $ 36,566 CHILE - 1.5% Banco Osorno y la Union SA Series A sponsored ADR 204,900 2,766,150 Compania Cervecerias Unidas SA ADR 148,500 3,434,063 Cristalerias de Chile SA sponsored ADR 73,200 1,775,100 Empresas Telex Chile SA sponsored ADR 128,300 1,154,700 Provida SA sponsored ADR 189,700 4,647,650 Santa Isabel SA sponsored ADR (a) 34,900 789,613 Soc Quimica y Minera de Chile ADR 30,000 1,301,250 Vina Concha Stet y Toro SA sponsored ADR 20,200 353,500 16,222,026 CHINA (PEOPLES REP) - 0.6% China First Pencil Co. Ltd. Class B (a)(e) 3,959,762 1,235,446 Huaneng Power International, Inc. Class N sponsored ADR (a) 10,000 166,250 Qingling Motors Co. Ltd. Class H 1,000,000 218,592 Shandong Huaneng Power Development Ltd. Class N sponsored ADR 10,170 81,360 Shanghai Hero Ltd. Class B (e) 3,314,480 961,199 Shanghai Industrial Sewing Machine Corp. Class B 1,135,600 193,052 Shanghai New Asia Class B (a) 100,000 48,000 Shanghai Refrigerator Compressor Co. Class B (a)(e) 3,644,420 1,749,322 Shanghai Tyre & Rubber Class B shares 150,000 41,100 Shanghi Vacuum Electron Devices Co. Ltd. (a)(e) 6,743,518 1,483,574 Tsingtao Brewery Co. Ltd. 952,000 252,428 6,430,323 COLOMBIA - 0.9% Banco de Columbia GDR (b) 371,900 2,184,913 Banco Ganadero Class C sponsored ADR 54,200 528,450 Banco Industrial Columbiano sponsored ADR 182,000 2,479,750 CADENALCO Gran Cadena de Almacenes Colombianos ADR (b) 15,500 197,625 Carulla & CIA SA Class B sponsored ADR (b) 80,720 585,220 Cementos Argos SA 28,200 169,667 Compania Nacional de Chocolates 130,000 1,036,350 Noel (Industria Alimenticias) 95,000 357,233 Suramericana de Seguros SA 116,567 2,057,237 9,596,445 CZECH REPUBLIC - 0.0% Deza Valasske Mezirici AS 1,000 76,482 GREECE - 0.3% Alpha Credit Bank 40,000 2,404,447 Hellenic Bottling Co. SA 11,250 358,728 2,763,175 HONG KONG - 4.8% Consolidated Electric Power Asia Ltd. 5,166,200 10,457,624 Dah Sing Financial Holdings Ltd. 2,259,675 5,114,834 Dao Heng Bank Group Ltd. 1,202,000 4,407,629 First Pacific Bancshares Holding Ltd. 7,050,000 1,449,885 Guoco Group Ltd. 1,514,000 7,010,619 International Bank of Asia Ltd. 2,610,000 1,552,908 JCG Holdings Ltd. 10,686,000 7,809,282 Kumagai Gumi 1,000,000 756,665 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HONG KONG - CONTINUED Kwong Sang Hong International Ltd. 5,000,000 $ 1,280,509 Liu Chong Hing Bank Ltd. 1,133,000 1,392,198 Liu Chong Hing Investment Ltd. 11,058,000 10,941,717 Magnum International Holdings Ltd. 3,750,000 179,465 Magnum International Holdings Ltd. (warrants) (a) 250,000 3,880 Nanyang Holdings Ltd. 430,000 378,203 52,735,418 HUNGARY - 0.0% Pannonplast Plastic Industries PLC 25,000 323,255 INDIA - 4.0% Alacrity Housing Ltd. 160,000 128,655 Apollo Hospitals Enterprises Ltd. 100,000 97,953 Bajaj Auto 176,300 3,851,360 Bajaj Auto Ltd. GDR 20,000 525,000 Bharat Heavy Electricals Ltd. 1,000,000 2,777,667 Bharti Telecom Ltd. 14,000 29,883 CESC Ltd. GDR (a) 26,000 70,200 Chemplast Sanmar Ltd. (b) 315,000 1,105,263 Core Parenterals Ltd. GDR (a) 348,000 1,392,000 Cosmo Films Ltd. 20,275 84,776 Crompton Greaves Ltd. 300,000 1,833,333 E.I.D.-Parry GDR 50,000 162,500 Finolex Cables Ltd. GDR 55,000 330,000 Finolex Cables Ltd. GDR (b) 175,000 1,050,000 Great Eastern Shipping Co. Ltd. 600,000 844,737 Great Eastern Shipping Co. Ltd. GDR 172,700 1,447,226 Gujarat Ambuja Cement Ltd. GDR 40,000 315,200 HDFC Bank Ltd. (a) 500 501 Himachal Futuristic Communications Ltd. 20,000 32,456 Hindalco Industries Ltd. GDR 20,000 620,000 Housing Development Finance Corp. Ltd. 48,500 3,667,939 Indian Rayon & Industries, Inc. GDR 85,000 956,250 Industrial Credit & Investments Corp. Ltd. 1,425,900 3,744,097 JCT Electronics Ltd. 50,000 40,310 JK Corp. Ltd. GDR (a) 75,000 216,000 JK Corp. Ltd. GDR (b) 250,000 720,000 Larsen and Toubro Ltd. GDR 151,000 1,080,842 Mahindra & Mahindra Ltd. GDR 225,000 2,475,000 Maral Overseas Ltd. (a) 405,000 438,158 Mukand Ltd. 95,000 733,333 Nicholas Piramal India Ltd. 25,000 179,094 Prime Securities 300,000 446,053 Reliance Industries Ltd. 1,000,000 7,000,728 SCICI Ltd. 110,000 114,985 Shriram Industrial Enterprises Ltd.: GDR (b) 105,600 594,528 GDR (warrants) (a)(b) 35,200 352 State Bank Of India 20,000 122,450 Tata Electric Companies GDR 1,000 310,000 Tata Electric Companies GDR (b) 1,200 372,000 Tata Engineering & Locomotive Ltd. 21,280 242,083 Tata Engineering & Locomotive Ltd. (warrants) (a)(b) 357,000 2,052,750 Unitech Ltd. 254,350 959,390 Zee Telefilms Ltd. 88,300 406,122 43,571,174 INDONESIA - 5.8% APAC Centertex Corp. PT (For. Reg.) (a) 1,221,000 766,150 Andayani Megah PT 1,695,500 1,455,847 Asahimas Flat Glass PT (b) 1,000,000 1,144,871 Bank Bali PT (For. Reg.) 175,000 408,411 SHARES VALUE (NOTE 1) Bank Bali PT (For. Reg) (warrants) (a) 100,000 $ 59,886 Bank Niaga PT 663,000 2,364,731 Barito Pacific Timber PT (For. Reg.) 80,000 55,482 Bimantara Citra (For. Reg.) (a) 613,500 472,755 Dharmala International Land 1,000,000 561,427 Duta Anggada Realty Ord. 3,295,000 2,067,538 Indo Rama Synthetics PT (For. Reg.) 262,500 869,799 Lippo Bank (For. Reg.) 1,193,050 2,416,572 Matahari Putra Prima PT (For. Reg.) 8,482,500 17,741,923 Modernland Realty PT 100,000 140,907 Mulia Industrindo PT (For.) 1,450,000 4,277,855 Pakuwon Jati PT (For. Reg.) 4,006,500 3,396,089 Panin Bank PT (For. Reg.) 2,463,750 2,712,188 Putra Surya Perkasa PT (For. Reg.) 2,886,833 1,080,498 Roda Vivatex PT (For. Reg.) 2,360,000 1,948,482 SUCACO PT 50,000 123,294 Sampoerna Hanjaya Mandala (For. Reg.) 1,380,000 12,760,908 Sekar Bumi PT (For. Reg.) (a)(b) 361,500 477,543 Semen Gresik (For. Reg.) 1,012,500 2,630,451 Trias Sentosa (For. Reg.) 803,000 1,767,945 United Tractors PT (For. Reg.) 584,000 1,157,200 62,858,752 ISRAEL - 0.1% Elbit Computer Ltd. 7,500 146,250 Gilat Satellite Networks 5,000 111,250 Koor Industries Ltd. 10,640 936,385 Optrotech Ltd. 10,000 132,500 Teva Pharmaceutical Industries Ltd. ADR 4,000 157,000 1,483,385 KOREA (SOUTH) - 5.0% Cho Hung Bank Co. Ltd. 85,037 1,122,490 Chosun Brewery 16,674 642,161 Chosun Brewery (New) (a) 5,100 173,966 Dae Chang Industrial Co. 3,457 65,964 Dai Han Investment & Finance 1,999 53,035 Dong Yang Tin Plate Industries (a) 6,370 218,952 Han Chang Co. Ltd.(a) 2,097 95,374 Hotel Shilla (a) 83,000 1,247,468 Hyundai International Merchant Bank 20,400 762,517 Hyundai Motor Service Co. Ltd. 34,750 1,866,799 Hyundai Securities Co. Ltd. 31,202 664,696 Ke Yang Electric Machinery 10,000 355,486 Kookmin Bank (a) 92,800 1,889,838 Kookmin Bank (New) (a) 13,746 195,945 Korea Electric Power Corp. 249,410 10,960,885 Korea Electric Power Corp. sponsored ADR (a) 113,000 2,782,625 Korea Electronics Co. Ltd. 10,000 365,941 Korea First Securities Co. Ltd. 61 941 Korea Mobile Telecommunications Corp. 12,100 10,719,840 LG Securities Co. Ltd. 30,690 673,844 Mando Machinery Corp. 1,000 65,111 Samsung Electronics Co. Ltd.: (vtg.) 49,900 11,120,625 (New) (a) 606 131,076 GDS (vtg.) (a) 1,068 122,393 Samsung Fire & Marine Insurance 2,305 1,137,663 Shinhan Bank (a) 25,680 585,960 Shinhan Investment & Finance 31,952 659,794 Ssangyong Oil Refining (a) 40,000 1,155,329 Sunny-Emi Co. (a) 10,300 329,805 Tae Gu Department Store Co. 41,500 1,182,382 Yeonhap Insupanel Co. 945 15,315 Yu Hwa Securities Co. 39,030 596,812 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) KOREA (SOUTH) - CONTINUED Yukong Ltd.: GDR (a)(b) 23,006 $ 432,969 NV GDR (b) 192,000 2,016,000 54,410,001 LUXEMBOURG - 0.0% Quilmes Industries SA 26,700 469,920 MALAYSIA - 20.4% Advance Synergy BHD (a) 100,000 120,413 Affin Holdings BHD 1,164,000 2,198,603 Arab Malaysian Corp. BHD 4,476,000 15,059,439 Arab Malaysian Finance BHD (For. Reg.) 3,068,666 10,747,123 Bandar Raya Development BHD 2,276,000 3,403,364 Berjaya Group BHD 17,109,000 10,782,682 Boustead Holdings Berhad 1,378,000 2,765,489 Buildcon BHD 1,026,000 2,119,626 East Asiatic BHD 350,000 600,492 Gadek BHD 1,380,000 7,548,254 Golden Pharos BHD 592,000 1,043,644 Hong Leong Bank BHD 11,826,000 31,877,266 Hong Leong Credit BHD 3,825,000 16,255,780 Hume Industries BHD 3,750,000 20,068,864 IOI Properties BHD (rights) (a) 750 - Industrial Oxygen, Inc. BHD 3,000 2,810 Johan Holdings BHD 1,002,000 737,330 Kamunting Corp. BHD 1,990,000 1,331,235 Kent (George) BHD 331,000 622,599 Larut Consolidated BHD 1,632,000 2,093,584 MGR Corp. BHD 1,481,000 2,354,448 Malakoff BHD 4,234,000 12,579,124 Malaysian Industrial Development Finance BHD Ord. 701,000 1,368,209 Malaysian Plantations BHD 5,017,000 4,126,131 Malaysian Resources Corp. BHD 3,305,000 4,812,002 Metacorp BHD 1,540,000 3,908,706 Multi-Purpose Holdings BHD 1,492,000 1,996,183 OSK Holdings BHD 418,000 605,308 Oyl Industries BHD 1,649,000 12,393,861 Park May BHD 584,000 1,332,887 Prime Utilities BHD 50,000 462,371 Public Finance BHD (For. Reg.) 2,718,000 5,112,460 Sungei Bagen Rubber Co. BHD 10,000 468,273 TA Enterprise BHD 1,801,000 2,062,336 Tongkah Holdings BHD (a) 2,499,600 4,229,525 Westmont Land BHD 4,486,000 6,849,259 Wing Tiek Holdings BHD 1,000 4,289 YTL Corp. BHD 3,456,400 18,769,629 YTL Corp. BHD (warrants) (a) 1,150,800 4,483,195 Yeo Hiap Seng BHD 184,000 372,887 Zalik BHD 2,578,333 4,930,919 222,600,599 MEXICO - 5.1% Cemex SA, Series B 899,900 2,798,276 Cifra SA Class C 4,985,300 5,115,658 Corporacion Geo SA de CV (a) 283,960 764,184 Corporacion Geo SA de CV Class B sponsored ADR (a)(b) 12,700 133,350 Desc SA de CV, Series C sponsored ADR (a) 100,000 1,200,000 Emvasa del Valle de Enah Ord. (a) 1,217,000 1,114,652 Far-Ben SA de CV Series B (a) 575,800 545,281 Fomento Economico Mexicano SA de CV (FEMSA) Class B 527,100 1,099,646 SHARES VALUE (NOTE 1) Groupo Financiero Serfin SA sponsored ADR (a) 400,000 $ 1,550,000 Gruma SA Class B 250,614 743,872 Grupo Carso SA de CV Class A-1 (a) 3,696,000 19,485,625 Grupo Casa Autrey SA sponsored ADR 108,900 1,388,475 Grupo Elektra SA 151,200 598,389 Grupo Financiero Bancomer Class B (a) 7,864,900 2,045,430 Grupo Financiero Inbursa SA Class B 537,000 1,464,890 Grupo Financiero Probursa B1 Ord. (a) 28,737 1,259 Grupo Modelo SA de CV Class C Ord. 182,600 699,429 Grupo Posadas SA de CV Class L (a) 390,000 115,208 Grupo Televisa SA de CV sponsored ADR (b) 287,400 4,921,725 Internacional de Ceramica SA sponsored ADR (a) 250,000 1,437,500 Kimberly-Clark de Mexico SA Class A 500,000 6,572,438 Sears Roebuck de Mexico SA de CV (a) 681,000 1,876,961 Sears Roebuck de Mexico SA de CV ADR representing Series B-1 (a)(b) 47,000 235,000 Tolmex SA Class B2 27,500 103,975 56,011,223 PAKISTAN - 1.4% Adamjee Insurance Ltd. 161,125 494,243 Al-Faysal Investment Bank Ltd. (a) 464,000 417,199 Askari Commercial Bank (a) 413,080 467,797 Askari Commercial Bank (rights) (a) 179,600 86,215 Askari Leasing Ltd. (a) 384,400 370,741 Askari Leasing Ltd. (rights) (a) 384,400 233,117 Bank of Punjab (a) 33,150 26,159 Crescent Investment Bank Ltd. 715,000 591,825 DG Kahn Cement Ltd. (e) 912,550 980,052 Dandot Cement Co. Ltd. (a) 593,750 409,898 Engro Chemical Pakistan Ltd. 24,000 95,395 Fauji Fertilizer Co. Ltd. 850,000 1,366,326 First Grindlays Modarba 565,200 289,042 Hub Power Co. Ltd. (a) 2,000,000 1,239,730 Hub Power Co. Ltd. GDR (a) 112,600 1,857,900 Ibrahim Energy Ltd. (a) 237,000 228,579 Maple Leaf Cement Factory Ltd. (a) 240,000 190,088 Muslim Commercial Bank Ltd. (a) 299,250 334,319 National Development Leasing Corp. 469,300 253,846 Nishat Tek Ltd. (a) 51,700 42,672 PEL Appliances Ltd. (a) 8,250 21,881 Packages Ltd. 10,000 34,195 Pak Electron Ltd. (a) 50,000 77,450 Pakistan State Oil Co. Ltd. 304,640 3,169,871 Pakland Cement Ltd. (a) 300,000 415,291 Sui Southern Gas Pipelines Ltd. (a) 831,960 709,245 Sunflo Cit-Russ Ltd. (a) 2,350,000 480,657 Trust Leasing Corp. Ltd. (a) 290,550 144,202 Union Bank Ltd. 555,300 385,278 15,413,213 PANAMA - 1.0% Banco Latino Americano de Exportaciones SA Class E 127,100 5,306,425 Panamerican Beverages, Inc. Class A 211,000 5,776,125 11,082,550 PERU - 1.7% Banco Wiese Ltd. 209,720 346,606 Banco Weise Ltd. sponsored ADR 177,118 1,173,407 Cementos Lima SA Class C (b) 60,692 900,349 Cementos Notre Pacasmayo SA Class T 101,865 224,022 Consor De Alim Fabril Pacifico (a) 511,726 529,994 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PERU - CONTINUED Minsur SA Class T 255,489 $ 1,776,825 Southern Peru Copper Corp. Series 2 (a) 107,478 368,997 Telefonica del Peru (CPT): Class A 586,231 1,033,461 Class B 6,665,174 11,896,851 18,250,512 PHILIPPINES - 4.9% Aboitiz Equity Ventures, Inc. (a) 5,191,600 988,021 Aboitiz Equity Ventures, Inc. (a)(b) 1,504,400 286,304 Ayala Corp. Class B 3,966,656 4,041,383 Ayala Land, Inc. Class B 1,079,531 1,245,134 Bankard, Inc. (a) 1,100,000 454,633 Belle Resources Corp. (a) 5,103,999 775,117 Benpress Holdings Corp. GDR (a) 89,100 512,325 Benpress Holdings Corp. GDR (a)(b) 192,500 1,155,000 C & P Homes, Inc. (a)(b) 1,600,000 1,030,373 Filinvest Land, Inc. ORD (a) 550,000 148,020 First Phillipines Holdings Corp. 354,110 748,791 Guoco Holdings, Inc. Class B (e) 36,485,000 6,522,693 House of Investments, Inc. 5,095,000 1,116,551 Interport Resources Corp. Class B (a) 100,000,000 69,200 Ionics Circuits, Inc. (a) 500,000 701,653 Kuok Philippine Properties, Inc. (a) 311,200 13,879 Lepanto Consolidated Mining Co. (a) 92,170,000 673,293 Liberty Telecoms Holdings, Inc. (a) 63,304,000 3,163,985 Liberty Telecoms Holdings, Inc. (a)(b) 20,919,000 1,045,548 Manila Mining Corp. Class B 351,788,000 946,767 Megaworld Properties & Holdings, Inc. (a) 6,004,000 3,000,846 Metropolitan Bank & Trust Co. 22,551 416,166 Metro Pacific, Inc. Class B 83,830,766 12,086,326 Mondragon International Philippines, Inc. (a) 6,487,000 2,045,114 Negros Navigation Co. (a) 2,625,000 287,630 PICOP Resources 12,675,000 4,142,157 Philex Mining Corp. (a) 7,552,934 871,158 Private Development Corp. of the Philippines (a) 2,016,000 1,608,305 Robinson's Land Corp. (a) 16,673,000 2,467,937 SM Prime Holdings, Inc. (a) 1,300,000 349,865 Sanitary Wares Manufacure Corp. 186,000 63,645 San Miguel Corp. Class B 6,500 21,492 Steniel Manufacturing Corp. 3,280,750 567,604 United Paragon Mining Corp. (a) 4,500,000 1,125 53,568,040 POLAND - 0.3% BRE (Bank Rozwoju Eksportu) 20,000 311,455 Debica SA Class A 5,000 69,099 Krosno Krosnienskie Szkala SA 14,000 228,292 Okocimskie Zaklady Piwowarskie SA (a) 20,000 481,044 RAFAKO (a) 10,000 76,233 Warta SA (Reg) (a) 7,203 138,011 Wedel SA 5,000 220,139 Zaklady Piwowarskie W Zywcu SA 15,500 1,232,165 2,756,438 PORTUGAL - 0.0% CIN 6,250 189,467 Mague (Constru Metalom) 1,586 30,991 Unicer (Uniao Cervejeira) SA 10,000 162,388 382,846 RUSSIA - 0.1% Mosenergo AO sponsored ADR (a)(b) 65,000 568,750 SHARES VALUE (NOTE 1) SINGAPORE - 4.0% ABR Holdings Ltd. 500,000 $ 944,130 Asiamatrix Ltd. 420,000 614,851 Focal Finance Ltd. 503,200 960,849 Hong Leong Finance Ltd.: (For. Reg.) 909,000 2,751,429 (warrants) (a) 424,600 369,348 Keppel Finance Ltd. 1,848,000 2,326,337 L&M Group Investments Ltd. 500,000 937,058 Overseas Union Trust Ltd. (For. Reg.) 751,000 2,018,246 Singapore Finance Ltd. 3,211,400 4,973,809 Singapore Finance Ltd.(warrants) (a) 200,000 104,668 Tat Lee Finance Ltd. 1,292,000 1,726,931 Tat Lee Finance Ltd. (warrants) (a) 494,023 269,022 Transmarco Ltd. (e) 1,513,000 14,766,195 Van Der Horst Ltd. 2,007,000 10,290,488 43,053,361 SOUTH AFRICA - 2.5% AECI Ltd. 100,000 699,157 Amalgamated Banks of South Africa Ltd. 204,880 968,999 Anglo American Corp. of South Africa (Reg.) 80,000 4,551,374 Anglo American Industrial Corp. Ltd. 30,000 1,513,469 Anglovaal Ltd. Class N (b) 72,600 2,756,898 Cashbuild Ltd. 10,000 15,080 De Beers Consolidated Mines Ltd. ADR 10,000 275,000 Nampak Ltd. (a) 20,000 102,817 Nedcor Ltd. 30,300 431,997 Nedcor Ltd. unit (a)(b) 85,000 4,887,500 Polifin Ltd. (a) 45,100 97,069 Power Technologies Ltd. 500,000 945,918 Sasol Ltd. 102,781 887,683 Smith (CG) Ltd. (a) 20,000 130,235 South African Brewers Ltd. 268,400 8,812,365 South African Brewers Ltd. Sponsored ADR 5,000 163,125 Southern Life Association Ltd., The 10,000 94,592 Standard Bank Investment Corp. 5,000 190,555 27,523,833 SRI LANKA - 0.4% Aitken Spence & Co. Ltd. 95,000 369,744 Asia Capital Ltd. (a) 903,100 185,460 Blue Diamond Jewelry Worldwide Ltd. 572,282 218,257 Development Finance Corp. of Ceylon (a) 282,488 1,668,519 John Keells Holdings Ltd. 86,500 287,600 John Keells Holdings Ltd. GDR 77,500 503,750 Kelani Tyres Ltd. (Loc. Reg.) (a) 136,920 36,151 Lanka Ceramic Ltd. (a) 101,300 81,230 Lanka Tiles Ltd. 181,100 154,075 National Development Bank 196,600 845,922 Sampath Bank Ltd. 90,000 84,491 Vanik, Inc. Ltd. 48,000 26,286 Vanik, Inc. Ltd. (warrants) (a) 9,600 657 4,462,142 TAIWAN (FREE CHINA) - 0.3% Advanced Semiconductor Engineering, Inc. GDR (a)(b) 33,000 404,250 GVC Corp. GDR (a)(b) 27,239 231,532 Hocheng Corp. GDR (b) 634 5,231 Yageo Corp. GDR (a) 174,669 1,790,357 Yageo Corp. GDR (a)(b) 35,721 366,140 2,797,510 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) THAILAND - 17.2% Ayudhya Insurance Co. 291,000 $ 2,012,080 Ayudhya Life Assurance Co. (For. Reg.) 7,500 34,274 Bangkok Bank Ltd. 1,986,800 20,527,240 Bangkok Expressway PCL (For. Reg.) (a) 4,317,900 6,992,029 Bangkok Insurance PCL (For. Reg.) 146,500 2,386,847 Bangkok Metropolitan Bank PCL: (For. Reg.) 6,445,866 6,403,602 (Loc. Reg.) (a) 700,000 695,410 Bangkok Union Insurance Co. Ltd. (For. Reg.) (a) 50,000 115,239 Berli Jucker PCL 55,000 124,578 Bumrungrad Hospital PCL (For. Reg.) (a) 50,000 85,436 Charan Insurance PCL (For. Reg.) 288,500 940,075 Christiani & Nielsen (For. Reg.) (a) 100,000 153,984 Deves Insurance Co., Ltd. 20,000 193,920 General Engineering Ltd. (a) 20,000 35,764 Industrial Finance Corp. (For. Reg.) 11,144,266 36,534,947 International Broadcasting Corp. (For. Reg.) 20,000 42,122 Kiatnakin Finance & Securities PCL (warrants) (a) 24,516 - Krung Thai Bank (For. Reg.) 6,918,910 27,494,178 Nithipat Capital PCL 765,200 2,341,363 Nithipat Capital PCL (warrants) (a) 160,866 - Pacific Insurance PCL 66 163 Phatra Insurance PCL (For. Reg.) 26,000 175,641 Property Perfect PCL (For. Reg.) (warrants) (a) 4,444 8,123 Quality Houses Co. Ltd. (For. Reg.) 50,000 220,544 Raimon Land Co. Ltd. (For. Reg.) 900,000 2,020,664 SCF Finance and Securities Co. Ltd. (rights) (a) 129,675 - Safety Insurance PCL (For. Reg.) 363,200 534,012 Securities One PCL (warrants) (a) 36,483 - Siam City Bank PCL (For. Reg.) 17,903,000 22,765,587 Siam City Credit Finance & Securities Co. Ltd.: PCL 67,100 287,971 (rights) (a) 102,977 - Siam Commercial Life Assurance (For. Reg.) (a) 215,100 307,713 Siam General Factoring PCL (For. Reg.) (a) 145,000 331,313 S Khon Kaen Food Industry PCL (For. Reg.) 30,700 89,056 Somprasong Land and Development PCL (For. Reg.) (a) 300,000 572,223 Swedish Motors Corp. PCL (For. Reg.) 228,400 1,016,523 Thai Farmers Bank PCL 2,907,100 24,028,484 Thai Military Bank Ltd. (For. Reg.) 6,606,680 25,990,913 Thai Reinsurance Co. Ltd. (For. Reg.) 170,000 587,721 Thai Wah Food Products PCL (For. Reg.) 270,375 244,428 Thai Wah Resorts Development PCL (For. Reg.) 450,000 317,405 Tong Hua Daily News Co., Ltd. (For. Reg.) 657,500 914,465 187,526,037 TURKEY - 0.1% Akbank 500,000 131,517 Aksigoria (b) 230,875 31,039 Altinyildiz Mensucat Ve Konfeksiyon Fabrikalari AS 540,000 152,560 Anadolu Anonim Turk Sigoria SK 400,000 32,343 Bossa Ticaret Ve Sanayi Isletmeleri (a)(b) 1,500,000 140,285 SHARES VALUE (NOTE 1) Medya Holdings AS Class C 200,000 $ 6,430 Turkiye Garanti Bankasi AS 4,015,250 379,431 873,605 UNITED KINGDOM - 0.1% Antofagasta Holdings PLC 280,000 1,349,747 UNITED STATES OF AMERICA - 0.1% Capco Automotive Products Corp 158,600 1,209,325 VENEZUELA - 0.3% CA Venepal GDR Class A ADR (a)(b) 2,864 5,728 Corimon SA CA sponsored ADR (a) 16,700 70,975 Electricidad de Caracas 2,382,228 2,041,489 Mavesa SA sponsored ADR (b) 272,650 1,057,852 Venezolana de Prerreducidos Caroni Venpreca CA GDR (b) 1,500 8,070 3,184,114 TOTAL COMMON STOCKS (Cost $1,071,604,856) 1,045,636,652 PREFERRED STOCKS - 0.5% CONVERTIBLE PREFERRED STOCKS - 0.2% MALAYSIA - 0.2% Arab Malaysian Finance BHD unsecured 7 1/2%, 11/20/99 (For. Reg.) (a) 3,242,666 1,722,616 NONCONVERTIBLE PREFERRED STOCKS - 0.3% BRAZIL - 0.2% COSIPA (CIA Sidurg Paulista) Class B (a) 1,427,000 2,137,161 KOREA (SOUTH) - 0.1% Hotel Shilla (a) 22,550 206,299 Hyundai Motor Service Co. Ltd. 42,860 1,296,303 Korea First Securities Co. Ltd. 2,060 22,211 Shinhan Investment & Finance Co. Ltd. 9,045 102,845 1,627,658 TOTAL NONCONVERTIBLE PREFERRED STOCKS 3,764,819 TOTAL PREFERRED STOCKS (Cost $7,732,843) 5,487,435 CONVERTIBLE BONDS - 1.1% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) HONG KONG - 0.4% Lai Fung Overseas Finance Ltd. euro 5 1/2%, 2/5/98 (d) - $ 5,690,000 4,608,900 INDIA - 0.2% Gujarat Ambuja Cement Ltd.: 3 1/2%, 6/30/99 (b) - 190,000 262,200 euro 3 1/2%, 6/30/99 - 1,150,000 1,587,000 1,849,200 MEXICO - 0.1% Alfa SA de CV 8%, 9/15/00 (b) - 500,000 478,750 Grupo Financiero Invermexico 7 1/2%, 6/16/01 (b) - 1,000,000 280,000 758,750 CONVERTIBLE BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) NETHERLANDS - 0.4% Liblife International NV euro 6 1/2%, 9/30/04 - $ 4,000,000 $ 4,490,000 TOTAL CONVERTIBLE BONDS (Cost $12,856,988) 11,706,850 REPURCHASE AGREEMENTS - 2.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 27,478,487 27,474,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,119,668,687) $ 1,090,304,937 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $37,115,233 or 3.4% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 5. A company in which the fund has ownership of at least 5% of the voting securities is a affiliated company. A summary of the transactions during the period in which the issuers were affiliates is a follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Berjaya South Island BHD $ 1,630,448 $ 5,108,180 $ 38,646 $ - China First Pencil Co. Ltd. Class B 33,190 - - 1,235,446 DG Kahn Cement Ltd. 157,813 - - 980,052 Guoco Holdings, Inc. Class B 1,293,908 - 30,253 6,522,693 Mondragon International Philippines, Inc. - 784,688 - - North Borneo Timber BHD - 6,814,756 - - Shanghai Hero Ltd. Class B - - - 961,199 Shanghai Refrigerator Compressor Co. Class B 46,354 - - 1,749,322 Shanghai Vacuum Electron Devices Co. Ltd. 96,278 - - 1,483,574 Transmarco Ltd. 1,644,339 2,323,089 61,734 14,766,195 TOTALS $ 4,902,330 $ 15,030,713 $ 130,633 $ 27,698,481 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,047,699,607 and $1,532,101,039, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $86,207 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $2,135,000. The weighted average interest rate was 6.4% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $1,131,727,069. Net unrealized depreciation aggregated $41,422,132, of which $137,337,459 related to appreciated investment securities and $178,759,591 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $11,421,000 all of which will expire on September 30, 2002. The fund has elected to defer to its fiscal year ending September 30, 1996 approximately $92,140,000 of losses recognized during the period October 1, 1994 to September 30, 1995. For the period, interest and dividends from foreign countries were $23,800,531 or $0.33 per share. Taxes accrued or paid to foreign countries were $2,515,975 or $0.03 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investments in Securities Basic Industries 10.7 Conglomerates 1.9 Construction & Real Estate 11.7 Durables 3.0 Energy 0.9 Finance 36.9 Health 0.2 Holding Companies 4.7 Industrial Machinery & Equipment 1.3 Media & Leisure 1.8 Nondurables 7.0 Precious Metals 0.5 Repurchase Agreements 2.5 Retail & Wholesale 3.7 Services 0.3 Technology 2.2 Transportation 0.3 Utilities 10.4 100.0% EMERGING MARKETS FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $27,474,000) (cost $1,119,668,687) - $ 1,090,304,937 See accompanying schedule Cash 627,673 Receivable for investments sold 15,107,525 Receivable for fund shares sold 711,653 Dividends receivable 1,576,051 Interest receivable 325,329 Redemption fees receivable 386 TOTAL ASSETS 1,108,653,554 LIABILITIES Payable for investments purchased $ 4,815,614 Payable for fund shares redeemed 6,326,692 Accrued management fee 735,473 Other payables and accrued expenses 1,192,617 TOTAL LIABILITIES 13,070,396 NET ASSETS $ 1,095,583,158 Net Assets consist of: Paid in capital $ 1,254,740,388 Undistributed net investment income 2,812,777 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (132,540,126 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies (29,429,881 ) NET ASSETS, for 72,342,948 shares outstanding $ 1,095,583,158 NET ASSET VALUE and redemption price per share ($1,095,583,158 (divided by) 72,342,948 shares) $15.14 Maximum offering price per share (100/97.00 of $15.14) $15.61
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 22,189,600 Dividends (including $130,633 received from affiliated issuers) Interest 4,228,474 26,418,074 Less foreign taxes withheld (2,515,975 ) TOTAL INCOME 23,902,099 EXPENSES Management fee $ 10,483,318 Transfer agent Fees 4,560,626 Redemption fees (67,140 ) Accounting fees and expenses 564,844 Non-interested trustees' compensation 12,712 Custodian fees and expenses 1,776,872 Registration fees 71,308 Audit 68,116 Legal 72,308 Interest 1,145 Miscellaneous 19,885 Total expenses before reductions 17,563,994 Expense reductions (2,769 17,561,225 ) NET INVESTMENT INCOME 6,340,874 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized loss of $(302,572) on sales of investments in affiliated issuers) (105,159,525 ) Foreign currency transactions (3,272,140 (108,431,665 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities (290,773,855 ) Assets and liabilities in foreign 44,596 (290,729,259 currencies ) NET GAIN (LOSS) (399,160,924 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (392,820,050 ) OTHER INFORMATION $2,207,409 Sales charges paid to FDC Accounting fees paid to FSC $560,714
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 6,340,874 $ 6,347,187 Net investment income Net realized gain (loss) (108,431,665) (18,434,477) Change in net unrealized appreciation (depreciation) (290,729,259) 152,006,813 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (392,820,050) 139,919,523 Distributions to shareholders (3,891,795) (2,588,073) From net investment income In excess of net investment income - (549,335) TOTAL DISTRIBUTIONS (3,891,795) (3,137,408) Share transactions 402,587,670 2,784,381,422 Net proceeds from sales of shares Reinvestment of distributions 3,798,329 3,076,294 Cost of shares redeemed (892,234,446) (1,715,598,654) Redemption fees 1,772,044 9,993,085 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (484,076,403) 1,081,852,147 TOTAL INCREASE (DECREASE) IN NET ASSETS (880,788,248) 1,218,634,262 NET ASSETS Beginning of period 1,976,371,406 757,737,144 End of period (including undistributed net investment income of $2,812,777 and $2,603,242, respectively) $ 1,095,583,158 $ 1,976,371,406 OTHER INFORMATION Shares Sold 25,937,062 151,470,579 Issued in reinvestment of distributions 218,179 178,437 Redeemed (56,461,457) (95,823,026) Net increase (decrease) (30,306,216) 55,825,990
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 D 1993 1992 1991
Net asset value, beginning of period $ 19.25 $ 16.18 $ 11.05 $ 10.40 $ 10.00 Income from Investment Operations Net investment income .05 .06 .06 E .08 .12 Net realized and unrealized gain (loss) (4.13) 2.97 5.28 .76 .30 Total from investment operations (4.08) 3.03 5.34 .84 .42 Less Distributions (.04) (.04) (.08) (.08) (.04) From net investment income In excess of net investment income - (.01) - - - From net realized gain - - (.15) (.14) - Total distributions (.04) (.05) (.23) (.22) (.04) Redemption fees added to paid in capital .01 .09 .02 .03 .02 Net asset value, end of period $ 15.14 $ 19.25 $ 16.18 $ 11.05 $ 10.40 TOTAL RETURN A, B (21.17)% 19.32% 49.58% 8.56% 4.41% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 1,095,583 $ 1,976,371 $ 757,737 $ 13,732 $ 6,450 Ratio of expenses to average net assets 1.28% 1.52% 1.91% 2.60% 2.60% C C Ratio of net investment income to average net assets .46% .39% .44% .90% 1.34% Portfolio turnover rate 78% 107% 57% 159% 45% A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS.) C LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. D EFFECTIVE NOVEMBER 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 NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OURTSTANDING DURING THE PERIOD.
EUROPE 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND EUROPE 12.76% 58.87% 167.67% EUROPE (INCL. 3% SALES CHARGE) 9.37% 54.11% 159.64% Morgan Stanley Europe Index 13.21% 66.07% 168.94% Average European Region Fund 9.33% 42.45% 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 October 1, 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 Morgan Stanley Europe Index - a broad measure of the performance of stocks in Europe, weighted by each country's market capitalization (or the total value of its outstanding shares). To measure how the fund's performance stacked up against its peers, you can compare it to the average European region fund, which reflects the performance of 41 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND EUROPE 12.76% 9.70% 11.44% EUROPE (INCL. 3% SALES CHARGE) 9.37% 9.03% 11.07% Morgan Stanley Europe Index 13.21% 10.68% 11.51% Average European Region Fund 9.33% 6.70% 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 Europe (301) Europe Index 10/01/86 9700.00 10000.00 10/31/86 9690.30 10061.24 11/30/86 10078.30 10600.17 12/31/86 10485.70 10866.14 01/31/87 11563.06 11347.33 02/28/87 12300.92 11751.88 03/31/87 12922.28 12332.46 04/30/87 13456.26 12815.21 05/31/87 13679.56 12743.90 06/30/87 14232.95 13107.17 07/31/87 15252.37 13548.56 08/31/87 15572.75 13660.75 09/30/87 16135.86 13749.78 10/31/87 11737.82 11135.61 11/30/87 11213.55 10645.49 12/31/87 12048.50 11264.74 01/31/88 11475.68 10802.62 02/29/88 11533.94 11438.32 03/31/88 12067.91 11753.00 04/30/88 12407.72 11972.00 05/31/88 12271.80 11748.03 06/30/88 11999.95 11629.54 07/31/88 11873.74 11655.59 08/31/88 11252.38 11126.51 09/30/88 11776.65 11732.04 10/31/88 12582.47 12818.60 11/30/88 12737.81 12976.68 12/31/88 12751.82 13046.37 01/31/89 13357.16 13518.81 02/28/89 13386.93 13365.30 03/31/89 13615.17 13462.17 04/30/89 14200.67 13835.82 05/31/89 13813.65 13126.86 06/30/89 14190.74 13668.45 07/31/89 15460.96 15277.34 08/31/89 15341.88 15086.51 09/30/89 16036.53 15345.58 10/31/89 14925.09 14339.46 11/30/89 15798.36 15135.61 12/31/89 16874.83 16764.74 01/31/90 17085.64 16719.83 02/28/90 16643.94 16319.18 03/31/90 17145.87 16549.43 04/30/90 16804.56 16110.24 05/31/90 17838.53 17421.38 06/30/90 18581.38 18033.25 07/31/90 19705.70 18792.65 08/31/90 17356.68 16929.38 09/30/90 15640.08 14935.59 10/31/90 16342.78 16194.23 11/30/90 16322.71 16356.96 12/31/90 16100.10 16120.73 01/31/91 16418.61 16663.17 02/28/91 17415.23 18120.73 03/31/91 16480.26 16904.64 04/30/91 16439.16 16727.91 05/31/91 16511.08 17221.35 06/30/91 15062.38 15776.03 07/31/91 15822.69 16867.89 08/31/91 16141.20 17175.85 09/30/91 16726.84 17692.04 10/31/91 16367.24 17319.34 11/30/91 15874.06 16911.64 12/31/91 16769.89 18234.47 01/31/92 16844.23 18229.22 02/29/92 17046.02 18299.21 03/31/92 16461.89 17658.79 04/30/92 17545.19 18633.42 05/31/92 18405.46 19693.79 06/30/92 18235.53 19327.03 07/31/92 17577.05 18636.54 08/31/92 17630.16 18575.77 09/30/92 17354.02 18268.54 10/31/92 16058.31 16993.88 11/30/92 16047.69 16985.58 12/31/92 16346.71 17375.24 01/31/93 16260.10 17404.43 02/28/93 16357.53 17603.55 03/31/93 17429.27 18509.13 04/30/93 18003.03 18917.36 05/31/93 18219.54 19120.87 06/30/93 17710.74 18841.54 07/31/93 17721.56 18906.21 08/31/93 19161.37 20565.25 09/30/93 19139.72 20501.36 10/31/93 19951.64 21355.45 11/30/93 19561.92 20894.47 12/31/93 20787.26 22463.18 01/31/94 22287.59 23607.14 02/28/94 21765.73 22771.11 03/31/94 21156.90 22126.61 04/30/94 21765.73 23042.85 05/31/94 20928.59 22063.34 06/30/94 20678.54 21831.69 07/31/94 21624.40 22975.89 08/31/94 22309.33 23704.62 09/30/94 22004.92 22764.65 10/31/94 23026.89 23756.36 11/30/94 22168.00 22846.39 12/31/94 22087.73 22976.26 01/31/95 21612.84 22796.38 02/28/95 21999.37 23312.88 03/31/95 22529.48 24394.72 04/30/95 23291.51 25174.86 05/31/95 23755.35 25690.31 06/30/95 24429.02 25932.49 07/31/95 25522.37 27284.20 08/31/95 25036.44 26229.45 09/30/95 26140.82 27021.80 10/31/95 25964.12 26894.17 Let's say you invested $10,000 in Fidelity Europe Fund on October 1, 1986, when the fund started, and paid the 3% sales charge. By October 31, 1995, the value of your investment would have grown to $25,964 - a 159.64% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley Europe index, which would have grown to $26,894 over the same period - a 168.94% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) An interview with Sally Walden, Portfolio Manager of Fidelity Europe Fund Q. HOW HAS THE FUND PERFORMED, SALLY? A. For the 12-month period ended October 31, 1995, the fund returned 12.76%, versus the Morgan Stanley Europe Index which returned 13.21%. The fund outperformed the average European fund which achieved a return of 9.33% over the same period, according to Lipper Analytical Services. The first six months of the period saw the fund underperform the index but the second half saw strong outperformance. Q. WHAT FACTORS INFLUENCED THE PERFORMANCE OF THE FUND RELATIVE TO THE INDEX? A. The fund's performance began to improve relative to the index during the second six months of the period. Investor confidence improved and, in general, small- and medium-sized companies began to outperform large companies. Many of the largest holdings of small- and medium-sized companies in the fund performed extremely well during this period. By September, the U.K., German, Swiss and a number of the Scandinavian markets were reaching all-time highs. Many investors also were focusing on "growth" companies in which the fund concentrates as opposed to more economically sensitive companies. Q. WHAT FACTORS INFLUENCED EUROPEAN STOCK MARKETS DURING THE PAST 12 MONTHS? A. One of the most surprising events during the year was the slowdown in economic growth across much of Europe. Investors had expected growth to pick up during the year but slower growth in the U.S., a stronger deutschemark, the absence of any meaningful recovery in consumer demand in Europe and a buildup of inventories contributed to a slowdown in growth. This meant inflation expectations were revised downward in Europe. In Germany, inflation fell to under 2% and remained generally low in other countries - the exceptions being Italy and Spain. This enabled interest rates to decline in many of the deutschemark bloc countries: Germany, Austria, the Netherlands, Belgium and Switzerland. Bond yields also fell against this background but also were influenced by the declines in U.S. bond yields. Although lower growth resulted in downward revisions to profit growth, lower returns on cash deposits and lower bond yields encouraged many investors to increase their holdings in equities. Thus, we saw markets start to improve from about April/May onward. Q. WHICH PARTICULAR HOLDINGS HELPED THE FUND DO WELL? A. Nokia, a Finnish cellular communications company, was the star performer in the period - doubling in value over the year. Gehe, a German pharmaceuticals company, saw strong profit growth and I believe management has been successful in improving efficiency at recently acquired companies. Other holdings that have done well include Skandia, a Swedish insurance company; SGS Thomson, a semiconductor manufacturer; and Standard Chartered, a bank with a strong presence in the Far East. Q. WERE EUROPEAN CURRENCY MARKETS VOLATILE DURING THE PERIOD? A. Yes. There seemed to be two sources of the volatility. One was a consequence of a weaker dollar which disrupted foreign exchange rates in Europe, and the other was the uncertainty surrounding the timing and membership of a single European currency. Many German investors feared that the deutschemark would lose value in the run up to a single currency and have been shifting their cash into the Swiss franc. Some of this has found its way into the German equity market and this is also one reason why the Swiss market has been so strong this year. The French franc came under pressure as investors in general believe France's economic policies are deflationary and that eventually it will have to cut interest rates and go for growth. The Italian lira suffered from political uncertainty and although it did have a period of relative strength, the lira came under renewed weakness after the German government implied Italy would not be in a position to join the single currency in 1999. Finally, the Swedish krona and Finnish markka actually strengthened against the deutschemark in the latter part of the year after a period of weakness. Q. WHAT NEW OPPORTUNITIES DID YOU FIND DURING THE PAST SIX MONTHS? A. Shares were purchased in Hoganas, a Swedish company, which currently dominates the market for powdered metal. Sales are growing at 20% per annum. Bank of Ireland is benefiting from a strong Irish economy that is generating good loan growth. The company is over-capitalized and could give shareholders higher dividends. Cookson, a U.K. conglomerate that has a couple of high margin businesses related to semiconductors, has been showing good growth. Shares were purchased in Seita, a French tobacco company that I believed was attractively valued relative to other tobacco stocks worldwide. Q. THE FUND ALSO HAD A LARGE EXPOSURE TO THE MEDIA SECTOR AND SOME FINANCIAL STOCKS. WHY? A. Media companies often have strong national or local franchises, tend to generate cash and have good long term growth potential. Changes in legislation surrounding media are also creating attractive investment opportunities. There is less of a theme to holdings in the finance sector. Many of the companies are attractive in their own right. Skandia offers a highly efficient fund management administration system. Bank of Ireland is selling on very attractive valuations. Q. WHICH INVESTMENTS DIDN'T TURN OUT AS YOU WOULD HAVE LIKED? A. Some of the finance stocks in France have not performed as expected. Higher short-term interest rates, which have been needed to protect the franc's rate against the deutschemark, and problems with bad loans in the property market have had an adverse impact on the performance of BNP and Credit Local de France. In the UK, WH Smith, a retailer of books, newspapers and stationery, has been hit by increased competition and profits were disappointing. Holdings in these companies have been sold or reduced. Q. WHAT IS YOUR CURRENT STRATEGY? A. In terms of overall themes, media and telecommunications remain significant. There are also a number of service sector growth companies that I believe have strong market leadership in their chosen field. Companies with strong consumer brands are also well represented in the portfolio. Finally, the fund continues to be biased towards medium-sized companies. Such companies tend to be under-researched and so can offer good potential rewards. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. Many economic indicators point to a slowdown in growth prospects over the coming year. However, inflationary pressures remain muted which could result in lower interest rates. The bond market should also remain supportive of equities. Although profit growth is being revised downward, the negative impact of this should be offset by lower interest rates. Share valuations are reasonable. Companies that offer good "visibility" of earnings are likely to be favored by investors. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of Western European issuers START DATE: October 1, 1986 SIZE: as of October 31, 1995, more than $492 million MANAGER: Sally Walden, since July 1992; also manages various funds for non-U.S. investors, joined Fidelity in 1984 (checkmark) SALLY WALDEN ON CURRENT TRENDS IN WESTERN EUROPEAN COMPANIES: "The financial position of many Western European companies has improved since the end of the recession in 1992/93. The growth experienced since then, coupled with lower interest rates, has enabled many companies to rebuild their balance sheets. Debt levels have declined as has the cost of financing them. Many companies have reduced their inventory levels and cash has been accumulated. In the past, such cash resources would be spent on new capital equipment, but this is now more difficult to justify in a period of slow economic growth. This raises the question of what companies will do with their cash. "In the past year we have seen many companies in Anglo-Saxon countries use their cash resources to buy back their own shares, which boosts earnings per share, or grant special, one-time dividends to shareholders. In some cases, cash has also been used to acquire companies. However, we have yet to see such activity in continental Europe. Up until now, share buybacks or special dividends have been either illegal or highly tax inefficient, but this could be changing. Such changes could unlock value for investors and drive up the share prices of such companies. It would, therefore, be rewarding to know where such changes are likely and which companies would take advantage of the changes. "Corporate and industrial structures can sometimes make mergers and acquisitions difficult to achieve in Europe. Some firms are majority owned by families while others operate in very fragmented industries - particularly in the consumer related sectors. However, I expect that many of the families that own the small- and medium- sized firms may divest their interest over the coming years or become more shareholder friendly. This could unlock value in these companies. In addition, I believe consolidation within some fragmented industries appears likely. DISTRIBUTIONS The Board of Trustees of Fidelity Europe Fund voted to pay on December 11, 1995, to shareholders of record at the opening of business on December 8, 1995, a distribution of $.81 derived from capital gains realized from sales of portfolio securities and a dividend of $.12 from net investment income. 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. EUROPE INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 United States 8.4% Sweden 10.2% Row: 1, Col: 1, Value: 8.300000000000001 Row: 1, Col: 2, Value: 30.2 Row: 1, Col: 3, Value: 5.7 Row: 1, Col: 4, Value: 4.4 Row: 1, Col: 5, Value: 8.300000000000001 Row: 1, Col: 6, Value: 3.4 Row: 1, Col: 7, Value: 6.2 Row: 1, Col: 8, Value: 9.800000000000001 Row: 1, Col: 9, Value: 8.300000000000001 Row: 1, Col: 10, Value: 3.8 Row: 1, Col: 11, Value: 10.2 Belgium 3.8% United Kingdom 30.2% Netherlands 6.2% France 9.7% Germany 9.8% Switzerland 5.7% Italy 3.4% Spain 4.4% Other 8.2% AS OF APRIL 30, 1995 United States 8.1% Sweden 8.2% Row: 1, Col: 1, Value: 8.1 Row: 1, Col: 2, Value: 28.4 Row: 1, Col: 3, Value: 6.9 Row: 1, Col: 4, Value: 4.4 Row: 1, Col: 5, Value: 5.3 Row: 1, Col: 6, Value: 3.5 Row: 1, Col: 7, Value: 5.4 Row: 1, Col: 8, Value: 11.6 Row: 1, Col: 9, Value: 3.4 Row: 1, Col: 10, Value: 5.2 Row: 1, Col: 11, Value: 9.6 Row: 1, Col: 12, Value: 8.199999999999999 France 9.6% United Kingdom 28.4% Belgium 5.2% Finland 3.4% Germany 11.6% Switzerland 6.9% Netherlands 5.4% Spain 4.4% Other 5.3% Italy 3.5% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks 92.9 92.9 Bonds 0.2 0.3 Short-term investments 6.9 6.8 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Nokia Corp. AB, Series K 1.8 2.0 (Finland, Communications Equipment) Gehe AG 1.8 1.7 (Germany, Medical Equipment & Supplies) Skandia Foersaekrings AB 1.7 0.0 (Sweden, Insurance) Kuoni Reisen Holding AG Class B (Reg.) 1.6 1.8 (Switzerland, Entertainment) Television Francaise 1 SA 1.6 1.6 (France, Broadcasting) International Cabletel, Inc. 1.5 1.3 (United States, Cellular) Ericsson (L.M.) Telephone Co. Class B 1.3 1.0 (Sweden, Communications Equipment) PolyGram NV Ord. 1.3 1.3 (Netherlands, Entertainment) BIC 1.3 1.2 (France, Consumer Electronics) Swiss Reinsurance Corp. (Reg.) 1.2 0.8 (Switzerland, Insurance) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 16.7 13.0 Media & Leisure 16.6 14.5 Health 9.8 10.6 Retail & Wholesale 7.6 8.0 Technology 6.8 6.3 Durables 6.6 7.4 Utilities 6.2 6.9 Services 4.3 2.4 Nondurables 4.2 5.8 Construction & Real Estate 3.9 4.5 EUROPE INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.9% SHARES VALUE (NOTE 1) BELGIUM - 3.6% Audiofina 9,766 $ 5,110,705 Colruyt SA 95 23,791 Generale de Banque SA 11,762 3,831,284 Immob de Belgique 6,225 432,202 Quick Restaurants SA 54,245 4,965,432 UCB Group 3,007 3,451,039 17,814,453 BERMUDA - 0.4% Bona Shipholdings Ltd. (a) 203,570 2,092,760 DENMARK - 1.9% Kobenhaven Lufthave AS 33,230 2,495,065 Teledanmark AS Class B 48,825 2,548,324 Unidanmark AS Class A 95,010 4,367,276 9,410,665 FINLAND - 2.2% Nokia Corp. AB, Series K 153,920 8,995,336 WSOY (Werner Soderstrom) Class B 20,030 1,817,240 10,812,576 FRANCE - 9.7% Axa SA 65,500 3,643,584 BIC 66,120 6,283,601 Canal Plus 34,400 5,953,507 Castorama Dubois 14,800 2,403,769 Christian Dior SA 26,000 2,556,068 Credit Local de France (b) 38,750 3,072,222 Ecco SA 17,453 2,709,549 Guilbert SA, Ste 27,400 3,294,173 Salomon SA Class A 5,584 3,227,455 Scor SA 40 1,194 Seita 73,200 2,548,694 Taittinger SA 3,660 1,326,820 Television Francaise 1 SA 77,720 8,038,628 Total SA Class B 50,328 3,115,027 48,174,291 GERMANY - 7.8% Bayer AG 14,116 3,751,841 Gehe AG 18,241 8,947,951 Holsten Brauerei AG 4,865 1,070,635 Mannesmann AG Ord. 16,540 5,439,947 Otto Reichelt AG 150,800 2,676,321 Rhoen Klinikum AG 27,000 2,530,082 Rhoen Klinikum AG (rights) (a) 27,000 517,517 Schering AG 85,200 5,939,474 Tarkett AG (a) 25,000 596,316 Tarkett AG (a)(b) 38,000 906,400 Veba AG Ord. 120,610 4,948,037 Wella AG 2,700 1,493,132 38,817,653 IRELAND - 2.6% Bank of Ireland U.S. Holdings, Inc. 380,000 2,534,490 CRH PLC 595,660 3,954,051 IWP International (U.K. Reg.) 367,530 2,439,701 Independent Newspapers PLC 655,000 3,928,688 12,856,930 ITALY - 3.4% De Rigo Spa sponsored ADR 828 17,078 Industrie Natuzzi Spa ADR 139,500 5,580,000 Istituto Nazionale Delle Assicurazioni Spa 1,284,930 1,689,285 SHARES VALUE (NOTE 1) Mondadori Arnoldo Editore Spa 21,550 $ 159,805 Mondadori Arnoldo Editore Spa (b) 216,900 1,608,434 Telecom Italia Mobile Spa (a) 2,394,040 4,033,573 Telecom Italia Ord. 2,394,040 3,673,997 16,762,172 NETHERLANDS - 6.2% Grolsche Bierbrouwerij NV 65,020 2,282,271 Heineken NV 26,962 4,783,222 Philips Electronics NV (Bearer) 99,700 3,853,323 PolyGram NV Ord. 102,390 6,390,049 SGS Thomson Microelectronics NV 83,090 3,837,541 Unilever NV ADR 28,900 3,785,900 VNU Ord. 41,430 5,806,447 30,738,753 NORWAY - 1.1% Bergesen Group: Class A 61,140 1,266,896 Class B 27,820 571,996 Bohler-Gruppen AS (a) 48,700 38,331 Fokus Bank AS (a) 331,700 1,758,268 Fokus Bank AS (a)(b) 35,000 185,527 Helikopter Services AS 130,495 1,634,987 5,456,005 SPAIN - 4.4% Banco Popular Espanol 24,400 3,878,000 Centros Comerciales Continente SA 112,705 2,822,244 Corporacion Financiera Alba SA 47,970 2,654,078 Corporacion Mapfrecia International de Reaseguros SA (Reg.) 78,070 3,999,488 EL Aguila SA (a) 151,693 1,092,936 Empresa Nacional De Electricidad SA Ord. 48,660 2,421,034 FOCSA (Fomento Construcciones Y Contratas SA) 37,935 2,680,325 Mapfre Vida SA 3,688 194,980 Vallehermoso SA 130,295 2,109,284 21,852,369 SWEDEN - 10.2% Assa Abloy AB Class B (a) 309,650 2,055,209 Astra AB Class A Free shares 132,445 4,874,810 Autoliv AB 41,850 2,405,209 Ericsson (L.M.) Telephone Co. Class B 308,000 6,550,918 Forsheda AB B Free shares 107,200 1,956,647 Hennes & Mauritz AB B Free shares 39,000 2,553,211 Hoganas AB Class B Free shares 112,800 3,045,751 ICB Shipping Class B 351,160 2,913,400 Nordbanken AB (b) 29,500 436,094 Securitas B Free shares 152,500 5,912,012 Skandia Foersaekrings AB 323,113 8,212,713 Svenska Handelsbanken 135,000 2,372,422 TV 4 AB Class A 128,930 2,820,034 Volvo AB Class B 205,320 4,630,254 50,738,684 SWITZERLAND - 5.7% Ares Serono Class B (Bearer) 8,740 5,729,256 BBC Brown Boveri & Cie (Bearer) 4,840 5,608,693 Baloise Holding (Reg.) 1,575 3,228,993 Kuoni Reisen Holding AG Class B (Reg.) 5,056 8,052,231 Swiss Reinsurance Corp. (Reg.) 5,453 5,959,196 28,578,369 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - 30.2% Abbey National PLC Ord. 406,470 $ 3,440,190 Angerstein Underwriting Trust PLC 1,356,770 1,897,772 Asda Group PLC 3,072,000 4,976,678 Associated British Ports PLC Ord. 706,550 3,405,942 BAA PLC Ord. 305,734 2,377,406 Barclays PLC Ord. 391,370 4,592,810 Boots Co. PLC (The) 578,630 5,116,766 CLM Insurance Fund PLC 1,219,500 1,792,500 Cadbury-Schweppes PLC Ord. 487,646 4,027,036 Chubb Security PLC 529,620 2,783,239 Comcast UK Cable Partners PLC Class A (a) 132,900 1,711,088 Compass Group PLC Ord. 611,077 4,152,971 Cookson Group 548,000 2,537,714 De la Rue PLC 166,943 2,378,639 Electrocomponents PLC 656,320 3,360,897 Flextech PLC (a) 727,580 5,485,215 H.T.V. Group Ord. 15,200 61,981 London Insurance Market Investment Trust PLC 3,189,770 5,243,089 MAI PLC 614,960 3,192,837 MFI Furniture Group PLC 1,007,307 2,244,789 Mirror Group Newspaper PLC 2,041,140 5,371,326 Next PLC 400,000 2,588,859 Nynex CableComms Group ADR Units (a) 110,000 2,227,500 Prudential Corp. PLC 864,470 5,403,696 Reuters Holdings PLC Ord. 556,180 5,168,770 Royal Bank of Scotland Group PLC Ord. 528,160 4,278,129 Scottish Television PLC 624,130 4,902,594 Smith & Nephew PLC 829,590 2,546,942 Smithkline Beecham Ord. Units 426,260 4,365,601 Smiths Industries PLC Ord. 259,970 2,383,119 Standard Chartered Bank PLC 514,860 4,223,291 Storehouse PLC 773,000 3,665,180 Takare PLC Ord. 1,199,600 3,886,734 Telewest Communications PLC (a) 716,750 2,005,097 Tesco PLC Ord. 1,018,620 4,829,787 Ulster Television PLC Ord. 234,020 3,524,848 Unitech PLC 337,000 2,809,615 Vendome Luxury Group PLC SA 440,000 3,890,875 Vodafone Group PLC 1,333,825 5,512,709 Westminster Health Care Holdings PLC 448,870 2,337,602 Wickes PLC 1,433,850 2,821,419 Wolseley Ord. 533,250 3,303,782 Zeneca Group PLC Ord. 177,480 3,305,776 150,132,810 UNITED STATES OF AMERICA - 1.5% International Cabletel, Inc. (a) 276,800 7,335,200 TOTAL COMMON STOCKS (Cost $341,676,487) 451,573,690 NONCONVERTIBLE PREFERRED STOCKS - 2.0% GERMANY - 2.0% Boss (Hugo) AG 4,850 4,045,540 Hornbach AG 3,030 3,043,659 Moebel Walther AG 5,825 2,563,802 Porsche AG (RFD) (a) 1,117 507,493 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $7,662,857) 10,160,494 CONVERTIBLE BONDS - 0.2% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) BELGIUM - 0.2% Audiofina 5% 12/31/96 - BEF 26,010,000 $ 893,161 NORWAY - 0.0% Color Lines 7 1/2%, 12/31/00 - NOK 2,299 347,130 TOTAL CONVERTIBLE BONDS (Cost $1,094,316) 1,240,291 REPURCHASE AGREEMENTS - 6.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 34,061,562 34,056,000 TOTAL INVESTMENT IN SECURITIES - 100% Cost $384,489,660) $497,030,475 CURRENCY ABBREVIATIONS BEF - Belgian franc NOK - Norwegian krone LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $6,208,677 or 1.3% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $173,345,959 and $240,812,591, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $3,526 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $2,235,000 and $1,401,333, respectively. The weighted average interest rate was 5.9% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $385,127,747. Net unrealized appreciation aggregated $111,902,728, of which $123,586,564 related to appreciated investment securities and $11,683,836 related to depreciated investment securities. The fund hereby designates $10,365,838 as a capital gain dividend for the purpose of the dividend paid deduction. For the period, interest and dividends from foreign countries were $10,719,025 or $0.51 per share. Taxes accrued or paid to foreign countries were $1,237,772 or $0.06 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investments in Securities Aerospace & Defense 0.5% Basic Industries 2.7 Construction & Real Estate 3.9 Durables 6.6 Energy 0.6 Finance 16.7 Health 9.8 Holding Companies 0.8 Industrial Machinery & Equipment 2.4 Media & Leisure 16.6 Nondurables 4.2 Repurchase Agreements 6.8 Retail & Wholesale 7.6 Services 4.3 Technology 6.8 Transportation 3.5 Utilities 6.2 100.0% EUROPE FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $34,056,000) (cost $384,489,660) - $ 497,030,475 See accompanying schedule Cash 547 Receivable for investments sold 828,249 Receivable for fund shares sold 633,612 Dividends receivable 1,533,585 Interest receivable 37,458 Redemption fees receivable 82 TOTAL ASSETS 500,064,008 LIABILITIES Payable for investments purchased $ 3,924,708 Payable for fund shares redeemed 2,645,421 Accrued management fee 347,234 Other payables and accrued expenses 279,284 TOTAL LIABILITIES 7,196,647 NET ASSETS $ 492,867,361 Net Assets consist of: Paid in capital $ 351,304,467 Undistributed net investment income 3,463,355 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 25,555,140 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 112,544,399 NET ASSETS, for 20,964,906 shares outstanding $ 492,867,361 NET ASSET VALUE and redemption price per share ($492,867,361 (divided by) 20,964,906 shares) $23.51 Maximum offering price per share (100/97.00 of $23.51) $24.24
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 10,651,950 Dividends Interest 1,451,020 12,102,970 Less foreign taxes withheld (1,237,772 ) TOTAL INCOME 10,865,198 EXPENSES Management fee $ 3,621,828 Basic fee Performance adjustment 145,908 Transfer agent 1,618,602 Fees Redemption fees (914 ) Accounting fees and expenses 285,300 Non-interested trustees' compensation 10,267 Custodian fees and expenses 246,489 Registration fees 43,929 Audit 47,494 Legal 22,413 Interest 691 Miscellaneous 3,862 Total expenses before reductions 6,045,869 Expense reductions (475,027 5,570,842 ) NET INVESTMENT INCOME 5,294,356 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 26,560,699 Foreign currency transactions (32,975 26,527,724 ) Change in net unrealized appreciation (depreciation) on: Investment securities 24,445,008 Assets and liabilities in foreign currencies (19,343 24,425,665 ) NET GAIN (LOSS) 50,953,389 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 56,247,745 OTHER INFORMATION $389,484 Sales charges paid to FDC Deferred sales charges withheld $66,854 by FDC Accounting fees paid to FSC $283,887
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 5,294,356 $ 4,182,034 Net investment income Net realized gain (loss) 26,527,724 51,768,128 Change in net unrealized appreciation (depreciation) 24,425,665 11,323,676 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 56,247,745 67,273,838 Distributions to shareholders (4,575,941) (2,098,083) From net investment income From net realized gain (2,516,901) - TOTAL DISTRIBUTIONS (7,092,842) (2,098,083) Share transactions 382,348,507 549,191,101 Net proceeds from sales of shares Reinvestment of distributions 6,951,448 2,047,747 Cost of shares redeemed (453,061,566) (637,883,238) Redemption fees 13,949 - NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (63,747,662) (86,644,390) TOTAL INCREASE (DECREASE) IN NET ASSETS (14,592,759) (21,468,635) NET ASSETS Beginning of period 507,460,120 528,928,755 End of period (including undistributed net investment income of $3,463,355 and $2,640,665, respectively) $ 492,867,361 $ 507,460,120 OTHER INFORMATION Shares Sold 18,216,804 27,996,564 Issued in reinvestment of distributions 354,493 109,623 Redeemed (21,565,625) (32,845,483) Net increase (decrease) (2,994,328) (4,739,296)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 B 1993 1992 F 1991
Net asset value, beginning of period $ 21.18 $ 18.43 $ 15.12 $ 15.93 $ 16.28 Income from Investment Operations Net investment income .27 .18 .25 .27 .43 E Net realized and unrealized gain (loss) 2.37 2.65 3.35 (.57) (.40) Total from investment operations 2.64 2.83 3.60 (.30) .03 Less Distributions (.20) (.08) (.29) (.48) (.35) From net investment income From net realized gain (.11) - - (.03) D (.03) D Total distributions (.31) (.08) (.29) (.51) (.38) Redemption fees added to paid in capital .00 - - - - Net asset value, end of period $ 23.51 $ 21.18 $ 18.43 $ 15.12 $ 15.93 TOTAL RETURN A, C 12.76% 15.41% 24.24% (1.89)% .15% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 492,867 $ 507,460 $ 528,929 $ 431,223 $ 297,831 Ratio of expenses to average net assets 1.18% 1.35% 1.25% 1.22% 1.31% G Ratio of net investment income to average net assets 1.12% .85% 1.44% 2.38% 2.83% Portfolio turnover rate 38% 49% 76% 95% 80% A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B EFFECTIVE NOVEMBER 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. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS.) D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. E INCLUDES $.05 PER SHARE FROM RECOVERY OF FOREIGN TAXES PREVIOUSLY WITHHELD ON DIVIDEND AND INTEREST PAYMENTS. F AS OF NOVEMBER 1, 1991 THE FUND DISCONTINUED THE USE OF EQUALIZATION ACCOUNTING. 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.
EUROPE CAPITAL APPRECIATION 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND EUROPE CAPITAL APPRECIATION 6.43% 20.80% EUROPE CAPITAL APPRECIATION (INCL. 3% SALES CHARGE) 3.24% 17.18% Morgan Stanley Europe Index 13.21% 21.31% Average European Region Fund 9.33% 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 December 21, 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 the performance of the Morgan Stanley Europe Index - a broad measure of the performance of stocks in Europe, weighted by each country's market capitalization (or the total value of its outstanding shares). To measure how the fund's performance stacked up against its peers, you can compare it to the average European region fund, which reflects the performance of 41 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND EUROPE CAPITAL APPRECIATION 6.43% 10.68% EUROPE CAPITAL APPRECIATION (INCL. 3% SALES CHARGE) 3.24% 8.88% Morgan Stanley Europe Index 13.21% 10.93% Average European Region Fund 9.33% 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 Europe Europe Index 12/21/93 9700.00 10000.00 12/31/93 9729.10 10132.25 01/31/94 11145.30 10648.25 02/28/94 10670.00 10271.15 03/31/94 10786.40 9980.44 04/30/94 11242.30 10393.72 05/31/94 10825.20 9951.90 06/30/94 10602.10 9847.41 07/31/94 11145.30 10363.51 08/31/94 11339.30 10692.22 09/30/94 10941.60 10268.23 10/31/94 11009.50 10715.55 11/30/94 10534.20 10305.10 12/31/94 10398.40 10363.68 01/31/95 10272.30 10282.54 02/28/95 10563.30 10515.52 03/31/95 10786.40 11003.49 04/30/95 11300.50 11355.38 05/31/95 11475.10 11587.88 06/30/95 11640.00 11697.12 07/31/95 12241.40 12306.82 08/31/95 11737.00 11831.07 09/30/95 12086.20 12188.47 10/31/95 11717.60 12130.90 Let's say you invested $10,000 in Fidelity Europe Capital Appreciation Fund on December 21, 1993, when the fund started and paid the 3% sales charge. By October 31, 1995, the value of your investment would have grown to $11,718 - a 17.18% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley Europe index, which would have grown to $12,131 over the same period - a 21.31% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) An interview with Kevin McCarey, Portfolio Manager of Fidelity Europe Capital Appreciation Fund Q. KEVIN, HOW DID THE FUND PERFORM? A. For the 12 months ended October 31, 1995, the fund returned 6.43%. That trailed the Morgan Stanley Europe index, which returned 13.21%, and the average European region fund which returned 9.33% for the same time period, according to Lipper Analytical Services. Q. WHY DID THE FUND UNDERPERFORM? A. For most of the year, I've been slowly switching the fund from emphasizing small- and mid-cap value names to focusing on larger "blue chip" stocks that I believe are still reasonably priced. During the period, however, being underweighted in large-cap growth names hurt the fund since those were the kinds of stocks that outperformed. Another reason for underperformance was the fact that many mid-cap stocks with somewhat disappointing earnings were excessively punished by the drop in their stock price. For example, Hornbach Baumarkt, a German home repair chain, dropped significantly even though the earnings weren't too bad. Finally, the fund was overweighted in French stocks, which performed quite poorly during the period. Q. WHY DID YOU CHOOSE TO OVERWEIGHT THE FUND IN FRENCH STOCKS? A. France had underperformed Europe for the year-and-a-half leading up to the spring of 1995. I believed the election of a pro-business conservative leadership during the period would have been a more neutral, if not a positive, backdrop. For both of those reasons, I began adding to the fund's French holdings. The strategy worked for about a month, but France has continued to underperform Europe during the past six months. One of the reasons is that many investors have been very skeptical of the political process in France and its ability to cut the budget deficit. Because of this uncertainty, the French franc has been somewhat weakened and the country has chosen to keep short-term interest rates higher than they otherwise might be. This has led to pressure on the stock market and a weaker-than-expected economy. Q. WHAT CHANGES IN STRATEGY HAVE YOU MADE WITH RESPECT TO THE FRENCH HOLDINGS? A. Though I've trimmed back holdings in certain French securities - especially in economically sensitive or cyclical stocks - I am currently overweighted versus the Morgan Stanley Europe Index. I still think many of the stocks in France are well positioned even though some of them haven't performed well lately. Total SA is one of the fund's largest holdings. Because it's one of the 10 largest oil companies in the world, one wouldn't expect Total to be captive to the whims of the French stock market. However, since it's such a big part of the local index, it seems to move up and down with the market. During the past six months, Total has signed a contract with Iran to help its development efforts, a project which could be a positive for the company. In addition, it has one of the fastest rising production profiles of all multi-national oil companies, due largely to recent discoveries in Colombia and Southeast Asia. I also think it's one of the best managed oil companies. My interest in the stock, however, is based on the company's attractive outlook, and has little to do with the fact it happens to be located in France. Q. WHAT OTHER STRATEGIC CHANGES HAVE YOU MADE TO THE FUND? A. A year ago I trimmed the fund's exposure to cyclicals and began to buy pharmaceuticals, which are now about 8% of investments. As of October 31, Roche Holdings was the fund's largest holding. I think it's one of the fastest-growing pharmaceutical companies. If the relative price movement of a pharmaceutical is determined by its drug pipeline, Roche certainly has one of the most interesting pipelines in the business. SmithKline Beecham, a drug company in the U.K., is new to the fund's top 10 holdings. Both SmithKline and Roche benefited from cost-cutting associated with acquisitions made last year. Q. WHAT ABOUT SOME OF THE FUND'S OTHER TOP 10 HOLDINGS . . . A. I've increased the fund's position in Svedala, a Swedish mining and construction equipment company. It derives about one-third of its revenues from serving emerging markets that are spending on capital equipment in order to develop their economies. I view the stock as generally inexpensive in light of its recent pricing and productivity improvements. New to the fund's top 10 is English brewer Guinness. Unlike many of the blue chip growth stocks, Guinness has underperformed the market in the past 18 to 24 months. I think it's a growth-oriented, resilient business that is both generating cash flow and is reasonably priced - just the kind of stock I'm looking for. Finally, Brown, Boveri & Cie (BBC) is a Swiss engineering company that makes train locomotives and power generators. The company is generating reasonable growth and is seeing good volume. BBC is also attractive to me because it's selling to the emerging markets and is still reasonably priced. Q. WHAT'S AHEAD FOR THE FUND IN THE NEXT SIX MONTHS? A. The fund is still overweighted in France relative to its index and I think a lot of the fund's holdings are well positioned there. Because of economic and currency swings, currency selection was a negative in the most recent period. However, stock selection during the past six months proved neutral as some good stock picks offset the underweighting in blue-chip growth companies. Over the next six months, I believe that investors will be less focused on the biggest growth companies. The fund's holdings of several medium cap companies that have focused managements should once again help the fund's performance. 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: long-term growth of capital by investing mainly in equity securities of Eastern and Western European issuers START DATE: December 21, 1993 SIZE: as of October 31, 1995, more than $194 million MANAGER: Kevin McCarey, since 1993; manager, Plymouth Europe Fund (now Fidelity Advisor Overseas Fund), 1992-1993; Fidelity Select Regional Banks Portfolio, 1986-1989; joined Fidelity in 1985 (checkmark) KEVIN MCCAREY ON COMPANIES WITH EXPOSURE TO THE EMERGING MARKETS: "With the economic slowdown in the U.S. and in Europe, and the fact that the Japanese economy hasn't picked up, one of the main areas in which a company can achieve higher volumes and consistent sales growth is in those parts of the world that are still growing the quickest, the emerging markets. Companies that are actively supplying the emerging markets are attractive since these economies have not matured and there's still plenty of opportunity. "The emerging markets of Latin America, Southeast Asia and Eastern Europe are still currently the fastest-growing parts of the world. The fund owns a number of stocks that are significant exporters to these regions and/or have local operations there. There are basically two kinds of trends to look for in picking stocks that benefit from growth in emerging markets. "As salaries rise in these regions, the consumer demand for `western' products is increasing. The fund owns positions in Volkswagen, Guinness, LVMH, Hellenic Bottling, Michelin and Benetton, all of which are major exporters to the emerging regions. "Another on-going theme is that as these economies are developing they are buying capital equipment to build up their infrastructure - roads, bridges and telephones. Companies that appear in this segment of the market include Ericsson, Brown Boveri, Vodafone, Svedala, Atlas Copco and Valmet. "Finally, though the activity in the emerging markets of Eastern Europe is exciting, I don't have much exposure there because I believe the local stock markets in those countries are depressed. I also think that due to recent privatizations and increased efficiency, there is more supply of stock than demand, which does not make for inviting investment prospects." EUROPE CAPITAL APPRECIATION INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 Finland 5.3% Ireland 3.5% Row: 1, Col: 1, Value: 5.3 Row: 1, Col: 2, Value: 22.6 Row: 1, Col: 3, Value: 10.8 Row: 1, Col: 4, Value: 11.7 Row: 1, Col: 5, Value: 8.800000000000001 Row: 1, Col: 6, Value: 8.6 Row: 1, Col: 7, Value: 6.5 Row: 1, Col: 8, Value: 4.5 Row: 1, Col: 9, Value: 17.7 Row: 1, Col: 10, Value: 3.5 United Kingdom 22.6% France 17.7% Germany 4.5% Italy 6.5% Switzerland 10.8% Netherlands 8.6% Sweden 11.7 % Other 8.8% AS OF APRIL 30, 1995 Norway 3.3% Row: 1, Col: 1, Value: 3.3 Row: 1, Col: 2, Value: 15.9 Row: 1, Col: 3, Value: 6.6 Row: 1, Col: 4, Value: 15.6 Row: 1, Col: 5, Value: 5.7 Row: 1, Col: 6, Value: 15.6 Row: 1, Col: 7, Value: 6.9 Row: 1, Col: 8, Value: 8.199999999999999 Row: 1, Col: 9, Value: 6.5 Row: 1, Col: 10, Value: 15.7 France 15.7% United Kingdom 15.9% Germany 6.5% Switzerland 6.6% Italy 8.2% Sweden 15.6 % Netherlands 6.9% Spain 5.7% Other 15.6 % ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks 97.3 95.9 Bonds 1.9 0.0 Short-term investments 0.8 4.1 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Roche Holdings AG (part. certs.) 4.6 2.3 (Switzerland, Drugs & Pharmaceuticals) Total SA Class B 2.9 2.0 (France, Oil & Gas) Svedala Industri 2.8 2.2 (Sweden, Industrial Machinery & Equipment) C.S. Holdings (Reg.) 2.6 0.0 (Switzerland, Banks) Guinness PLC Ord. 2.2 0.0 (United Kingdom, Beverages) SmithKline Beecham PLC Class A 1.9 0.0 (United Kingdom, Drug & Pharmaceutical) BBC Brown Boveri & Cie (Bearer) 1.8 0.0 (Switzerland, Electrical Equipment) Valmet OY Class A 1.8 1.2 (Finland, Industrial Machinery & Equipment) KLM Royal Dutch Airlines Ord. 1.8 0.0 (Netherlands, Air Transportation) Vodafone Group PLC 1.7 2.3 (United Kingdom, Cellular) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 18.9 19.7 Industrial Machinery & Equipment 13.2 6.9 Nondurables 9.3 3.0 Health 8.0 6.2 Construction & Real Estate 6.8 3.4 Media & Leisure 6.0 3.0 Basic Industries 6.0 9.3 Durables 5.9 9.8 Retail & Wholesale 5.9 9.9 Energy 5.1 11.9 EUROPE CAPITAL APPRECIATION INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.3% SHARES VALUE (NOTE 1) AUSTRIA - 0.1% Hemingway Holdings AG (a) 3,500 $ 91,794 DENMARK - 0.4% Unidanmark AS Class A 16,700 767,640 FINLAND - 5.3% America Group Ltd. Class A 38,000 601,760 Fiskars OY, Series A 7,100 359,722 Huhtamaki Ord. 102,000 3,028,596 Kemira OY 252,200 2,121,700 Nokia Corp. AB, Series A 9,000 515,370 Valmet OY Class A 123,000 3,420,250 10,047,398 FRANCE - 17.7% Alcatel Alsthom CGE 33,000 2,822,488 BIS SA Ord. (a) 30,500 2,861,034 Canal Plus 17,500 3,028,674 Club Mediterranee SA: Ord. 21,000 1,649,462 (rights) (a) 21,000 20,731 Credit Commercial de France Ord. 51,000 2,538,249 Ecco SA 17,000 2,639,222 Elf Sanofi SA 6,930 442,697 Eramet SA 21,400 1,446,398 LVMH 14,300 2,849,749 Michelin SA Cie Generale des Etablissements Class B 75,000 3,033,794 Pechiney International SA 5,096 266,151 Simco (Reg.) 16,000 1,294,419 (Reg) (New) (a) 452 36,567 Skis Rossignol SA 7,900 2,109,903 Total SA Class B 90,000 5,570,507 Vallourec SA (a) 30,000 1,179,109 33,789,154 GERMANY - 4.5% Asko 1,500 778,405 Bayer AG 9,200 2,445,235 Gildemeister AG (a) 12,600 1,426,685 Hornbach Baumarkt AG (Bearer) 19,000 957,654 Karstadt AG 1,800 784,581 Praktiker Bau und Heim AG (a)(b) 10,500 331,701 Volkswagen AG 6,000 1,889,043 8,613,304 GREECE - 2.7% Alpha Credit Bank 43,000 2,584,781 Ergo Bank SA (Reg.) 20,000 861,809 Hellenic Bottling Co. SA 51,000 1,626,234 5,072,824 HONG KONG - 0.7% HSBC Holdings Ord. 94,000 1,398,015 IRELAND - 3.5% Anglo Irish Bank 3,000,000 3,034,560 Bank of Ireland U.S. Holdings, Inc. 340,000 2,267,701 Jurys Hotel Group PLC (U.K. Reg.) 420,000 1,327,620 6,629,881 ITALY - 6.5% Banca Fideuram Spa 800,000 854,674 Benetton Group Spa (a) 149,600 1,550,576 Credito Italiano Ord. 1,850,000 2,107,809 SHARES VALUE (NOTE 1) Italcementi Fabbriche Ruinite Cemento Spa, Bergamo 101,000 $ 625,645 Italgas Spa 393,000 1,045,695 SAI (Sta Assieuratrice Industriale) Spa 175,000 1,783,488 Stet (Societa Finanziaria Telefonica) Spa Ord. 617,700 1,749,552 Telecom Italia Mobile Spa (a) 1,644,600 2,770,887 12,488,326 LIECHTENSTEIN - 0.6% Bil GT Gruppe AG (part. certs.) 2,000 1,228,333 NETHERLANDS - 8.6% Amev NV CVA 18,700 1,174,156 BAM Groep NV 26,800 1,596,148 International Nederlanden Groep NV 51,336 3,060,709 KLM Royal Dutch Airlines Ord. 102,131 3,371,365 Macintosh Confectie NV 50,000 1,457,264 Philips Electronics NV 75,000 2,896,875 SGS-Thomson Microelectronics NV (a) 10,000 452,500 Samas-Groep NV 53,268 2,328,766 16,337,783 NORWAY - 0.8% Tomra Systems AS 230,000 1,451,932 POLAND - 0.3% Zaklady Piwowarskie W Zywcu SA 7,000 556,461 SPAIN - 2.4% Banco Bilbao Vizcaya SA Ord. (Reg.) 26,000 794,918 Banco de Santander SA Ord. (Reg.) 68,800 3,000,131 Corporacion Mapfrecia International de Reaseguros SA (Reg.) 5,792 296,721 Uralita SA 54,200 546,443 4,638,213 SWEDEN - 9.8% Atlas Copco AB Class A Free shares 187,100 2,836,431 Esselte AB Class B Free shares 61,400 903,037 Euroc AB, Series A 112,000 2,787,625 Mo Och Domsjoe (Modo) AB Class B 33,000 1,682,531 Nordbanken AB (b) 13,000 192,177 SKF AB Ord. 65,000 1,235,425 Securitas B Free shares 30,900 1,197,909 Stora Kopparbergs Bergslags AB Class A Free shares 142,500 1,730,386 Svedala Industri 212,700 5,406,295 Trygg Hansa B Free shares (a) 56,000 802,498 18,774,314 SWITZERLAND - 10.8% BBC Brown Boveri & Cie (Bearer) 3,000 3,476,463 C. S. Holdings (Reg.) 48,000 4,899,252 Logitech International SA (Reg.) (a) 300 32,996 Roche Holdings AG (part. certs.) 1,200 8,710,955 Sabdoz AG (Reg.) 3,000 2,473,383 Zurich Versicherungs AG (Reg.) (a) 3,800 1,086,670 20,679,719 UNITED KINGDOM - 22.6% Barratt Developments PLC 900,000 2,759,553 Bass PLC Ord. 128,200 1,343,371 Berkeley Group PLC 425,000 2,723,794 British Land Ord. 142,200 815,832 British Petroleum PLC ADR 25,000 2,206,250 Cookson Group 357,500 1,655,534 Farnell Electronics PLC 128,700 1,360,815 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - CONTINUED Grand Metropolitan PLC 460,000 $ 3,184,391 Guinness PLC Ord. 520,000 4,166,838 Inchcape Berhad Ord. 226,300 1,117,710 Lex Service Ord. 480,000 2,503,512 London Clubs International PLC 240,000 1,559,005 Next PLC 167,100 1,081,496 Premier Consolidated Oilfields Ltd. Ord. (a) 800,000 331,905 Prudential Corp. PLC 224,000 1,400,197 Smithkline Beecham PLC Class A 350,000 3,653,721 Storehouse PLC 300,000 1,422,450 Telegraph PLC (The) 257,500 1,660,473 United Biscuits Holdings PLC 240,570 1,039,904 Vodafone Group PLC 800,000 3,306,408 Waste Management International PLC sponsored ADR (a) 160,000 1,620,000 Woolworth Holdings PLC Ord. 310,000 2,329,736 43,242,879 TOTAL COMMON STOCKS (Cost $176,240,980) 185,807,970 CONVERTIBLE BONDS - 1.9% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) SWEDEN - 1.9% Ericsson (L.M.) Telephone Co. 4 1/4%, 6/30/00 (Cost $3,856,316) A2 SEK 12,500,000 3,658,003 REPURCHASE AGREEMENTS - 0.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 1,514,247 1,514,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $181,611,296) $ 190,979,973 CURRENCY ABBREVIATIONS SEK - Swedish krona LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $523,878 or 0.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $424,374,148 and $588,401,182, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $74,000 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $13,497,000 and $7,080,000, respectively. The weighted average interest rate was 6.3% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $181,664,071. Net unrealized appreciation aggregated $9,315,902, of which $15,770,323 related to appreciated investment securities and $6,454,421 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $1,744,000 all of which will expire on October 31, 2003. For the period, interest and dividends from foreign countries were $7,186,941 or $0.45 per share. Taxes accrued or paid to foreign countries were $794,837 or $0.05 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investments in Securities Basic Industries 6.0% Construction & Real Estate 6.8 Durables 5.9 Energy 5.1 Finance 18.9 Health 8.0 Holding Companies 0.5 Industrial Machinery & Equipment 13.2 Media & Leisure 6.0 Nondurables 9.3 Repurchase Agreements 0.8 Retail & Wholesale 5.9 Services 3.5 Technology 3.7 Transportation 1.8 Utilities 4.6 100.0% EUROPE CAPITAL APPRECIATION FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $1,514,000) (cost $181,611,296) - $ 190,979,973 See accompanying schedule Cash 5,262 Receivable for investments sold 4,442,391 Receivable for fund shares sold 124,923 Dividends receivable 981,573 Interest receivable 56,763 Redemption fees receivable 63 TOTAL ASSETS 196,590,948 LIABILITIES Payable for investments purchased $ 1,119,648 Payable for fund shares redeemed 776,698 Accrued management fee 129,416 Other payables and accrued expenses 132,398 TOTAL LIABILITIES 2,158,160 NET ASSETS $ 194,432,788 Net Assets consist of: Paid in capital $ 183,456,993 Undistributed net investment income 3,687,757 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (2,081,200 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 9,369,238 NET ASSETS, for 16,100,670 $ 194,432,788 shares outstanding NET ASSET VALUE and redemption price per share ($194,432,788 (divided by) 16,100,670 shares) $12.08 Maximum offering price per share (100/97.00 of $12.08) $12.45
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 7,210,341 Dividends Interest 766,431 7,976,772 Less foreign taxes withheld (794,837 ) TOTAL INCOME 7,181,935 EXPENSES Management fee $ 1,962,713 Basic fee Performance adjustment 208,549 Transfer agent 868,715 Fees Redemption fees (430 ) Accounting fees and expenses 154,672 Non-interested trustees' compensation 2,137 Custodian fees and expenses 206,635 Registration fees 14,775 Audit 41,914 Legal 4,427 Interest 18,591 Miscellaneous 1,787 Total expenses before reductions 3,484,485 Expense reductions (2,438 3,482,047 ) NET INVESTMENT INCOME 3,699,888 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (1,136,503 ) Foreign currency transactions (12,404 (1,148,907 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities 9,365,525 Assets and liabilities in foreign currencies (24,802 9,340,723 ) NET GAIN (LOSS) 8,191,816 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 11,891,704 OTHER INFORMATION $155,891 Sales charges paid to FDC Accounting fees paid to FSC $153,762
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED DECEMBER 21, OCTOBER 31, 1993 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1994
Operations $ 3,699,888 $ 1,968,835 Net investment income Net realized gain (loss) (1,148,907) 55,763 Change in net unrealized appreciation (depreciation) 9,340,723 28,515 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 11,891,704 2,053,113 Share transactions 303,427,272 942,473,601 Net proceeds from sales of shares Cost of shares redeemed (473,746,104) (591,671,795) Redemption fees 4,997 - NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (170,313,835) 350,801,806 TOTAL INCREASE (DECREASE) IN NET ASSETS (158,422,131) 352,854,919 NET ASSETS Beginning of period 352,854,919 - End of period (including undistributed net investment income (loss) of $3,687,757 and $(168,912),$ 194,432,788 $ 352,854,919 respectively) OTHER INFORMATION Shares Sold 26,489,106 83,509,152 Redeemed (41,479,214) (52,418,374) Net increase (decrease) (14,990,108) 31,090,778
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS YEAR ENDED DECEMBER 21, OCTOBER 31, 1993 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994
Net asset value, beginning of period $ 11.35 $ 10.00 Income from Investment Operations Net investment income .23 .08 D Net realized and unrealized gain (loss) .50 1.27 B Total from investment operations .73 1.35 Redemption fees added to paid in capital .00 - Net asset value, end of period $ 12.08 $ 11.35 TOTAL RETURN A 6.43% 13.50% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 194,433 $ 352,855 Ratio of expenses to average net assets 1.36% 1.54% C Ratio of net investment income to average net assets 1.45% .79% C Portfolio turnover rate 176% 317% C A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. B THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. C ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
JAPAN 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND JAPAN -12.96% 28.35% JAPAN (INCL. 3% SALES CHARGE) -15.57% 24.50% TOPIX Index -14.84% 27.16% Average Japanese Fund -11.26% 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 September 15, 1992. 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 TOPIX index - a broad measure of the Japanese stock market's performance, similar to the Standard & Poor's 500 stock index in the U.S. To measure how the fund's performance stacked up against its peers, you can compare it to the average Japanese fund, which reflects the performance of 12 funds with similar objectives - in this case, a very small peer group - tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND JAPAN -12.96% 8.30% JAPAN (INCL. 3% SALES CHARGE) -15.57% 7.25% TOPIX Index -14.84% 7.98% Average Japanese Fund -11.26% 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 Japan FundTOPIX Total Return 09/15/92 9700.00 10000.00 09/30/92 9641.80 9811.27 10/31/92 9544.80 9332.17 11/30/92 9641.80 9572.82 12/31/92 9661.20 9433.21 01/31/93 9748.50 9384.24 02/28/93 10301.40 9811.42 03/31/93 11484.80 11248.65 04/30/93 13036.80 13164.83 05/31/93 13405.40 13960.79 06/30/93 12610.00 13384.04 07/31/93 13453.90 14324.51 08/31/93 13686.70 14644.62 09/30/93 13318.10 13883.59 10/31/93 12949.50 13630.65 11/30/93 11252.00 11425.15 12/31/93 11637.09 11710.09 01/31/94 13010.29 13580.32 02/28/94 13621.71 14243.17 03/31/94 13391.17 13839.98 04/30/94 13701.90 14380.65 05/31/94 14082.78 14642.50 06/30/94 14934.77 15458.92 07/31/94 14443.62 14904.58 08/31/94 14393.51 14941.03 09/30/94 14042.69 14546.44 10/31/94 14303.30 14931.14 11/30/94 13331.03 14046.14 12/31/94 13552.55 14293.80 01/31/95 12387.96 13541.08 02/28/95 11810.82 12774.70 03/31/95 12758.98 13878.24 04/30/95 12913.57 14542.52 05/31/95 12181.84 13603.56 06/30/95 12016.94 12954.90 07/31/95 12820.82 13954.75 08/31/95 12769.29 13412.04 09/30/95 12738.37 13423.28 10/31/95 12449.80 12716.06 Let's say you invested $10,000 in Fidelity Japan Fund on September 15, 1992, when the fund started and paid the 3% sales charge. By October 31, 1995, the value of your investment would have grown to $12,450 - a 24.50% increase on your initial investment. That compares to $10,000 invested in the TOPIX index, which would have grown to $12,716 over the same period - a 27.16% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) JAPAN FUND TALK: THE MANAGER'S OVERVIEW An interview with Shigeki Makino, Portfolio Manager of Fidelity Japan Fund Q. HOW HAS THE FUND PERFORMED OVER THE PAST YEAR, SHIGEKI? A. The fund had a total return of -12.96% for the year ended October 31, 1995, outperforming the TOPIX Index - a measure of the overall performance of the Japanese stock market - which returned -14.84% over the same period. However, the fund trailed the average Japanese fund tracked by Lipper Analytical Services, which returned -11.26% over the same 12-month period. Q. LET'S TALK ABOUT THE FUND'S RELATIVE PERFORMANCE . . . A. As a matter of policy, I try to keep the fund fully invested. In addition, I do not try to predict the direction of currency rates. During the period, the market was down and the yen was weak. Because many other funds probably were more aggressive in currency hedging, and probably were not as fully invested - keeping more of a stake in cash, short-term investments and bonds - their performance beat that of Japan Fund. At the same time, the fund beat the index because it had more of a stake in electronics and pharmaceutical stocks than is represented in the index. These were two of the best performing sectors in the market over the period. Many pharmaceutical company stocks benefited from their defensive nature; in a weak economy, demand for their products remained steady. And many electronics stocks performed well because they had robust earnings growth in an economy that wasn't very strong. Q. WERE THERE PARTICULAR STOCKS WHOSE PERFORMANCE DETRACTED FROM THE FUND'S RETURN? A. One was Sony. Some of the reasons were because it wrote off a huge loss in its motion picture business, and also suffered from a slowdown in consumer demand in the U.S. and Southeast Asia, especially China. As a result, Sony had to reduce its prices. In addition, the smaller company stocks were, in general, a disappointment. The over-the-counter market was down more than 15% in local currency over the period. Q. WHAT HAS THE JAPANESE ECONOMY AND INVESTMENT ENVIRONMENT BEEN LIKE OVER THE PAST SIX MONTHS? A. Six months ago, economic prospects in Japan were very dim because the yen was so strong. Such an environment made it very difficult for most Japanese companies, as the strong yen made their products very expensive overseas. Over the past six months, we've seen the yen weaken, providing some hope that the economy would recover and corporate earnings would improve. Unfortunately, those hopes have fallen short, because growth in the developed world has slowed, decreasing demand worldwide. In addition, there has been some latent over-capacity in a variety of manufacturing areas, holding back the economy. Inventories are coming down a bit, but are still reasonably high, and consumption is fairly weak. Q. STILL, THERE MUST HAVE BEEN SOME POSITIVE SIGNS . . . A. Sure. First of all, long-term interest rates currently are much higher than short-term ones. That can provide an incentive for investors to borrow money in the short run and invest more for the long run. Additional capital spending could help the stock market and the economy overall. Second, going forward it should be easier for many companies to post improving performance numbers compared to previous periods, because the recent numbers have been so weak. Third, sentiment in the market is fairly pessimistic, making many stocks cheap compared to alternative investments in bonds. Finally, we're starting to see significant changes in the attitude of management with respect to shareholders. It appears that taxation rules will be eased regarding share repurchases, which could help returns on equity - the amount earned on a company's shareholder equity - significantly. Q. LET'S TAKE A LOOK AT THOSE STOCKS THAT WERE POSITIVE CONTRIBUTORS TO THE FUND'S PERFORMANCE. A. Three of the top performers were stocks of companies that have made concerted efforts to increase shareholder value; we've talked about two in the past. One of those is Omron, a company that makes control devices used in manufacturing processes. The other is Fuji Photo Film, which did well because investors started to appreciate the company's attempts to improve shareholder relations. I found its stock to be very cheap, benefiting from its defensive nature, meaning its business is relatively stable. The third top performer was Yamanouchi Pharmaceutical, a company that is becoming more shareholder friendly. It also benefited from its defensive characteristics. Honda also has done well, benefiting from growth in Southeast Asia for its motorcycle products, and the depreciation of the yen - - which helped overseas auto sales. The introduction of two new recreational vehicles in Japan also is helping it increase market share. Finally, NEC has thrived on an increase in semiconductor demand. Its PC business also has grown because more people are using computers in Japan, and its communications arm has shown strong earnings because cellular infrastructure spending has grown faster than many expected. Q. NEC FALLS INTO THE TECHNOLOGY SECTOR. YOUR INVESTMENTS IN TECHNOLOGY HAVE INCREASED OVER 12% OVER THE PAST SIX MONTHS, SO THAT THEY MAKE UP APPROXIMATELY 30% OF THE FUND AT THE END OF THE PERIOD. WHAT'S THE ATTRACTION THERE? A. There are four reasons for this. First, I find it to be one of the few areas that offers attractive valuations - stock prices relative to other measures such as earnings or cash flow. Second, electronics companies tend to be among the few Japanese companies that are globally competitive. Third, the yen's strength over the recent past has forced most electronics companies to restructure operationally. Finally, these stocks have underperformed the market significantly over the past 10 to 12 years, making them attractive from a contrarian perspective. Q. BUT DOESN'T SUCH A LARGE STAKE IN ONE SECTOR MAKE THE FUND MORE VOLATILE? A. I would agree that the fund's concentration in this area may make it more volatile than the TOPIX index. On the flip side, I'd rather invest in companies that I think will do well than keep the fund more in line with the index, which would result in my buying stocks that I don't think are attractive. In addition, it's important to differentiate the fund's electronics holdings - which tend to be stocks of diversified companies - from companies purely devoted to making equipment for something like semiconductor production. For example, I'd call Hitachi an electronics-related investment, but if the semiconductor cycle ends, it has other parts to its business to help protect its value. I've stayed away from stocks of strictly semiconductor equipment makers or other stocks that are highly susceptible to the semiconductor cycle. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. While the yen's depreciation should have a positive impact, I believe the economy will be reasonably slow. Within that backdrop, I'll be focusing on areas that have strong business prospects. I find one of the few areas with that kind of outlook, again, is electronics companies or those firms with electronics subsidiaries or some exposure to electronics. Among the risks to the fund are rapid yen appreciation and lower interest rates. That would hurt the electronics exporters and the economy. In a sluggish economy, I'll maintain the fund's investments as they are now, with exposure to electronics, while avoiding banks, utilities and other interest-rate sensitive sectors. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of Japanese issuers START DATE: September 15, 1992 SIZE: as of October 31, 1995, more than $343 million MANAGER: Shigeki Makino, since 1994; analyst, Fidelity Japan Fund, 1993-1994; joined Fidelity in 1990 (checkmark) SHIGEKI MAKINO ON WHAT HE BELIEVES IT WILL TAKE FOR THE JAPANESE ECONOMY AND STOCK MARKET TO TURN AROUND: "More than anything else, I think it will take time for Japan to turn things around. In general, Japanese companies need to change the way they operate before the economy and the market rebound. Perhaps that means getting out of certain businesses or eliminating production capacity, especially in the manufacturing sector. In the service sector that may mean restructuring and becoming more productive, focusing more on a performance-based career system. In many ways, Japan resembles the U.S. in the 1970s; it's making a transition from a manufacturing economy to a service or value-added economy. Those companies that change quickly likely will benefit significantly. "Currency has something to do with it, too. When the currency of a country strengthens, it's easy to get priced out of global markets. "For Japan to get going again, we probably need to see a significantly weaker yen - to achieve 3% to 4% growth rates in the gross domestic product - or we have to see an acceleration of change in Japan's economy." (solid bullet) Problems in Japan's banking industry have worsened. Banks are seeing rising funding costs because of a lack of trust. The manager finds credit spreads - the difference between the rate a bank earns from lending and the rate it pays for funding - to be peaking. Most banks are not competing globally. They have an ever-growing problem related to bad loans and declining values of real estate collateral. There have been scandals, rocking such institutions as Daiwa Bank. And most stocks in the banking sector are overvalued. The main problems have occurred within the city bank sector, as well as in non-banking areas such as housing corporations and other real estate-oriented areas, as well as leasing companies. The manager has avoided these problems, with minimal investments in these troubled areas. JAPAN INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 United States 1.7% Other 3.1% Row: 1, Col: 1, Value: 1.7 Row: 1, Col: 2, Value: 3.1 Row: 1, Col: 3, Value: 95.2 Japan 95.2% AS OF APRIL 30, 1995 United States 10.9% Row: 1, Col: 1, Value: 10.9 Row: 1, Col: 2, Value: 2.5 Row: 1, Col: 3, Value: 86.59999999999999 Other 2.5% Japan 86.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks, closed-end investment companies and equity futures 97.4 88.8 Bonds 0.9 0.3 Short-term investments 1.7 10.9 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Omron Corp. 5.3 2.1 (Electrical Equipment) Hitachi Ltd. 4.7 2.2 (Electronics) NEC Corp. 4.4 0.0 (Computers & Office Equipment) Mitsubishi Electric Co. Ord. 3.7 2.5 (Electrical Equipment) Fuji Photo Film Co. Ltd. 3.4 3.5 (Photographic Equipment) Rohm Co. Ltd. 2.9 1.5 (Electronics) Yamanouchi Pharmaceutical Co. Ltd. 2.5 2.3 (Drugs & Pharmaceuticals) Honda Motor Co. Ltd. 2.5 0.9 (Autos, Tires, & Accessories) Matsushita Electric Industrial Co. Ltd. 2.4 2.1 (Consumer Electronics) Ito-Yokado Co. Ltd. 2.2 1.4 (General Merchandise Stores) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Technology 29.7 17.0 Industrial Machinery & Equipment 15.7 12.4 Durables 14.8 16.1 Finance 8.5 7.7 Retail & Wholesale 6.7 6.4 Basic Industries 4.7 10.5 Health 4.1 4.1 Media & Leisure 4.0 1.8 Construction & Real Estate 2.2 2.5 Services 1.4 3.0 JAPAN INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.7% SHARES VALUE (NOTE 1) BASIC INDUSTRIES - 4.7% CHEMICALS & PLASTICS - 2.4% JSP Corp. 60,000 $ 693,744 Sekisui Chemical Co. Ltd. 270,000 3,518,691 Shin-Etsu Chemical Co. Ltd. 150,000 3,071,873 Tayca Corp. (a) 223,000 721,082 8,005,390 IRON & STEEL - 1.8% Kobe Steel (a) 2,018,000 5,299,339 Osaka Steel Co. Ltd. 18,000 275,146 Sumitomo Metal Industries Ltd. (a) 240,000 651,413 6,225,898 METALS & MINING - 0.5% Sumitomo Sitix Corp. 100,000 1,793,151 TOTAL BASIC INDUSTRIES 16,024,439 CONSTRUCTION & REAL ESTATE - 2.2% BUILDING MATERIALS - 1.7% Arc Land Sakamoto Co. Ltd. 11,000 142,276 Berger International 761,000 452,079 C.I. Holdings BHD 85,000 299,361 Chofu Seisaku Co. Ltd. 55,000 1,293,420 Nippon Electric Glass Co. Ltd. 202,000 3,740,924 5,928,060 CONSTRUCTION - 0.5% Daito Trust Construction 100,200 883,641 Kaneshita Construction Co. Ltd. Ord. 62,000 783,695 1,667,336 TOTAL CONSTRUCTION & REAL ESTATE 7,595,396 DURABLES - 14.6% AUTOS, TIRES, & ACCESSORIES - 5.7% Bridgestone Corp. 100,000 1,391,407 Calsonic Corp. 235,000 1,611,876 Daido Metal Co. Ltd. 220,000 1,377,493 Honda Motor Co. Ltd. 482,000 8,406,839 Kansei Corp. 93,000 745,422 Kasai Kogyo Co. Ltd. 205,000 723,139 Keihin Seiki Manuufacturing Co. Ltd. 94,000 554,485 Mitsuba Electric Manufacturing Co. Ltd. 63,000 642,007 Sumitomo Rubber Industries Ltd. 117,000 934,349 Toyoda Gosei Co. 186,000 1,157,317 Toyota Motor Corp. 109,000 2,029,298 19,573,632 CONSUMER DURABLES - 0.5% Aderans Co. Ltd. 113,000 1,849,101 CONSUMER ELECTRONICS - 5.9% Citizen Watch Co. Ltd. Ord. 270,000 1,854,588 Daiichi Corp. Ord. 97,000 2,005,487 Matsushita Electric Industrial Co. Ltd. 569,000 8,084,366 Rinnai Corp. Ord. 70,000 1,550,145 Sony Corp. 130,400 5,877,615 Zojirushi Thermos 64,000 752,535 20,124,736 HOME FURNISHINGS - 0.8% Komatsu Wall Industry Co. Ltd. 77,000 1,297,732 Matsuyadenki Co. Ltd. 74,000 659,115 Shimachu 27,000 714,321 2,671,168 SHARES VALUE (NOTE 1) TEXTILES & APPAREL - 1.7% Chiyoda Corp. 103,200 $ 2,032,551 Daidoh Ltd. 75,000 551,173 Danto Corp. 32,000 366,861 Danto Corp. (rights) 6,400 70,237 Morishita Co. Ltd. 44,000 314,732 Roda Vivatex PT (For. Reg.) 661,000 545,740 Tokyo Style Co. Ltd. 50,000 759,394 Yagi Corp. 87,000 1,022,978 5,663,666 TOTAL DURABLES 49,882,303 FINANCE - 6.4% BANKS - 0.6% Akita Bank Ltd. 301,000 1,990,838 Union Bank of Philippines (a) 24,600 27,901 2,018,739 CREDIT & OTHER FINANCE - 2.5% Acom Co. Ltd. 130,000 4,241,830 Japan Securities Finance Co. Ltd. 91,000 1,141,345 Nichiei Co. Ltd. 25,000 1,555,534 Promise Co. Ltd. 40,000 1,579,540 8,518,249 SECURITIES INDUSTRY - 3.3% Daiko Shoken Business Co. 21,000 257,214 Daiwa Securities Co. Ltd. 270,000 3,174,759 Nomura Securities Co. Ltd. 391,000 7,164,470 Osaka Securities Finance Co. Ltd. Ord. 165,000 784,136 11,380,579 TOTAL FINANCE 21,917,567 HEALTH - 4.1% DRUGS & PHARMACEUTICALS - 2.5% Yamanouchi Pharmaceutical Co. Ltd. 383,000 8,556,563 MEDICAL EQUIPMENT & SUPPLIES - 1.6% Hitachi Medical Corp. Ord. 52,000 662,388 Hoya Corp. 160,000 4,703,346 5,365,734 TOTAL HEALTH 13,922,297 INDUSTRIAL MACHINERY & EQUIPMENT -15.7% ELECTRICAL EQUIPMENT - 12.2% Hitachi Koki Co. Ltd. Ord. 88,000 786,399 Icom, Inc. 108,000 994,758 Inaba Denkisangyo Co. Ltd. 57,000 1,228,749 Mirai Industry Co. Ltd. 70,000 1,515,849 Mitsubishi Electric Co. Ord. 1,672,000 12,516,859 Murata Manufacturing Co. Ltd. 154,000 5,417,275 Omron Corp. 777,000 18,196,365 USC Corp. 21,000 674,930 Yaesu Musen Co. Ltd. 33,000 371,858 41,703,042 INDUSTRIAL MACHINERY & EQUIPMENT - 3.5% Aida Engineering Ltd. Ord. 172,000 1,210,093 Amada Metrecs Co. Ltd. 146,000 1,974,230 Amadasonoike Co. Ltd. 146,000 895,556 Fuji Machine Manufacturing Co. Ltd. Ord. 107,000 4,036,549 Heiwa Corp. 8,000 213,218 Okuma Corp. (a) 234,000 1,731,125 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED Shintokogio Ltd. 99,000 $ 737,250 Tsugami Corp. 91,000 459,213 Zuiko Corp. 46,000 766,253 12,023,487 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 53,726,529 MEDIA & LEISURE - 4.0% LEISURE DURABLES & TOYS - 2.2% Nintendo Co. Ltd. Ord. 60,000 4,421,145 Shimano, Inc. 127,000 2,364,411 Takara Co. Ltd. 84,000 650,238 7,435,794 RESTAURANTS - 1.8% Edosawa Co. Ltd. 18,000 405,664 Joyfull Co. Ltd. 31,000 583,215 Ohsho Food Service Corp. 78,000 1,520,945 Skylark Co. Ltd. 109,000 1,698,202 Yoshinoya D&C Co. Ltd. Ord. 126 2,000,098 6,208,124 TOTAL MEDIA & LEISURE 13,643,918 NONDURABLES - 0.6% FOODS - 0.5% Chubu Suisan Co. Ltd. 150,000 693,744 Morozoff Ltd. 47,000 175,004 Sonton Food Industry Co. Ltd. 80,000 940,669 1,809,417 HOUSEHOLD PRODUCTS - 0.1% Uni Charm Corp. Ord. 13,000 292,979 TOTAL NONDURABLES 2,102,396 RETAIL & WHOLESALE - 6.7% APPAREL STORES - 0.5% Charle Co. Ltd. 95,000 1,377,688 Esprit Asia Holdings Ltd. 1,436,000 487,564 1,865,252 APPLIANCE STORES - 0.4% Japan CBM Corp. 50,000 1,371,809 GENERAL MERCHANDISE STORES - 2.6% Ito-Yokado Co. Ltd. 140,000 7,668,414 Matsumotokiyoshi Co. Ltd. 17,400 409,191 Nikku Sangyo Co. Ltd. 32,000 344,912 Shinseido Co. Ltd. 28,000 290,824 8,713,341 GROCERY STORES - 1.2% Heiwado Co. Ltd. 85,000 1,607,467 Heromini Supermarket PT (For. Reg.) 285,500 584,578 Izumi Co. Ord. 70,000 1,330,655 Marukyo Corp. 48,000 686,689 4,209,389 RETAIL & WHOLESALE, MISC - 2.0% Amway Japan Ltd. 82,500 3,152,712 Senshukai Co. Ltd. 33,000 620,842 Tachibana Shokai Ltd. 31,000 300,720 Uny Co. Ltd. 156,000 2,690,314 6,764,588 TOTAL RETAIL & WHOLESALE 22,924,379 SHARES VALUE (NOTE 1) SERVICES - 1.4% LEASING & RENTAL - 1.0% Orix Corp. 93,000 $ 3,280,584 PRINTING - 0.4% Riso Kagaku Corp. 15,000 1,211,112 TOTAL SERVICES 4,491,696 TECHNOLOGY - 29.7% COMMUNICATIONS EQUIPMENT - 0.2% Aiphone Co. Ltd. 41,000 662,878 COMPUTER SERVICES & SOFTWARE - 0.4% Hitachi Information Systems Co. Ltd. 83,000 1,041,007 ISR Group Ltd. (a) 70,000 67,604 Multipolar PT (For. Reg.) 690,000 394,980 1,503,591 COMPUTERS & OFFICE EQUIPMENT - 7.4% Canon, Inc. 335,000 5,744,452 Fujitsu Ltd. 256,000 3,060,311 Fujitsu Ltd. (warrants) (a) 148 258,135 NEC Corp. 1,133,000 14,987,507 Nihon Unisys Ltd. 121,000 1,209,348 25,259,753 ELECTRONICS - 17.4% Aiwa Co. Ltd. 85,000 1,849,003 Apollo Electronics Co. Ltd. 16,000 396,649 Hirose Electric Co. Ltd. 38,250 2,447,430 Hitachi Ltd. 1,555,000 15,998,726 KOA 270,000 4,391,750 Nichicon Corp. 390,000 5,273,627 Nitto Denko Corp. 395,000 6,308,853 Rohm Co. Ltd. 160,000 9,735,927 Ryoden Trading Co. Ltd. 135,000 1,055,607 Ryosan Co. Ltd. 81,000 2,254,079 Ryoyo Electro Corp. Ord. 169,000 3,957,768 Toshiba Corp. 400,000 2,904,316 U-Shin Ltd. 51,000 309,833 Varitronix International Ltd. 340,000 648,662 Wako Electric Co. Ltd. 80,000 1,928,372 59,460,602 PHOTOGRAPHIC EQUIPMENT - 4.3% Fuji Photo Film Co. Ltd. 463,000 11,478,027 Konica Corp. 460,000 3,087,551 14,565,578 TOTAL TECHNOLOGY 101,452,402 TRANSPORTATION - 0.7% TRUCKING & FREIGHT - 0.7% Fukuyama Transporting Co. Ltd. 95,000 797,756 Hitachi Transport System Co. 182,000 1,605,017 2,402,773 UTILITIES - 0.9% TELEPHONE SERVICES - 0.9% DDI Corp. Ord. 378 3,070,519 TOTAL COMMON STOCKS (Cost $320,789,756) 313,156,614 CLOSED-END INVESTMENT COMPANIES - 1.4% SHARES VALUE (NOTE 1) FINANCE - 1.4% Morgan Stanley Asia-Pacific Fund, Inc. (Cost $4,470,596) 428,500 $ 4,713,500 CONVERTIBLE BONDS - 0.9% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) DURABLES - 0.2% AUTOS, TIRES, & ACCESSORIES - 0.2% Kiriu Machine Manufacturing Co. Ltd. 5 1/5%, 9/30/98 - JPY 69,000,000 756,563 FINANCE - 0.7% CREDIT & OTHER FINANCE - 0.7% MBL International Finance Bermuda Trust 3%, 11/30/02 Aa3 $ 2,310,000 2,396,625 TOTAL CONVERTIBLE BONDS (Cost $3,255,566) 3,153,188 U.S. TREASURY OBLIGATIONS- 0.3% U.S. Treasury Bill, yield at time of purchase 5 1/4%, 12/7/95 (c) (Cost $994,781) Aaa 1,000,000 994,950 REPURCHASE AGREEMENTS - 5.7% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 19,383,165 19,380,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $348,890,699) $341,398,252 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT OF VALUE GAIN/(LOSS) PURCHASED 166 Nikkei Stock Average Contracts Dec. 1995 $ 14,661,950 $(106,804) THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 4.3% CURRENCY ABBREVIATIONS JPY - Japanese yen LEGEND 1. Non-income producing 2. Principal amount is stated in United States dollars unless otherwise noted. 3. Security pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $845,708. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $282,002,662 and $364,705,773, respectively. The market value of futures contracts opened and closed during the period amounted to $39,812,804 and $23,932,875, respectively (see Note 2 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $8,356,000 and $5,260,286, respectively. The weighted average interest rate was 6.5% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $349,390,042. Net unrealized depreciation aggregated $7,991,790, of which $17,181,674 related to appreciated investment securities and $25,173,464 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $34,385,000 all of which will expire on October 31, 2003. For the period, interest and dividends from foreign countries were $2,891,369 or $0.10 per share. Taxes accrued or paid to foreign countries were $430,520 or $0.02 per share. JAPAN FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $19,380,000) (cost $348,890,699) - $ 341,398,252 See accompanying schedule Cash 161 Receivable for investments sold 4,240,791 Receivable for fund shares sold 1,109,956 Dividends receivable 936,790 Interest receivable 6,644 Redemption fees receivable 1,219 Receivable for daily variation on futures contracts 62,250 TOTAL ASSETS 347,756,063 LIABILITIES Payable for investments purchased $ 1,999,941 Payable for fund shares redeemed 1,366,581 Accrued management fee 203,721 Other payables and accrued expenses 204,706 TOTAL LIABILITIES 3,774,949 NET ASSETS $ 343,981,114 Net Assets consist of: Paid in capital $ 386,798,095 Accumulated net investment loss (419,251 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (34,777,290 ) Net unrealized appreciation (depreciation) on investments (7,620,440 and assets and liabilities in ) foreign currencies NET ASSETS, for 28,466,696 shares outstanding $ 343,981,114 NET ASSET VALUE and redemption price per share ($343,981,114 (divided by) 28,466,696 shares) $12.08 Maximum offering price per share (100/97.00 of $12.08) $12.45
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 2,906,233 Dividends Interest 1,251,639 4,157,872 Less foreign taxes withheld (430,520 ) TOTAL INCOME 3,727,352 EXPENSES Management fee $ 2,621,095 Basic fee Performance adjustment (362,948 ) Transfer agent 1,188,195 Fees Redemption fees (47,405 ) Accounting fees and expenses 206,549 Non-interested trustees' compensation 3,173 Custodian fees and expenses 238,522 Registration fees 32,284 Audit 35,276 Legal 20,634 Interest 6,629 Miscellaneous 5,906 Total expenses before reductions 3,947,910 Expense reductions (750 3,947,160 ) NET INVESTMENT INCOME (LOSS) (219,808 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (33,224,417 ) Foreign currency transactions (4,057,023 ) Futures contracts (1,111,175 (38,392,615 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities (19,936,966 ) Assets and liabilities in foreign currencies 555,395 Futures contracts (106,804 (19,488,375 ) ) NET GAIN (LOSS) (57,880,990 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (58,100,798 ) OTHER INFORMATION $375,382 Sales charges paid to FDC Accounting fees paid to FSC $205,394
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ (219,808) $ (1,174,746) Net investment income (loss) Net realized gain (loss) (38,392,615) 20,876,210 Change in net unrealized appreciation (depreciation) (19,488,375) 9,594,977 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (58,100,798) 29,296,441 Distributions to shareholders from net realized gains (10,783,293) (2,956,786) Share transactions 328,361,252 1,298,877,029 Net proceeds from sales of shares Reinvestment of distributions 10,600,847 2,893,660 Cost of shares redeemed (396,639,291) (977,683,984) Redemption fees 903,307 1,017,597 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (56,773,885) 325,104,302 TOTAL INCREASE (DECREASE) IN NET ASSETS (125,657,976) 351,443,957 NET ASSETS Beginning of period 469,639,090 118,195,133 End of period (including undistributed net investment (loss) income of $(419,251) and $316,078, $ 343,981,114 $ 469,639,090 respectively) OTHER INFORMATION Shares Sold 26,845,585 95,609,478 Issued in reinvestment of distributions 830,825 247,321 Redeemed (32,128,159) (71,792,044) Net increase (decrease) (4,451,749) 24,064,755
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31, SEPTEMBER 15, 1992 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 B 1993 1992
Net asset value, beginning of period $ 14.27 $ 13.35 $ 9.84 $ 10.00 Income from Investment Operations Net investment income (loss) (.02) (.04) F (.09) - Net realized and unrealized gain (loss) (1.89) 1.31 3.60 (.16) Total from investment operations (1.91) 1.27 3.51 (.16) Less distributions from net realized gain (.36) (.39) - - Redemption fees added to paid in capital .08 .04 - - Net asset value, end of period $ 12.08 $ 14.27 $ 13.35 $ 9.84 TOTAL RETURN A, C (12.96)% 10.45% 35.67% (1.60)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 343,981 $ 469,639 $ 118,195 $ 2,953 Ratio of expenses to average net assets 1.15% 1.42% 1.71% 2.00% D, E Ratio of net investment income (loss) to average net assets (.06)% (.32)% (.77)% .03% E Portfolio turnover rate 86% 153% 257% -%
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. B EFFECTIVE NOVEMBER 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. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENT). D FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. E ANNUALIZED. F NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
LATIN AMERICA 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND LATIN AMERICA -39.85% -1.84% LATIN AMERICA (INCL. 3% SALES CHARGE) -41.66% -4.79% Morgan Stanley Latin America Free Index -31.33% 23.65% Average Latin America Fund -38.94% 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 April 19, 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 the performance of the Morgan Stanley Latin America Free Index, a broad measure of the performance of stocks in Latin American markets weighted by each country's market capitalization (or the total value of the shares outstanding). To measure how the fund's performance stacked up against its peers, you can compare it to the average Latin American fund, which reflects the performance of 17 funds with similar objectives - in this case, a very small peer group - tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND LATIN AMERICA -39.85% -0.73% LATIN AMERICA (INCL. 3% SALES CHARGE) -41.66% -1.92% Morgan Stanley Latin America Free Index -31.33% 8.73% Average Latin American Fund -38.94% 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 Latin AMorgan Stanley E 04/19/93 9700.00 10000.00 04/30/93 9641.80 9568.13 05/31/93 9874.60 9818.14 06/30/93 10379.00 10436.73 07/31/93 10737.90 10716.71 08/31/93 11746.70 11640.43 09/30/93 11960.10 11844.71 10/31/93 12881.60 12314.07 11/30/93 13861.30 13120.91 12/31/93 15722.24 14784.37 01/31/94 16981.97 17217.49 02/28/94 16093.32 16719.16 03/31/94 14462.50 15584.66 04/30/94 13437.14 14395.32 05/31/94 14169.54 15245.68 06/30/94 12851.22 14269.20 07/31/94 14042.59 15621.61 08/31/94 16132.38 18162.47 09/30/94 16679.24 18941.58 10/31/94 15829.65 18005.81 11/30/94 15360.92 17492.25 12/31/94 12079.76 14879.00 01/31/95 10331.75 13254.17 02/28/95 8710.70 11334.14 03/31/95 8564.22 10943.14 04/30/95 9618.88 12522.51 05/31/95 9667.71 12807.01 06/30/95 9804.43 13006.60 07/31/95 10331.75 13409.01 08/31/95 10527.06 13562.20 09/30/95 10361.05 13446.57 10/31/95 9521.23 12364.71 Let's say you invested $10,000 in Fidelity Latin America Fund on April 19, 1993, when the fund started, and paid the 3% sales charge. By October 31, 1995, your investment would have been valued at $9,521 - a -4.79% decrease on your initial investment. That compares to $10,000 invested in the Morgan Stanley Latin America Free index, which would have grown to $12,365 over the same period - a 23.65% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) LATIN AMERICA FUND TALK: THE MANAGER'S OVERVIEW An interview with Patti Satterthwaite, Portfolio Manager of Fidelity Latin America Fund Q. HOW HAS THE FUND PERFORMED, PATTI? A. The past year was a difficult time for Latin American Funds, including this one. The fund's total return for the 12 months ended October 31, 1995, was -39.85%. That trailed the average Latin American fund, which returned - 38.94% for the same period, as tracked by Lipper Analytical Services. The fund also trailed the Morgan Stanley Latin America Free Index, which returned -31.33%. Q. WHAT MADE THIS PAST YEAR SO DIFFICULT? A. Throughout the year, the Latin American markets continued to suffer from the lingering effects of the Mexican peso devaluation. As a result, investment interest and equity trading volumes in the region remained sluggish despite a slight improvement in economic activity and falling interest rates. The decline was triggered when the Mexican government devalued the peso last December. That, in turn, triggered a bear market in the entire Latin American region that lasted throughout the spring. Q. DID CONDITIONS IMPROVE DURING THE YEAR? A. From the summer to the early fall - when the peso was relatively stable - - the Latin American markets showed some improvement. At the time, many investors seemed less negative about the viability of the region's economies. What's more, Latin American governments consistently stuck to their policies of maintaining low inflation, budget and trade surpluses. But the peso experienced more weakness in the fall, and a bad market for Latin America ensued. In October alone, Brazil was down 9.4%, Argentina fell 5.7%, Columbia was down 7.8% and Mexico was off 13.2%. Q. WHAT CAUSED THE FUND TO UNDERPERFORM THE INDEX OVER THE PAST YEAR? A. In the final months of 1994 this fund was one of the more heavily weighted funds in Mexico, and therefore was one of the hardest hit by the currency devaluation there. Q. LET'S TAKE THESE COUNTRIES ONE AT A TIME. HOW HAVE YOU CHANGED THE FUND'S HOLDINGS IN BRAZIL? A. I increased the fund's stake in Brazil to 37.5% at the end of the period, from 29.8% six months earlier. I believe Brazil's economy is growing at a healthy pace, the rate of inflation has declined, and its trade deficit is improving. I also believe an additional positive is the fact that the country wasn't forced to devalue and defend its currency the way Mexico and Argentina were. I changed the holdings within Brazil by reducing the fund's steel and paper holdings. Generally speaking, earnings for these companies are expected to deteriorate as worldwide metal and paper prices fall. On the other hand, I maintained holdings in Telebras, which has been a solid performer over the past six months. The company is a state holding company controlling 28 telephone operating subsidiaries that are monopoly suppliers of local and long distance services in Brazil. The fund's top holding as of October 31, 1995, was Panamerican Beverages, a multi-regional Coca-Cola bottler that serves Mexico, Brazil and Colombia. The company has been able to keep its operating margins above its competitors in Mexico. What's more, its volumes are up 50% in Brazil. Q. WHAT OTHER NAMES DO YOU LIKE IN BRAZIL? A. I also like Brahma, Brazil's largest and the world's eighth-largest beer company. The company has 50% market share in Brazil, its volumes are up substantially this year compared to last, and its pricing is a positive. Beer demand is beginning to outstrip supply. For the country's summer season, the government has actually allowed imports in to meet high demand. Also, I believe the stock is priced attractively relative to other beer companies around the world. In addition, holdings in telecommunications companies such as Telesp were increased. I believe they are most likely to gain from rate increases and industry privatization. Q. NOW TURNING TO MEXICO, HOW DID YOU ALTER THOSE HOLDINGS? A. As I already mentioned, throughout the year I reduced the fund's holdings in Mexico to 21.1% at the end of the period, from 39.8% a year ago. I think the country's economic growth rate will lag that of other Latin American countries. I added Grupo Modelo, a beer company, which has no debt, more than 50% market share and aggressive plans to gain more. Another large holding is the retailer Cifra. In spite of a poor economy, Cifra has gained significant market share by aggressively cutting costs and improving its operating efficiency. Q. MOVING TO ARGENTINA, WHY DID YOU REDUCE THE NUMBER OF HOLDINGS IN THAT COUNTRY? A. Mainly due to political uncertainty surrounding the finance minister's resignation and because I was able to find more attractive opportunities elsewhere. One exception is Perez Companc, which is the fund's largest Argentine holding, and one of the fund's top 10 holdings at the end of the period. This conglomerate has an oil and energy focus. The company had a strong financial profile as many of its businesses were recently privatized companies. Q. WHAT ABOUT PERU, CHILE AND COLOMBIA? A. I increased the fund's holdings in Peru, based on improving earnings prospects and a falling inflation rate. In that country I liked Telefonica del Peru, which is the fastest growing telephone company in Latin America. With a monopoly franchise until the year 2000, it doesn't face any near-term competitive pressures. I have continued to keep the fund's holdings in Chile and Colombia rather light. In Chile, expensively valued equities and low earnings growth kept my weightings low. The Colombian equity markets suffered in part from political scandals within the government. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: high total investment return by investing mainly in equity and debt securities of Latin American issuers START DATE: April 19, 1993 SIZE: as of October 31, 1995, more than $466 million MANAGER: Patti Satterthwaite, since 1993; assistant manager, Latin American portion of Fidelity Emerging Markets Fund, since 1990; securities and Latin American analyst, 1986-1990; joined Fidelity in 1986 (checkmark) PATTI SATTERTHWAITE ON HER OUTLOOK: "The rate of economic growth for Latin American countries probably isn't going to be as quick as many might have believed a year ago. That's primarily due to a diminished amount of foreign capital available to finance this growth. One positive sign is that despite all the volatility in the markets, the region generally has stuck to its policies of reducing inflation and building budget and trade surpluses. In my view, the Mexican peso's recent decline has more to do with speculative trading than economic fundamentals. But for Latin American markets to improve, we're going to have to see economic growth and a period of stability for the peso." LATIN AMERICA INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 Other 4.9% Peru 3.8% Row: 1, Col: 1, Value: 4.9 Row: 1, Col: 2, Value: 21.1 Row: 1, Col: 3, Value: 7.3 Row: 1, Col: 4, Value: 37.5 Row: 1, Col: 5, Value: 13.9 Row: 1, Col: 6, Value: 5.7 Row: 1, Col: 7, Value: 5.8 Row: 1, Col: 8, Value: 3.8 Panama 5.8% United States 5.7% Mexico 21.1% Argentina 13.9% Chile 7.3% Brazil 37.5% AS OF APRIL 30, 1995 Peru 3.4% Panama 3.7% United States 18.7% Row: 1, Col: 1, Value: 18.7 Row: 1, Col: 2, Value: 3.7 Row: 1, Col: 3, Value: 19.9 Row: 1, Col: 4, Value: 7.5 Row: 1, Col: 5, Value: 29.8 Row: 1, Col: 6, Value: 13.3 Row: 1, Col: 7, Value: 3.7 Row: 1, Col: 8, Value: 3.4 Argentina 13.3% Other 3.7% Brazil 29.8% Mexico 19.9% Chile 7.5% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks and closed-end investment companies 92.4 79.5 Bonds 2.3 2.2 Short-term investments 5.3 18.3 TOP TEN STOCKS
% OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Panamerican Beverages, Inc. 4.5 2.8 Class A (Panama, Beverages) Perez Companc Class B 3.8 2.9 (Argentina, Basic Industries) Grupo Carso SA de CV Class A-1 3.6 4.1 (Mexico, Conglomerates) Telesp PN (Pref. Reg.) 3.2 2.1 (Brazil, Telephone Services) Brahma (Cia Cervejaria) PN Class B 3.1 1.5 (Pfd. Reg.) (Brazil, Beverages) Compania Vale do Rio Doce PN Ord. (Brazil, Metals & Mining) 2.8 2.1 Telefonica del Peru (CPT) Class B 2.6 0.9 (Peru, Telephone Services) Cemex SA, Series B 2.6 2.2 (Mexico, Building Materials) Telebras ON 2.5 1.4 (Brazil, Telephone Services) Bradesco PN 2.5 0.8 (Brazil, Banks)
TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Utilities 23.5 23.6 Nondurables 16.1 11.3 Basic Industries 16.0 16.6 Finance 15.0 8.5 Construction & Real Estate 6.0 4.8 Retail & Wholesale 4.2 4.8 Durables 3.8 3.1 Conglomerates 3.8 4.1 Holding Companies 1.7 0.7 Energy 1.6 2.6 LATIN AMERICA INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.0% SHARES VALUE (NOTE 1) ARGENTINA - 13.5% Astra Comp Argentina de Petroleum (Reg.) 3,222,440 $ 4,768,973 Banco de Galicia Y Buenos Aires SA sponsored ADR representing Class B shares 350,171 6,697,020 Banco del Sud SA (a) 84,700 423,479 Banco Frances del Rio de la Plata SA 426,500 3,100,655 Banco Frances del Rio de la Plata SA ADR 172,100 3,764,688 Buenos Aires Embotelladora SA sponsored ADR 165,600 3,788,100 Capex SA Class A (b) 92,000 593,370 Central Costanera SA Class B Sponsored ADR (b) 120,700 3,289,075 Citicorp Equity Inv. Class B 31,815 95,440 Commercial del Plata (a) 897,200 1,812,253 Mirgor Sacifia Class C sponsored ADR (b) 245,710 429,993 Molinos Rio de La Plata SA Class B (Reg) 921,673 5,760,456 Perez Companc Class B 3,971,211 17,512,165 Telecom Argentina Stet France Telecom SA 1,264,900 4,869,622 Telefonica de Argentina SA Class B 2,193,000 4,626,999 61,532,288 BERMUDA - 1.5% Credicorp Ltd. 401,029 6,616,979 BRAZIL - 35.0% Acesita Cia Acos Especiais Itabira Ord. 758,461,301 6,310,626 Acesita Cia Acos Especiais Itabira (warrants)(a) 43,628,304 454 Bradesco PN 1,225,025,036 11,211,919 Brahma (Cia Cervejaria): ON (warrants) (a) 1,510,428 298,473 PN Class B (Pfd. Reg.) 36,793,095 14,043,751 PN (warrants) (a) 117,827 17,769 Brasmotor PN 26,016,100 6,088,012 Celesc PN Class B Ord. (a) 5,371,000 4,077,826 Compania Paulista de Forca Luz Ord. 74,903,597 3,695,714 Compania Vale do Rio Doce PN Ord. 79,838,000 12,870,397 Coteminas PN 22,725,310 7,090,581 Eletrobras: ON 5,979,000 1,697,626 PN Class B 37,949,110 10,814,411 Iochpe Maxion PN Ord. 3,645,311 1,137,345 Itaubanco PN (Pfd. Reg.) 10,120,100 2,999,718 Itausa Investimentos Itau SA 5,221,000 2,986,532 Iven SA (a) 5,895,300 3,310,872 Klabin Industria de Papel e Celulose PN 6,243,165 5,843,836 Light Servicos de Electricidade SA Ord. 27,138,400 8,199,382 Lojas Americanas 64,208,300 1,535,927 Marco Polo PN Ord. Class B (a) 4,052,000 737,494 Minas Gerais State Preference (warrants) (a)(b) 2,000 50,000 Moinho Santista-Industrias Gerais SA Ord. (a) 610,700 406,498 Perdigao SA Comercio e Industria PDG (a) 528,800,100 956,970 Petrobras PN (Pfd. Reg.) 9,596,700 828,521 Rhodia Ster SA GDR (b) 214,000 2,782,000 Souza Cruz Industria Comerico 597,600 4,276,119 Telebras: ON 341,974,800 11,360,027 (Pfd. Reg.) 257,712,597 10,450,555 SHARES VALUE (NOTE 1) Telerj SA PN (a) 1,864,540 $ 129,926 Telepar: PN 7,029,944 2,193,430 PN (rights) (a) 8,393 - ON (rights) (a) 81 - Telesp: ON 580,000 84,482 PN (Pfd. Reg.) 101,378,857 14,551,526 Unibanco PN 59,279,808 2,077,722 Votorantim Celulose e Paper SA (Pfd. Reg.) 145,251,499 4,380,960 159,497,401 CANADA - 0.0% Bolivar Goldfields Ltd. (a) 51,750 36,566 CHILE - 7.3% Banco Osorno y la Union SA Series A sponsored ADR 343,900 4,642,650 Chilectra SA sponsored ADR 40,400 1,696,800 Chilgener SA sponsored ADR 136,800 3,283,200 Compania Cervecerias Unidas SA ADR 180,300 4,169,438 Cristalerias de Chile SA sponsored ADR 124,700 3,023,975 Empresa Nacional de Electricidad SA 115,000 2,472,500 Empresas Telex Chile SA sponsored ADR 115,200 1,036,800 Enersis SA sponsored ADR 167,100 4,198,388 Maderas Y Sinteticos SA sponsored ADR 111,500 1,993,063 Provida SA sponsored ADR 124,300 3,045,350 Santa Isabel SA sponsored ADR (a) 14,700 332,588 Soc Quimica y Minera de Chile ADR 38,000 1,648,250 Vina Concha y Toro SA sponsored ADR 97,500 1,706,250 33,249,252 COLOMBIA - 2.3% Banco de Columbia GDR (b) 420,600 2,471,025 Banco Ganadero Class C sponsored ADR 76,600 746,850 Banco Industrial Columbiano sponsored ADR 132,000 1,798,500 CADENALCO, Gran Cadena de Almacenes Colombianos ADR (b) 15,500 197,625 Carulla & CIA SA Class B sponsored ADR (b) 105,840 767,340 Cementos Argos SA 105,013 631,816 Compania Nacional de Chocolates 136,000 1,084,182 Noel (Industria Alimenticias) 112,997 424,907 Suramericana de Seguros SA 122,450 2,161,064 10,283,309 LUXEMBOURG - 0.4% Quilmes Industries SA 111,000 1,953,600 MEXICO - 20.3% Apasco SA de CV 805,600 2,971,895 Cemex SA, Series B 3,751,613 11,665,793 Cifra SA Class C 10,727,200 11,007,699 Corporacion Geo SA de CV (a) 781,873 2,104,150 Corporacion Geo SA de CV Class B sponsored ADR (a)(b) 40,800 428,400 DESC (Sociedad de Fomento Industrial) SA: Class B (a) 1,570,500 5,083,314 Class C (a) 480,048 1,506,299 Empaques Ponderosa SA Class B Ord. 167,500 355,124 Empresas Ica Sociedad Controladora SA de CV sponsored ADR representing Ord. (Part. Cert.) 368,600 3,501,700 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEXICO - CONTINUED Emvasa del Valle de Enah Ord. (a) 2,243,600 $ 2,054,916 Far-Ben SA de CV Series B (a) 1,698,700 1,608,663 Fomento Economico Mexicano SA (FEMSA) Class B 3,422,200 7,139,459 Fondo Opcion SA de CV Class 2, Series B (a) 142,000 155,748 Groupo Financiero Serfin SA sponsored ADR (a) 166,300 644,413 Gruma SA Class B 693,396 2,058,137 Grupo Carso SA de CV Class A-1 (a) 3,131,700 16,510,588 Grupo Casa Autrey SA sponsored ADR 21,300 271,575 Grupo Cementos Chihuahua Class B 4,102,300 2,899,152 Grupo Elektra SA 411,500 1,628,551 Grupo Financiero Bancomer Class B (a) 4,603,300 1,197,183 Grupo Financiero Banorte SA de CV Class B 1,190,000 1,227,844 Grupo Financiero Inbursa SA Class B 1,837,000 5,011,180 Grupo Modelo SA de CV Class C Ord. 348,100 1,333,358 Grupo Posadas SA de CV Ord. (a) 1,292,000 410,883 Grupo Televisa GDS (b) 238,500 4,084,313 Herdez SA de CV Class A (a) 1,567,900 392,252 Kimberly Clark de Mexico SA Class A 31,000 407,491 Sears Roebuck de Mexico SA de CV (a) 638,900 1,760,926 Tolmex SA Class B2 787,200 2,976,339 Transport Maritima Mexicana SA de CV Class A (a) 47,300 290,820 92,688,165 PANAMA - 5.8% Banco Latino Americano de Exportaciones SA Class E 149,900 6,258,325 Panamerican Beverages, Inc. Class A 742,100 20,314,988 26,573,313 PERU - 3.8% Banco Wiese Ltd. 304,773 503,702 Banco Weise Ltd. sponsored ADR 173,819 1,151,551 Cementos Notre Pacasmayo SA Class T 146,582 322,364 Consor De Alim Fabril Pacifico (a) 839,903 869,886 Minsur SA Class T 123,731 860,500 Southern Peru Copper Corp. Series 2 (a) 169,279 581,174 Tele 2000 SA (a) 251,376 247,055 Telefonica del Peru (CPT): Class A 400,700 706,390 Class B 6,661,414 11,890,140 17,132,762 UNITED KINGDOM - 0.1% Antofagasta Holdings PLC 140,000 674,874 UNITED STATES OF AMERICA - 0.4% Capco Automotive Products Corp. 261,200 1,991,650 VENEZUELA - 0.6% Electricidad de Caracas 1,447,735 1,240,660 Mavesa SA sponsored ADR (b) 342,622 1,329,349 2,570,009 TOTAL COMMON STOCKS (Cost $504,931,620) 414,800,168 NONCONVERTIBLE PREFERRED STOCKS - 1.4% SHARES VALUE (NOTE 1) BRAZIL - 1.4% COSIPA (CIA Sidurg Paulista) Class B (a) (Cost $9,086,675) 4,321,400 $ 6,471,987 CONVERTIBLE BONDS - 0.3% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) MEXICO - 0.3% Alfa SA de CV 8%, 9/15/00 (b) - $ 1,000,000 957,500 Grupo Financiero Invermexico 7 1/2%, 6/16/01 (b) - 1,000,000 280,000 TOTAL CONVERTIBLE BONDS (Cost $2,000,000) 1,237,500 GOVERNMENT OBLIGATIONS (F) - 2.0% ARGENTINA - 0.4% Province of Chaco yankee 11 7/8%, 9/10/97 (e) - 1,733,334 1,785,334 BRAZIL - 1.1% Siderurgica Brasileiras inflation indexed 6%, 8/15/99 (d) - BRR 37,408,700 5,129,719 MEXICO - 0.5% Mexican Government Cetes 0%, 2/8/96 - MXN 19,700,000 2,463,185 TOTAL GOVERNMENT OBLIGATIONS (Cost $8,956,491) 9,378,238 REPURCHASE AGREEMENTS - 5.3% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 24,118,939 24,115,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $549,089,786) $ 456,002,893 CURRENCY ABBREVIATIONS BRR - Brazilian real MXN - Mexican peso LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $17,659,990 or 3.8% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. Principal amount shown is original face amount and does not reflect the inflation adjustments. 5. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Province of Chaco yankee 11 7/8%, 9/10/97 3/9/94 $ 2,717,987 6. Some foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. OTHER INFORMATION At the end of the period, restricted securities (excluding 144A issues) amounted to $1,785,334 or 0.4% of net assets (see Note 2 of Notes to Financial Statements). Purchases and sales of securities, other than short-term securities, aggregated $295,870,271 and $373,836,797, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $53,346 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $556,133,089. Net unrealized depreciation aggregated $100,130,196, of which $36,791,098 related to appreciated investment securities and $136,921,294 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $147,415,000 all of which will expire on October 31, 2003. For the period, interest and dividends from foreign countries were $10,874,581 or $0.23 per share. Taxes accrued or paid to foreign countries were $552,854 or $0.01 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) Basic Industries 16.0% Conglomerates 3.8 Construction & Real Estate 6.0 Durables 3.8 Energy 1.6 Finance 15.0 Government Obligations 2.0 Holding Companies 1.7 Media & Leisure 0.9 Nondurables 16.1 Repurchase Agreements 5.3 Retail & Wholesale 4.2 Transportation 0.1 Utilities 23.5 100.0% LATIN AMERICA FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $24,115,000) (cost $549,089,786) - $ 456,002,893 See accompanying schedule Cash 37 Receivable for investments sold 13,477,093 Receivable for fund shares sold 1,344,738 Dividends receivable 431,048 Interest receivable 140,170 Redemption fees receivable 211 TOTAL ASSETS 471,396,190 LIABILITIES Payable for investments purchased $ 1,910,624 Payable for fund shares redeemed 2,384,084 Accrued management fee 318,253 Other payables and accrued expenses 494,471 TOTAL LIABILITIES 5,107,432 NET ASSETS $ 466,288,758 Net Assets consist of: Paid in capital $ 708,295,751 Undistributed net investment income 4,391,206 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (153,243,272 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies (93,154,927 ) NET ASSETS, for 47,807,952 shares outstanding $ 466,288,758 NET ASSET VALUE and redemption price per share ($466,288,758 (divided by) 47,807,952 shares) $9.75 Maximum offering price per share (100/97.00 of $9.75) $10.05
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 9,077,820 Dividends Interest 5,404,934 14,482,754 Less foreign taxes withheld (552,854 ) TOTAL INCOME 13,929,900 EXPENSES Management fee $ 4,473,579 Transfer agent 2,242,350 Fees Redemption fees (81,552 ) Accounting fees and expenses 324,942 Non-interested trustees' compensation 5,807 Custodian fees and expenses 1,122,709 Registration fees 62,128 Audit 55,609 Legal 27,398 Miscellaneous 9,713 TOTAL EXPENSES 8,242,683 NET INVESTMENT INCOME 5,687,217 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (net of Brazilian IPMF tax of $502,803) (149,438,501 ) Foreign currency transactions (740,449 (150,178,950 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities (183,896,089 ) Assets and liabilities in (11,018 (183,907,107 foreign currencies ) ) NET GAIN (LOSS) (334,086,057 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (328,398,840 ) OTHER INFORMATION $1,673,435 Sales charges paid to FDC Accounting fees paid to FSC $323,090
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 5,687,217 $ 3,669,803 Net investment income Net realized gain (loss) (150,178,950) 2,312,139 Change in net unrealized appreciation (depreciation) (183,907,107) 58,380,222 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (328,398,840) 64,362,164 Distributions to shareholders - (1,988,207) From net investment income From net realized gain - (1,988,193) TOTAL DISTRIBUTIONS - (3,976,400) Share transactions 430,328,990 1,515,609,862 Net proceeds from sales of shares Reinvestment of distributions - 3,877,609 Cost of shares redeemed (526,564,610) (1,041,351,744) Redemption fees 2,393,237 7,074,858 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (93,842,383) 485,210,585 TOTAL INCREASE (DECREASE) IN NET ASSETS (422,241,223) 545,596,349 NET ASSETS Beginning of period 888,529,981 342,933,632 End of period (including undistributed net investment income of $4,391,206 and $2,630,483, respectively) $ 466,288,758 $ 888,529,981 OTHER INFORMATION Shares Sold 41,302,837 95,990,469 Issued in reinvestment of distributions - 261,277 Redeemed (48,312,015) (67,265,359) Net increase (decrease) (7,009,178) 28,986,387
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS YEARS ENDED APRIL 19, 1993 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO SELECTED PER-SHARE DATA 1995 1994 C OCTOBER 31, 1993
Net asset value, beginning of period $ 16.21 $ 13.28 $ 10.00 Income from Investment Operations Net investment income .04 .07 .03 Net realized and unrealized gain (loss) (6.52) 2.82 3.23 Total from investment operations (6.48) 2.89 3.26 Less Distributions - (.05) - From net investment income From net realized gain - (.05) - Total distributions - (.10) - Redemption fees added to paid in capital .02 .14 .02 Net asset value, end of period $ 9.75 $ 16.21 $ 13.28 TOTAL RETURN A (39.85)% 22.89% 32.80% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 466,289 $ 888,530 $ 342,934 Ratio of expenses to average net assets 1.41% 1.48% 1.94% B Ratio of net investment income to average net assets .97% .47% 1.21% B Portfolio turnover rate 57% 77% 72% B A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. B ANNUALIZED. C EFFECTIVE NOVEMBER 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.
PACIFIC BASIN 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND PACIFIC BASIN -15.87% 36.41% 86.48% PACIFIC BASIN (INCL. 3% SALES CHARGE) -18.39% 32.32% 80.88% Morgan Stanley Pacific Index -11.21% 20.39% 66.09% Average Pacific Region Fund -9.48% 44.12% 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 October 1, 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 Morgan Stanley Pacific Index, a broad measure of the performance of stocks in the Pacific region, weighted by each country's market capitalization (or total value of its outstanding shares). To measure how the fund's performance stacked up against its peers, you can compare it to the average Pacific region fund, which reflects the performance of 36 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND PACIFIC BASIN -15.87% 6.41% 7.10% PACIFIC BASIN (INCL. 3% SALES CHARGE) -18.39% 5.76% 6.74% Morgan Stanley Pacific Index -11.21% 3.78% 5.74% Average Pacific Region Fund -9.48% 7.45% 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 Pacific Basin (3Pacific Index 10/01/86 9700.00 10000.00 10/31/86 9603.00 8862.00 11/30/86 10146.20 9399.07 12/31/86 10611.80 10088.05 01/31/87 12300.82 11598.87 02/28/87 12689.17 11904.22 03/31/87 13951.29 13131.82 04/30/87 15349.33 15062.31 05/31/87 15397.87 15062.31 06/30/87 14329.93 14116.01 07/31/87 14407.60 13782.70 08/31/87 15203.70 15420.34 09/30/87 14999.82 14974.05 10/31/87 12058.11 13345.52 11/30/87 12339.66 13875.39 12/31/87 13264.02 14088.57 01/31/88 13264.02 14793.36 02/29/88 13813.42 15831.10 03/31/88 14578.65 17064.31 04/30/88 15118.23 17280.12 05/31/88 14578.65 16620.65 06/30/88 13744.74 16055.73 07/31/88 13479.85 16785.08 08/31/88 13430.80 15542.64 09/30/88 13627.01 16142.75 10/31/88 13725.12 17469.62 11/30/88 14608.08 18911.35 12/31/88 14649.48 19018.54 01/31/89 14926.25 19193.41 02/28/89 15252.46 19438.67 03/31/89 14896.60 18821.29 04/30/89 15282.11 18832.42 05/31/89 14689.02 17780.12 06/30/89 14006.96 16987.42 07/31/89 15677.51 19192.02 08/31/89 14837.29 18004.64 09/30/89 16063.02 19105.05 10/31/89 15598.43 18593.72 11/30/89 16102.56 19478.89 12/31/89 16325.66 19500.06 01/31/90 15770.16 18396.74 02/28/90 14782.59 16611.35 03/31/90 13867.04 13619.98 04/30/90 13712.73 13711.64 05/31/90 15039.77 15616.28 06/30/90 15266.09 14987.13 07/31/90 15780.44 14873.33 08/31/90 13681.87 13454.50 09/30/90 11449.57 11345.09 10/31/90 13260.10 13796.09 11/30/90 12046.22 12266.22 12/31/90 11882.90 12788.36 01/31/91 12112.22 13186.92 02/28/91 13206.70 14812.56 03/31/91 13039.92 14005.66 04/30/91 13602.80 14365.60 05/31/91 13508.99 14309.99 06/30/91 13279.67 13374.87 07/31/91 13446.44 13825.95 08/31/91 12539.59 13124.61 09/30/91 13321.36 14157.05 10/31/91 13707.03 14759.53 11/30/91 13060.77 13809.99 12/31/91 13373.48 14233.78 01/31/92 13029.50 13682.29 02/29/92 12904.42 12724.00 03/31/92 12091.38 11513.90 04/30/92 11966.29 10986.10 05/31/92 12925.26 11842.95 06/30/92 12654.25 10911.67 07/31/92 12091.38 10759.99 08/31/92 12445.78 12234.05 09/30/92 12362.39 11953.73 10/31/92 12508.32 11531.67 11/30/92 12456.20 11749.15 12/31/92 12354.67 11614.67 01/31/93 12480.95 11593.05 02/28/93 13207.07 12155.13 03/31/93 14101.58 13623.52 04/30/93 15532.78 15794.04 05/31/93 16290.48 16253.52 06/30/93 15448.59 15987.05 07/31/93 16269.43 16932.23 08/31/93 17016.60 17433.05 09/30/93 17058.70 16781.05 10/31/93 18395.19 17153.59 11/30/93 17490.17 14733.35 12/31/93 20250.36 15760.40 01/31/94 20799.71 17584.75 02/28/94 21004.37 18038.08 03/31/94 19431.73 17042.36 04/30/94 19970.31 17779.27 05/31/94 20562.74 18202.23 06/30/94 20476.56 18797.67 07/31/94 20433.48 18394.37 08/31/94 21402.91 18714.06 09/30/94 21122.85 18245.66 10/31/94 21499.85 18707.18 11/30/94 19733.33 17663.27 12/31/94 19680.70 17782.12 01/31/95 17857.29 16659.13 02/28/95 17565.54 16246.54 03/31/95 18124.72 17493.87 04/30/95 18331.37 18237.90 05/31/95 18221.97 17508.42 06/30/95 18051.78 16766.42 07/31/95 19230.92 17975.25 08/31/95 19024.27 17298.16 09/30/95 18805.46 17458.39 10/31/95 18088.25 16609.48 Let's say you invested $10,000 in Fidelity Pacific Basin Fund on October 1, 1986, when the fund started, and paid the 3% sales charge. By October 31, 1995, the value of your investment would have grown to $18,088 - an 80.88% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley Pacific index, which would have grown to $16,609 over the same period - a 66.09% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) An interview with Simon Fraser, Portfolio Manager of Fidelity Pacific Basin Fund Q. SIMON, HOW DID THE FUND PERFORM? A. It's been disappointing. For the 12 months ended October 31, 1995, the fund returned -15.87%. That trailed the Morgan Stanley Pacific Index, which returned -11.21%, and the average Pacific region fund, which returned - -9.48% for the same time period, according to Lipper Analytical Services. Q. WHY DID THE FUND UNDERPERFORM THE INDEX? A. As I've mentioned in other reports, this is a broadly diversified Asian fund, and there's no one index to benchmark the fund's performance. The Morgan Stanley index, for example, has about 80% of its assets invested in Japan while this fund usually has between 40% and 60% of its assets invested there. The fund's performance during the past six months was better than average, with most of the damage occurring in the first half of the year. For the six months ending October 31, 1995, the fund returned - -1.33% while the Morgan Stanley Index returned -8.93%. Beginning in about August, Japanese markets began rebounding nicely, but at the same time the yen weakened, which somewhat offset the gains. Toward the end of the period, the fund was also hurt by its exposure to Thailand and Malaysia. Q. THE FUND HAS ABOUT 40% OF ITS ASSETS INVESTED IN JAPAN. WHAT WAS YOUR JAPANESE INVESTMENT STRATEGY DURING THE PERIOD? A. In recent months, the percentage growth of personal computers in Japan has been greater than in other parts of the world. It was only within the past year that Microsoft Windows(trademark) has become available in Japan in Japanese language form. In addition, U.S. companies such as Compaq, AST and Apple have begun to penetrate the Japanese market in the past 18 - 24 months. As a result, prices have come down sharply and volumes have increased. Many Japanese technology stocks have been the best performers, and were an area of concentration for the fund. NEC is currently the second-largest producer of commodity DRAM chips in the world. It's been a good investment because as its stock price has gone up, its earnings growth continues to be dramatic. Toshiba, a producer of personal computers and lap- tops, has also performed well. Other technology stocks that helped during the period include NGK Spark Plug and Kyocera, both suppliers of ceramic packages for Intel semiconductor chips and smaller holdings within the fund, have done very well due to the boom in Intel's business. Q. THE FUND'S HOLDINGS IN AUSTRALIA HAVE DONE WELL. WHAT'S THE STORY THERE? A. The Australian economy has been going through a recovery phase in recent years and there are some signs that it's begun to slow. In the late 1980s, many companies in Australia became overburdened with debt when they went on buying sprees throughout the world to acquire companies that weren't compatible with their underlying businesses. As a result, many Australian companies became over-diversified, over-stretched and over-borrowed. Since then, managers with more financial acumen have begun running these troubled companies. They've begun restructuring balance sheets by selling business that don't fit with their core businesses and have concentrated more on taking their talent outside of the country to spur growth rather than growing by diversifying into other, often inappropriate ventures. The main attraction in Australia has been the valuation of individual companies rather than any broad market themes. Q. WHAT PARTICULAR STOCKS LOOKED ATTRACTIVE IN AUSTRALIA DURING THE PERIOD? A. Fosters Brewing is a good example of a company that got overly stretched in the 1980s. Recently, it has managed to restructure and become more focused on its core beer business. Fosters recently sold its UK operations, which has left it with a large amount of cash. Oil Search Ltd. is another Australian stock in the fund's top 10 holdings as of October 31, 1995. An oil exploration company, it's had considerable success in discovering oil wells and bringing them into production in Papua, New Guinea. Q. WHAT ABOUT THAILAND AND MALAYSIA . . . A. Some of the fund's holdings in Malaysia and Thailand were negative for the fund during the period. In both countries, economic growth has been very strong - between 8% and 9% per year - yet the stock markets have become quite weak. The fear has been that their economies have been growing too fast and that interest rates will have to go up sharply in order to slow it down. So far, interest rates have been held down artificially which led to the overheated economy in the first place. That's why the stock markets in these countries haven't reacted to the overall decline in interest rates we've seen in other economies around the world. When U.S. interest rates started to come down in the spring of 1995, and U.S. markets started to take off again, most thought that Southeast Asian markets would do the same since they're highly geared into the U.S. interest rate cycle; but it didn't happen. While some Southeast Asian markets have reacted more quickly, these markets have been slow to take the appropriate measures to slow down their economies. As a result, some of the holdings there did not perform well. Q. DID YOU ESTABLISH ANY INVESTMENT THEMES ACROSS THE MARKETS DURING THE PAST SIX MONTHS? A. Yes. I think growth in Southeast Asian economies has increased consumer demand. I've begun adding to the fund's consumer-related holdings in Malaysia, Thailand and Indonesia. In general, these companies produce a lot of cash and have very strong balance sheets and are much more geared to consumer spending patterns than to interest rates and economic activity. In Indonesia, Sampoerna is the largest producer of clove cigarettes and is growing by about 40% per year. Astra International is an assembler of Japanese autos in Indonesia that performed very well during the period. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. I think the corporate restructuring of Japan is beginning to bring considerable success to many of the companies there, and that the earnings recovery will continue to come through. In addition, the fact that the yen has started to decline is also good for Japanese companies that export. I expect the recovery in Japan to continue to be a major theme for this fund, and I'll probably deploy assets there as they come into the fund. The fund's been overexposed to Malaysia and Thailand, and weightings in those areas may decline as concerns about interest rate pressure grow. In any event, I'll continue to focus on consumer stocks rather than interest rate sensitive stocks in those countries. Since I plan to take a more defensive stance across the whole of Southeast Asia, I would expect to see Australia, Singapore and Hong Kong featured more prominently in the fund than Thailand, Indonesia and Malaysia. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of Pacific Basin issuers START DATE: October 1, 1986 SIZE: as of October 31, 1995, more than $317 million MANAGER: Simon Fraser, since 1993; also manages Japan Small Companies Fund, various funds for non-U.S. investors; joined Fidelity in 1981 (checkmark) SIMON FRASER ON THE FUND'S SHIFT FROM INVESTING IN INTEREST RATE-SENSITIVE STOCKS TO CONSUMER STOCKS: "The current challenge in investing in many of the economies of Southeast Asia is that they have grown too quickly while interest rates have remained artificially low. To combat this trend, I've begun to make changes to the fund that I hope will be beneficial. "First, with the economic conditions I just described, interest rate-sensitive stocks are unlikely to do well. For that reason, I've cut the fund's investments in construction and real estate stocks during the period from 16.9% of investments six months ago to 11.8% as of October 31, 1995. I would expect to cut more real estate and financial stocks going forward. "In addition, I've begun investing in consumer-related stocks - especially in the beer and tobacco industries. Going forward, these investment changes should help the fund to outperform." PACIFIC BASIN INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 United States 3.3% Australia 10.0% Thailand 8.5% Row: 1, Col: 1, Value: 3.3 Row: 1, Col: 2, Value: 8.6 Row: 1, Col: 3, Value: 4.6 Row: 1, Col: 4, Value: 7.3 Row: 1, Col: 5, Value: 9.0 Row: 1, Col: 6, Value: 5.2 Row: 1, Col: 7, Value: 40.1 Row: 1, Col: 8, Value: 6.2 Row: 1, Col: 9, Value: 5.7 Row: 1, Col: 10, Value: 10.0 Hong Kong 5.7% Singapore 4.7% Other 7.3% Indonesia 6.2% Malaysia 9.0% Korea (South) 5.2% Japan 40.1% AS OF APRIL 30, 1995 Thailand 5.9% Australia 8.6% Row: 1, Col: 1, Value: 5.9 Row: 1, Col: 2, Value: 7.1 Row: 1, Col: 3, Value: 9.1 Row: 1, Col: 4, Value: 9.5 Row: 1, Col: 5, Value: 4.0 Row: 1, Col: 6, Value: 44.1 Row: 1, Col: 7, Value: 6.7 Row: 1, Col: 8, Value: 5.0 Row: 1, Col: 9, Value: 8.6 Singapore 7.1% Hong Kong 5.0% Other 9.1% Indonesia 6.7% Malaysia 9.5% Korea (South) 4.0% Japan 44.1% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks and closed-end investment companies 95.2 94.9 Bonds 1.5 3.5 Short-term investments 3.3 1.6 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO NEC Corp. 1.7 0.0 (Japan, Computers & Office Equipment) HSBC Holdings PLC 1.4 0.0 (Hong Kong, Banks) Omron Corp. 1.4 0.7 (Japan, Electrical Equipment) Oil Search Ltd. 1.2 0.8 (Australia, Oil & Gas) Toshiba Corp. 1.2 0.9 (Japan, Electronics) Berjaya Sports Toto BHD 1.2 0.0 (Malaysia, Real Estate) Sumitomo Sitix Corp. 1.2 0.7 (Japan, Metals & Mining) Fosters Brewing Group Ltd. 1.1 0.5 (Australia, Beverages) Sampoerna Hanjaya Mandala 1.1 0.6 (For. Reg.) (Indonesia, Tobacco) Sony Corp. 0.9 1.3 (Japan, Consumer Electronics) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 14.8 13.3 Construction & Real Estate 11.8 16.9 Technology 11.0 6.3 Durables 8.5 5.0 Basic Industries 8.2 15.2 Nondurables 7.0 5.4 Industrial Machinery & Equipment 6.6 6.5 Media & Leisure 5.5 4.9 Retail & Wholesale 5.3 3.8 Energy 4.4 3.9 PACIFIC BASIN INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.1% SHARES VALUE (NOTE 1) AUSTRALIA - 10.0% Accor Asia Pacific Ltd. 804,716 $ 465,079 Amcor Ltd. 126,885 949,459 Ampolex Ltd. Ord. 1,225,674 2,423,366 Australian National Industries Ltd. 1,351,935 1,058,921 CSR Ltd. 159,374 507,811 Coca-Cola Amatil Ltd. 32,254 249,200 Country Road Ltd. 566,163 731,916 Erg Ltd. 23,200 28,051 Fairfax (John) Holdings Ltd. 750,000 1,539,911 Fosters Brewing Group Ltd. 3,750,000 3,564,609 Goodman Fielder Ltd. Ord. 500,000 501,897 Lend Lease Corp. Ltd. 75,000 1,041,436 Memtec Ltd. Ord. 841,638 1,382,451 Odin Mining & Investment Co. (a) 87,500 21,958 Oil Search Ltd. 4,302,500 3,631,738 Pacific BBA Ltd. (b) 1,172,989 2,497,599 Plutonic Resources Ltd. 300,000 1,368,810 Publishing & Broadcasting 350,000 1,112,538 Qantas Airways Ltd. 128,000 225,823 Rothmans Holdings Ltd. Ord. 344,500 1,283,678 Shomega Ltd. 715,000 869,955 TNT Ltd. (a) 500,000 703,416 VA Holdings Ltd. 1,010,000 138,250 W.D. & H.O. Wills Holdings Ltd. 155,700 224,964 Western Mining Holdings Ltd. 200,680 1,284,952 Woodside Petroleum Ltd. 300,000 1,434,969 Woolworths Ltd. 844,156 2,009,267 31,252,024 CHINA (PEOPLES REP.) - 0.8% Harbin Power Equipment Co. Ltd. Class H 120,000 27,628 Louyang Glass Ltd. Class H 934,000 317,120 Maanshan Iron & Steel Co. Ltd. Class H 2,750,000 501,533 Northeast Electrical Transmission & Transformation Machinery Mfg. Co. Ltd. Class H (a) 2,750,000 558,444 Yizheng Chemical Fibre Co. Ltd. Class H 3,935,000 1,145,183 2,549,908 GRAND CAYMAN (UK OVERSEAS TER.) - 0.0% Sanzo Finance Ltd. (warrants) (a) 250 6,250 HONG KONG - 5.2% CDL Hotels International Ltd. 672,465 304,428 Dickson Concepts International Ltd. 1,000,000 724,328 Esprit Asia Holdings Ltd. 430,000 145,997 First Pacific Co. Ltd. 930,000 1,070,583 Goldlion Holdings 500,000 284,558 Great Eagle Holdings Ltd. 845,000 2,317,075 HSBC Holdings PLC 290,000 4,219,860 Hong Kong & China Gas Co. Ltd. 650,000 1,055,127 Hong Kong Ferry Holdings Ltd. 465,000 481,161 International Bank of Asia Ltd. 2,184,000 1,299,445 JCG Holdings Ltd. 668,000 488,171 Jardine International Motor Corp. 888,000 1,027,977 K Wah International Holdings Ltd. (warrants) (a) 450,028 1 New Asia Reality & Trust Co. Class A 309,000 529,568 New World Infrastructure Ltd. 280,000 492,543 New World Infrastructure Ltd. (b) 404,000 710,670 Wah Kwong Shipping Holdings Ltd. 708,000 993,597 16,145,089 SHARES VALUE (NOTE 1) INDIA - 0.1% Indo Gulf Fertilizer and Chemicals Corp. Ltd. GDR (b) 17,000 $ 22,100 Tata Electric Companies GDR (b) 210 65,100 Tube Investments of India Ltd. GDR 110,000 352,000 439,200 INDONESIA - 5.3% Andayani Megah PT 809,500 695,080 Astra International PT (For. Reg.) 1,286,400 2,577,334 Bakrie & Bros PT Ord. (For. Reg.) 1,160,000 2,094,233 Bank International Indonesia PT Ord. 200,000 700,133 Bank Mashill Utama PT (For. Reg.) 350,400 200,581 Bank Tiara Asia PT 457,500 523,778 Bimantara Citra (For. Reg.) (a) 165,500 127,532 Bukaka Teknik Utama (For. Reg.) 58,500 86,939 Citra Marga Nusadhala Persada PT 410,000 338,508 Gadjah Tunggal PT (For. Reg.) 830,000 529,943 Indofood Sukses Makmur (For. Reg.) 200,000 924,704 Kabelmetal Indonesia PT 100,000 92,470 Matahari Putra Prima PT (For. Reg.) 600,000 1,254,955 Medco Energi Corp. (For. Reg.) 1,021,000 1,663,454 Modernland Realty PT 60,000 84,544 Mulia Industrindo PT (For. Reg.) 500 1,475 Panin Bank PT (For. Reg.) 900,250 991,029 Semen Cibinong PT (For. Reg.) 124,000 324,879 Sampoerna Hanjaya Mandala (For. Reg.) 368,000 3,402,909 16,614,480 JAPAN - 40.1% Acom Co. Ltd. 30,000 978,884 Aida Engineering Ltd. Ord. 30,000 211,063 Aim Services Co. Ltd. 50,000 906,374 Amway Japan Ltd. 36,600 1,398,658 Apic Yamada Corp. 12,000 529,126 CMK Corp. 105,000 1,419,823 Charle Co. Ltd. 26,000 377,052 Chofu Seisakusho Co. Ltd. 85,000 1,998,922 Daiwa Kosho Lease Co. Ltd. 100,000 901,475 Daiwa Securities Co. Ltd. 60,000 705,502 Denki Kagaku Kogyo (a) 429,000 1,446,044 Denyo Co. Ltd. (warrants) (a) 740 249,750 FCC Co. Ltd. 56,000 1,728,480 Fuji Coca-Cola Bottling Co. Ltd. 29,000 306,893 Fuji Photo Film Co. Ltd. 100,000 2,479,055 Fujisash Co. Ltd. 11,200 72,432 Fujitsu Kiden Ltd. 60,000 752,535 Fujitsu Ltd. (warrants) (a) 4,200 683,678 Funai Consulting Co. Ltd. 32,000 269,659 Fuso Pharmaceutical Industries Ltd. 97,000 575,033 Geomatec Co. Ltd. 14,000 666,699 Hankyu Corp. 200,000 1,040,615 Hankyu Corp. (warrants) (a) 1,800 585,000 Hitachi Ltd. 200,000 2,057,714 Hitachi Ltd. ADR 23,800 2,490,075 Hitachi Transport System Co. 104,000 917,153 Honda Motor Co. Ltd. 125,000 2,180,197 Hoya Corp. 50,000 1,469,796 Inui Tatemono Co. Ltd. 27,000 275,146 Isetan Co. Ltd. 125,000 1,665,768 Ito-Yokado Co. Ltd. 40,000 2,190,975 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) JAPAN - CONTINUED Japan Industrial Land Development Co. Ltd. (a) 32,000 $ 1,197,786 Kagoshima Bank Ltd. 100,000 744,696 Katokichi Co. Ltd. 25,000 458,086 Kawasaki Kisen Kaisha Ltd. (a) 600,000 1,610,896 Keiyo Co. Ltd. 30,000 296,899 Kobe Steel 709,000 1,861,859 Konica Corp. 200,000 1,342,413 Kyocera Corp. (warrants) (a) 835 1,409,063 Kyushu Matsushita Electric Co. Ltd. 50,000 798,589 Mabuchi Motor Co. 100 6,065 Marukyo Corp. 27,000 386,262 Matsushita Electric Industrial Co. Ltd. 70,000 994,562 Matsushita-Kotobuki Electronics Industries Ltd. 30,000 608,495 Miroku Jyoho Service Co. Ltd. 15,000 242,516 Mitsuba Electric Manufacturing Co. Ltd. (warrants) (a) 3,000 646,722 Mitsubishi Electric Co. Ord. 320,000 2,395,571 Mitsubishi Motors Corp. (warrants) (a) 573 673,754 Mitsui Engineer & Shipbuilding Co. Ltd. 250,000 548,724 Mitsui Fudosan (Re Devel) Co. 140,000 1,605,017 Mitsui High-Tec, Inc. 70,000 1,899,956 Mitsui Mining & Smelting Co. Ltd. (warrants) (a) 1,150 5,888 Mitsui OSK Lines Ltd. 500,000 1,313,018 Mitsukoshi Ltd. 175,000 1,390,672 Miyosha Oil & Fat Co. Ltd. Ord. 150,000 529,126 NEC Corp. 400,000 5,291,265 NGK Spark Plug Co. Ltd. (warrants) (a) 1,400 1,925,000 NKK Corp. (a) 100,000 242,026 Namura Shipbuilding Co. Ltd. 265,000 1,480,084 Nichicon Corp. 200,000 2,704,424 Nintendo Co. Ltd. Ord. 15,000 1,105,286 Nippon Crane Works Ltd. (a) 81,000 138,896 Nippon Electric Glass Co. Ltd. 38,000 703,738 Nippon Hodo Co. Ltd. 70,000 1,090,588 Nippon Kagaku Co. Ltd. 100,000 571,261 Nippon Shokubai Co. Ltd. 300,000 2,622,116 Nippon Telegraph & Telephone Corp. Ord. 204 1,677,096 Nippon Yakin Kogyo Co. Ltd. (a) 158,000 696,683 Nishimatsu Construction 125,000 1,408,554 Nitto Denko Corp. 100,000 1,597,178 Nomura Securities Co. Ltd. 100,000 1,832,345 Ohkura Electric Co. Ltd. (a) 40,000 356,670 Oliver Corp. (warrants) (a) 2,000 140,783 Olympus Optical Co. Ltd. 100,000 935,770 Omron Corp. 180,000 4,215,374 Ono Pharmaceutical Co. Ltd. 15,000 595,267 Orix Corp. 22,000 776,052 Promise Co. Ltd. 48,900 1,930,988 Riso Kagaku Corp. 8,000 645,926 Rohm Co. Ltd. 10,000 608,495 Ryoyo Electro Corp. Ord. 25,000 585,469 Sampei Construction Co. Ltd. 3 22,282 San-In Godo Bank Ltd. 30,000 249,571 Sanyo Coca-Cola Bottling Co. Ltd. 45,000 608,495 Sekisui Chemical Co. Ltd. 130,000 1,694,185 Senshukai Co. Ltd. 31,000 583,215 Shikoku Coca-Cola Bottling Co. Ltd. 26,000 308,265 Shinkawa Ltd. 35,000 1,251,776 Sony Corp. 60,500 2,726,961 Sumitomo Chemical Co. Ltd. (warrants) (a) 1,100 110,886 SHARES VALUE (NOTE 1) Sumitomo Metal Mining Co. Ltd. (warrants) (a) 707 $ 1,042,825 Sumitomo Rubber Industries Ltd. 140,000 1,118,025 Sumitomo Sitix Corp. 200,000 3,586,302 Super Daiei Co. Ltd. 12,000 117,584 Taikisha Ltd. 77,000 1,229,827 Takara Co. Ltd. 123,000 952,134 Takuma Co. Ltd. 197,000 2,509,431 Tanseisha Co. Ltd. 30,000 283,671 Tasaki Shinju Co. Ltd. Ord. 50,000 480,133 Techno Ryowa Ltd. 27,000 505,316 Tobu Railway Co. Ltd. (warrants) (a) 2,250 421,875 Tohoku Telecommunications Construction Co. Ltd. 20,000 100,338 Tokyo Kososushi Co. Ltd. 29,000 284,161 Tokyo Securities Co. Ltd. 150,000 604,086 Tokyo Style Co. Ltd. 50,000 759,394 Toshiba Chemical Corp. 91,000 753,466 Toshiba Corp. 500,000 3,630,395 Toshoku Co. Ltd. 93,000 470,217 Towa Pharmaceutical Co. Ltd. 11,000 517,368 Toyo Communication Equipment Ltd. 60,000 1,117,045 Uni Charm Corp. Ord. 11,000 247,906 Wako Electric Co. Ltd. 30,000 723,139 Yamaha Corp. 100,000 1,597,178 Yamanouchi Pharmaceutical Co. Ltd. 40,000 893,636 Yoshinoya D&C Co. Ltd. Ord. 70 1,111,166 124,985,799 KOREA (SOUTH) - 5.0% Boram Bank 37,130 553,201 Boram Securities Co. Ltd. 25,000 457,427 Cheil Investment Finance (a) 30,000 595,961 Coryo Securities (a) 100,000 1,816,637 Daewoo Electronics (a) 41,200 549,226 Daewoo Electronics (New) (a) 2,050 26,122 Daeyu Securities 71,820 1,182,685 Dong Ah Construction Industries Co. Ltd. 21,277 853,694 Hanil Development Co. (a) 48,141 1,176,549 Hanshin Securities Co. Ltd. 466 10,414 Kia Motors Corp. GDR (a)(b) 71,500 1,698,125 Kolon Industries, Inc. (a) 197 6,269 Miwon Co. Ltd. 26,806 770,740 Namsung Corp. 53,560 1,063,990 Nong Shim Co. (a) 26,857 975,788 Sam Yang Co. Ltd. (warrants) (a) 300 45,000 Ssangyong Cement Co. 19,712 607,989 Ssangyong Investment & Securities Co. Ltd. 47,061 971,788 Tong Yang Investment & Finance Co. Ltd. 47,999 928,426 Tong Yang Securities Co. Ltd. 21,012 340,520 Yukong Ltd. 26,504 997,602 Yukong Ltd. (new) 3,175 115,356 15,743,509 MALAYSIA - 9.0% Affin Holdings BHD 415,000 783,866 Berjaya Simger BHD 187,000 168,512 Berjaya Sports Toto BHD 1,738,000 3,624,752 CHG Industries BHD 176,000 277,029 DCB Holdings BHD 284,000 804,643 DCB Holdings BHD (warrants) (a) 125,000 134,776 General Lumber Fabric & Building BHD 155,000 240,315 Genting BHD 247,000 2,128,598 Genting International 1,176,000 1,893,360 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MALAYSIA - CONTINUED Golden Pharos BHD 112,000 $ 197,446 Leader Universal Holdings BHD 250,000 673,881 Lion Land BHD 2,325,000 2,515,986 Malaya Glass BHD (a) 50,000 157,403 Metacorp BHD 137,000 347,723 Multi-Purpose Holdings BHD 200,000 267,585 New Straits Times Press BHD 350,000 1,101,820 Pacific & Orient BHD (a) 274,000 749,356 Petronas Gas BHD (a) 175,000 592,228 Petronas Gas BHD (warrants) (a) 136,000 237,615 Phileo Allied BHD 300,000 1,263,158 Public Bank BHD (For. Reg.) 1,108,000 1,962,027 Resorts World BHD 332,000 1,619,990 Rothmans of Pall Mall Malaysia BHD 200,000 1,479,587 Sungei Way Holdings BHD 200,000 672,897 Sungei Way Holdings BHD (warrants) (a) 62,500 73,783 Sunway Building Technology 135,000 361,240 Tan Chong Motor Holdings BHD 2,332,000 2,193,204 Tanjong PLC (Mlay Reg.) 37,000 93,182 Timah Langat BHD 80,000 409,247 Worldwide Holdings BHD (a) 1,000 1,181 YTL Corp. BHD 200,000 1,086,080 28,112,470 NEW ZEALAND - 0.6% Brierley Investments Ltd. 2,153,738 1,674,154 U-Bix Business Machines Ltd. 105,858 66,945 1,741,099 PAKISTAN - 0.8% Adamjee Insurance Ltd. 149,400 461,092 Bank of Punjab (a) 42,900 33,852 National Development Leasing Corp. 609,871 329,881 Pakistan International Airlines (a) 272,250 70,960 Pakistan State Oil Co. Ltd. 141,336 1,459,840 Pakistan Suzuki Motors Ltd. (a) 52,000 41,146 2,396,771 PHILIPPINES - 2.7% Aboitiz Equity Ventures, Inc. (a) 1,700,000 323,529 Ayala Corp. Class B 336,000 342,330 Ayala Land, Inc. Class B 1,280,375 1,476,788 Benpress Holdings Corp. GDR (a) 126,842 729,342 Filinvest Land, Inc. ORD (a) 1,875,000 504,614 JG Summit Holdings, Inc. Class B 2,450,000 687,620 Manila Mining Corp. Class B 26,635,000 71,683 Megaworld Properties & Holdings, Inc. (a) 750,000 374,856 Meralco Class B 350,000 2,610,534 Metro Pacific, Inc. Class B 750,000 108,131 Oriental Petroleum & Mineral Corp. Class B (a) 14,399,991 9,412 Oriental Petroleum & Mineral Corp. Class B (rights) (a) 8,207,994 2,209 Philex Mining Corp. (a) 2,389,000 275,548 SM Prime Holdings, Inc. (a) 536,900 144,494 Universal Robina Corp. 1,540,600 636,734 8,297,824 SINGAPORE - 4.4% Bukit Sembawang Estates Ltd. 35,000 747,525 Clipsal Industries Ltd. 1,100,000 2,695,000 Courts Singapore Ltd. 890,000 1,258,840 Development Bank of Singapore Ltd. (For. Reg.) 21,000 240,594 SHARES VALUE (NOTE 1) Far East-Levingston Shipbuilding Ltd. 200,000 $ 862,801 First Capital Corp. Ltd. 252,000 680,792 Hotel Properties Ltd. (warrants) (a) 90,000 79,562 Marco Polo Developments Ltd. 745,000 895,686 Parkway Holdings Ltd. (warrants) (a) 550,000 700,141 Robinson & Co. Ltd. 95,000 403,112 United Industrial Corp. Ltd. 900,000 801,980 United Overseas Bank Ltd.: (For. Reg.) 150,000 1,315,417 (warrants) (a) 263,151 986,351 United Overseas Land Ltd. 850,000 1,526,874 United Overseas Land Ltd. (warrants) (a) 501,000 368,487 13,563,162 SRI LANKA - 1.0% Associated Motorways Ltd. 13,500 11,881 Ceylon Tea Services Ltd. 215,000 336,397 Development Finance Corp. of Ceylon (a) 286,577 1,692,671 Distilleries Co. of Sri Lanka 2,542,000 335,586 John Keells Holdings Ltd. GDR (b) 70,000 455,000 Kelani Tyres Ltd. (Loc. Reg.) (a) 279,600 73,824 National Development Bank 47,000 202,230 3,107,589 TAIWAN (FREE CHINA) - 0.7% Yageo Corp. GDR (a)(b) 210,236 2,154,919 THAILAND - 7.2% Asia Fiber Co. PCL (For. Reg.) 283,700 180,378 Asia Securities Trading (For. Reg.) 255,200 699,734 Ban Chang Group PCL (For. Reg.) (a) 1,500,150 596,126 Bangchak Petroleum PCL (For. Reg.) (a) 750,000 1,058,017 Bangkok Metropolitan Bank PCL (For. Reg.) 1,019,033 1,012,352 Bangkok Steel Industry Co. Ltd.: (For. Reg.) 50,600 54,792 (rights) (a) 250,000 72,025 Central Pattana PCL (For. Reg.) 100,000 357,640 Dhana Siam Finance & Securities PCL (For. Reg.) 42,000 201,947 Eastern Star Real Estate Co. Ltd. (For. Reg.) (a) 1,137,200 474,492 Finance One PCL (For. Reg.) 245,000 1,509,040 First Bangkok City Bank PCL (For. Reg.) 500,000 437,115 Five Star Property Co. Ltd. (For. Reg.) 200,000 715,279 Goodyear (Thailand) Ltd. 23,600 219,448 International Engineering PCL (For. Reg.) 81,000 386,251 Kiatnakin Finance & Securities PCL: (For. Reg.) 376,000 1,157,957 (warrants) (a) 7,600 - Krisda Mahanakorn Co. PCL (For. Reg.) 188,500 346,439 Kr Precision PCL (a): (For. Reg.) 140,600 1,016,857 (Loc. Reg.) 5,700 39,865 Krung Thai Bank (For. Reg.) 200,110 795,192 Land & House PCL (For. Reg.) 145,000 2,339,360 Lanna Lignite PCL (For. Reg.) 90,000 650,904 MDX PCL (For. Reg.) 200,000 363,600 Padaeng Industry Co. Ltd. (For. Reg.) (a) 460,000 379,297 Phatra Thanakit PCL (For. Reg.) 60,400 472,831 Pizza PCL: (For. Reg.) 54,000 150,209 (warrants) (a) 21,100 13,625 Precious Shipping Ltd. (For. Reg.) 113,800 682,845 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) THAILAND - CONTINUED Quality Houses Co. Ltd. (For. Reg.) 68,100 $ 300,381 SCF Finance and Securities Co. Ltd. (rights) (a) 3,703 - Saha Union Corp. Ltd. (For. Reg.) 547,363 652,529 Siam Cement PCL (For. Reg.) 5,000 272,601 Siam City Bank PCL (For. Reg.) 500,000 635,804 Siam City Credit Finance and Securities Co. Ltd. (rights) (a) 2,941 - Siam Panich Leasing Ltd. (For. Reg.) 350,000 465,925 Thai German Ceramic Industry Co. Ltd. (For. Reg.) 302,500 853,467 Thai Military Bank Ltd. (For. Reg.) 76,200 299,773 Thai Petrochemical Industry (For. Reg.) 263,000 378,850 Thai President Food Ltd. (For. Reg.) 28,000 198,053 Thai Storage Battery PCL (For. Reg.) 344,200 1,060,024 United Communication Industry PCL (For. Reg.) 75,000 947,745 United Foods Co. Ltd. (For. Reg.) 114,200 80,550 22,529,319 UNITED KINGDOM - 0.2% Rowe Evans Investments PLC 438,369 748,270 TOTAL COMMON STOCKS (Cost $300,041,740) 290,387,682 NONCONVERTIBLE PREFERRED STOCKS - 0.2% KOREA (SOUTH) - 0.2% Dongbu Construction Co. Ltd. 10,910 129,754 Hanshin Securities Co. Ltd. 23,320 313,920 Kolon Industries, Inc. 9,882 158,856 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $1,045,317) 602,530 CLOSED-END INVESTMENT COMPANIES - 1.9% INDIA - 0.3% Himalayan Fund NV ISI (a) 67,299 $ 868,157 Himalayan Fund NV ISI (warrants) (a) 13,459 6,730 874,887 INDONESIA - 0.2% Indonesia Development Fund Ltd. (SG) 70,000 518,000 SINGAPORE - 0.3% Singapore SESDAQ Fund Ltd. (a) 50,000 875,000 TAIWAN (FREE CHINA) - 0.1% R.O.C. Taiwan Fund (SBI) (a) 52,500 505,313 THAILAND - 1.0% Kamrai Tawee Capital Fund (For. Reg.) 947,900 800,432 Ruang Khao Unit Trust (For. Reg.) 2,000,200 1,152,509 Thai Prime Fund 75,000 1,125,000 3,077,941 TOTAL CLOSED-END INVESMENT COMPANIES (Cost $5,196,607) 5,851,141 CORPORATE BONDS - 1.5% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) CONVERTIBLE BONDS - 1.2% HONG KONG - 0.3% Lai Fung Overseas Finance Ltd. euro 5.5%, 2/5/98 (d) - $500,000 $ 405,000 Stelux Holdings Ltd. 1 3/4%, 3/31/01 - CHF 2,000,000 655,521 1,060,521 INDONESIA - 0.7% Inti Indorayon Utama PT 7%, 5/2/06 - 2,600,000 2,093,000 Modernland Realty Ltd. 6%, 10/20/03 - IDR 247,000 208,824 2,301,824 THAILAND - 0.2% Kiatnakin Finance & Securities euro 4%, 11/30/03 - 1,000,000 $ 690,000 TOTAL CONVERTIBLE BONDS 4,052,345 NONCONVERTIBLE BONDS - 0.3% HONG KONG - 0.2% HKR International Ltd. 6%, 6/26/00 - 5,063,100 540,279 THAILAND - 0.1% Finance One PCL 3 3/4%, 3/15/01 (For. Reg.) - THB 818 22,459 Thai German Ceramic Industry Co. Ltd. 3%, 7/08/99 - THB 666 196,138 218,597 TOTAL NONCONVERTIBLE BONDS 758,876 TOTAL CORPORATE BONDS (Cost $6,170,394) 4,811,221 REPURCHASE AGREEMENTS - 3.3% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 10,176,662 10,175,000 TOTAL INVESTMENTS IN SECURITIES - 100% (Cost $322,629,058) $ 311,827,574 CURRENCY ABBREVIATIONS IDR - Indonesian rupiah CHF - Swiss franc THB - Thai baht LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $7,603,513 or 2.4% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $258,142,965 and $417,900,522, respectively. The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $8,540,000 and $4,671,688, respectively. The weighted average interest rate was 6.1% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $323,024,371. Net unrealized depreciation aggregated $11,196,797, of which $32,688,192 related to appreciated investment securities and $43,884,989 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $10,407,000 all of which will expire on October 31, 2003. For the period, interest and dividends from foreign countries were $7,418,304 or $0.35 per share. Taxes accrued or paid to foreign countries were $917,627 or $0.04 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.9% Basic Industries 8.2 Conglomerates 0.2 Construction & Real Estate 11.8 Durables 8.5 Energy 4.4 Finance 14.8 Health 1.4 Holding Companies 3.2 Industrial Machinery & Equipment 6.6 Media & Leisure 5.5 Nondurables 7.0 Precious Metals 0.8 Repurchase Agreements 3.3 Retail & Wholesale 5.3 Services 1.8 Technology 11.0 Transportation 3.4 Utilities 1.9 100.0% PACIFIC BASIN FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $10,175,000) (cost $322,629,058) - $ 311,827,574 See accompanying schedule Cash 17,125 Receivable for investments sold 8,497,400 Receivable for fund shares sold 740,554 Dividends receivable 811,228 Interest receivable 165,864 Redemption fees receivable 39 TOTAL ASSETS 322,059,784 LIABILITIES Payable for investments purchased $ 2,377,533 Payable for fund shares redeemed 1,472,966 Accrued management fee 218,257 Other payables and accrued expenses 356,113 TOTAL LIABILITIES 4,424,869 NET ASSETS $ 317,634,915 Net Assets consist of: Paid in capital $ 339,411,057 Distributions in excess of net investment income (67,351 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (10,897,267 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies (10,811,524 ) NET ASSETS, for 21,349,709 shares outstanding $ 317,634,915 NET ASSET VALUE and redemption price per share ($317,634,915 (divided by) 21,349,709 shares) $14.88 Maximum offering price per share (100/97.00 of $14.88) $15.34
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 6,690,016 Dividends Interest 1,346,680 8,036,696 Less foreign taxes withheld (917,627 ) TOTAL INCOME 7,119,069 EXPENSES Management fee $ 3,097,739 Basic fee Performance adjustment 86,567 Transfer agent Fees 1,511,728 Redemption fees (10,810 ) Accounting fees and expenses 243,546 Non-interested trustees' compensation 5,845 Custodian fees and expenses 449,157 Registration fees 90,662 Audit 43,974 Legal 21,312 Interest 13,953 Miscellaneous 6,302 Toal expenses before reductions 5,559,975 Expense reductions (231,426 5,328,549 ) NET INVESTMENT INCOME 1,790,520 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (10,062,827 ) Foreign currency transactions 3,639 (10,059,188 ) Change in net unrealized appreciation (depreciation) on: Investment securities (70,780,567 ) Assets and liabilities in foreign (20,949 (70,801,516 currencies ) ) NET GAIN (LOSS) (80,860,704 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (79,070,184 ) OTHER INFORMATION $94,810 Sales charges paid to FDC Deferred sales charges withheld $10,008 by FDC Accounting fees paid to FSC $242,212
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 1,790,520 $ 227,067 Net investment income Net realized gain (loss) (10,059,188) 95,892,182 Change in net unrealized appreciation (depreciation) (70,801,516) (23,604,018) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (79,070,184) 72,515,231 Distributions to shareholders - (256,048) From net investment income In excess of net investment income (583,259) (2,801,167) From net realized gain (52,235,883) (6,809,163) TOTAL DISTRIBUTIONS (52,819,142) (9,866,378) Share transactions 535,543,498 965,069,943 Net proceeds from sales of shares Reinvestment of distributions 51,819,678 9,613,028 Cost of shares redeemed (691,649,929) (977,332,983) Redemption fees 278,855 - NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (104,007,898) (2,650,012) TOTAL INCREASE (DECREASE) IN NET ASSETS (235,897,224) 59,998,841 NET ASSETS 553,532,139 493,533,298 Beginning of period End of period (including distributions in excess of net investment income of $67,351 $ 317,634,915 $ 553,532,139 and $352,101, respectively) OTHER INFORMATION 34,934,955 51,298,442 Shares Sold Issued in reinvestment of distributions 3,265,306 566,134 Redeemed (44,583,739) (52,364,846) Net increase (decrease) (6,383,478) (500,270)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 E 1993 1992 1991 D
Net asset value, beginning of period $ 19.96 $ 17.48 $ 12.00 $ 13.15 $ 12.89 Income from Investment Operations .07 C .10 .20 .08 C .02 C Net investment income Net realized and unrealized gain (loss) (3.12) 2.78 5.39 (1.23) .40 Total from investment operations (3.05) 2.88 5.59 (1.15) .42 Less Distributions - (.01) (.11) - (.16) From net investment income In excess of net investment income (.02) (.11) - - - From net realized gain (2.02) (.28) - - - Total distributions (2.04) (.40) (.11) - (.16) Redemption fees added to paid in capital .01 - - - - Net asset value, end of period $ 14.88 $ 19.96 $ 17.48 $ 12.00 $ 13.15 TOTAL RETURN A, B (15.87)% 16.88% 47.06% (8.75)% 3.37% RATIOS AND SUPPLEMENTAL DATA $ 317,635 $ 553,532 $ 493,533 $ 116,277 $ 95,051 Net assets, end of period (000 omitted) Ratio of expenses to average net assets 1.32% 1.54% 1.59% 1.84% 1.88% F Ratio of net investment income to average net assets .44% .04% .15% .65% .12% Portfolio turnover rate 65% 88% 77% 105% 143% A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS.) C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D AS OF NOVEMBER 1, 1991 THE FUND DISCONTINUED THE USE OF EQUALIZATION ACCOUNTING. E EFFECTIVE NOVEMBER 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 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.
SOUTHEAST ASIA 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The fund has a 3% sales charge. CUMULATIVE TOTAL RETURNS PERIOD ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND SOUTHEAST ASIA -5.00% 39.46% SOUTHEAST ASIA (INCL. 3% SALES CHARGE) -7.85% 35.27% Morgan Stanley Far East ex-Japan Free Index -7.54% 52.02% Average Pacific Region Fund -10.49% 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 April 19, 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 the performance of the Morgan Stanley Far East ex-Japan Free index, a broad measure of the performance of stocks in the Far East region, excluding Japan. The index is weighted by each country's market capitalization (or the total value of its outstanding shares). To measure how the fund's performance stacked up against its peers, you can compare it to the average Pacific region fund, which reflects the performance of 34 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIOD ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND SOUTHEAST ASIA -5.00% 14.01% SOUTHEAST ASIA (INCL. 3% SALES CHARGE) -7.85% 12.65% Morgan Stanley Far East ex-Japan Free Index -7.54% 17.95% Average Pacific Region Fund -10.49% 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 SoutheaMorgan Stanley E 04/19/93 9700.00 10000.00 04/30/93 9651.50 10378.31 05/31/93 10078.30 10975.91 06/30/93 9835.80 10687.54 07/31/93 9826.10 10760.98 08/31/93 10543.90 11661.43 09/30/93 10873.70 12024.42 10/31/93 12842.80 14239.20 11/30/93 13240.50 14143.38 12/31/93 15992.99 17581.63 01/31/94 14696.78 16380.67 02/28/94 14004.83 15439.89 03/31/94 12221.33 13760.40 04/30/94 12533.20 14408.66 05/31/94 13069.22 15023.00 06/30/94 12299.30 14355.17 07/31/94 12952.27 15156.89 08/31/94 14141.27 16391.33 09/30/94 14131.52 16127.43 10/31/94 14238.73 16440.91 11/30/94 12845.07 14875.07 12/31/94 12513.71 14507.62 01/31/95 11198.01 12951.63 02/28/95 12162.86 14260.59 03/31/95 12318.79 14329.01 04/30/95 12309.04 14193.40 05/31/95 13712.45 15922.73 06/30/95 13702.71 15683.30 07/31/95 14053.56 15930.93 08/31/95 13507.79 15172.95 09/30/95 13683.21 15436.24 10/31/95 13527.28 15201.74 Let's say you invested $10,000 in Fidelity Southeast Asia Fund on April 19, 1993, when the fund started. By October 31, 1995, the value of your investment would have grown to $13,527 - a 35.27% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley Far East ex-Japan Free index, which would have grown to $15,202 over the same period - a 52.02% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) SOUTHEAST ASIA FUND TALK: THE MANAGER'S OVERVIEW An interview with Allan Liu, Portfolio Manager of Fidelity Southeast Asia Fund Q. HOW DID THE FUND PERFORM, ALLAN? A. We've seen some improvement in the Southeast Asian markets during recent months, and the fund's performance reflects that. The fund outpaced both its peers and its benchmark. For the 12 months ended October 31, 1995, the fund returned -5.00%. This was better than the Morgan Stanley Far East ex-Japan Free Index, which returned -7.54% and better than the average Pacific region fund, which returned -10.49%, according to Lipper Analytical Services. Q. THE YEAR GOT OFF TO A ROCKY START . . . A. Yes, and from the end of 1994 through April of this year most Southeast Asian markets suffered a serious setback. That was especially true in January when many investors became concerned that the economic crisis in Mexico - set off by the devaluation of the Mexican peso - might repeat itself in other emerging markets across the globe. What followed was a large outflow of money from the Southeast Asian markets as many investors questioned whether or not these countries would be forced to follow suit. In some cases, a lack of investor confidence caused central banks in Southeast Asia to raise their domestic interest rates in an effort to support their own currencies. That had a fairly negative impact on the markets. Q. YET OVER THE PAST SIX MONTHS, MANY OF THE REGION'S MARKETS HAVE PERFORMED BETTER. WHAT CHANGED? A. It's important to remember that markets in this part of the world are extremely sensitive to changes in interest rates, investor confidence and fund flows. One positive that helped these markets was the fact that after a while, interest rates started to come down again. And generally speaking, there is a high correlation between the region's currencies and the U.S. dollar. And as the dollar strengthened, so did many regional currencies, effectively eliminating the need to raise interest rates higher. Q. CAN YOU TELL US HOW INDIVIDUAL MARKETS PERFORMED OVER THE PAST SIX MONTHS? A. Sure. Prospective interest rate cuts in the United States and improving sentiment toward China helped to fuel the Hong Kong market. But Thailand, too, is sensitive to changes in U.S. interest rates, and the Thai market performed poorly. There, the positive effect of lower interest rates was more than offset by political transition as a new coalition government took control. Malaysian stocks suffered from concerns over a widening current account deficit and rising inflation. The balance of the markets in the region were generally flat to down, as investors remained on the sidelines due to a lack of major market-moving news. Q. WHAT HELPED THE FUND PERFORM BETTER THAN THE AVERAGE? A. It's difficult to say for sure, but I suspect that it came down to individual stock selection, rather than market selection. One good example is Indonesian cigarette manufacturer Sampoerna, the fund's second largest holding as of October 31, 1995. The company recently reported that net profits for the first six months of the year were up more than 50%. As a result, the stock rose and made a significant contribution to the fund. The company has been well positioned in the premium cigarette market and gained market share in the low tar segment. It also has achieved high sales growth through expanding capacity and price increases. Hutchison Whampoa, which is a Hong Kong-based conglomerate, was the fund's largest holding at the end of the period and was up more than 19% during the past year. The company has had strong property earnings and also owns container terminals and telecommunications operations. In addition to its Hong Kong container terminals, it operates container terminals in China, which I believe could have tremendous long-term growth potential. Finally, two additional Hong-Kong property companies, Sun Hung Kai Properties and Cheung Kong Holdings, gained from improved earnings prospects and expectations of declining U.S. interest rates. Q. HAVE YOU FOUND ANY WAYS TO PLAY THE OPENING OF MAINLAND CHINA? A. Yes, through the addition of Hong Kong-based Goldlion. This menswear wholesaler is experiencing explosive sales growth in mainland China. And, its new tobacco division also could do well in the Chinese market, with its smoking population exceeding 300 million people. Q. HOW HAVE THE FUND'S KOREAN HOLDINGS FARED? A. In the third quarter of 1995, the Korean market performed well due to more moderate economic growth and a slowdown in capital investment that is expected to improve the country's current account balance. One standout was Korean-based Samsung Electronics, currently the world's largest dynamic random-access memory (DRAM) manufacturer. Its higher-than-expected sales and earnings were due to high volume and prices. The company has a competitive edge over Japanese DRAM producers due to the lower costs. At the end of the period, the fund had a heavier weighting - relative to its benchmark in Korean stocks. Q. WERE THERE ANY STOCKS THAT DISAPPOINTED? A. Malaysian Airlines Systems shares were negatively affected by a recent plane crash, despite better-than-expected operating margins. I continued to underweight Malaysian holdings in general throughout the period, compared to the benchmark, because their relative valuations were high and there were concerns about inflation and widening current account deficits. But after a period of market consolidation in the fall, more Malaysian stocks began to look attractive from a valuation standpoint. As a result, I have recently found good buying opportunities among high-quality stocks. One example is Berjaya Sports Toto, a number forecast operator that is benefiting from growing gambling demand in Malaysia. Q. SOME BELIEVE THAT THAILAND WILL CONTINUE TO BE CHALLENGED BY ECONOMIC AND POLITICAL UNCERTAINTY. WHAT'S YOUR VIEW? A. I don't share the same concerns, and Thailand holdings accounted for 23.5% of the fund's holdings at the end of the period. I'm not particularly worried about the country's economy, which I believe is strong. I regard its relatively high rate of inflation as a short-term problem caused primarily by food price increases. As a result, I have continued to overweight the Thai market. Two of my favorites in this area are Thai banks Krung Thai Bank and Bangkok Bank. When I bought these stocks, they were attractively priced and could perform well with improving operational efficiency. Also, these companies help serve as a proxy for the growth of the Thailand economy, which is growing 8%-9% per year. Q. WHAT WILL YOUR STRATEGY BE OVER THE NEXT SIX MONTHS? A. I expect Hong Kong and Thailand to continue to play an important role in my strategy going forward. I expect that investors will look at Hong Kong as a proxy for investing in China. While some have been concerned about inflation in China, there have been encouraging indications that the country will experience a "soft landing," in which growth is moderate and inflation is low. I also think that there could be renewed interest in Thailand. While there has been some recent political uncertainty of late, it is fairly common for Thailand's coalition government to change on average less than every two years. What we've learned over time is that change in government hasn't had any significant impact on Thailand's economic growth. 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: long-term growth of capital by investing mainly in equity securities of Southeast Asian issuers. The fund does not anticipate investing in Japan START DATE: April 19, 1993 SIZE: as of October 31, 1995, more than $649 million MANAGER: Allan Liu, since 1993; manager, various funds for non-U.S. investors; analyst, Southeast Asian markets, 1987-1990; joined Fidelity in 1987 (checkmark) ALLAN LIU'S OUTLOOK FOR SOUTHEAST ASIAN MARKETS: "It's very hard to say what we'll see over the next six months. From a fundamental viewpoint, we are seeing more and more values arising in Southeast Asian equity markets. From an economic standpoint, growth is still quite good. Some countries - like Malaysia and the Philippines - are showing signs of overheating, but I don't believe they are in danger of collapsing. Interest rates might have to rise a bit in these countries and credit may need to be tightened, but I don't think it's the end of the world. "In general, there's still a lack of interest in these markets from overseas investors on the back of the Mexican crisis and some macroeconomic issues. But given time, investors may give these markets a second look." (solid bullet) Major shifts: Finance, the fund's largest sector concentration grew to 27.9% of investments at the end of the period, from 15.6% six months earlier. Transportation, meanwhile, dropped to 4.3% as of October 31, 1995, from 10.2% six months earlier. SOUTHEAST ASIA INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 United States 3.0% Row: 1, Col: 1, Value: 3.0 Row: 1, Col: 2, Value: 23.5 Row: 1, Col: 3, Value: 8.9 Row: 1, Col: 4, Value: 3.4 Row: 1, Col: 5, Value: 1.3 Row: 1, Col: 6, Value: 16.8 Row: 1, Col: 7, Value: 8.0 Row: 1, Col: 8, Value: 7.1 Row: 1, Col: 9, Value: 28.0 Row: 1, Col: 10, Value: 0.0 Thailand 23.5% Hong Kong 28.0% Indonesia 7.1% Singapore 8.9% Philippines 3.4% Other 1.3% Korea (South) 8.0% Malaysia 16.8% AS OF APRIL 30, 1995 United States 4.4% Row: 1, Col: 1, Value: 4.4 Row: 1, Col: 2, Value: 18.7 Row: 1, Col: 3, Value: 17.3 Row: 1, Col: 4, Value: 3.7 Row: 1, Col: 5, Value: 1.2 Row: 1, Col: 6, Value: 13.9 Row: 1, Col: 7, Value: 12.8 Row: 1, Col: 8, Value: 8.300000000000001 Row: 1, Col: 9, Value: 19.7 Hong Kong 20.0% Thailand 18.7% Indonesia 8.3% Singapore 17.0% Korea (South) 12.8% Philippines 3.7% Malaysia 13.9% Other 1.2% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks 97.0 95.4 Bonds 0.0 0.2 Short-term investments 3.0 4.4 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Hutchison Whampoa Ltd. Ord. 4.1 4.0 (Hong Kong, Electrical Equipment) Sampoerna Hanjaya Mandala (For. Reg.) 3.7 3.7 (Indonesia, Tobacco) HSBC Holdings PLC 3.4 1.1 (Hong Kong, Banks) Samsung Electronics Co. Ltd. (vtg.) 3.0 3.1 (Korea (South), Electronics) Sun Hung Kai Properties Ltd. 2.3 3.1 (Hong Kong, Real Estate) Development Bank of Singapore 2.2 2.6 Ltd. (For. Reg.) (Singapore, Banks) Krung Thai Bank (For. Reg.) 2.1 1.0 (Thailand, Banks) Goldlion Holdings 1.9 0.0 (Hong Kong, Apparel Stores) Malaysian Airlines Systems BHD 1.9 2.8 (Malaysia, Air Transportation) Cheung Kong Holdings Ltd. 1.8 1.3 (Hong Kong, Real Estate) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 27.9 15.6 Utilities 17.0 15.8 Construction & Real Estate 14.0 16.9 Nondurables 5.9 5.3 Technology 5.6 4.6 Industrial Machinery & Equipment 5.3 6.3 Transportation 4.3 10.2 Media & Leisure 4.2 5.9 Energy 2.5 1.8 Retail & Wholesale 2.4 1.9 SOUTHEAST ASIA INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.9% SHARES VALUE (NOTE 1) CHINA (PEOPLES REP) - 1.3% Huaneng Power International, Inc. Class N sponsored ADR (a) 495,250 $ 8,233,531 HONG KONG - 28.0% Bank of East Asia 400,000 1,409,853 Cheung Kong Holdings Ltd. 2,100,000 11,842,769 China Light & Power Co. Ltd. 1,711,000 9,117,897 Citic Pacific Ltd. Ord. 980,000 3,061,193 Consolidated Electric Power Asia Ltd. 4,443,000 8,993,694 Dah Sing Financial Holdings Ltd. 920,000 2,082,444 Dao Heng Bank Group Ltd. 921,000 3,377,226 First Pacific Co. Ltd. 5,298,705 6,099,682 Goldlion Holdings 22,220,000 12,645,740 Great Eagle Holdings Ltd. 900,000 2,467,890 Guangnan Holdings 11,069,000 3,543,489 Guangzhou Investment Co. Ltd. 12,000,000 2,467,890 HKR International Ltd. 1,600,000 1,386,572 HSBC Holdings PLC 1,524,786 22,187,527 Hang Seng Bank 502,000 4,204,274 Harbour Ring International Holdings Ltd. (warrants) (a) 333 4 Henderson Investment Ltd. (warrants) (a) 164,000 8,697 Henderson Land Development Co. Ltd. 100,000 598,864 Hong Kong & China Gas Co. Ltd. 2,125,000 3,449,452 Hong Kong Electric Holdings Ord. 1,860,000 6,327,267 Hong Kong Telecommunications Ltd. 3,800,000 6,635,365 Hopewell Holdings Ltd. 1,000,000 630,554 Hutchison Whampoa Ltd. Ord. 4,880,000 26,889,139 Hysan Development Co. Ltd. 2,080,000 5,300,014 New World Development Co. 780,000 3,036,747 New World Infrastructure Ltd. 1,300 2,287 New World Infrastructure Ltd. (b) 800,000 1,407,267 Sun Hung Kai Properties Ltd. 1,908,000 15,239,222 Swire Pacific Ltd. Class A 1,204,000 9,032,375 Varitronix International Ltd. 1,932,000 3,685,926 Wharf Holdings Ltd. (b) 400,000 1,350,355 Wing Hang Bank Ltd. 800,000 2,576,540 Wo Kee Hong Holdings 3,000,000 593,691 181,651,906 INDONESIA - 7.1% Astra International PT (For. Reg.) 500,000 1,001,762 Bank Dagang Nas Indonesia PT 500,000 445,839 Bank Danamon PT (For. Reg.) 500,000 726,553 Bank International Indonesia PT Ord. 121,500 425,331 Bimantara Citra (For. Reg.) (a) 327,500 252,367 Gudang Garam PT Perusahaan 692,500 6,022,407 Indocement Tungaal Prakarsa PT (For. Reg.) 200,000 739,763 Indofood Sukses Makmur (For. Reg.) 400,000 1,849,407 Indosat (Indonesia Satellite) sponsored ADR 264,000 8,745,000 SUCACO PT 350,000 863,057 Sampoerna Hanjaya Mandala (For. Reg.) 2,600,000 24,042,291 Semen Gresik (For. Reg.) 400,000 1,039,191 46,152,968 KOREA (SOUTH) - 7.9% Daelim Industrial (RFD) (a) 8,344 173,390 Hyundai Engineering and Construction Co. Ltd. (RFD) 1,410 73,342 Hyundai Motor Co. GDR (a) (b) 68,000 1,173,000 Korea Electric Power Corp. 244,510 10,745,544 SHARES VALUE (NOTE 1) Korea First Securities Co. Ltd. 1 $ 15 Korea Mobile Telecommunications Corp. 8,700 7,707,654 Pohang Iron & Steel Co. Ltd. 63,055 5,982,374 Samsung Electronics Co. Ltd.: (bonus issued 3/95) (a) 20,698 4,558,077 GDS (b) 5,000 323,500 GDS (non-vtg.) (a) 5,343 343,822 GDS (vtg.) (a) 104 11,918 (New) (a) 1,646 356,026 (vtg.) 88,464 19,714,929 Samsung Engineering & Construction Co. (vtg.) GDR (a) 22 352 51,163,943 MALAYSIA - 16.8% Affin Holdings BHD 1,600,000 3,022,135 Arab Malaysian Corp. BHD 291,000 979,065 Berjaya Sports Toto BHD 5,475,833 11,420,330 Cement Manufacturers Sarawak 620,000 2,927,693 Commerce Asset Holding BHD 666,000 3,302,154 Crest Petroleum BHD (a) 200,000 391,933 EON (Edaran Otomobil Nasional) BHD 830,000 6,532,218 Econstates BHD 172,000 204,403 Ekran BHD Ord. 100,000 253,812 Genting BHD 810,000 6,980,423 Hong Leong Industries BHD 710,000 3,380,620 Jaya Tiasa Holdings BHD 95,000 284,112 Kian Joo Can Factory BHD 78,000 306,936 Kwong Yik Bank BHD 690,000 1,425,480 Magnum Corp. BHD 660,000 1,121,968 Malaysian Airlines Systems BHD 4,591,000 12,555,809 Malaysain Banking BHD 432,000 3,484,899 Malaysian Assurance Alliance BHD 720,000 2,918,249 Malaysian Pacific Industries Ord. 150,000 404,329 Multi-Purpose Holdings BHD 900,000 1,204,132 Nylex Malaysia SDN BHD 1,111,000 3,257,039 Oyl Industries BHD 23,000 172,868 Pacific & Orient BHD (a) 415,000 1,134,973 Petronas Gas BHD (a) 761,000 2,575,347 Petronas Gas BHD (warrants) (a) 627,000 1,095,477 Press Metal BHD 10,000 24,791 Prime Utilities BHD 330,000 3,051,648 Public Bank BHD (For. Reg.) 2,800,000 4,958,190 RJ Reynolds BHD 500,000 1,023,119 Resorts World BHD 1,990,000 9,710,182 Time Engineering BHD 2,800,000 7,161,830 United Engineers BHD 820,000 5,098,278 Wembley Industries Holdings BHD (a) 550,000 805,116 YTL Corp. BHD 977,000 5,305,499 YTL Corp. BHD (warrants) (a) 180,000 701,230 109,176,287 PHILIPPINES - 3.4% Benpress Holdings Corp. (a): GDR 80,520 462,990 GDR (b) 79,200 475,200 Filinvest Land, Inc. Ord. (a) 864,000 232,526 House of Investments, Inc. 4,398,000 963,806 Megaworld Properties & Holdings, Inc. (a) 4,000,000 1,999,231 Meralco Class B 526,232 3,924,991 Metropolitan Bank & Trust Co. 185,839 3,429,555 Petron Corp. 4,418,125 1,953,419 Philippine Long Distance Telephone Co. sponsored ADR 90,000 5,051,250 Philippine National Bank (a) 60 505 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PHILIPPINES - CONTINUED SM Prime Holdings, Inc. (a) 5,151,200 $ 1,386,329 Universal Robina Corp. 3,925,800 1,622,543 William Lines, Inc. (a) 3,000,000 888,120 22,390,465 SINGAPORE - 8.9% Cerebos Pacific Ltd. 66,000 410,750 City Developments Ltd. 400,400 2,477,723 Cycle & Carriage Ltd. 41,000 365,347 DBS Land Ltd. 200,000 591,231 Development Bank of Singapore Ltd. (For. Reg.) 1,250,000 14,321,075 Ipco International Ltd. 200,000 748,000 Keppel Corp. Ltd. 630,000 5,168,317 Malayan Credit Ltd. 100,000 183,168 Overseas Chinese Banking Corp. 40,000 469,590 Overseas Union Bank Ltd. (For. Reg.) 1,600,000 9,957,567 Singapore International Airlines Ltd. 300,000 2,779,349 Singapore Press Holdings Ltd. (For. Reg.) 526,800 8,233,579 Singapore Technologies Industrial Corp. Ltd. 800,000 1,454,031 Ssangyong Cement Ltd. 1,075,000 2,919,378 Straits Steamship Co. Ltd. Ord. 205,000 574,116 United Overseas Bank Ltd. (For. Reg.) 826,000 7,243,564 57,896,785 THAILAND - 23.5% Advanced Information Services (For. Reg.) 596,000 9,852,414 Asia Securities Trading (For. Reg.) 760,000 2,083,847 Ban pu Coal (For. Reg.) (a) 70,000 1,680,111 Bangkok Bank Ltd. 1,137,300 11,750,368 Bangkok Expressway PCL (For. Reg.) (a) 1,320,000 2,137,493 Bangkok Metropolitan Bank PCL (For. Reg.) 2,828,250 2,809,706 Dhana Siam Finance & Securities PCL: (For. Reg.) 1,567,900 7,538,879 (For. Reg.) (warrants) (a) 231,300 1,948,563 Dynamic Eastern Finance Thailand 1991 Co. Ltd. (For. Reg.) (a) 605,100 1,298,446 Ekachart Finance & Securities Co. Ltd. (For. Reg.) (warrants) (a) 20,280 32,638 Electricity Generating PCL (For. Reg.) (a) 1,575,860 5,385,415 Finance One PCL: (For. Reg.) 964,200 5,938,844 (For. Reg.) (warrants) (a) 350,350 2,283,227 General Finance & Securities PCL (For. Reg.) 600,000 2,670,376 Hemeraj Land & Development PCL (For. Reg.) (a) 73,500 318,359 Industrial Finance Corp. of Thailand (a): (For. Reg.) 400,000 1,311,345 Series F (warrants) (a) 700,000 980,529 Krung Thai Bank (For. Reg.) 3,395,110 13,491,397 National Finance & Securities PCL: (For. Reg.) 994,200 4,543,334 (warrants) (a) 160,000 95,371 National Petrochemical Co. (a) 1,100,000 2,600,835 Nava Finance & Securities PCL (For. Reg.) 800,100 2,209,694 Nithipat Capital PCL 480,000 1,468,707 Nithipat Capital PCL (warrants) (a) 80,000 - One Holding PCL (For. Reg.) 1,169,100 3,042,958 SHARES VALUE (NOTE 1) PTT Exploration & Production (For. Reg.) 658,000 $ 5,961,613 Phatra Thanakit PCL (For. Reg.) 627,500 4,912,279 Prime Finance & Securities (For. Reg.) (warrants) (a) 46,666 75,103 Property Perfect PCL: (For. Reg.) 258,400 2,053,646 (For. Reg.) (warrants) (a) 66,800 122,106 Quality Houses Co. Ltd. (For. Reg.) 156,600 690,745 Sammakorn Co. Ltd. (For. Reg.) 89,200 262,301 Seamico Securities PCL (For. Reg.) (a) 364,500 919,760 Securities One PCL: (For. Reg.) 268,200 2,408,631 (warrants) (a) 44,700 - Shinawatra Computer & Communication PCL (For. Reg.) 190,000 4,650,904 Siam Cement PCL (For. Reg.) 50,000 2,726,008 Siam Commercial Bank PCL (For. Reg.) 147,500 1,723,227 TPI Polene PCL (For. Reg.) 540,000 3,647,924 Telecomasia Corp. PCL (For. Reg.) (a) 2,127,300 6,297,789 Thai Airways International Ltd. (For. Reg.) 261,000 469,313 Thai Farmers Bank PCL 630,000 5,207,232 Thai Farmers Bank PCL (For. Reg.) (warrants) (a) 610,000 1,345,321 Thai Military Bank Ltd. (For. Reg.) 2,054,860 8,083,892 Thai Petrochemical Industry (For. Reg.) 753,300 1,085,123 Thai Telephone & Telecommunication PCL (For. Reg.) (a) 1,516,300 10,243,226 United Communication Industry PCL (For. Reg.) 100,000 1,263,660 Univest Land PCL (For. Reg.) 692,100 1,106,975 152,729,634 TOTAL COMMON STOCKS (Cost $586,860,398) 629,395,519 NONCONVERTIBLE PREFERRED STOCKS - 0.1% KOREA (SOUTH) - 0.1% Samsung Electronics Co. Ltd. (bonus issued 3/95) (Cost $333,903) 3,818 457,571 CONVERTIBLE BONDS - 0.0% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) KOREA (SOUTH) - 0.0% Shin Won Corp. euro 0.5%, 12/31/08 (Cost $350,000) - $ 350,000 346,500 REPURCHASE AGREEMENTS - 3.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 19,560,194 19,557,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $607,101,301) $ 649,756,590 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $4,729,322 or 0.7% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $599,225,620 and $716,864,396, respectively. INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $611,360,411. Net unrealized appreciation aggregated $38,396,179, of which $77,826,554 related to appreciated investment securities and $39,430,375 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $28,533,000 all of which will expire on October 31, 2003. For the period, interest and dividends from foreign countries were $12,776,206 or $0.27 per share. Taxes accrued or paid to foreign countries were $1,125,389 or $0.02 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investments in Securities Aerospace & Defense 0.8% Basic Industries 1.9 Construction & Real Estate 14.0 Durables 1.9 Energy 2.5 Finance 27.9 Holding Companies 2.2 Industrial Machinery & Equipment 5.3 Media & Leisure 4.2 Nondurables 5.9 Repurchase Agreements 3.0 Retail & Wholesale 2.4 Services 1.1 Technology 5.6 Transportation 4.3 Utilities 17.0 100.0% SOUTHEAST ASIA FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $19,557,000) (cost $607,101,301) - $ 649,756,590 See accompanying schedule Cash 42,447 Receivable for investments sold 2,383,548 Receivable for fund shares sold 826,220 Dividends receivable 734,390 Interest receivable 1,458 Redemption fees receivable 659 TOTAL ASSETS 653,745,312 LIABILITIES Payable for investments purchased $ 222,317 Payable for fund shares redeemed 2,759,076 Accrued management fee 341,888 Other payables and accrued expenses 553,987 TOTAL LIABILITIES 3,877,268 NET ASSETS $ 649,868,044 Net Assets consist of: Paid in capital $ 633,694,104 Undistributed net investment income 5,866,341 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (32,345,179 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 42,652,778 NET ASSETS, for 46,822,525 $ 649,868,044 shares outstanding NET ASSET VALUE, offering price $13.88 and redemption price per share ($649,868,044 (divided by) 46,822,525 shares) Maximum offering price per share $14.31 (100/97.00 of $13.88)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 12,662,952 Dividends Interest 1,784,084 14,447,036 Less foreign taxes withheld (1,125,389 ) TOTAL INCOME 13,321,647 EXPENSES Management fee $ 5,078,673 Basic fee Performance adjustment (1,128,697 ) Transfer agent Fees 1,982,805 Redemption fees (39,432 ) Accounting fees and expenses 350,985 Non-interested trustees' compensation 6,122 Custodian fees and expenses 907,276 Registration fees 76,448 Audit 55,056 Legal 28,269 Miscellaneous 7,602 TOTAL EXPENSES 7,325,107 NET INVESTMENT INCOME 5,996,540 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (20,531,025 ) Foreign currency transactions (521,246 (21,052,271 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities (40,275,024 ) Assets and liabilities in foreign currencies (9,081 (40,284,105 ) ) NET GAIN (LOSS) (61,336,376 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (55,339,836 ) OTHER INFORMATION $805,224 Sales charges paid to FDC Accounting fees paid to FSC $349,043
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 5,996,540 $ 1,794,901 Net investment income Net realized gain (loss) (21,052,271) 6,125,880 Change in net unrealized appreciation (depreciation) (40,284,105) 8,854,396 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (55,339,836) 16,775,177 Distributions to shareholders - (2,133,538) From net investment income In excess of net investment income - (1,834,307) TOTAL DISTRIBUTIONS - (3,967,845) Share transactions 315,850,011 1,349,887,034 Net proceeds from sales of shares Reinvestment of distributions - 3,847,389 Cost of shares redeemed (437,770,027) (1,048,177,751) Redemption fees 1,393,801 7,700,655 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (120,526,215) 313,257,327 TOTAL INCREASE (DECREASE) IN NET ASSETS (175,866,051) 326,064,659 NET ASSETS Beginning of period 825,734,095 499,669,436 End of period (including under (over) distribution of net investment income of $5,866,341 $ 649,868,044 $ 825,734,095 and $(1,366,477), respectively) OTHER INFORMATION Shares Sold 23,184,715 92,561,106 Issued in reinvestment of distributions - 259,959 Redeemed (32,874,037) (74,053,904) Net increase (decrease) (9,689,322) 18,767,161
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS YEARS ENDED APRIL 19, 1993 OCTOBER 31, (COMMENCEMENT OF OPERATIONS) TO SELECTED PER-SHARE DATA 1995 1994 B OCTOBER 31, 1993
Net asset value, beginning of period $ 14.61 $ 13.24 $ 10.00 Income from Investment Operations Net investment income .15 .04 .01 Net realized and unrealized gain (loss) (.91) 1.23 3.22 Total from investment operations (.76) 1.27 3.23 Less Distributions - (.04) - From net investment income In excess of net investment income - (.03) - Total distributions - (.07) - Redemption fees added to paid in capital .03 .17 .01 Net asset value, end of period $ 13.88 $ 14.61 $ 13.24 TOTAL RETURN A, C (5.00)% 10.87% 32.40% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 649,868 $ 825,734 $ 499,669 Ratio of expenses to average net assets 1.10% 1.47% 2.00% D, E Ratio of net investment income to average net assets .90% .22% .45% E Portfolio turnover rate 94% 157% 14% E A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. B EFFECTIVE NOVEMBER 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. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. D FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. E ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS For the period ended October 31, 1995 a SIGNIFICANT ACCOUNTING POLICIES. Fidelity Canada Fund, Fidelity Emerging Markets Fund, Fidelity Europe Fund, Fidelity Europe Capital Appreciation Fund, Fidelity Japan Fund, Fidelity Latin America Fund, Fidelity Pacific Basin Fund and Fidelity Southeast Asia Fund are funds of Fidelity Investment Trust. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Each fund is authorized to issue an unlimited number of shares. The following summarizes the significant accounting policies of the funds: 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. Korean equity securities that have reached the limit for aggregate foreign ownership and for which premiums to the local exchange prices may be paid by foreign investors are valued 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. Equity securities that have reached the limit for aggregate foreign ownership may trade at a premium to the local share price. If the broker-quoted premium is not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, 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, each 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. Each fund may be subject to foreign taxes on income, gains on investments or currency repatriation. Each fund accrues such taxes as applicable based upon its current interpretation of the tax rules and regulations that exist in markets in which it invests. The schedules of investments include 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 funds are informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Certain foreign currency gains (losses) are taxable as ordinary income and, therefore, increase (decrease) taxable ordinary income available for distribution. 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 transactions, foreign currency transactions, passive foreign investment companies (PFIC), capital loss carryforwards, and losses deferred due to wash sales and excise tax regulations. Certain funds also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income (loss) and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. REDEMPTION FEES. Shares held in Emerging Markets, Latin America and Southeast Asia less than 90 days are subject to a redemption fee equal to 1.50% of the proceeds of the redeemed shares. Shares held in Japan less than 90 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. In December 1994, the Board of Trustees of Pacific Basin approved a 1.00% redemption 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED REDEMPTION FEES - CONTINUED fee on shares held less than 90 days which is effective for shares purchased after April 15, 1995. In May 1995, the Board of Trustees of Canada, Europe and Europe Capital Appreciation approved a 1.00% redemption fee on shares held less than 90 days which is effective for shares purchased on or after September 1, 1995. In December 1995, The Board of Trustees of Canada and Japan approved a 1.50% redemption fee on shares held less than 90 days which is effective on shares purchased on or after February 1, 1996. 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 those funds and their 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 the trade date. Gains and losses on securities sold are determined on the basis of identified cost. b OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The funds may use foreign currency contracts to facilitate transactions in foreign securities and to manage the funds' currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the funds' investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the funds, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. FMR is responsible for determining that the value of these underlying securities remains at least equal to the resale price. FUTURES CONTRACTS AND OPTIONS. The funds may use futures and options contracts to manage their exposure to the stock and bond markets and to fluctuations in interest rates and currency values. Buying futures, writing puts, and buying calls tend to increase the funds' exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the funds' exposure to the underlying instrument, or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value is shown in the schedule of investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. INDEXED SECURITIES. The funds 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 funds use these securities to increase or decrease their 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 funds are permitted to invest in privately placed restricted securities. These securities 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. Restricted securities (excluding 144A issues) at the end of the period are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. c PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities) and the market value of futures contracts opened and closed is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. d FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2700% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED 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 each fund. The basic fee for Canada, Europe, Europe Capital Appreciation, Japan, Pacific Basin, and Southeast Asia is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) based on each fund's investment performance as compared to the appropriate index over a specified period of time. For the period, each fund's management fee was equivalent to the following annualized rates expressed as a percentage of average net assets after the performance adjustment, if applicable: Canada .72% Emerging Markets .77% Europe Capital Appreciation .85% Europe .80% Japan .66% Latin America .77% Pacific Basin .79% Southeast Asia .59% SUB-ADVISER FEE. FMR, on behalf of the funds, entered into sub-advisory agreements with affiliates of FMR. In addition, one of the sub-advisers, Fidelity International Investment Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary, Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the sub-advisory arrangements, FMR may receive investment advice and research services and may grant the sub-advisers investment management authority to buy and sell securities. FMR pays its sub-advisers either a portion of its management fee or a fee based on costs incurred for these services. FIIA pays FIIAL U.K. and FIIAL Japan a fee based on costs incurred for either service. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the funds. FDC is paid a 3% sales charge on sales of shares of each fund. Shares of Canada, Europe, and Pacific Basin purchased before October 12, 1990 are subject to a 1% deferred sales charge upon redemption. The amount received by FDC for sales charges and deferred sales charges is shown under the caption "Other Information" on each applicable fund's Statement of Operations. TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. During the period November 1, 1994 to December 31, 1994, FSC received fees based on the type, size, number of accounts and the number of transactions made by shareholders. 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. ACCOUNTING FEE. 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. The accounting and pricing fees paid to FSC are shown under the caption "Other Information" on each fund's Statement of Operations. BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. e TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Information regarding affiliated companies is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. f BANK BORROWINGS. Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, each 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 periods for which loans were outstanding are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. g EXPENSE REDUCTIONS. FMR directed certain portfolio trades to brokers who paid a portion of certain funds' expenses. For the period, the expenses of Canada, Emerging Markets, Europe Capital Appreciation, and Japan were reduced by $3,730, $2,769, $2,438, and $750, respectively, under this arrangement. In addition, FMR voluntarily agreed to reimburse a portion of operating expenses for certain funds. For the period, the reimbursement reduced expenses for Canada, Europe, and Pacific Basin by $197,748, $475,027, and $231,426, respectively. h CONCENTRATION OF RISK. The relatively large investments of Emerging Markets, Latin America, Pacific Basin and Southeast Asia 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 consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these funds' investments and the income they generate, as well as the fund's ability to repatriate such amounts. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Investment Trust and the Shareholders of: Fidelity Canada Fund, Fidelity Emerging Markets Fund, Fidelity Europe Fund, Fidelity Japan Fund, Fidelity Pacific Basin Fund: We have audited the accompanying statements of assets and liabilities of Fidelity Investment Trust: Fidelity Canada Fund, Fidelity Emerging Markets Fund, Fidelity Europe Fund, Fidelity Japan Fund, and Fidelity Pacific Basin Fund, including the schedules of portfolio investments, as of October 31, 1995, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated. 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 audits 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 October 31, 1995 by correspondence with the custodians 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 Canada Fund, Fidelity Emerging Markets Fund, Fidelity Europe Fund, Fidelity Japan Fund, and Fidelity Pacific Basin Fund as of October 31, 1995, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts December 20, 1995 REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Investment Trust and the Shareholders of: Fidelity Europe Capital Appreciation Fund, Fidelity Latin America Fund, Fidelity Southeast Asia Fund: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Europe Capital Appreciation Fund, Fidelity Latin America Fund and Fidelity Southeast Asia Fund (funds of Fidelity Investment Trust ) at October 31, 1995, the results of each of their operations for the period then ended, and the changes in each of their 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 Investment Trust'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 October 31, 1995 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts December 20, 1995 (2_FIDELITY_LOGOS)FIDELITY'S BROADLY DIVERSIFIED INTERNATIONAL EQUITY FUNDS FIDELITY INTERNATIONAL GROWTH & INCOME FUND FIDELITY DIVERSIFIED INTERNATIONAL FUND FIDELITY INTERNATIONAL VALUE FUND FIDELITY OVERSEAS FUND FIDELITY WORLDWIDE FUND ANNUAL REPORT FOR THE YEAR ENDING OCTOBER 31, 1995 AND PROSPECTUS DATED DECEMBER 30, 1995 CONTENTS
MARKET RECAP A REVIEW OF WHAT HAPPENED IN WORLD MARKETS DURING THE LAST YEAR. INTERNATIONAL GROWTH & INCOME FUND PERFORMANCE A-5 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-8 INVESTMENTS A-12 FINANCIAL STATEMENTS DIVERSIFIED INTERNATIONAL FUND PERFORMANCE A-15 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-18 INVESTMENTS A-22 FINANCIAL STATEMENTS INTERNATIONAL VALUE FUND PERFORMANCE A-25 FUND TALK: THE MANAGER'S OVERVIEW A-27 INVESTMENT CHANGES A-28 INVESTMENTS A-31 FINANCIAL STATEMENTS OVERSEAS FUND PERFORMANCE A-34 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-37 INVESTMENTS A-42 FINANCIAL STATEMENTS WORLDWIDE FUND PERFORMANCE A-45 FUND TALK: THE MANAGER'S OVERVIEW INVESTMENT CHANGES A-48 INVESTMENTS A-51 FINANCIAL STATEMENTS NOTES TO FINANCIAL STATEMENTS A-53 NOTES TO THE FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS A-56 THE AUDITORS' OPINION FIDELITY'S BROADLY DIVERSIFIED INTERNATIONAL P-1 EQUITY FUNDS PROSPECTUS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS 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. MARKET RECAP Overseas stock markets have not turned in the same strong performance that the U.S. market has in 1995. Slow growth, a string of negative events in Japan, and Mexico's currency crisis in late 1994 helped spark a flight of capital to the U.S., in spite of positive news regarding interest rate declines in many markets. For the 12 months ended October 31, 1995, the Morgan Stanley EAFE Index - which measures stock performance in Europe, Australia and the Far East - had a total return of -0.37%. EUROPE: European markets produced fairly strong results. The Morgan Stanley Europe Index rose 13.21% during the 12 months ended October 31. The economic recovery in many European economies stalled in 1995, despite interest rate declines. Strong dollar-based returns in Switzerland were bolstered by the strength of the Swiss franc, as well as the solid performance of insurance companies and consumer nondurable stocks, such as pharmaceuticals. Strong performances by the Finnish and Swedish markets also were marked by a lack of breadth, as large-capitalization stocks that make up significant portions of local indexes posted strong returns. Italy and Austria produced negative returns; Norway fared a bit better; Belgium, Denmark, Germany, Ireland, the Netherlands, Spain and the United Kingdom posted solid, double-digit returns. JAPAN AND THE FAR EAST: Japan's stock market continued to struggle in 1995 as the country's economy stalled. According to Morgan Stanley Capital International, Japanese stocks fell 13.1% in U.S. dollars over the 12 months ended October 31. The drop was due to a number of factors that affected investor sentiment: the Barings debacle, the Kobe earthquake, the subway nerve gas attack, the strength of the yen versus other currencies, a lack of consumer confidence, political and banking scandals, and a weakening economy. A lack of foreign capital exacerbated the issue. The Morgan Stanley Far East ex-Japan Free Index - a measure of Far East markets excluding Japan - fell 7.54% during the period, in spite of strong returns in Hong Kong. A lack of investor interest, slowing economies and fears of interest rate increases spurred weakness in the Far East. EMERGING MARKETS: Emerging markets struggled in 1995, hurt by the flight of capital to the U.S. The Morgan Stanley Emerging Markets Free Index had a total return of -19.43% for the 12 months ended October 31. Rising interest rates in late 1994 and early 1995, as well as Mexico's peso devaluation in December 1994, contributed significantly to this exodus. While interest rates have declined in the U.S., they have not in Southeast Asia, adding to mounting trade deficits and making it more expensive for companies to borrow. Except for Peru and Venezuela, returns across Latin America were negative, even though Brazil and Chile took steps to alleviate inflation, increase savings, raise foreign exchange reserves and improve economic growth. The top performing markets through October 1995 were Turkey, Greece and South Africa. Other emerging markets making positive gains in 1995 included Israel and Jordan. U.S. AND CANADA: Strong corporate earnings and a favorable interest rate environment helped the U.S. stock market post robust returns during the period. The Standard & Poor's Composite Index of 500 Stocks was up 26.44% - well above its historical annual average of roughly 12%. With inflation posing little threat, interest rates fell during the first half of 1995. Technology companies - whose goods and services benefited from both corporate and consumer demand - posted the strongest earnings growth and stock price gains. Canadian stocks did not perform as well over the past 12 months. Stocks included in the Toronto Stock Exchange 300 Index returned 7.07% for the period. BONDS: Many global bond markets turned in strong performances during the 12 months ended October 31, 1995, sparked by declines in interest rates. In the U.S., yields fell - and prices rose - on most fixed-income investments. Indications of a slowing U.S. economy and a relative absence of inflation pressures helped to push interest rates down. In an effort to thwart the possibility of a recession, the Federal Reserve Board lowered U.S. short-term interest rates in July, after raising them seven successive times in 1994 and early 1995. Slowing economies in developed countries also helped push interest rates down. For the 12 months ended October 31, 1995, the Salomon Brothers Non-U.S. World Government Bond Index - which tracks the performance of government bonds in 13 developed countries excluding the U.S. - had a total return of 15.19%. That nearly matched the Lehman Brothers Government Bond Index - a broad measure of taxable bonds in the U.S. market - which returned 15.38%. For the same period, the J.P. Morgan Emerging Markets Bond Index had a total return of 8.01%. S&P 500 EAFE * YEAR TO DATE THROUGH OCTOBER 31, 1995. Row: 1, Col: 1, Value: 22.38 Row: 1, Col: 2, Value: 23.69 Row: 2, Col: 1, Value: 6.1 Row: 2, Col: 2, Value: 7.38 Row: 3, Col: 1, Value: 31.57 Row: 3, Col: 2, Value: 56.16 Row: 4, Col: 1, Value: 18.56 Row: 4, Col: 2, Value: 69.44000000000001 Row: 5, Col: 1, Value: 5.1 Row: 5, Col: 2, Value: 24.63 Row: 6, Col: 1, Value: 16.61 Row: 6, Col: 2, Value: 28.27 Row: 7, Col: 1, Value: 31.69 Row: 7, Col: 2, Value: 10.53 Row: 8, Col: 1, Value: -3.1 Row: 8, Col: 2, Value: -23.45 Row: 9, Col: 1, Value: 30.47 Row: 9, Col: 2, Value: 12.13 Row: 10, Col: 1, Value: 7.619999999999999 Row: 10, Col: 2, Value: -12.17 Row: 11, Col: 1, Value: 10.08 Row: 11, Col: 2, Value: 32.56 Row: 12, Col: 1, Value: -2.56 Row: 12, Col: 2, Value: 7.89 Row: 13, Col: 1, Value: 29.3 Row: 13, Col: 2, Value: 4.01 % INTERNATIONAL GROWTH & INCOME 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The 2% sales charge was eliminated June 1, 1994. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND INTERNATIONAL GROWTH & INCOME 4.95% 44.79% 105.89% INTERNATIONAL GROWTH & INCOME (INCL. 2% SALES CHARGE) 2.85% 41.89% 101.77% Morgan Stanley EAFE Index -0.37% 39.94% 98.47% JP Morgan Global Government Bond Index 15.36% 64.59% 129.04% 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 31, 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 Morgan Stanley EAFE index - a broad measure of the performance of stocks in Europe, Australia, and the Far East. You can also compare the fund's performance to the JP Morgan Global Traded Government Bond index - a broad measure of bond performance in developed countries, including the United States. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31, 1995 YEAR YEARS FUND INTERNATIONAL GROWTH & INCOME 4.95% 7.68% 8.51% INTERNATIONAL GROWTH & INCOME (INCL. 2% SALES CHARGE) 2.85% 7.25% 8.26% Morgan Stanley EAFE Index -0.37% 6.95% 8.06% JP Morgan Global Government Bond Index 15.36% 10.48% 9.83% 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 International GrEurope, AustralJP Morgan Global 12/31/86 9800.00 10000.00 10000.00 01/31/87 10456.60 11091.44 10297.27 02/28/87 10917.20 11423.38 10417.34 03/31/87 11387.60 12359.45 10606.42 04/30/87 11828.60 13667.22 10615.67 05/31/87 11907.00 13667.17 10515.48 06/30/87 12024.46 13231.74 10469.90 07/31/87 12525.07 13208.62 10344.80 08/31/87 12868.62 14199.03 10457.90 09/30/87 12976.78 13975.49 10203.47 10/31/87 10259.33 11956.28 10770.71 11/30/87 9993.50 12135.62 11049.24 12/31/87 10616.00 12495.97 11424.65 01/31/88 10240.74 12719.07 11483.03 02/29/88 10704.88 13566.88 11588.48 03/31/88 11169.02 14401.06 11680.11 04/30/88 11465.28 14610.33 11625.84 05/31/88 11317.15 14141.98 11500.86 06/30/88 11188.77 13769.22 11398.38 07/31/88 11188.77 14201.21 11309.95 08/31/88 10635.75 13277.87 11229.75 09/30/88 11020.89 13858.05 11509.54 10/31/88 11662.79 15043.77 11962.76 11/30/88 11870.17 15939.87 12068.55 12/31/88 11843.60 16028.75 11995.89 01/31/89 12064.60 16310.76 11877.18 02/28/89 12104.79 16394.60 11857.65 03/31/89 12104.79 16072.84 11757.23 04/30/89 12406.15 16221.91 11950.87 05/31/89 12054.56 15339.38 11821.66 06/30/89 12094.74 15081.17 12090.48 07/31/89 13239.92 16974.95 12571.92 08/31/89 13059.10 16211.52 12199.93 09/30/89 13581.47 16949.99 12392.89 10/31/89 12928.51 16268.98 12552.27 11/30/89 13410.70 17086.82 12664.00 12/31/89 14108.23 17717.27 12811.84 01/31/90 13864.29 17058.04 12620.70 02/28/90 13376.40 15867.48 12484.41 03/31/90 13366.23 14214.47 12407.75 04/30/90 13335.74 14101.66 12359.19 05/31/90 14199.71 15710.68 12754.37 06/30/90 14646.95 15572.31 12985.15 07/31/90 15327.97 15791.65 13366.62 08/31/90 14016.76 14258.15 13262.42 09/30/90 12664.89 12271.07 13386.50 10/31/90 13935.44 14183.13 13915.46 11/30/90 13620.34 13346.50 14160.40 12/31/90 13652.86 13562.71 14317.95 01/31/91 14135.96 14001.39 14642.75 02/28/91 14934.13 15502.33 14657.03 03/31/91 14398.52 14571.68 14171.37 04/30/91 14619.06 14714.78 14370.50 05/31/91 14598.06 14868.32 14382.84 06/30/91 13894.41 13775.78 14190.79 07/31/91 14377.51 14452.61 14490.80 08/31/91 14325.00 14159.11 14791.96 09/30/91 14787.10 14957.10 15331.31 10/31/91 14692.58 15169.13 15482.81 11/30/91 14282.99 14460.97 15734.95 12/31/91 14750.26 15207.78 16530.10 01/31/92 14728.99 14882.94 16206.33 02/29/92 14750.26 14350.25 16159.15 03/31/92 14271.70 13402.90 16009.94 04/30/92 14899.14 13466.61 16143.15 05/31/92 15569.12 14368.01 16601.62 06/30/92 15420.24 13686.50 17054.38 07/31/92 14920.41 13336.22 17430.14 08/31/92 15186.28 14172.68 17893.86 09/30/92 14931.05 13892.81 17876.50 10/31/92 14133.45 13164.07 17430.02 11/30/92 14101.54 13287.94 17120.99 12/31/92 14257.46 13356.67 17282.76 01/31/93 14388.16 13355.03 17575.80 02/28/93 14780.27 13758.44 17859.02 03/31/93 15880.35 14957.71 18133.44 04/30/93 16762.59 16377.23 18463.61 05/31/93 17154.70 16723.11 18586.77 06/30/93 16925.97 16462.20 18596.37 07/31/93 17492.35 17038.46 18603.91 08/31/93 18407.26 17958.25 19154.58 09/30/93 18287.45 17554.02 19357.13 10/31/93 18788.48 18094.99 19347.20 11/30/93 18145.86 16513.30 19205.99 12/31/93 19258.98 17705.68 19402.72 01/31/94 20267.42 19202.61 19585.74 02/28/94 19905.70 19149.42 19370.62 03/31/94 18842.45 18324.63 19281.85 04/30/94 19094.56 19102.13 19266.42 05/31/94 19445.32 18992.46 19107.16 06/30/94 18973.99 19260.86 19334.06 07/31/94 19291.87 19446.09 19516.05 08/31/94 19478.21 19906.48 19465.90 09/30/94 19028.80 19279.52 19562.09 10/31/94 19226.10 19921.52 19854.68 11/30/94 18634.19 18964.09 19604.82 12/31/94 18705.99 19082.84 19650.41 01/31/95 18072.28 18349.76 20047.87 02/28/95 18196.76 18297.10 20564.83 03/31/95 19237.86 19438.31 21610.88 04/30/95 19588.67 20169.36 21955.44 05/31/95 19339.71 19928.93 22567.92 06/30/95 19384.98 19579.44 22708.90 07/31/95 20527.93 20798.38 22816.63 08/31/95 20290.29 20005.00 22182.45 09/30/95 20437.40 20395.70 22682.28 10/31/95 20177.12 19847.46 22903.80 Let's say you invested $10,000 in Fidelity International Growth & Income Fund on December 31, 1986, when the fund started, and paid the 2% sales charge. By October 31, 1995, the value of your investment would have grown to $20,177 - a 101.77% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley EAFE index, which would have grown to $19,847 over the same period - a 98.47% increase. If you had put $10,000 in the JP Morgan Global Government Bond index, it would have grown to $22,904 - a 129.04% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) INTERNATIONAL GROWTH & INCOME FUND TALK: THE MANAGER'S OVERVIEW An interview with Richard Mace, Portfolio Manager of Fidelity International Growth & Income Fund Q. RICK, HOW HAS THE FUND PERFORMED? A. For the 12 months ended October 31, 1995, the fund had a total return of 4.95%. Looking at performance, we can compare the fund's return to two separate indexes, because the fund invests in both stocks and bonds - keeping at least 25% invested in bonds - and no index tracks both international stocks and bonds. First, the Morgan Stanley EAFE Index - which tracks the performance of stocks in Europe, Australia and the Far East - had a total return of -0.37% for the 12 months ended October 31, 1995. Second, the JP Morgan Global Government Bond Index, which tracks the performance of government bonds in 13 developed countries including the U.S., had a total return of 15.36% for the same 12 months. Q. WHAT WERE THE MAJOR CONTRIBUTORS TO THE FUND'S PERFORMANCE? A. As you can see from the index returns, it has been a better year for international bonds than it has been for international stocks. The fund beat the EAFE index return because of its substantial fixed-income investments, and because of the relatively good performance of its equity holdings. It lagged the JP Morgan index because the fund had a significant investment in foreign stocks. In 1994, the opposite occurred: bonds substantially underperformed stocks. Beyond these factors, the fund's Japanese investments had the most meaningful impact on performance. Specifically, the fund benefited from being relatively underweighted in Japan during the first part of the year, when the Japanese market performed poorly. I increased the fund's Japanese investments over the second part of the year, a period when that market started to rebound, helping performance. Stock selection in Japan also had a positive influence on the fund's return. Q. WHAT MADE JAPAN APPEALING? A. There was a great deal of negative sentiment caused by the Kobe earthquake, the subway nerve gas attack, a lack of consumer confidence, political and banking scandals, and a weakening economy. This kind of backdrop usually creates buying opportunities. Unfortunately, sometimes an investor has to wait before sentiment changes. It clearly has taken longer than I anticipated for an upturn in Japan. Q. WHAT WERE SOME OF THE JAPANESE STOCKS THAT ATTRACTED YOUR ATTENTION? A. Omron, a manufacturer of factory automation and control equipment was one. The company benefited from strong worldwide demand for its products, as electronic equipment companies were looking to use automation to increase their manufacturing capacity. I also was particularly fond of this investment because management strove to maximize shareholder value, something relatively revolutionary in Japan. Omron aggressively cut costs, restructuring its business, and generated free cash flow. I believed that the company probably would share this cash in the form of dividends, and may buy back shares - generally viewed as favorable by existing shareholders because it tends to increase the value of the stock. The Japanese government has indicated it may allow companies to do so without severe tax implications. Q. DO YOUR JAPANESE INVESTMENTS FOLLOW A PARTICULAR THEME? A. It's important for me to repeat what I've said in the past, that I am a bottom-up investor. I choose stocks one-by-one based on the prospects for each company. That said, many of the fund's Japanese were companies whose business should improve as the Japanese economy picks up. These included electronics and computer companies, such as Hitachi, Mitsubishi Electric, Canon and NEC; Ito-Yokado, a retailer; and Honda, the motorcycle and automobile manufacturer that has benefited from strong new model sales, a solid balance sheet and cost cutting. Q. LET'S TAKE A LOOK AT WHAT MOVES MAY HAVE DETRACTED FROM PERFORMANCE . . . A. I cut back on some European cyclical stocks - those that rise and fall with the economy - because business wasn't picking up. An example would be EVC, a chemical company focused on the manufacture of PVC, a material used to make plumbing components. The worldwide economic slowdown led me to believe that chemical prices would fall, so I sold the stock. In addition, by focusing on Japan, the fund missed out on other opportunities, including those in Switzerland, Sweden and the United Kingdom. All of these markets had good returns, but the fund was underweighted there. That's because I found stock prices to be expensive in those areas. Instead, I focused on Japan because that's where I found better value and I felt there was a lower level of inherent risk. Q. LET'S TURN TO THE FUND'S BOND PORTFOLIO. YOU MENTIONED IT'S BEEN A GOOD YEAR FOR FIXED-INCOME INVESTMENTS. A. Yes, you can see by the index return that international bonds have done well. The fund's return from bonds, which was around 14% this year, benefited from investments in Germany, New Zealand, France, Australia, Sweden, the United Kingdom and Italy. Q. WERE THERE ANY DISAPPOINTMENTS ON THE BOND FRONT? A. Japanese fixed-income investments were among the best performing securities in the world during the period; as news concerning Japan's slowing economy spread, the bonds rallied. The fund missed out on this move, because I was not invested in Japanese bonds. I felt the value of Japanese stocks was superior to the value found in Japanese bonds. In addition, I believed the attempts by the Japanese government and central bank to stimulate the economy would have negative implications for bonds. Real yields - yields adjusted for inflation - are unattractive by historical standards, and the yen is one of the most overvalued currencies in the world. I felt bonds in Europe offered better value in terms of real yields, and that currencies there posed less of a risk. Q. YOU'VE REPOSITIONED THE FUND'S BOND PORTFOLIO RECENTLY . . . A. I've tried to broaden the currency exposure of the bond portion of the portfolio by adding positions in Australia, Italy and Sweden. When evaluating a fixed-income investment, I must consider the value of the bond and the value of the currency, looking for the best risk/reward profile. In addition, in previous reports I had mentioned the fund's occasional use of forward foreign currency contracts to hedge currency risk. During the year, I reduced these contracts to a minimum, because they hadn't added much value to the fund, and I don't foresee using them much going forward. Q. WHAT SORT OF INVESTMENTS ARE YOU TARGETING IN NORTH AMERICA? A. North America - Canada, specifically - has looked more attractive in terms of valuations than much of Europe. I targeted nickel and aluminum companies such as Falconbridge, Inco and Alcan because the supply/demand situation looked positive for these non-ferrous metals. For most of the year, the fund held a meaningful investment in Aluminum Co. of America - Alcoa - considered an American stock, but one which received much of its earnings and cash flow from its overseas business. Q. LET'S TAKE A LOOK AT THE NEXT SIX MONTHS. WHAT'S YOUR OUTLOOK? A. I believe that fixed-income is nearing the end of its solid run. Economies around the world have weakened for some time, and central banks, in general, are seeking to improve economic conditions; that's ordinarily an early warning indicator for bonds. On the stock side, my belief is that six or 12 months from now economic outlooks will improve and that earnings estimates for companies outside the U.S. will improve. The key going forward will be to select those company stocks that are best positioned to benefit from an improving economy. It appears we're already seeing signs of improvement in Japan, and the fund is positioned there accordingly. But a key going forward will be to capitalize on improvements in business in Europe over the next year. 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: growth of capital and current income by investing mainly in foreign stocks and bonds START DATE: December 31, 1986 SIZE: as of October 31, 1995, more than $903 million MANAGER: Richard Mace, since 1994; manager, Fidelity International Value Fund, since 1994; co-manager, Fidelity Global Balanced Fund, since January 1995, and February 1993 - December 1993; manager, Fidelity Select Chemicals Portfolio and Fidelity Select Industrial Materials Portfolio, 1992; Fidelity Select Transportation Portfolio, 1989-1991; joined Fidelity in 1987 (checkmark) RICK MACE ON THE INTERNATIONAL INVESTING ENVIRONMENT: "Looking around the world, the past year has offered a mixed bag. In Europe, it appeared economies were going to recover earlier in the year, but that didn't happen. As a result, European cyclical stocks were disappointing, but bonds there were positive performers. On the other end of the spectrum, the Chinese have tried to slow their economy to ease inflation fears. This has muted demand for commodities. In Japan, the economy has taken longer than expected to reaccelerate, but it appears to be on the right track. "Surprising strength in the U.S. has kept most investors focused on the U.S. at the expense of the foreign markets. Competition for the investor dollar becomes more difficult if that investor is getting great returns at home. Many investors who believe that foreign investing entails higher risk ask, `Why invest in a foreign market when the U.S. is so strong?' "I would answer by saying that about two-thirds of the world's market capitalization - or the total value of corporate assets - lies outside of the U.S. I believe an investor is taking on risk by not investing overseas. Investors tend to ignore non-U.S. markets when they are not doing well. Just a few years ago, these markets offered appealing returns, but they've been sluggish over the recent past. That has led to some appealing values that could offer solid returns when we see a turnaround in foreign economies." INTERNATIONAL GROWTH & INCOME INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 Australia 3.6% Canada 3.0% United States 19.2% Row: 1, Col: 1, Value: 19.2 Row: 1, Col: 2, Value: 11.4 Row: 1, Col: 3, Value: 39.7 Row: 1, Col: 4, Value: 6.9 Row: 1, Col: 5, Value: 5.8 Row: 1, Col: 6, Value: 10.4 Row: 1, Col: 7, Value: 3.0 Row: 1, Col: 8, Value: 3.6 United Kingdom 10.4% France 5.8% Other 11.4% Germany 6.9% Japan 39.7% AS OF APRIL 30, 1995 Netherlands 5.1% Denmark 3.0% United States 9.7% Row: 1, Col: 1, Value: 9.699999999999999 Row: 1, Col: 2, Value: 10.6 Row: 1, Col: 3, Value: 37.0 Row: 1, Col: 4, Value: 12.1 Row: 1, Col: 5, Value: 8.300000000000001 Row: 1, Col: 6, Value: 11.0 Row: 1, Col: 7, Value: 3.2 Row: 1, Col: 8, Value: 3.0 Row: 1, Col: 9, Value: 5.1 Canada 3.2% Other 10.6% United Kingdom 11.0% France 8.3% Germany 12.1% Japan 37.0% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks and equity futures 61.5 63.9 Bonds 26.4 33.8 Short-term investments 12.1 2.3 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Omron Corp. 5.0 3.4 (Japan, Electrical Equipment) Hitachi Ltd. 4.4 4.4 (Japan, Electronics) Mitsubishi Electric Co. Ord. 3.1 2.7 (Japan, Electrical Equipment) Ito-Yokado Co. Ltd. 1.9 3.5 (Japan, General Merchandise Stores) Canon, Inc. 1.8 0.8 (Japan, Computers & Office Equipment) British Petroleum PLC Ord. 1.7 1.8 (United Kingdom, Oil & Gas) Sony Corp. 1.5 2.7 (Japan, Consumer Electronics) TDK Corp. 1.4 0.0 (Japan, Electronics) Nomura Securities Co. Ltd. 1.4 2.6 (Japan, Securities Industry) Total SA sponsored ADR 1.3 0.7 (France, Oil & Gas) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Technology 14.5 9.3 Industrial Machinery & Equipment 10.5 8.6 Basic Industries 6.6 8.4 Energy 5.1 5.2 Durables 4.6 9.6 Retail & Wholesale 4.0 4.5 Finance 3.1 4.1 Utilities 2.8 7.0 Media & Leisure 1.0 0.9 Health 0.9 2.4 INTERNATIONAL GROWTH & INCOME INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 55.7% SHARES VALUE (NOTE 1) AUSTRALIA - 0.7% BTR Nylex Ltd. 1,000 $ 2,715 QNI Ltd. 1,765,400 3,383,096 Western Mining Holdings Ltd. 440,000 2,817,315 6,203,126 AUSTRIA - 0.1% Mayr Melnhof Karton AG 22,700 1,323,508 BRAZIL - 0.5% Acesita Cia Acos Especiais Itabira Ord. 18,069,100 133,052 Coteminas PN 405,300 126,459 Duratex Corp. PN 4,800,000 234,634 Refrigeracao Parana SA 156,629,300 369,786 Telebras PN (Pfd. Reg.) 42,000,000 1,703,150 Telesp PN (Pfd. Reg.) 11,200,000 1,607,604 4,174,685 CANADA - 3.0% AT Plastics, Inc. 74,900 633,684 Alcan Aluminium Ltd. 300,000 9,510,971 Barrick Gold Corp. 35,500 825,121 Canada Occidental Petroleum Ltd. 93,700 2,752,808 Canadian Pacific Ltd. Ord. 72,300 1,149,433 Falconbridge Ltd. 1,000,000 9,390,108 Inco Ltd. 51,600 1,775,009 Intertape Polymer Group, Inc. 47,300 1,380,829 27,417,963 DENMARK - 0.5% International Service Systems AS, Series B 40,000 820,438 Tele Danmark AS Class B 60,000 3,131,581 Unidanmark AS Class A 20,000 919,330 4,871,349 FINLAND - 1.1% Kemira OY 199,800 1,680,871 Kemira OY sponsored ADR (b) 72,125 1,190,063 Valmet OY Class A 253,700 7,054,613 9,925,547 FRANCE - 3.4% Accor SA 17,682 2,104,095 Alcatel Alsthom CGE 40,000 3,421,198 Axa SA 20,000 1,112,545 Eramet SA (b) 8,000 540,707 Generale des Eaux 25,491 2,372,895 Michelin SA Cie Generale des Etablissements Class B 200,000 8,090,118 Pechiney International SA 30,000 1,566,820 Total SA sponsored ADR 400,000 12,350,000 31,558,378 GERMANY - 0.6% Deutsche Bank AG 70,000 3,163,951 Veba AG (warrants) (a) 20,000 2,846,697 6,010,648 HONG KONG - 0.1% Peregrine Investments Holdings Ltd. 1,000,000 1,274,042 Sun Hung Kai & Co. Ltd. 1,000 256 1,274,298 ITALY - 0.3% Italcementi Fabbriche Ruinite Cemento Spa, Bergamo 50,000 309,725 SHARES VALUE (NOTE 1) Stet (Societa Finanziaria Telefonica) Spa Ord. 600,000 $ 1,699,419 Telecom Italia Mobile Spa (a) 310,000 522,300 Telecom Italia Ord. 310,000 475,739 3,007,183 JAPAN - 33.9% Acom Co. Ltd. 50,000 1,631,473 Aiwa Co. Ltd. 50,000 1,087,649 Amway Japan Ltd. 81,400 3,110,676 Bridgestone Corp. 100,000 1,391,407 Canon, Inc. 1,000,000 17,147,617 Citizen Watch Co. Ltd. Ord. 150,000 1,030,327 Daifuku Co. Ltd. 1,000 11,954 Daihatsu Motor Co. Ltd. 1,000 4,899 Daiwa Securities Co. Ltd. 450,000 5,291,265 Fuji Electric Co. Ltd. 694,000 3,352,526 Fuji Photo Film Co. Ltd. 350,000 8,676,694 Fujitsu Ltd. 300,000 3,586,302 Hitachi Ltd. 4,000,000 41,154,280 Hitachi Maxell Ltd. 1,000 15,580 Honda Motor Co. Ltd. 125,000 2,180,197 Hoya Corp. 72,000 2,116,506 Ito-Yokado Co. Ltd. 320,000 17,527,804 Izumi Co. Ord. 84,000 1,596,786 Kenwood Corp. 1,000 5,566 Kobe Steel (a) 1,100,000 2,888,639 Kokusai Securities Co. Ltd. 1,000 12,542 Konica Corp. 147,000 986,674 Kyocera Corp. 100,000 8,211,259 Kyocera Corp. (warrants) (a) 350 590,625 Matsushita Electric Industrial Co. Ltd. 600,000 8,524,815 Mazda Motor Corp. (a) 1,000 3,145 Mitsubishi Electric Co. Ord. 3,794,000 28,402,489 Mitsubishi Heavy Industries Ltd. 150,000 1,159,669 Mitsubishi Motors Corp. 1,000 8,348 Murata Manufacturing Co. Ltd. 68,000 2,392,043 NEC Corp. 600,000 7,936,897 Nichicon Corp. 440,000 5,949,733 Nifco, Inc. 102,000 1,209,348 Nintendo Co. Ltd. Ord. 14,000 1,031,601 Nippon Shokubai Co. Ltd. 200,000 1,748,077 Nissan Motor Co. Ltd. Ord. 101,000 682,867 Nitto Denko Corp. 600,000 9,583,068 Nomura Securities Co. Ltd. 700,000 12,826,417 Omron Corp. 2,000,000 46,837,490 Pioneer Electronic Corp. 1,000 15,384 Ricoh Co. Ltd. Ord. 500,000 5,389,251 Rohm Co. Ltd. (warrants) (a) 5,361 3,938,790 Sankyo Co. Ltd. 25,000 551,173 Sekisui Chemical Co. Ltd. 271,000 3,531,723 Shimamura Corp. 45,000 1,605,017 Shin-Etsu Chemical Co. Ltd. 50,000 1,023,958 Sony Corp. 310,000 13,972,858 Sumitomo Chemical Co. Ltd. 1,000 4,654 TDK Corp. 250,000 12,909,706 Taiyo Yuden Co. Ltd. 1,000 9,995 Takeda Chemical Industries Ltd. 1,000 14,110 Tokai Rika Denki Co. Ltd. 1,000 7,741 Toppan Printing Co. Ltd. 1,000 13,228 Toshiba Corp. 501,000 3,637,656 Toyoda Automatic Loom Works Ltd. 1,000 15,678 Uny Co. Ltd. 400,000 6,898,241 Wako Electric Co. Ltd. 80,000 1,928,372 Yamanouchi Pharmaceutical Co. Ltd. 250,000 5,585,224 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) JAPAN - CONTINUED Yoshinoya D&C Co. Ltd. Ord. 76 $ 1,206,408 Zexel Corp. 1,000 5,997 314,170,418 KOREA (SOUTH) - 0.1% Samsung Electronics Co. Ltd. (b): GDR (partial dividend) 124 14,210 GDS (vtg.) 10,000 1,170,000 1,184,210 MALAYSIA - 0.0% Tenega Nasional BHD 1,000 3,778 MEXICO - 0.0% Telefonos de Mexico SA sponsored ADR representing shares Ord. Class L 1,000 27,500 NETHERLANDS - 1.7% AKZO NV Ord. 15,300 1,742,007 Heineken NV 2,000 354,812 KLM Royal Dutch Airlines Ord. 40,975 1,352,593 Koninklijke PPT Nederland 200,000 7,032,883 Philips Electronics NV (Bearer) 35,000 1,352,721 Vendex International NV 80,000 2,306,279 Vendex International NV (b) 57,000 1,643,224 15,784,519 NETHERLANDS ANTILLES - 0.9% Schlumberger Ltd. 130,000 8,092,500 NEW ZEALAND - 0.2% Brierley Investments Ltd. 2,000,000 1,554,650 NORWAY - 1.3% Helikopter Services AS 100,000 1,252,911 Kverneland Gruppen AS 160,000 2,775,681 Saga Petroleum AS Class B 138,000 1,662,517 Smedvig AS 76,800 1,332,327 Transocean Drilling AS (a) 350,000 5,340,936 12,364,372 RUSSIA - 0.0% Mosenergo AO sponsored ADR (a) (b) 51,000 446,250 SINGAPORE - 0.0% Kim Engineering Holdings Ltd. 20,000 17,256 SOUTH AFRICA - 0.4% Anglo American Corp. of South Africa (Reg.) 20,000 1,137,844 Buffelsfontein Gold Mining Co. Ltd. ADR 76,300 314,738 Driefontein Consolidated Ltd.: ADR 42,500 467,500 Ord. 75,500 843,547 Free State Consolidated Gold Mines Ltd.: ADR 74,182 700,093 Ord. 25,578 238,440 Western Deep Levels Ltd. Ord. 14,700 411,104 4,113,266 SPAIN - 0.0% Telefonica de Espana SA Ord. 5,000 63,115 SWEDEN - 1.1% Electrolux AB 40,000 1,713,605 Esselte AB Class B Free shares 80,000 1,176,595 SKF AB Ord. 60,000 1,140,392 SHARES VALUE (NOTE 1) Svedala Industri 50,000 $ 1,270,873 Volvo AB Class B 200,000 4,510,280 9,811,745 SWITZERLAND - 0.2% Kuoni Reisen Holding AG Class B (Reg.) 915 1,457,237 UNITED KINGDOM - 3.7% BET PLC Ord. 4,100,000 8,164,863 British Petroleum PLC Ord. 2,103,795 15,461,473 Cookson Group 1,000,000 4,630,865 Forte PLC 400,000 1,593,144 Telegraph PLC (The) 300,000 1,934,532 Tomkins PLC Ord. 200,000 788,670 WPP Group PLC 33,200 80,283 Wickes PLC 1,000,000 1,967,717 34,621,547 UNITED STATES OF AMERICA - 1.9% Aluminum Co. of America 220,000 11,220,000 American Express Co. 50,000 2,031,250 Limited, Inc. (The) 30,000 551,250 RJR Nabisco Holdings Corp. 83,100 2,555,325 Reynolds Metals Co. 25,700 1,294,638 17,652,463 TOTAL COMMON STOCKS (Cost $473,435,369) 517,131,511 NONCONVERTIBLE PREFERRED STOCKS - 0.1% BRAZIL - 0.0% COSIPA (CIA Sidurg Paulista) Class B (a) 130,000 194,696 ITALY - 0.1% Fiat Spa 1,000 1,877 Italmobiliare Spa (Milano) 90,000 703,032 704,909 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $1,227,511) 899,605 CONVERTIBLE BONDS - 0.1% MOODY'S RATINGS PRINCIPAL (UNAUDITED) (H) AMOUNT (C) JAPAN - 0.1% Matsushita Electric Works Co. Ltd. 2.70%, 5/31/02 (Cost $1,063,866) - JPY 81,000,000 906,394 GOVERNMENT OBLIGATIONS (F) - 26.3% ARGENTINA - 0.0% Province of Chaco yankee 11 7/8%, 9/10/97 (e) - $ 200,000 206,000 AUSTRALIA - 2.9% Commonwealth of Australia: 13%, 7/15/96 Aa2 AUD 10,250,000 8,196,581 13%, 7/15/00 Aa2 AUD 9,100,000 8,174,847 9 3/4%, 3/15/02 Aa2 AUD 12,600,000 10,140,090 26,511,518 GOVERNMENT OBLIGATIONS (F) - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (H) AMOUNT (C) (NOTE 1) DENMARK - 0.6% Danish Government Bullet 8%, 5/15/03 Aaa DKK 29,000,000 $ 5,430,364 FRANCE - 2.4% French Government: OAT 8 1/2%, 11/25/02 Aaa FRF 49,000,000 10,859,785 8 1/2%, 12/26/12 Aaa FRF 34,000,000 7,474,081 Principal Strips 0%, 10/25/25 Aaa FRF 225,000,000 4,233,940 22,567,806 GERMANY - 6.3% Federal Republic of Germany: 8%, 7/22/02 Aaa DEM 19,300,000 15,102,680 6%, 6/20/16 Aaa DEM 30,700,000 19,095,829 Treuhandanstalt: 6 5/8%, 7/9/03 AAA DEM 12,200,000 8,814,936 7 1/2%, 9/9/04 Aaa DEM 20,000,000 15,152,096 58,165,541 ITALY - 1.0% Italian Government 8 1/2%, 4/1/99 (d) - ITL 15,600,000 9,119,323 NEW ZEALAND - 0.1% New Zealand Government 9%, 11/15/96 Aaa NZD 1,500,000 1,000,279 SWEDEN - 1.1% Swedish Government 13%, 6/15/01 Aa1 SEK 60,000,000 10,598,404 UNITED KINGDOM - 6.7% United Kingdom, Great Britain & Northern Ireland: 9 1/2%, 1/15/99 Aaa GBP 8,550,000 14,366,300 9 3/4%, 8/27/02 Aaa GBP 13,100,000 22,910,879 6 3/4% 11/26/04 - GBP 5,500,000 8,035,361 7 3/4%, 9/8/06 Aaa GBP 5,100,000 7,916,971 9%, 10/13/08 Aaa GBP 2,200,000 3,741,142 8 3/4%, 8/25/17 Aaa GBP 3,000,000 5,017,100 61,987,753 UNITED STATES OF AMERICA - 5.2% U.S. Treasury Notes: 6 1/2%, 5/15/97 Aaa $ 7,820,000 7,919,001 8 1/2%, 5/15/97 Aaa 7,535,000 7,850,490 9 1/4%, 8/15/98 (g) Aaa 7,385,000 8,049,650 9 1/8%, 5/15/99 Aaa 14,800,000 16,365,544 7 3/4%, 12/31/99 Aaa 7,550,000 8,084,389 48,269,074 TOTAL GOVERNMENT OBLIGATIONS (Cost $238,496,859) 243,856,062 REPURCHASE AGREEMENTS - 17.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 164,992,944 $ 164,966,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $879,189,605) $ 927,759,572 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) PURCHASED 600 Nikkei Stock Average Contracts Dec. 1995 $ 52,995,000 $ (162,651) THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 5.7% CURRENCY ABBREVIATIONS AUD - Australian dollar GBP - British pound DKK - Danish krone FRF - French franc DEM - German deutsche mark ITL - Italian lira JPY - Japanese yen NZD - New Zealand dollar SEK - Swedish krona LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,004,454 or 0.6% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. Principal amount in thousands. 5. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Province of Chaco yankee 11 7/8%, 9/10/97 3/9/94 $ 208,400 6. Some foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. 7. Security pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $4,283,700. 8. Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 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 23.5% AAA, AA, A 21.6% Baa 0.0% BBB 0.0% 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 2.0%. At the end of the period, restricted securities (excluding 144A issues) amounted to $206,000 or 0.02% of net assets (see Note 2 of Notes to Financial Statements). Purchases and sales of securities, other than short-term securities, aggregated $1,335,124,780 and $1,803,897,005, respectively, of which U.S. government and government agency obligations aggregated $132,775,450 and $137,452,321, respectively. The market value of futures contracts opened and closed during the period amounted to $178,695,811 and $154,331,744, respectively (see Note 2 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $235,616 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $12,636,000 and $6,460,000, respectively. The weighted average interest rate was 6.2% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $879,768,030. Net unrealized appreciation aggregated $47,991,542, of which $62,320,763 related to appreciated investment securities and $14,329,221 related to depreciated investment securities. At October 31, 1995, the fund had a capital loss carryforward of approximately $23,289,000 all of which will expire on October 31, 2003. At October 31, 1995, the fund was required to defer $563,000 of losses on futures contracts and options. For the period, interest and dividends from foreign countries were $35,321,818 or $0.70 per share. Taxes accrued or paid to foreign countries were $1,131,032 or $0.02 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Basic Industries 6.6% Conglomerates 0.1 Durables 4.6 Energy 5.1 Finance 3.1 Government Obligations 26.3 Health 0.9 Holding Companies 0.3 Industrial Machinery & Equipment 10.5 Media & Leisure 1.0 Nondurables 0.3 Precious Metals 0.8 Repurchase Agreements 17.8 Retail & Wholesale 4.0 Services 0.9 Technology 14.5 Transportation 0.4 Utilities 2.8 100.0% INTERNATIONAL GROWTH AND INCOME FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $164,966,000) (cost $879,189,605) - $ 927,759,572 See accompanying schedule Cash 1,080 Receivable for investments sold 23,841,454 Receivable for fund shares sold 2,410,366 Dividends receivable 1,559,099 Interest receivable 6,937,270 Receivable for daily variation on futures contracts 225,000 TOTAL ASSETS 962,733,841 LIABILITIES Payable for investments purchased $ 53,968,069 Payable for fund shares redeemed 4,503,207 Accrued management fee 581,194 Other payables and 446,162 accrued expenses TOTAL LIABILITIES 59,498,632 NET ASSETS $ 903,235,209 Net Assets consist of: Paid in capital $ 854,650,700 Undistributed net investment income 24,058,046 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (23,952,947 ) Net unrealized appreciation (depreciation) on investments 48,479,410 and assets and liabilities in foreign currencies NET ASSETS, for 50,666,743 shares outstanding $ 903,235,209 NET ASSET VALUE, offering price $17.83 and redemption price per share ($903,235,209 (divided by) 50,666,743 shares)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 10,265,591 Dividends Interest 34,048,676 44,314,267 Less foreign taxes withheld (1,131,032 ) TOTAL INCOME 43,183,235 EXPENSES Management fee $ 7,967,320 Transfer agent fees 3,228,107 Accounting fees and expenses 465,444 Non-interested trustees' compensation 11,108 Custodian fees and expenses 343,548 Registration fees 66,717 Audit 55,814 Legal 61,594 Interest 2,219 Miscellaneous 10,478 Total expenses before reductions 12,212,349 Expense reductions (3,915 12,208,434 ) NET INVESTMENT INCOME 30,974,801 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (10,957,366 ) Foreign currency transactions (13,502,084 ) Futures contracts 1,409,044 (23,050,406 ) Change in net unrealized appreciation (depreciation) on: Investment securities 7,647,225 Assets and liabilities in foreign currencies 14,414,807 Futures contracts (143,861 21,918,171 ) NET GAIN (LOSS) (1,132,235 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 29,842,566 OTHER INFORMATION Deferred sales charges withheld $12,868 by FDC Accounting fees paid to FSC $462,071
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 30,974,801 $ 28,691,450 Net investment income Net realized gain (loss) (23,050,406) 29,756,601 Change in net unrealized appreciation (depreciation) 21,918,171 (45,604,352) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 29,842,566 12,843,699 Distributions to shareholders (16,097,075) (1,769,894) From net investment income From net realized gain (24,102,957) (2,997,808) In excess of net realized gain - (1,647,620) TOTAL DISTRIBUTIONS (40,200,032) (6,415,322) Share transactions 548,686,974 1,287,341,882 Net proceeds from sales of shares Reinvestment of distributions 39,646,248 6,281,612 Cost of shares redeemed (1,042,678,966) (934,960,509) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (454,345,744) 358,662,985 TOTAL INCREASE (DECREASE) IN NET ASSETS (464,703,210) 365,091,362 NET ASSETS Beginning of period 1,367,938,419 1,002,847,057 End of period (including undistributed net investment income of $24,058,046 and $11,175,791, $ 903,235,209 $ 1,367,938,419 respectively) OTHER INFORMATION Shares Sold 32,087,835 72,892,665 Issued in reinvestment of distributions 2,423,206 363,939 Redeemed (61,852,870) (53,381,201) Net increase (decrease) (27,341,829) 19,875,403
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS YEARS ENDED OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 B 1993 1992 1991
Net asset value, beginning of period $ 17.54 $ 17.25 $ 13.29 $ 13.99 $ 13.71 Income from Investment Operations Net investment income .54 .38 C .14 C .31 .30 E Net realized and unrealized gain (loss) .28 F .02 F 4.14 (.84) .41 Total from investment operations .82 .40 4.28 (.53) .71 Less Distributions (.21) G (.03) (.31) (.16) (.38) From net investment income From net realized gain (.32) G (.05) (.01) D (.01) D (.05) D In excess of net realized gain - (.03) - - - Total distributions (.53) (.11) (.32) (.17) (.43) Net asset value, end of period $ 17.83 $ 17.54 $ 17.25 $ 13.29 $ 13.99 TOTAL RETURN A 4.95% 2.33% 32.94% (3.81)% 5.43% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 903,235 $ 1,367,938 $ 1,002,847 $ 60,007 $ 49,738 Ratio of expenses to average net assets 1.18% 1.21% 1.52% 1.62% 1.89% Ratio of net investment income to average net assets 2.98% 2.16% .87% 2.78% 2.86% Portfolio turnover rate 141% 173% 24% 76% 117% A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B EFFECTIVE NOVEMBER 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. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. E INCLUDES $.02 PER SHARE FROM RECOVERY OF FOREIGN TAXES PREVIOUSLY WITHHELD ON DIVIDEND AND INTEREST PAYMENT. F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. G THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
DIVERSIFIED INTERNATIONAL 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The 3% sales charge, which had been waived since the fund's start on December 27, 1991, was eliminated on July 1, 1995. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND DIVERSIFIED INTERNATIONAL 6.02% 34.96% Morgan Stanley GDP- weighted EAFE Index 0.50% 39.55% Average International Fund -1.09% 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 December 27, 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 Morgan Stanley GDP-weighted EAFE index - a broad measure of the performance of stocks in Europe, Australia, and the Far East, weighted by each country's gross domestic product. To measure how the fund's performance stacked up against its peers, you can compare it to the average international fund, which reflects the performance of 233 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF OCTOBER 31, 1995 YEAR FUND DIVERSIFIED INTERNATIONAL 6.02% 8.10% Morgan Stanley GDP- weighted EAFE Index 0.50% 9.04% Average International Fund -1.09% 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 Fidelity DiversiGDP Weighted EAF 12/27/91 9700.00 10000.00 12/31/91 9758.20 10275.57 01/31/92 9564.20 10188.63 02/29/92 9389.60 10050.14 03/31/92 8865.80 9554.95 04/30/92 8962.80 9638.28 05/31/92 9457.50 10205.78 06/30/92 9253.80 9873.69 07/31/92 8914.30 9524.06 08/31/92 9069.50 9997.89 09/30/92 8865.80 9631.08 10/31/92 8206.20 9240.11 11/30/92 8206.20 9285.20 12/31/92 8410.93 9283.63 01/31/93 8607.22 9391.13 02/28/93 8901.65 9719.67 03/31/93 9618.10 10383.39 04/30/93 10206.96 11339.71 05/31/93 10462.14 11516.97 06/30/93 10167.70 11317.62 07/31/93 10481.77 11658.22 08/31/93 11021.56 12512.58 09/30/93 10874.34 12250.09 10/31/93 11109.89 12586.98 11/30/93 10697.68 11584.19 12/31/93 11495.12 12399.01 01/31/94 12357.26 13347.09 02/28/94 12109.52 13273.82 03/31/94 11723.04 13083.23 04/30/94 11950.96 13744.12 05/31/94 11931.14 13428.70 06/30/94 11772.59 13422.75 07/31/94 12178.88 13734.43 08/31/94 12486.08 13967.08 09/30/94 12129.34 13476.08 10/31/94 12347.35 13885.61 11/30/94 11683.40 13266.77 12/31/94 11620.39 13367.39 01/31/95 11085.65 13024.96 02/28/95 11219.34 13010.19 03/31/95 11764.36 13599.39 04/30/95 12134.57 14207.31 05/31/95 12237.41 14069.97 06/30/95 12422.51 13912.97 07/31/95 13224.63 14822.36 08/31/95 13018.96 14203.34 09/30/95 13265.76 14371.87 10/31/95 13090.94 13955.28 Let's say you invested $10,000 in Fidelity Diversified International Fund on December 27, 1991, when the fund started. By October 31, 1995, the value of your investment would have grown to $13,496 - a 34.96% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley GDP-weighted EAFE index, which would have grown to $13,955 over the same period - a 39.55% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) DIVERSIFIED INTERNATIONAL FUND TALK: THE MANAGER'S OVERVIEW An interview with Greg Fraser, Portfolio Manager of Fidelity Diversified International Fund Q. HOW DID THE FUND PERFORM, GREG? A. In an environment in which the U.S. markets outperformed many international markets, the fund returned 6.02% for the 12 months ended October 31, 1995. That's better than the average international fund tracked by Lipper Analytical Services which returned -1.09% for the same time period. The Morgan Stanley GDP-weighted EAFE index, a broad measure of stock performance in Europe, Australia and the Far East returned .50% for the same 12-month period. Q. WHAT FACTORS LED TO SUCH STRONG PERFORMANCE? A. The fund profited from successful country and industry themes. In particular, several Japanese technology stocks performed well during the period. Though some investors were concerned about technology in general, the valuations of Japanese technology stocks were very reasonable. Stocks such as Omron, Fujitsu, NEC and OKI Electric Industry were positive contributors to performance. Q. WHY DID THE FUND'S HOLDINGS IN JAPANESE STOCKS INCREASE FROM ABOUT 23% OF ASSETS SIX MONTHS AGO TO ABOUT 30% AT THE END OF THE PERIOD? A. The fund uses two kinds of computer models to determine its investment strategy - top-down country selection models and bottom-up stock selection models. The fund's weighting in Japan increased during the period as a result of the fund's bottom-up stock selection models. When the models looked at valuation parameters such as the price-to-book ratio and the price-to-cash flow multiple, some Japanese equities had very reasonable valuations when compared to their international competitors. In addition, many Japanese technology companies had market-leading positions and earnings estimates that were continually being revised upward. So, positive business developments combined with attractive business valuations were very appealing to the models. Q. HOW DOES CURRENCY AFFECT THE FUND? A. There are two factors to keep in mind. First, when the dollar changes in value when compared to a foreign currency there is an immediate translation impact. So a foreign stock the fund holds is immediately worth fewer dollars if the dollar is strong, or more dollars if the dollar is weak. Second, there is a longer-term business impact. Many analysts feel that it is possible for a currency to be too strong. When this happens, a country's or company's manufactured goods tend to be too expensive in some foreign markets and the country or the company will lose sales. But when a currency that the market felt was overvalued begins to fall, that country's stock market often does very well. We saw examples of this in the United Kingdom and Scandinavia in 1992-1993. Q. AND WHAT HAPPENED TO THE FUND THIS PERIOD? A. At the beginning of the period, the dollar tended to be weaker when compared to the yen and deutschmark. This resulted in a favorable translation impact (for U.S. investors) but tended to put a damper on Japanese and German stock performance (in local currency terms) because analysts felt that their manufactured goods were becoming uncompetitive. Toward the end of the period, the process tended to reverse and the yen and the deutschmark were somewhat weaker when compared to the dollar. This had a negative translation impact (for U.S. investors) since a stock priced in a foreign currency was immediately worth fewer dollars. However, many stocks in Japan and Germany then started to do quite a bit better (in local currency terms) as investors started to look forward to the positive earnings growth which could result from more cheaply priced exports. Q. WHAT ABOUT THE FUND'S HOLDINGS IN NORDIC COUNTRIES? A. The fund's holdings in Scandinavia remained significant and were about the same as they were six months ago. Many Nordic companies were trading below 10 times earnings and appeared to be growing earnings by 10% or greater per year. I found that, during the period, stocks such as Pharmacia were a very reasonable way to buy earnings growth within the fund. Q. HAVE YOU MADE ANY SIGNIFICANT CHANGES TO THE FUND'S MODELS? A. I'm constantly working on improving the fund's stock selection and country methodologies. In the top-down country selection models, we've added new artificial intelligence techniques. With the bottom-up models, I'm working on looking at industry-specific models in addition to stock-specific models. As long-term shareholders know, the quantitative management techniques of this fund are constantly evolving. Q. IN PREVIOUS REPORTS YOU'VE MENTIONED THAT YOU MAY INCREASE THE FUND'S EXPOSURE TO EMERGING MARKETS, YET THE WEIGHTING WAS ABOUT THE SAME AS IT WAS SIX MONTHS AGO. WHAT'S HOLDING YOU BACK? A. Some of the economies of larger emerging markets, notably Mexico, have been quite problematic lately. Until valuations better reflect troubles in the economy, I'll continue to be cautious. However, I've been seeing some excellent opportunities in closed-end funds that concentrate on emerging markets. They're trading at discounts approaching 20%, which appears to be a compelling bargain. So I've been prudently building positions in some of the funds gaining exposure to the emerging markets. Q. WHAT INVESTMENTS PROVED DISAPPOINTING? A. Most French stocks performed poorly during the period and, as a result, I reduced the fund's holdings in France from 6.4% to 4.1% of investments. Many analysts thought that France - where valuations appeared reasonable and positive political changes seemed imminent - would outperform. But with unexpected political turmoil such as terrorist bombings and continued shakeups in the government, France didn't live up to its potential. The models that the fund uses are unable to predict political problems or controversies. At the end of the period, I was maintaining less exposure to countries such as France and Italy where politics seem to be such a pivotal factor in returns. I've re-emphasized countries where political issues account for less of the activity in the markets or where valuations already incorporate many political problems. At the end of the period, the fund's exposure to France and Italy was quite modest. Q. WHAT'S AHEAD FOR THE FUND, GREG? A. As an international portfolio manager, it's been frustrating to watch the U.S. market outdistance many foreign markets during the past six months. However, outperformance by the U.S. means that many international companies have very reasonable valuations when compared to their U.S. peers. After considering their present relative valuations, the outlook on many foreign stocks begins to look more positive. So we could be approaching another time period in which foreign stocks could perform favorably. However, as I've cautioned in the past, some analysts feel that the dollar has finally bottomed and that we could see a sustained period of substantial dollar strength. If that were to happen, it's very important for shareholders to understand that the fund could undergo a very challenging period. 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: long-term growth of capital by investing in foreign equity securities that are determined, through both technical and fundamental analysis, to be undervalued compared to others in their industries and countries START DATE: December 27, 1991 SIZE: as of October 31, 1995, more than $295 million MANAGER: Gregory Fraser, since 1991; manager, Fidelity Select Defense and Aerospace Portfolio, 1989-1990; and Fidelity Select Environmental Services Portfolio, 1991; joined Fidelity in 1986 (checkmark) GREG FRASER ON THE USE OF FUNDAMENTAL DATA IN QUANTITATIVE INVESTING METHODS: "When people hear the word "quant" or the term "quantitative analysis," they tend to think of it as a completely different type of analysis - having little or nothing to do with more well-known methods of analysis such as technical or fundamental. "The quantitative research group here at Fidelity believes in taking the best of both technical and fundamental research techniques and combining them in a disciplined and systematic way in order to make good, profitable decisions. As quantitative investors, some of the most important things we look at are future earnings estimates, balance sheet items and company cash flows - just as fundamental analysts do. We're also interested in price and volume trends, which are the key components of technical research. "Our goal is to enhance traditional research and analysis with technology. With a fund like Diversified International, it would be extremely difficult to synthesize the data on the more than 5,000 companies around the world from which we choose our holdings without the help of computers and technology. "The bottom line is that our goal is to achieve the best returns possible for the fund; and we don't shy away from borrowing techniques from technical and fundamental analysis to achieve that goal. "Finally, every year I attend dozens and dozens of company meetings when they visit us here at Fidelity. This allows continuous quality controls of the models by comparing the models' favorite stocks to the business prospects the companies are actually discussing." DISTRIBUTIONS The Board of Trustees of Fidelity Diversified International Fund voted to pay on December 11, 1995, to shareholders of record at the opening of business on December 8, 1995, a distribution of $.41 derived from capital gains realized from sales of portfolio securities and a dividend of $.22 from net investment income. DIVERSIFIED INTERNATIONAL INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 United States 5.3% Netherlands 4.7% Row: 1, Col: 1, Value: 5.3 Row: 1, Col: 2, Value: 6.8 Row: 1, Col: 3, Value: 3.4 Row: 1, Col: 4, Value: 3.6 Row: 1, Col: 5, Value: 28.7 Row: 1, Col: 6, Value: 4.3 Row: 1, Col: 7, Value: 29.8 Row: 1, Col: 8, Value: 9.300000000000001 Row: 1, Col: 9, Value: 4.1 Row: 1, Col: 10, Value: 4.7 United Kingdom 6.8% France 4.1% Canada 3.4% Germany 9.3% Australia 3.6% Japan 29.8% Other 28.7% Sweden 4.3% AS OF APRIL 30, 1995 United States 10.0% Netherlands 5.9% Row: 1, Col: 1, Value: 10.0 Row: 1, Col: 2, Value: 9.300000000000001 Row: 1, Col: 3, Value: 3.1 Row: 1, Col: 4, Value: 3.6 Row: 1, Col: 5, Value: 23.3 Row: 1, Col: 6, Value: 3.6 Row: 1, Col: 7, Value: 22.9 Row: 1, Col: 8, Value: 3.4 Row: 1, Col: 9, Value: 8.5 Row: 1, Col: 10, Value: 6.4 Row: 1, Col: 11, Value: 5.9 Row: 1, Col: 12, Value: 0.0 France 6.4% United Kingdom 9.3% Germany 8.5% Canada 3.1% Australia 3.6% Norway 3.4% Other 23.3% Japan 22.9% Sweden 3.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks and closed-end investment companies 94.4 89.2 Bonds 1.5 2.7 Short-term investments 4.1 8.1 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Hitachi Ltd. 2.1 2.2 (Japan, Electronics) Omron Corp. 2.0 1.2 (Japan, Electrical Equipment) Ricoh Co. Ltd. Ord. 1.8 0.8 (Japan, Computers & Office Equipment) Bayer AG 1.8 1.4 (Germany, Chemicals & Plastics) TDK Corp. 1.8 1.5 (Japan, Electronics) Canon, Inc. 1.8 0.6 (Japan, Computers & Office Equipment) Matsushita Electric Industrial Co. Ltd. 1.7 1.7 (Japan, Consumer Electronics) Fuji Photo Film Co. Ltd. 1.7 1.2 (Japan, Photographic Equipment) Toshiba Corp. 1.5 0.7 (Japan, Electronics) Veba AG Ord. 1.4 1.6 (Germany, Electric Utilities) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Technology 19.1 10.9 Finance 17.8 13.7 Utilities 10.6 10.1 Basic Industries 8.4 8.7 Nondurables 6.6 9.0 Health 6.2 4.6 Industrial Machinery & Equipment 5.5 5.4 Durables 5.0 5.3 Energy 4.5 7.1 Media & Leisure 2.7 2.7 DIVERSIFIED INTERNATIONAL INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 83.2% SHARES VALUE (NOTE 1) ARGENTINA - 1.2% Banco de Galicia Y Buenos Aires SA sponsored ADR representing Class B shares (New) 50,000 $ 956,250 Banco Frances del Rio de la Plata SA ADR 50,000 1,093,750 Telecom Argentina sponsored ADR Class B 20,000 767,500 Telefonica de Argentina SA sponsored ADR 30,000 622,500 3,440,000 AUSTRALIA - 3.6% Advance Bank Australia Ltd. 106,025 782,079 Boral Ltd. Ord. 308,700 737,118 Broken Hill Proprietary Co. Ltd. (The) 100,000 1,352,080 CSR Ltd. 400,000 1,274,514 Caltex Australia Ltd. 630,000 2,031,314 Capral Aluminum Ltd. 400,000 912,540 News Corp. Ltd. ADR 30,000 596,250 Orbital Engine Corp. Ltd. sponsored ADR 1,000 7,625 Pioneer International Ltd. 500,000 1,224,325 Qantas Airways Ltd. (a) 100,000 176,424 Qantas Airways Ltd. sponsored ADR (b) 5,600 98,700 Santos Ltd. 432,507 1,167,595 Siddons Ramset Ltd. 109,258 293,604 10,654,168 BERMUDA - 0.1% Partner Re Holdings 10,000 266,250 BRAZIL - 0.6% Brahma (Cia Cervejaria) PN Class B (Pfd. Reg.) 1,250,000 477,119 Telebras PN (Pfd. Reg.) 30,000,000 1,216,536 1,693,655 CANADA - 3.0% Algoma Steel, Inc. (a) 3,600 15,396 BCE Mobile Communications, Inc. (a) 5,800 173,633 Barrick Gold Corp. 60,000 1,394,570 C A E Industries Ltd. 50,000 353,291 Chieftain International, Inc. (a) 100,000 1,375,976 FCA International Ltd. (a) 150,300 335,366 Imasco Ltd. 75,900 1,354,853 Magna International, Inc. Class A 30,000 1,305,318 Newbridge Networks Corp. (a) 50,000 1,525,000 Toronto Dominion Bank 50,000 883,228 8,716,631 DENMARK - 1.0% Novo-Nordisk AS Class B 15,000 1,909,166 Scandinavian Mobility (b) 9,000 214,266 Tele Danmark AS ADR Class B 35,000 914,375 3,037,807 FINLAND - 2.7% Cultor OY Ord., Series 2 30,000 1,244,241 Enso-Gutzeit OY Class R Free shares 100,000 784,720 Instrumentarium OY Class B 40,000 1,036,868 Kemira OY sponsored ADR (b) 65,000 1,072,500 Nokia Corp. AB: Series K 15,000 876,625 sponsored ADR 50,000 2,787,500 7,802,454 SHARES VALUE (NOTE 1) FRANCE - 4.1% Alcatel Alsthom sponsored ADR 25,000 $ 421,875 CGIP 6,000 1,136,713 Coflexip sponsored ADR 44,700 625,800 Credit Commercial de France (warrants) (a) 277 79 Elf Aquitaine sponsored ADR 25,000 843,750 Elf Sanofi SA 17,600 1,124,309 Eramet SA 19,990 1,351,091 Eridania Beghin Say Group Ord. 4,000 673,425 Europeene de Propulsion SA 1,579 103,488 Lafarge Coppee SA 13,000 862,939 Michelin SA Cie Generale des Etablissements Class B 30,000 1,213,518 Peugeot SA Ord. 2,000 260,932 Salomon SA 1,000 577,983 Societe Generale Class A 9,000 1,030,415 Total SA Class B 30,000 1,856,836 12,083,153 GERMANY - 6.6% Andrea-Noris Zahn 6,500 1,707,308 BASF AG 8,000 1,754,872 Bayer AG 20,000 5,315,728 Deutsche Bank AG 50,000 2,259,965 Hoechst AG Ord. 5,500 1,443,474 Springer Axel Verlag AG (Reg.) 3,000 1,810,244 Thyssen AG Ord. 5,000 899,088 Veba AG Ord. 100,000 4,102,509 19,293,188 HONG KONG - 1.9% Cheung Kong Holdings Ltd. 50,000 281,971 Consolidated Electric Power Asia Ltd. 500,000 1,012,120 New World Infrastructure Ltd. (b) 367,000 645,584 Peregrine Investments Holdings Ltd. 2,000,000 2,548,084 Semi-Tech (Global) Ltd. 531,413 831,697 South China Morning Post Holdings 400,000 232,820 Yue Yuen Industrial Holdings Ltd. 500,000 130,961 5,683,237 IRELAND - 0.8% Bank of Ireland U.S. Holdings, Inc. 130,000 867,062 IAWS Group PLC Class A (Reg.) 180,000 324,319 Independent Newspapers PLC 161,457 968,419 Waterford Foods PLC Class A 150,000 244,187 2,403,987 ISRAEL - 0.1% Elscint Ltd. (a) 99,000 222,750 Laser Industries Ltd. Ord. (a) 14,500 164,938 387,688 ITALY - 1.6% Stet (Societa Finanziaria Telefonica) Spa Ord. 800,000 2,265,892 Telecom Italia Mobile Spa (a) 700,000 1,179,388 Telecom Italia Ord. 800,000 1,227,715 4,672,995 JAPAN - 29.8% Canon, Inc. 300,000 5,144,285 Citizen Watch Co. Ltd. Ord. 125,000 858,606 Dai-Tokyo Fire & Marine Insurance Ord. 400,000 2,575,082 Dowa Fire & Marine Industries Co. Ltd. 150,000 699,623 Fuji Photo Film Co. Ltd. 200,000 4,958,111 Fujitsu Ltd. 300,000 3,586,302 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) JAPAN - CONTINUED Hitachi Ltd. 600,000 $ 6,173,142 Honda Motor Co. Ltd. 100,000 1,744,158 Izumiya Co. Ltd. 100,000 1,538,386 Kao Corp. 175,000 2,126,304 Kirin Brewery Co. Ltd. 100,000 1,009,260 Konica Corp. 200,000 1,342,413 Kyocera Corp. 40,000 3,284,503 Maruzen Showa Unyu Co., Ltd. 100,000 486,012 Matsushita Electric Industrial Co. Ltd. 350,000 4,972,809 Mitsubishi Heavy Industries Ltd. 450,000 3,479,006 NEC Corp. 200,000 2,645,632 Nittetsu Mining Co. Ltd. 100,000 867,179 Nitto Denko Corp. 100,000 1,597,178 Nomura Securities Co. Ltd. 100,000 1,832,345 OKI Electric Industry Co. Ltd. (a) 300,000 2,783,793 Omron Corp. 250,000 5,854,686 Ricoh Co. Ltd. Ord. 500,000 5,389,251 Royal Co. Ltd. 100,000 1,499,192 Sekisui Chemical Co. Ltd. 200,000 2,606,438 Sekisui House Ltd. 150,000 1,734,359 TDK Corp. 100,000 5,163,882 Takeda Chemical Industries Ltd. 270,000 3,809,710 Toshiba Corp. 600,000 4,356,474 Toyota Motor Corp. 125,000 2,327,177 Yamaichi Securities Co. Ltd. 100,000 525,207 86,970,505 KOREA (SOUTH) - 1.2% Korea Electric Power Corp. 40,000 1,757,890 Samsung Electronics Co. Ltd. (b): GDS 25,000 1,617,500 GDR representing shares (non-vtg.) 4,000 257,400 3,632,790 LUXEMBOURG - 0.2% Quilmes Industries SA 40,000 704,000 MEXICO - 0.2% Grupo Radio Centro SA de CV sponsored ADR 20,000 142,500 Sanluis Corp. Units 9,400 44,509 Telefonos de Mexico SA sponsored ADR representing shares Ord. Class L 10,000 275,000 462,009 NETHERLANDS - 4.7% ABN-AMRO Holdings NV 25,000 1,050,181 Heineken NV 5,000 887,030 International Nederlanden Groep NV 25,000 1,490,528 KLM Royal Dutch Airlines Ord. 60,336 1,991,703 Koninklijke PPT Nederland 1,113 39,138 Koninklijke PPT Nederland (b) 20,000 703,288 Philips Electronics NV (Bearer) 37,000 1,430,020 Royal Dutch Petroleum Co. 25,000 3,071,875 SGS Thomson Microelectronics NV 17,000 769,250 Telegraaf 5,000 719,128 Twentsche Kabel Holding NV 22,600 773,237 Unilever NV Ord. 5,000 654,818 13,580,196 NETHERLANDS ANTILLES - 0.5% Intrum Justitia NV (Reg.) 1,000,000 1,280,205 Orthofix International 20,000 195,000 1,475,205 SHARES VALUE (NOTE 1) NEW ZEALAND - 0.9% Brierley Investments Ltd. 2,500,000 $ 1,943,313 Fletcher Challenge Ltd.: (Forestry Division) 38,309 52,743 (Ordinary Division) 230,000 607,565 2,603,621 NORWAY - 2.2% Fokus Bank AS (a) 38,300 203,020 Helikopter Services AS 160,000 2,004,658 Norsk Hydro AS ADR 15,000 600,000 Orkla AS Class B (non-vtg.) 45,000 2,190,186 Saga Petroleum AS Class B 100,000 1,204,723 Transocean Drilling AS (a) 7,000 106,819 6,309,406 PANAMA - 0.1% McDermott (J. Ray) SA 20,000 302,500 PORTUGAL - 0.3% Portugal Telecom SA sponsored ADR (a) 50,000 937,500 SOUTH AFRICA - 1.1% Anglo American Corp. of South Africa (Reg.) 50,000 2,844,609 Rustenberg Platinum Holding Ltd. ADR 20,385 356,738 3,201,347 SPAIN - 1.4% Empresa Nacional de Electricidad SA sponsored ADR 10,000 502,500 Hidroelectrica de Cantabrico SA 35,000 1,052,869 Telefonica de Espana SA sponsored ADR 30,000 1,128,750 Union Electrica Fenosa SA 300,000 1,396,721 4,080,840 SWEDEN - 4.3% Astra AB Class A Free shares 45,000 1,656,283 Atlas Copco AB Class A Free shares 70,000 1,061,198 Cardo AB (a) 70,000 1,087,596 Celsius Industrier AB Class B 65,000 1,230,522 Marieberg Tidnings Class A 22,000 524,339 Mo Och Domsjoe AB Class B 15,000 764,787 Nordbanken AB (b) 20,000 295,657 Pharmacia AB Class A Free shares 70,000 2,439,172 SKF AB Ord. 30,000 568,494 Skandinaviska Enskilda Banken Class A Free shares 80,000 540,630 Sparbanken Sverige AB Class A (a)(b) 25,000 263,980 Volvo AB Class B 90,000 2,029,626 12,462,284 SWITZERLAND - 2.2% Bank for International Settlements 285 2,633,084 Bucher Holding AG (Bearer) 1,200 754,949 Nestle SA (Reg.) 3,000 3,141,223 6,529,256 UNITED KINGDOM - 6.8% British Petroleum PLC ADR 12,000 1,059,000 Carlton Communications 50,000 761,406 Cordiant PLC sponsored ADR (a) 50,000 193,750 Forte PLC 10,000 39,829 Glaxo PLC sponsored ADR 70,000 1,898,750 Guinness PLC Ord. 75,000 600,985 Huntingdon International Holdings PLC Ord. (a) 650,000 657,488 Invesco Mim PLC 250,000 960,154 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - CONTINUED London International Group PLC 600,000 $ 1,242,273 Northumbrian Water Group PLC Ord. 65,000 1,019,106 RTZ Corp. PLC Ord. 40,000 553,807 Royal Insurance Holdings PLC 175,000 1,080,074 Severn Trent PLC Ord. 90,000 913,924 SmithKline Beecham PLC ADR 25,000 1,296,875 South West Water PLC Ord. 90,000 712,647 Tesco PLC Ord. 225,000 1,066,838 Vodafone Group PLC sponsored ADR 100,000 4,087,500 WPP Group PLC ADR 155,000 745,938 Yorkshire Water Ord. 90,000 871,251 19,761,595 UNITED STATES OF AMERICA - 0.0% DST Systems, Inc. 2,000 42,000 TOTAL COMMON STOCKS (Cost $212,279,448) 243,190,267 CLOSED-END INVESTMENT COMPANIES - 9.0% CANADA - 0.4% Canadian General Investment Ltd. 50,000 1,176,088 CHILE - 0.5% Five Arrows Chile Investment Trust Ltd. 500,000 1,450,000 EMERGING MARKETS - 2.1% Emerging Markets Infrastructure Fund, Inc. 74,700 709,650 GT Global Developing Markets Fund 250,000 2,343,750 TCW/DW Emerging Markets Opportunities Trust 170,000 1,615,000 Templeton Dragon Fund, Inc. 120,000 1,440,000 6,108,400 GERMANY - 1.9% Central European Equity Fund (a) 119,500 1,912,000 Emerging Germany Fund, Inc. 186,000 1,348,500 The New Germany Fund, Inc. 200,000 2,450,000 5,710,500 MALAYSIA - 0.6% Malaysia Equity Fund Ltd. (a) 120,000 1,770,000 PHILIPPINES - 0.3% First Philippine Fund 50,000 762,500 REGIONAL AFRICA - 0.6% Morgan Stanley Africa Investment Fund, Inc. 70,000 901,250 Southern Africa Fund, Inc. 50,000 775,000 1,676,250 REGIONAL ASIA - 0.5% Morgan Stanley Asia-Pacific Fund, Inc. 125,000 1,375,000 SPAIN - 1.1% Growth Fund of Spain, Inc. 300,000 3,150,000 THAILAND - 0.3% Thai Prime Fund 61,000 915,000 UNITED STATES OF AMERICA - 0.7% Alliance Global Environment Fund (a) 140,200 1,314,375 Global Health Sciences Fund (a) 50,000 737,500 2,051,875 TOTAL CLOSED-END INVESTMENT COMPANIES (Cost $26,374,769) 26,145,613 NONCONVERTIBLE PREFERRED STOCKS - 2.2% SHARES VALUE (NOTE 1) GERMANY - 0.8% GEA AG 3,500 $ 1,140,454 SAP AG 3,000 460,015 Suedzucker AG 2,000 810,705 2,411,174 ITALY - 0.6% Stet (Societa Finanziaria Telefonica) Spa 800,000 1,748,060 UNITED STATES OF AMERICA - 0.8% Freeport McMoran Copper & Gold, Inc.: Series B 50,000 1,675,000 Series C 25,000 787,500 2,462,500 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $6,974,364) 6,621,734 GOVERNMENT OBLIGATIONS (E) - 1.8% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) ARGENTINA - 0.4% Argentina Republic BOCON 5.5625%, 4/1/01 (d) B1 $ 1,969,002 1,303,452 NEW ZEALAND - 1.4% New Zealand Government: 8%, 11/15/95 Aaa NZD 1,500,000 987,856 9%, 11/15/96 Aaa NZD 3,000,000 2,000,558 10%, 7/15/97 Aaa NZD 1,500,000 1,027,452 4,015,866 TOTAL GOVERNMENT OBLIGATIONS (Cost $4,888,637) 5,319,318 REPURCHASE AGREEMENTS - 3.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 11,057,806 11,056,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $261,573,218) $292,332,932 CURRENCY ABBREVIATIONS NZD - New Zealand dollar LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,168,875 or 1.8% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 5. Some foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $275,742,713 and $333,750,125, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $128,327 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $262,205,547. Net unrealized appreciation aggregated $30,127,385, of which $37,231,337 related to appreciated investment securities and $7,103,952 related to depreciated investment securities. The fund hereby designates $2,480,000 as a capital gain dividend for the purpose of the dividend paid deduction. For the period, interest and dividends from foreign countries were $7,865,097 or $0.34 per share. Taxes accrued or paid to foreign countries were $1,533,192 or $0.07 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.6% Basic Industries 8.4 Construction & Real Estate 2.1 Durables 5.0 Energy 4.5 Finance 17.8 Government Obligations 1.8 Health 6.2 Holding Companies 0.8 Industrial Machinery & Equipment 5.5 Media & Leisure 2.7 Nondurables 6.6 Precious Metals 1.5 Repurchase Agreements 3.8 Retail & Wholesale 0.9 Services 0.3 Technology 19.1 Transportation 1.8 Utilities 10.6 100.0% DIVERSIFIED INTERNATIONAL FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $11,056,000) (cost $261,573,218) - $ 292,332,932 See accompanying schedule Cash 730 Receivable for investments sold 6,698,035 Receivable for fund shares sold 1,124,132 Dividends receivable 878,089 Interest receivable 157,194 TOTAL ASSETS 301,191,112 LIABILITIES Payable for investments purchased $ 4,818,263 Payable for fund shares redeemed 957,145 Accrued management fee 226,996 Other payables and accrued expenses 172,109 TOTAL LIABILITIES 6,174,513 NET ASSETS $ 295,016,599 Net Assets consist of: Paid in capital $ 248,402,049 Undistributed net investment income 5,148,992 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 10,717,968 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 30,747,590 NET ASSETS, for 23,168,679 shares outstanding $ 295,016,599 NET ASSET VALUE, offering price $12.73 and redemption price per share ($295,016,599 (divided by) 23,168,679 shares)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 7,797,044 Dividends Interest 1,658,855 9,455,899 Less foreign taxes withheld (1,533,192 ) TOTAL INCOME 7,922,707 EXPENSES Management fee $ 2,270,179 Basic fee Performance adjustment (211,273 ) Transfer agent fees 867,536 Accounting fees and expenses 178,932 Non-interested trustees' compensation 2,887 Custodian fees and expenses 175,243 Registration fees 24,701 Audit 38,833 Legal 14,471 Miscellaneous 3,501 Total expenses before reductions 3,365,010 Expense reductions (35,327 3,329,683 ) NET INVESTMENT INCOME 4,593,024 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 11,746,226 Foreign currency transactions (35,175 11,711,051 ) Change in net unrealized appreciation (depreciation) on: Investment securities (3,741,846 ) Assets and liabilities in 366,100 (3,375,746 foreign currencies ) NET GAIN (LOSS) 8,335,305 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,928,329 OTHER INFORMATION Accounting fees paid to FSC $177,924
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 4,593,024 $ 3,033,098 Net investment income Net realized gain (loss) 11,711,051 10,885,262 Change in net unrealized appreciation (depreciation) (3,375,746) 13,742,044 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 12,928,329 27,660,404 Distributions to shareholders (804,584) (57,277) From net investment income From net realized gain (10,459,145) (2,281,540) TOTAL DISTRIBUTIONS (11,263,729) (2,338,817) Share transactions 211,031,927 439,644,650 Net proceeds from sales of shares Reinvestment of distributions 10,913,981 2,282,423 Cost of shares redeemed (279,746,151) (371,125,272) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (57,800,243) 70,801,801 TOTAL INCREASE (DECREASE) IN NET ASSETS (56,135,643) 96,123,388 NET ASSETS Beginning of period 351,152,242 255,028,854 End of period (including undistributed net investment income of $5,148,992 and $819,988, respectively) $ 295,016,599 $ 351,152,242 OTHER INFORMATION Shares Sold 17,615,508 36,516,172 Issued in reinvestment of distributions 980,592 201,263 Redeemed (23,603,323) (31,079,116) Net increase (decrease) (5,007,223) 5,638,319
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31, DECEMBER 27, 1991 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 B 1993 1992
Net asset value, beginning of period $ 12.46 $ 11.32 $ 8.46 $ 10.00 Income from Investment Operations Net investment income .22 .05 .07 .07 Net realized and unrealized gain (loss) .47 1.20 2.89 (1.61) Total from investment operations .69 1.25 2.96 (1.54) Less Distributions (.03) (.01) (.10) - From net investment income From net realized gain (.39) (.10) - - Total distributions (.42) (.11) (.10) - Net asset value, end of period $ 12.73 $ 12.46 $ 11.32 $ 8.46 TOTAL RETURN A, C 6.02% 11.14% 35.38% (15.40)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 295,017 $ 351,152 $ 255,029 $ 36,439 Ratio of expenses to average net assets 1.13% 1.25% 1.47% 2.00% D, E Ratio of expenses to average net assets after expense reductions 1.12% 1.25% 1.47% 2.00% D Ratio of net investment income to average net assets 1.55% .96% .84% 1.38% D Portfolio turnover rate 101% 89% 56% 56% D A TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. B EFFECTIVE NOVEMBER 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. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS). D ANNUALIZED 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.
INTERNATIONAL VALUE 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED LIFE OF OCTOBER 31, 1995 FUND INTERNATIONAL VALUE 6.30% Morgan Stanley EAFE Index -0.37% Average International Fund -1.09% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, since the fund started on November 1, 1994. 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 Morgan Stanley EAFE index - a broad measure of the performance of stocks in Europe, Australia, and the Far East. You can also compare the fund's performance to the average international fund, which reflects the performance of 150 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS 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. In the fund's next report we'll report these numbers for the fund and the benchmarks. $10,000 OVER LIFE OF FUND Fidelity InternaEurope, Australi 11/01/94 10000.00 10000.00 11/30/94 9700.00 9519.40 12/31/94 9790.00 9579.01 01/31/95 9440.00 9211.02 02/28/95 9530.00 9184.59 03/31/95 10000.00 9757.44 04/30/95 10170.00 10124.41 05/31/95 10030.00 10003.72 06/30/95 10040.00 9828.29 07/31/95 10830.00 10440.16 08/31/95 10800.00 10041.90 09/30/95 10860.00 10238.02 10/31/95 10620.00 9962.82 Let's say you invested $10,000 in Fidelity International Value Fund on November 1, 1994, when the fund started. By October 31, 1995, the value of your investment would have grown to $10,630 - a 6.30% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley EAFE index, which would have decreased value to $9,963 over the same period - - a 0.37% decrease. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) INTERNATIONAL VALUE FUND TALK: THE MANAGER'S OVERVIEW An interview with Richard Mace, Portfolio Manager of Fidelity International Value Fund Q. HOW HAS THE FUND PERFORMED, RICK? A. From its inception on November 1, 1994, through October 31, 1995, the fund had a total return of 6.30%. During the same period, the Morgan Stanley EAFE Index -which tracks the performance of stocks in Europe, Australia and the Far East - returned -0.37%. The average international fund had a total return of -1.09% according to Lipper Analytical Services. Q. WHAT HELPED THE FUND BEAT BOTH THE AVERAGE FUND AND THE INDEX? A. I would say there were three major contributors to the fund's performance. The first had to do with the level of the fund's investment in Japan. Specifically, the fund had less than 30% invested there in January, but nearly 60% of the fund was invested in Japan in August. The fund was underweighted relative to the index early in the year when the Japanese market was weak. But the fund was overweighted relative to the index as the market recovered later in the year. The second reason had to do with the fund's cash and short-term investment position. Because of the rapid growth in the fund's assets over the year, it maintained a higher-than-normal cash level. Once the rapid growth slowed, the fund's cash level declined. In an environment where international markets were underperforming, being underinvested provided an advantage. Third, the fund's investments in Norway - although only a small percentage of the fund - provided positive performance. Q. LET'S TALK ABOUT JAPAN FIRST. WHAT SORT OF STOCKS DID YOU TARGET? A. If you look at the portfolio, you'll see that many of the Japanese stocks were cyclicals - companies poised to benefit from an economic recovery there. These included electronics and computer companies, such as Hitachi, Mitsubishi Electric, Canon and NEC; Ito-Yokado, a retailer; and Honda, the motorcycle and automobile manufacturer that benefited from strong new model sales, a solid balance sheet and cost cutting. While these stocks followed a particular theme, let me remind investors that I select stocks one at a time, based on company prospects and valuation - trying to maximize return with minimal risk, by buying stocks that I find to be cheap. Q. YOU INCREASED THE PERCENTAGE OF THE FUND'S INVESTMENTS IN ITS TOP STOCK, OMRON. WHAT WAS THE APPEAL BEHIND THIS PARTICULAR COMPANY? A. Omron manufactures factory automation and control equipment. It benefited from strong worldwide demand for its products, as electronic equipment companies were looking to use automation to increase their manufacturing capacity. In addition, Omron was at the forefront of a revolutionary trend in Japanese management. Companies were starting to understand the benefits of focusing on increasing shareholder value. Companies such as Omron cut costs aggressively, restructured their business and generated free cash flow. It appeared Omron would share this cash in the form of dividends. Also, the company may buy back shares - a move that generally is viewed as favorable by existing shareholders because it tends to increase the value of the stock. The Japanese government has indicated it may change present policy and allow companies to do so without severe tax implications. Q. WERE THERE ANY PARTICULAR AREAS OR INVESTMENTS THAT DIDN'T TURN OUT AS WELL AS YOU WOULD HAVE LIKED? A. Because the fund concentrated heavily on increasing investments in Japan, it missed opportunities in markets elsewhere in the world that turned in solid performance, such as Switzerland, Sweden and the United Kingdom. All three of these markets produced substantial returns, but the fund had very small levels of investment there. The rationale behind investing significantly in Japan came from my belief that buying stocks with low valuations is one way of reducing risk. I didn't invest more in those European countries because I found overall stock prices to be expensive. Japan was more attractive because that's where I found better value and a lower level of inherent risk. Q. WHAT HAS THE INVESTING ENVIRONMENT BEEN LIKE IN JAPAN, SPECIFICALLY? A. Many factors - the Kobe earthquake, the subway nerve gas attack, a lack of consumer confidence, political and banking scandals, and a weakening economy - depressed the stock market, producing buying opportunities. Unfortunately, the negative sentiment generated by all of these factors kept a lid on stock prices for several months. Therefore, it clearly has taken longer than I anticipated for an upturn in Japan. Nonetheless, it appears at the present time that business conditions and the economy could improve slowly. A specific company that was disappointing was Nifco, a Japanese auto part manufacturer. Auto production in Japan didn't pick up as much as I had expected and the company's exports declined. As a result, the share price declined. In addition, trade discussions between the U.S. and Japan had negative implications, as did news that Japanese auto companies are going to move production offshore. I also cut back on some European cyclical stocks - those that rise and fall with the economy - because business wasn't picking up. Kuoni, for example, a Swiss travel agency suffered from the economic slowdown, as its business is highly dependent on leisure travel. Q. TWO OF THE FUND'S TOP 10 STOCKS - ALUMINUM COMPANY OF AMERICA AND FALCONBRIDGE OF CANADA - WERE METALS AND MINING STOCKS. WERE YOU PURSUING A PARTICULAR THEME IN THAT AREA? A. I targeted nickel and aluminum companies such as these, as well as Capral Aluminum in Australia and Inco in Canada, because the supply/demand situation looked positive for these non-ferrous metals. The Canadian stocks were also attractive in terms of valuations, more so than comparable stocks in Europe. I also would like to note that while Aluminum Company of America - - Alcoa - is considered an American stock, it received much of its earnings and cash flow from its overseas business. Q. RICK, IN THE PAST THE FUND HAS USED A HEDGING STRATEGY TO REDUCE CURRENCY RISK - THE RISK THAT MOVEMENTS IN A COUNTRY'S CURRENCY WILL NEGATIVELY AFFECT THE FUND'S INVESTMENTS THERE. IS THIS STRATEGY STILL IN PLACE? A. During the year I reduced the fund's investments in forward foreign currency contracts, which I had used to hedge foreign currencies. I did so because these investments hadn't added much value to the fund, and I don't foresee using them much going forward. Q. RICK, LET'S DISCUSS YOUR OUTLOOK. WHAT DO YOU SEE HAPPENING OVER THE NEXT SIX MONTHS? A. It appears to me that we'll see some economic improvement overseas within the next six to 12 months. When economies recover, the degree of earnings growth that companies see in response usually surprises investors. I've positioned the fund to benefit from a recovering economy in Japan - where we're already seeing signs of recovery. I would expect to see earnings growth from the stocks I've invested in to be higher than expected. The key going forward will be to select those stocks that are best positioned to benefit from an improving economy. That also could include capitalizing on European companies whose business is improving. 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: growth of capital by investing mainly in the stocks of foreign companies that own valuable assets or are undervalued in the marketplace START DATE: November 1, 1994 SIZE: as of October 31, 1995, more than $56 million MANAGER: Richard Mace, since 1994; manager, Fidelity International Growth & Income Fund, since 1994; co-manager, Fidelity Global Balanced Fund, since January 1995, and February 1993- December 1993; manager, Fidelity Select Chemicals Portfolio and Fidelity Select Industrial Materials Portfolio, 1992; Fidelity Select Transportation Portfolio, 1989-1991; joined Fidelity in 1987 (checkmark) RICK MACE ON INTERNATIONAL ECONOMIC TRENDS: "When overseas bond markets perform well, overseas stock markets often do so as well. That has not been the case this year. While we've seen a very strong bond market rally, stock markets have stalled. Strong bond market performance often is a reflection of slow economic growth. My belief is that six or 12 months from now, the outlook will be for improving economies abroad, with earnings estimates outside the U.S. on the rise. As a result, I'll be looking for stocks that are positioned to move upward in step with economic growth. "To get a read on the direction of worldwide economies, one can look at the behavior of the three largest financial institutions in the world - the Bank of Japan, the Federal Reserve Bank and Germany's Bundesbank. All three have publicly stated that they believe the U.S. dollar is undervalued and have pledged their support to strengthen it. A strong dollar would help foreign companies with export-oriented business, because it would reduce their export prices, thus making their products more competitively priced abroad. In addition, the three central banks have expressed their commitment to strengthening their home economies by lowering interest rates. Coordinated central bank action is a pretty powerful policy. This is one of the reasons I believe overseas economic growth will soon be on the upswing." DISTRIBUTIONS The Board of Trustees of Fidelity International Value Fund voted to pay on December 11, 1995, to shareholders of record at the opening of business on December 8, 1995, a distribution of $.30 derived from capital gains realized from sales of portfolio securities and a dividend of $.01 from net investment income. INTERNATIONAL VALUE INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 Canada 3.1% United Kingdom 5.0% Row: 1, Col: 1, Value: 15.5 Row: 1, Col: 2, Value: 14.7 Row: 1, Col: 3, Value: 56.9 Row: 1, Col: 4, Value: 4.8 Row: 1, Col: 5, Value: 5.0 Row: 1, Col: 6, Value: 3.1 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 8, Value: 0.0 United States 15.5% France 4.8% Other 14.7% Japan 56.9% AS OF APRIL 30, 1995 United Kingdom 7.2% Row: 1, Col: 1, Value: 26.1 Row: 1, Col: 2, Value: 12.7 Row: 1, Col: 3, Value: 6.6 Row: 1, Col: 4, Value: 37.3 Row: 1, Col: 5, Value: 6.5 Row: 1, Col: 6, Value: 3.6 Row: 1, Col: 7, Value: 7.2 Row: 1, Col: 8, Value: 0.0 France 3.6% United States 26.1% Germany 6.5% Other 12.7% Japan 37.3% Netherlands 6.6% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks and equity futures 87.1 74.6 Bonds 4.5 1.4 Short-term investments 8.4 24.0 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Omron Corp. 5.3 4.0 (Japan, Electrical Equipment) Hitachi Ltd. 4.3 4.2 (Japan, Electronics) Mitsubishi Electric Co. Ord. 4.1 3.2 (Japan, Electrical Equipment) Ito-Yokado Co. Ltd. 3.1 3.9 (Japan, General Merchandise Stores) Canon, Inc. 2.7 0.6 (Japan, Computers & Office Equipment) TDK Corp. 2.3 0.4 (Japan, Electronics) Aluminum Co. of America 2.0 1.0 (Unites States, Metals & Mining) Nitto Denko Corp. 1.7 2.5 (Japan, Electronics) Sony Corp. 1.7 1.8 (Japan, Consumer Electronics) Falconbridge Ltd. 1.6 0.0 (Canada, Metals & Mining) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Technology 21.4 11.8 Industrial Machinery & Equipment 13.1 10.8 Basic Industries 10.7 7.6 Durables 6.6 7.4 Retail & Wholesale 5.7 4.6 Energy 5.4 6.6 Finance 4.4 4.3 Utilities 3.5 9.3 Services 1.8 4.1 Media & Leisure 1.7 1.8 INTERNATIONAL VALUE INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 77.7% SHARES VALUE (NOTE 1) AUSTRALIA - 1.4% Capral Aluminum Ltd. 85,000 $ 193,915 QNI Ltd. 176,500 338,233 Western Mining Holdings Ltd. 44,000 281,732 813,880 AUSTRIA - 0.2% Mayr Melnhof Karton AG 1,900 110,778 BERMUDA - 0.4% ADT Ltd. (a) 17,000 238,000 CANADA - 3.1% Alcan Aluminium Ltd. 20,000 634,065 Canada Occidental Petroleum Ltd. 200 5,876 Falconbridge Ltd. (1st. installment receipts)(e) 100,000 939,011 Inco Ltd. 6,000 206,396 1,785,348 DENMARK - 0.6% International Service Systems AS, Series B 4,500 92,299 Tele Danmark AS Class B 2,500 130,483 Unidanmark AS Class A 2,000 91,933 314,715 FINLAND - 2.3% Kemira OY 80,000 673,021 Valmet OY Class A 22,500 625,655 1,298,676 FRANCE - 4.8% Accor SA 1,113 132,443 Alcatel Alsthom CGE 4,000 342,120 Axa SA 2,000 111,254 Elf Aquitaine sponsored ADR 500 16,875 Generale des Eaux 4,078 379,611 Michelin SA Cie Generale des Etablissements Class B 18,000 728,111 Pechiney International SA 3,000 156,682 Total SA Class B 7,171 443,846 Total SA sponsored ADR 14,000 432,250 2,743,192 GERMANY - 0.9% Deutsche Bank AG 7,000 316,395 Veba AG (warrants) (a) 1,200 170,802 487,197 HONG KONG - 0.2% Peregrine Investments Holdings Ltd. 100,000 127,404 ITALY - 0.5% De Rigo Spa sponsored ADR 100 2,063 Italcementi Fabbriche Ruinite Cemento Spa, Bergamo 5,000 30,973 Stet (Societa Finanziaria Telefonica) Spa Ord. 60,000 169,942 Telecom Italia Mobile Spa (a) 30,000 50,545 Telecom Italia Ord. 30,000 46,039 299,562 JAPAN - 47.3% Acom Co. Ltd. 5,000 163,147 Aiwa Co. Ltd. 5,000 108,765 Amway Japan Ltd. sponsored ADR 10,000 190,000 Bridgestone Corp. 10,000 139,141 Canon, Inc. 90,000 1,543,285 SHARES VALUE (NOTE 1) Citizen Watch Co. Ltd. Ord. 15,000 $ 103,033 Daiwa Securities Co. Ltd. 50,000 587,918 Fuji Electric Co. Ltd. 69,000 333,320 Fuji Photo Film Co. Ltd. 35,000 867,669 Fujitsu Ltd. 30,000 358,630 Hitachi Ltd. 240,000 2,469,257 Honda Motor Co. Ltd. 13,000 226,740 Hoya Corp. 7,000 205,771 Ito-Yokado Co. Ltd. 32,000 1,752,780 Kobe Steel (a) 110,000 288,864 Konica Corp. 15,000 100,681 Kyocera Corp. 10,000 821,126 Kyocera Corp. (warrants) (a) 30 50,625 Matsushita Electric Industrial Co. Ltd. 60,000 852,482 Mitsubishi Electric Co. Ord. 312,000 2,335,682 Mitsubishi Heavy Industries Ltd. 15,000 115,967 Murata Manufacturing Co. Ltd. 6,000 211,063 NEC Corp. 60,000 793,690 Nichicon Corp. 50,000 676,106 Nifco, Inc. 10,000 118,564 Nihon Unisys Ltd. 5,000 49,973 Nintendo Co. Ltd. Ord. 1,500 110,529 Nippon Shokubai Co. Ltd. 47,000 410,798 Nissan Motor Co. Ltd. Ord. 10,000 67,611 Nitto Denko Corp. 60,000 958,307 Nomura Securities Co. Ltd. 45,000 824,555 Omron Corp. 130,000 3,044,437 Ricoh Co. Ltd. Ord. 50,000 538,925 Rohm Co. Ltd. (warrants) (a) 599 440,092 Sankyo Co. Ltd. 2,000 44,094 Sanyo Electric Co. Ltd. 10,000 51,933 Sekisui Chemical Co. Ltd. 24,000 312,773 Shimamura Corp. 5,000 178,335 Shin-Etsu Chemical Co. Ltd. 5,000 102,396 Sony Corp. 21,000 946,548 TDK Corp. 25,000 1,290,971 Toshiba Corp. 50,000 363,040 Uny Co. Ltd. 40,000 689,824 Wako Electric Co. Ltd. 19,000 457,988 Yamanouchi Pharmaceutical Co. Ltd. 23,000 513,841 Yoshinoya D&C Co. Ltd. Ord. 8 126,990 26,938,266 KOREA (SOUTH) - 0.1% Samsung Electronics Co. Ltd. (b): GDR (partial dividend) 6 688 GDS (vtg.) 500 58,500 59,188 MEXICO - 0.1% Telefonos de Mexico SA sponsored ADR representing shares Ord. Class L 1,000 27,500 NETHERLANDS - 1.8% AKZO NV Ord. 1,000 113,857 Heineken NV 500 88,703 Hoogovens en Staalfabrieken 100 3,421 KLM Royal Dutch Airlines Ord. 204 6,734 Koninklijke PPT Nederland 15,000 527,466 Philips Electronics NV (Bearer) 3,500 135,272 Vendex International NV 3,000 86,485 Vendex International NV (b) 3,000 86,485 1,048,423 NETHERLANDS ANTILLES - 0.7% Schlumberger Ltd. 6,000 373,500 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) NEW ZEALAND - 0.3% Brierley Investments Ltd. 200,000 $ 155,465 NORWAY - 1.8% Fokus Bank AS (a) 7,100 37,636 Fokus Bank AS (a) (b) 4,000 21,203 Helikopter Services AS 10,000 125,291 Kverneland Gruppen AS 4,800 83,270 Saga Petroleum AS Class B 14,000 168,661 Smedvig AS 4,800 83,270 Transocean Drilling AS (a) 34,000 518,834 1,038,165 RUSSIA - 0.0% Mosenergo AO sponsored ADR (a)(b) 3,000 26,250 SPAIN - 0.9% Banco Bilbao Vizcaya SA Ord. (Reg.) 3,000 91,721 Tabacalera SA, Series A 12,000 403,279 495,000 SWEDEN - 2.1% Atlas Copco AB Class A Free shares 3,000 45,480 Electrolux AB 5,000 214,201 Esselte AB Class B Free shares 16,000 235,319 Svedala Industri 10,000 254,175 Volvo AB Class B 20,000 451,028 1,200,203 SWITZERLAND - 0.3% Kuoni Reisen Holding AG Class B (Reg.) 100 159,261 UNITED KINGDOM - 5.0% BET PLC Ord. 300,000 597,429 British Petroleum PLC: ADR 5,000 441,250 Ord. 51,095 375,514 Cookson Group 100,000 463,087 Eurocamp PLC 18,000 64,864 Forte PLC 40,000 159,314 London Clubs International PLC 10,000 64,959 Telegraph (The) PLC 30,000 193,453 Vodafone Group PLC sponsored ADR 3,000 122,625 WPP Group PLC 58,900 142,430 Wickes PLC 100,000 196,768 2,821,693 UNITED STATES OF AMERICA - 2.9% Aluminum Co. of America 22,000 1,122,000 American Express Co. 500 20,313 Limited, Inc. (The) 3,000 55,125 Pride Petroleum Services, Inc. (a) 5,000 43,750 Reynolds Metals Co. 1,000 50,375 Roadway Services, Inc. 5,000 223,750 Sonat Offshore Drilling, Inc. 5,000 158,750 1,674,063 TOTAL COMMON STOCKS (Cost $42,602,920) 44,235,729 NONCONVERTIBLE PREFERRED STOCKS- 0.1% ITALY - 0.1% Italmobiliare Spa (Milano) (Cost $106,220) 10,000 78,115 CONVERTIBLE BONDS - 0.3% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) AMOUNT (C) (NOTE 1) JAPAN - 0.3% Matsushita Electric Works Co. Ltd. 2.70%, 5/31/02 (Cost $194,038) - JPY 15,000,000 $ 167,850 GOVERNMENT OBLIGATIONS - 5.5% UNITED STATES OF AMERICA - 5.5% U.S. Treasury Bill yield at time of purchase 5 1/4%, 12/7/95 Aaa $ 370,000 368,132 U.S. Treasury Notes: 9 1/4%, 1/15/96 Aaa 390,000 392,742 6 1/2%, 5/15/97 Aaa 390,000 394,937 8 3/4%, 10/15/97 Aaa 370,000 391,042 9 1/4%, 8/15/98 Aaa 370,000 403,300 5 1/8%, 12/31/98 (d) Aaa 410,000 402,952 8 7/8%, 2/15/99 Aaa 370,000 404,166 9 1/8%, 5/15/99 Aaa 360,000 398,081 TOTAL GOVERNMENT OBLIGATIONS (Cost $3,135,568) 3,155,352 REPURCHASE AGREEMENTS - 16.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 9,319,522 9,318,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $55,356,746) $56,955,046 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT OF VALUE GAIN/(LOSS) PURCHASED 60 Nikkei Stock Average Contracts Dec. 1995 $ 5,299,500 $(12,077) THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 9.3% CURRENCY ABBREVIATIONS JPY - Japanese yen LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $193,126 or 0.3% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. Security pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $402,952. 5. Purchased on an installment basis. Market value reflects only those payments made through October 31, 1995. The remaining installments aggregating CAD $1,900,000 are due July 31, 1996 and January 31, 1997. 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 5.5% AAA, AA, A 5.5% Baa 0.0% BBB 0.0% 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 0.3%. Purchases and sales of securities, other than short-term securities, aggregated $85,408,600 and $42,316,313, respectively, of which U.S. government and government agency obligations aggregated $3,821,442 and $1,487,639, respectively. The market value of futures contracts opened and closed during the period amounted to $24,976,540 and $19,972,963, respectively (see Note 2 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $16,341 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $55,387,527. Net unrealized appreciation aggregated $1,567,519, of which $2,919,292 related to appreciated investment securities and $1,351,773 related to depreciated investment securities. The fund hereby designates $172,000 as a capital gain dividend for the purpose of the dividend paid deduction. For the period, interest and dividends from foreign countries were $767,392 or $0.14 per share. Taxes accrued or paid to foreign countries were $105,096 or $0.02 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Basic Industries 10.7% Construction & Real Estate 0.1 Durables 6.6 Energy 5.4 Finance 4.4 Government Obligations 5.5 Health 1.3 Holding Companies 0.4 Industrial Machinery & Equipment 13.1 Media & Leisure 1.7 Nondurables 0.9 Precious Metals 0.5 Repurchase Agreements 16.4 Retail & Wholesale 5.7 Services 1.8 Technology 21.4 Transportation 0.6 Utilities 3.5 100.0% INTERNATIONAL VALUE FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $9,318,000) (cost $55,356,746) - See $ 56,955,046 accompanying schedule Cash 311 Receivable for investments sold 1,295,124 Receivable for fund shares sold 401,705 Dividends receivable 128,778 Interest receivable 61,483 Receivable for daily variation on futures contracts 22,500 TOTAL ASSETS 58,864,947 LIABILITIES Payable for investments purchased $ 1,307,258 Payable for fund shares redeemed 571,859 Accrued management fee 36,386 Other payables and accrued expenses 121,244 TOTAL LIABILITIES 2,036,747 NET ASSETS $ 56,828,200 Net Assets consist of: Paid in capital $ 52,744,905 Undistributed net investment income 36,632 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 2,462,124 Net unrealized appreciation (depreciation) on investments 1,584,539 and assets and liabilities in foreign currencies NET ASSETS, for 5,348,536 shares outstanding $ 56,828,200 NET ASSET VALUE, offering price $10.63 and redemption price per share ($56,828,200 (divided by) 5,348,536 shares)
STATEMENT OF OPERATIONS
NOVEMBER 1, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1995 INVESTMENT INCOME $ 737,040 Dividends Interest 692,542 1,429,582 Less foreign taxes withheld (105,096 ) TOTAL INCOME 1,324,486 EXPENSES Management fee $ 361,109 Transfer agent fees 181,666 Accounting fees and expenses 44,123 Non-interested trustees' compensation 158 Custodian fees and expenses 78,481 Registration fees 117,201 Audit 28,964 Legal 1,903 Miscellaneous 417 TOTAL EXPENSES 814,022 NET INVESTMENT INCOME 510,464 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,183,044 Foreign currency transactions (502,752 ) Futures contracts 308,000 1,988,292 Change in net unrealized appreciation (depreciation) on: Investment securities 1,598,300 Assets and liabilities in foreign currencies (1,684 ) Futures contracts (12,077 1,584,539 ) NET GAIN (LOSS) 3,572,831 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,083,295 OTHER INFORMATION Accounting fees paid to FSC $43,939
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS NOVEMBER 1, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1995
Operations $ 510,464 Net investment income Net realized gain (loss) 1,988,292 Change in net unrealized appreciation (depreciation) 1,584,539 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,083,295 Share transactions 164,834,882 Net proceeds from sales of shares Cost of shares redeemed (112,089,977) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 52,744,905 TOTAL INCREASE (DECREASE) IN NET ASSETS 56,828,200 NET ASSETS Beginning of period - End of period (including undistributed net investment income of $36,632) $ 56,828,200 OTHER INFORMATION Shares Sold 16,269,212 Redeemed (10,920,676) Net increase (decrease) 5,348,536
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS ISELECTED PER-SHARE DATA NOVEMBER 1, 1994 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1995
Net asset value, beginning of period $ 10.00 Income from Investment Operations Net investment income .11A Net realized and unrealized gain (loss) .52 Total from investment operations .63 Net asset value, end of period $ 10.63 TOTAL RETURN 6.30% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 56,828 Ratio of expenses to average net assets 1.72% Ratio of net investment income to average net assets 1.08% Portfolio turnover rate 109% A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
OVERSEAS 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The 3% sales charge was eliminated July 1, 1995. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 OCTOBER 31, 1995 YEAR YEARS YEARS OVERSEAS -0.34% 36.87% 290.47% OVERSEAS (INCL. 3% SALES CHARGE) -3.33% 32.76% 278.76% Morgan Stanley EAFE Index -0.37% 39.94% 265.72% Average International Fund -1.09% 53.21% 252.05% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or 10 years. 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 Morgan Stanley EAFE index - a broad measure of the performance of stocks in Europe, Australia, and the Far East. To measure how the fund's performance stacked up against its peers, you can compare it to the average international fund, which reflects the performance of 233 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 OCTOBER 31, 1995 YEAR YEARS YEARS OVERSEAS -0.34% 6.48% 14.59% OVERSEAS (INCL. 3% SALES CHARGE) -3.33% 5.83% 14.24% Morgan Stanley EAFE Index -0.37% 6.95% 13.85% Average International Fund -1.09% 8.71% 13.12% 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 TEN YEARS Overseas (094) Europe, Australi 10/31/85 9700.00 10000.00 11/30/85 10394.60 10410.51 12/31/85 11202.17 10903.60 01/31/86 11539.77 11176.94 02/28/86 13240.04 12415.05 03/31/86 15517.31 14160.85 04/30/86 15996.08 15088.13 05/31/86 15486.62 14417.53 06/30/86 16695.84 15399.09 07/31/86 18580.26 16349.87 08/31/86 19814.03 17960.80 09/30/86 18893.30 17776.03 10/31/86 16517.83 16588.53 11/30/86 18064.65 17545.08 12/31/86 18959.44 18474.68 01/31/87 21877.19 20437.82 02/28/87 22579.13 21049.47 03/31/87 25132.27 22774.34 04/30/87 27011.00 25184.11 05/31/87 26907.77 25184.02 06/30/87 25015.28 24381.67 07/31/87 25386.90 24339.08 08/31/87 27499.60 26164.06 09/30/87 27162.40 25752.15 10/31/87 21264.71 22031.43 11/30/87 21092.66 22361.89 12/31/87 22441.85 23025.89 01/31/88 21569.32 23436.99 02/29/88 22254.20 24999.23 03/31/88 23605.22 26536.33 04/30/88 24224.43 26921.95 05/31/88 23736.57 26058.94 06/30/88 23061.06 25372.07 07/31/88 22760.83 26168.09 08/31/88 22075.95 24466.68 09/30/88 22901.57 25535.74 10/31/88 23736.57 27720.64 11/30/88 24355.78 29371.85 12/31/88 24294.85 29535.62 01/31/89 24592.53 30055.28 02/28/89 25235.91 30209.77 03/31/89 25015.05 29616.86 04/30/89 25552.80 29891.55 05/31/89 24323.66 28265.35 06/30/89 23613.06 27789.54 07/31/89 25956.12 31279.16 08/31/89 25351.15 29872.42 09/30/89 26705.13 31233.16 10/31/89 25255.12 29978.29 11/30/89 26685.92 31485.29 12/31/89 28408.82 32647.00 01/31/90 27764.08 31432.26 02/28/90 27189.86 29238.46 03/31/90 28086.45 26192.51 04/30/90 28015.93 25984.65 05/31/90 29919.92 28949.53 06/30/90 30453.85 28694.55 07/31/90 31954.88 29098.73 08/31/90 28418.89 26273.00 09/30/90 25265.71 22611.48 10/31/90 27673.41 26134.77 11/30/90 26756.67 24593.13 12/31/90 26533.15 24991.53 01/31/91 27121.82 25799.88 02/28/91 28106.51 28565.60 03/31/91 27186.04 26850.74 04/30/91 27571.36 27114.42 05/31/91 27624.87 27397.34 06/30/91 25890.96 25384.16 07/31/91 27303.78 26631.33 08/31/91 27507.14 26090.50 09/30/91 28716.59 27560.93 10/31/91 28812.92 27951.64 11/30/91 27774.72 26646.73 12/31/91 28818.56 28022.85 01/31/92 29149.41 27424.28 02/29/92 28544.75 26442.71 03/31/92 27951.49 24697.06 04/30/92 29651.40 24814.46 05/31/92 30929.18 26475.43 06/30/92 30199.02 25219.64 07/31/92 28282.35 24574.19 08/31/92 28042.76 26115.51 09/30/92 26879.07 25599.80 10/31/92 25053.66 24256.97 11/30/92 24928.17 24485.23 12/31/92 25517.18 24611.88 01/31/93 26260.90 24608.85 02/28/93 26799.45 25352.21 03/31/93 28620.28 27562.05 04/30/93 30607.80 30177.76 05/31/93 31313.04 30815.11 06/30/93 30569.33 30334.33 07/31/93 31967.00 31396.18 08/31/93 33775.00 33091.04 09/30/93 33480.08 32346.18 10/31/93 34826.46 33343.01 11/30/93 33236.45 30428.48 12/31/93 35737.86 32625.64 01/31/94 38278.47 35383.99 02/28/94 37561.88 35285.98 03/31/94 36480.50 33766.17 04/30/94 37705.20 35198.84 05/31/94 37223.14 34996.75 06/30/94 36728.04 35491.32 07/31/94 37757.32 35832.64 08/31/94 38304.52 36680.99 09/30/94 37249.19 35525.70 10/31/94 38004.86 36708.70 11/30/94 36441.41 34944.47 12/31/94 36192.03 35163.29 01/31/95 34640.94 33812.47 02/28/95 34667.46 33715.43 03/31/95 35701.51 35818.30 04/30/95 36722.31 37165.38 05/31/95 37239.34 36722.35 06/30/95 37517.74 36078.36 07/31/95 39201.40 38324.46 08/31/95 38114.32 36862.52 09/30/95 38644.60 37582.45 10/31/95 37875.69 36572.22 Let's say you invested $10,000 in Fidelity Overseas Fund on October 31, 1985, and paid the 3% sales charge. By October 31, 1995, the value of your investment would have grown to $37,876 - a 278.76% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley EAFE index, which would have grown to $36,572 over the same period - a 265.72% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) OVERSEAS FUND TALK: THE MANAGER'S OVERVIEW An interview with John Hickling, Portfolio Manager of Fidelity Overseas Fund Q. JOHN, HOW HAS THE FUND PERFORMED OVER THE PAST YEAR? A. For the 12 months ended October 31, 1995, the fund had a total return of - -0.34%, compared to a -1.09% return for the average international fund tracked by Lipper Analytical Services. In addition, the Morgan Stanley EAFE Index - a broad measure of stocks in Europe, Australia and the Far East - returned -0.37% for the same 12-month period. Q. WHAT HAS THE ENVIRONMENT BEEN LIKE FOR OVERSEAS INVESTING OVER THE PAST YEAR? A. It's been a frustrating period because, historically, markets around the world often perform well when the U.S. market does. The U.S. market performance has overshadowed foreign markets. And in those few markets that have done well, performance has been driven largely by strong returns for stocks that make up a large portion of foreign indexes. For example, the overall positive return seen in Finland and Sweden largely resulted from stock price gains from Nokia and Ericsson, respectively, both of which are tied to cellular equipment manufacturing. Both stocks rose along with the strong move in technology stocks seen in the U.S. this year, but dropped somewhat toward the end of the period. Outside of these two stocks, those two markets did not perform that well. Q. HOW HAVE YOU POSITIONED THE FUND? A. Japan was the country best represented in the fund -18.8% at the end of the period - although the fund has held less there than is included in the EAFE index. This is a market that has struggled through most of the year, although it has shown recent signs of some strength. The Japanese banking sector performed well through the first part of the period, although the fund didn't participate because most of its Japanese investments were focused on exporters or companies with electronics or technology-oriented businesses, such as Matsushita Electric, Hitachi, Rohm, Omron, Toshiba and Kyocera. In the second part of the period, however, these stocks rebounded as the yen started to weaken versus the dollar starting in June, making these companies' products less expensive abroad. Q. YOU'VE ALSO INVESTED A FAIR AMOUNT IN THE UNITED KINGDOM . . . A. That's right, 14.2%, about as much as is included in the EAFE index. This has been one of the best performing markets outside of the U.S., led for the most part by financial stocks including Barclays and National Westminster Bank. In the early part of 1995, a number of consumer nondurable stocks helped the fund, including brewers Bass and Whitbread, and food retailers Tesco, Argyll and Sainsbury's. The retailers were helped by food price inflation and a more orderly competitive environment, but lagged a bit during the past two months due to fears of new price competition. Q. YOU MENTIONED BARCLAYS AND NATIONAL WESTMINSTER BANK. HAVE YOU INVESTED IN OTHER EUROPEAN BANKS? A. Yes, I have. I've invested the fund in stocks such as Deutsche Bank, C.S. Holdings, Swiss Bank Corp., Creditanstalt in Austria and BNP and Societe Generale - which the fund no longer owns - in France. Despite strong bond market performance in Europe - one of the reasons I invested in this area - the sector has turned in mixed results. Instead of being attracted by bond market sensitivity, investors apparently were cautious about the quality of both bank assets and credit. Relatively high property prices hurt the French banks, one of the reasons I've cut back there. But the fund still held continental European bank stocks, because I believed that they would rebound, and remained more invested in Europe than the index, because I found valuations - stock prices compared to other measures such as earnings or cash flow - to be attractive. Q. LET'S TURN TO EMERGING MARKETS . . . A. Last December, when emerging markets dropped sharply after Mexico's devaluation of the peso, I had almost no investments in emerging markets. I started adding some emerging market stocks in May, including Mexican banks such as Bancomer, as well as investments in Brazil, Chile and Southeast Asia. I traveled to Central Europe as well, looking for new opportunities, but did not find anything I was interested in for now. One stock that has turned in a very good performance is Sampoerna, an Indonesian cigarette company. One of the main reasons I owned this stock and Matahari, an Indonesian retailer, is that the standard of living for many Indonesians is on the rise. With wages and disposable income growing, demand for items such as cigarettes, beer, toothpaste and clothing is on the rise. The fund's investments in Unilever and Nestle also gave it some exposure to this growth in consumer nondurable spending. Q. NOMURA SECURITIES AND VOLVO ARE TWO OF THE FUND'S TOP INVESTMENTS. WHAT ARE THE STORIES BEHIND THEM? A. I invested in Nomura Securities to try to take advantage of a turnaround in Japan. When trading volume increases - which it had during the last part of the period - Nomura is well poised to profit. Nomura's valuation has been attractive due to the depressed Japanese market, and the company also has been cutting costs, which should help its balance sheet. Volvo has been attractive most of all because it has been a cheap stock. Although it has a small market share in the U.S., it has successfully introduced a new product line, the 850. It also is one of the best truck manufacturers in the world, producing a new model when other companies have not. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. In the past, there has been a stronger correlation between the U.S. market and those overseas, but we haven't seen that yet this year. Japan's market might be helped by upcoming legislation that would make it easier for companies to buy back stock. In addition, the coming season historically has been a good one in Japan, so I'm hoping to see some strength there. In Europe, I would expect to see a continued economic slowdown, hoping that currencies will weaken enough to help exports. In any event, I'm hoping that 1996 will be a better year for the international investor, and that we'll see markets abroad catch up to the U.S. Up until now, most of the domestic investment dollar has stayed in the U.S., because, in general, it has the most efficient markets, the best analysts, and companies that are more dedicated to shareholder value. I'm hoping we'll see some signs of rebound in overseas markets, with investors finding better buys abroad than domestically. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: long-term growth of capital by investing in equity securities outside the United States START DATE: December 4, 1984 SIZE: as of October 31, 1995, more than $2.2 billion MANAGER: John Hickling, since 1993; manager, Fidelity Advisor Overseas Fund, since 1993; Fidelity VIP: Overseas, since 1993; Fidelity Advisor Annuity Overseas Fund, since January 1995; previously managed the Fidelity Japan, Fidelity Europe, Fidelity International Growth & Income, Fidelity International Opportunities (now Fidelity Emerging Markets) and Fidelity Pacific Basin funds; joined Fidelity in 1982 (checkmark) JOHN HICKLING ON TRENDS IN INTERNATIONAL INVESTING: "These days, the investor dollar is focused mostly on the U.S. Judging from flows into and out of international funds, the interest - and money - is elsewhere. Unfortunately, many investors tend to follow performance rather than anticipating it. It may take a stumble in the U.S. market to change this, but I hope not, because historically a declining U.S. market has not been a good backdrop for performance overseas. I'm hoping that more investors will start to perceive the value and opportunities in foreign markets, and that performance in foreign markets will start to capture attention. At the beginning of the year, I was quite optimistic based on what I saw in the U.S. Interest rates had gone up a lot, the economy looked as if it were slowing and investor sentiment was pretty negative. That indicated to me that perhaps the market had bottomed and was ready to turn. It looked that way in foreign markets as well. Ten months later, the U.S. has been phenomenal, while markets outside the U.S have underperformed markedly. Some companies with business prospects similar to American firms' have moved down while those in the U.S. have gone up. "This situation has been frustrating. Yet because of what we've seen through market history, I'm hoping that foreign markets and foreign companies can catch up to the U.S. In the meantime, there must be opportunities when stocks have struggled, and that's what I'll be looking for going forward." (solid bullet) Over the past few months, European cyclical stocks - - those that rise and fall with the economy - have seen sharp drops. This underperformance - seen in paper and chemical stocks, among others - has resulted from uncertainty over the economic outlook. The fund's performance relative to its competitors and the Morgan Stanley EAFE Index was helped by its relative avoidance of these kinds of investments. DISTRIBUTIONS The Board of Trustees of Fidelity Overseas Fund voted to pay on December 11, 1995, to shareholders of record at the opening of business on December 8, 1995, a distribution of $.35 derived from capital gains realized from sales of portfolio securities and a dividend of $.34 from net investment income. OVERSEAS INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 Italy 3.1% United States 11.1% France 4.8% Row: 1, Col: 1, Value: 11.1 Row: 1, Col: 2, Value: 14.2 Row: 1, Col: 3, Value: 8.699999999999999 Row: 1, Col: 4, Value: 4.2 Row: 1, Col: 5, Value: 19.5 Row: 1, Col: 6, Value: 6.5 Row: 1, Col: 7, Value: 18.8 Row: 1, Col: 8, Value: 3.3 Row: 1, Col: 9, Value: 5.8 Row: 1, Col: 10, Value: 4.8 Row: 1, Col: 11, Value: 3.1 Germany 5.8% United Kingdom 14.2% Sweden 3.3% Japan 18.8% Switzerland 8.7% Spain 4.2% Netherlands 6.5% Other 19.5% AS OF APRIL 30, 1995 France 8.6% United States 12.0% Row: 1, Col: 1, Value: 12.0 Row: 1, Col: 2, Value: 12.7 Row: 1, Col: 3, Value: 8.1 Row: 1, Col: 4, Value: 3.7 Row: 1, Col: 5, Value: 20.4 Row: 1, Col: 6, Value: 6.1 Row: 1, Col: 7, Value: 19.5 Row: 1, Col: 8, Value: 3.4 Row: 1, Col: 9, Value: 5.5 Row: 1, Col: 10, Value: 8.6 Germany 5.5% United Kingdom 12.7% Sweden 3.4% Japan 19.5% Switzerland 8.1% Spain 3.7% Netherlands 6.1% Other 20.4% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks and closed-end investment companies 88.2 86.5 Bonds 0.7 1.5 Short-term investments 11.1 12.0 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO C.S. Holdings 2.0 1.6 (Switzerland, Banks) Unilever NV Ord. 1.3 1.1 (Netherlands, Household Products) Deutsche Bank AG 1.2 1.1 (Germany, Banks) Volvo AB Class B 1.1 0.8 (Sweden, Automotive) CIBA-GEIGY AG (Reg.) 1.1 0.8 (Switzerland, Drugs & Pharmaceuticals) Swiss Bank Corp. (Bearer) 1.1 1.1 (Switzerland, Banks) International Nederlanden Groep 1.0 0.8 (Netherlands, Insurance) Nomura Securities Co. Ltd. 1.0 1.0 (Japan, Securities Industry) Nestle SA (Reg.) 0.9 1.1 (Switzerland, Foods) Hitachi Ltd. 0.9 0.9 (Japan, Electronics) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 24.0 23.4 Utilities 8.8 7.7 Nondurables 8.4 7.5 Durables 7.3 8.5 Technology 6.0 4.9 Basic Industries 5.7 5.6 Retail & Wholesale 5.6 4.4 Construction & Real Estate 3.8 2.7 Health 3.6 4.4 Industrial Machinery & Equipment 3.3 3.2 OVERSEAS INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 86.0% SHARES VALUE (NOTE 1) ARGENTINA - 0.8% Buenos Aires Embotelladora SA sponsored ADR 72,200 $ 1,651,575 Perez Companc Class B 590,826 2,605,412 Telecom Argentina sponsored ADR Class B 162,230 6,225,576 Telecom Argentina Stet France Telecom SA 473,300 1,822,114 YPF Sociedad Anonima sponsored ADR representing Class D shares 257,700 4,413,113 16,717,790 AUSTRALIA - 2.2% Amcor Ltd. 346,600 2,593,548 Brambles Industries Ltd. 541,000 5,743,192 FAI Insurance Ltd. Ord. 3,866,800 1,734,900 Lend Lease Corp. Ltd. 190,000 2,638,305 Pioneer International Ltd. 966,700 2,367,109 Qantas Airways Ltd. sponsored ADR (a)(b) 68,700 1,210,838 TNT Ltd. (a) 2,094,200 2,946,189 Western Mining Holdings Ltd. 820,800 5,255,573 Westpac Banking Corp. 4,924,181 20,183,359 Woolworths Ltd. 1,808,800 4,305,321 48,978,334 AUSTRIA - 0.3% Mayr Melnhof Karton AG 39,000 2,273,869 VA Technologie AG 13,900 1,609,643 VA Technologie AG (b) 24,000 2,779,240 6,662,752 BELGIUM - 1.2% Bekaert SA 20,245 14,895,285 Delhaize Freres & Cie Le Lion SA 238,300 9,268,594 Petrofina SA 10,200 3,206,218 Petrofina SA (warrants)(a) 1,105 15,649 27,385,746 BERMUDA - 0.1% Consolidated Electric Power Asia Ltd. sponsored ADR (b) 70,700 1,431,675 BRAZIL - 0.5% Brahma (Cia Cervejaria) PN Class B (Pfd. Reg.) 5,719,000 2,182,915 Coteminas PN 4,900,000 1,528,861 Telebras PN (Pfd. Reg.) 184,248,415 7,471,494 11,183,270 CANADA - 0.5% Midland Walwyn, Inc. 480,800 2,950,242 Noranda, Inc. 460,700 9,208,860 12,159,102 CHILE - 0.2% Santa Isabel SA sponsored ADR (a) 49,000 1,108,625 Vina Concha Stet y Toro SA sponsored ADR 164,200 2,873,500 3,982,125 FINLAND - 0.8% Pohjola Class B 680,670 9,944,867 Valmet OY Class A 259,200 7,207,550 17,152,417 SHARES VALUE (NOTE 1) FRANCE - 4.8% Accor SA 109,318 $ 13,008,450 Alcatel Alsthom CGE 115,100 9,844,498 Axa SA 215,665 11,996,849 Club Mediterranee SA: Ord. 51,400 4,037,256 (rights)(a) 51,400 50,742 Compagnie Bancaire Ord. 112,420 11,673,720 Elf Aquitaine 97,044 6,618,669 Generale des Eaux 110,077 10,246,799 IMETAL SA Ord. 65,800 7,762,581 Lafarge Coppee SA 75,600 5,018,323 Michelin SA Cie Generale des Etablissements Class B 191,100 7,730,108 Total SA Class B 256,400 15,869,755 Vallourec SA (a) 105,600 4,150,464 108,008,214 GERMANY - 5.5% Asko 6,500 3,373,088 Bayer AG 21,500 5,714,407 Bayerische Vereinsbank AG Ord. 182,600 5,165,662 Continental Gummi-Werke AG 443,000 6,258,261 Daimler Benz AG Ord. 16,000 7,706,670 Deutsche Bank AG 586,900 26,527,472 Duerr Beteiligungs AG (RFD) 16,573 5,353,150 Hoechst AG Ord. 47,750 12,531,981 Karstadt AG 20,900 9,109,857 Kaufhof Holding AG 26,600 9,101,764 Mannesmann AG Ord. 30,000 9,866,894 Metallgesellschaft AG (a)(b) 154,600 3,215,689 Metallgesellschaft AG Ord. (a) 53,500 1,112,803 Praktiker Bau und Heim AG (a)(b) 19,000 600,220 Schmalbach-Lubeca AG 7,700 1,514,145 Veba AG Ord. 366,900 15,052,107 122,204,170 HONG KONG - 2.6% Amoy Properties Ltd. 3,399,000 3,275,329 Consolidated Electric Power Asia Ltd. 2,110,000 4,271,145 Dickson Concepts International Ltd. 4,277,000 3,097,953 Great Eagle Holdings Ltd. 1,166,000 3,197,289 HSBC Holdings PLC 1,416,000 20,604,555 Hong Kong Land Holdings Ltd. 4,078,000 7,340,400 Hopewell Holdings Ltd. 6,992,000 4,408,831 Hysan Development Co. Ltd. 2,255,000 5,745,929 Jardine Strategic Holdings Ltd. Ord. 894,500 2,406,205 Peregrine Investments Holdings Ltd. 2,022,000 2,576,113 Sun Hung Kai Properties Ltd. 266,000 2,124,546 59,048,295 INDIA - 0.1% Reliance Industries Ltd. GDS 181,700 2,680,075 INDONESIA - 1.3% Astra International PT (For. Reg.) 440,000 881,551 Bank International Indonesia PT Ord. 1,556,300 5,448,082 Bank Niaga PT 533,500 1,902,842 Jakarta International Hotels & Development Ord. 3,017,400 4,152,084 Matahari Putra Prima PT (For. Reg.) 1,979,500 4,140,305 Sampoerna Hanjaya Mandala (For. Reg.) 1,214,900 11,234,223 Semen Gresik (For. Reg.) 607,000 1,576,972 29,336,059 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) IRELAND - 1.0% Bank of Ireland U.S. Holdings, Inc. 1,660,200 $ 11,073,053 Fyffes PLC 2,367,000 3,628,812 Independent Newspapers PLC 940,650 5,642,016 Waterford Wedgwood PLC Unit 1,622,200 1,474,235 21,818,116 ITALY - 1.7% Assicurazioni Generali Spa 304,560 7,081,298 Benetton Group Spa 266,600 2,763,259 Bulgari Spa (a) 300,000 2,597,393 Fiat Spa 723,200 2,358,780 Istituto Mobiliare Italiano 545,700 2,984,247 Istituto Nazionale Delle Assicurazioni Spa 2,026,900 2,664,746 Italgas Spa 1,173,800 3,123,250 Magneti Marelli Spa 2,131,400 4,085,325 Montedison Spa Ord. (a) 4,538,600 3,120,333 Olivetti Ing C & Co. Spa Ord. 3,074,400 2,310,752 SAI (Sta Assieuratrice Industriale) Spa 412,500 4,203,937 37,293,320 JAPAN - 18.8% ADO Electronic Industrial Co. Ltd. 76,000 1,712,802 Aida Engineering Ltd. Ord. 314,000 2,209,123 Amada Metrecs Co. Ltd. 162,000 2,190,584 Amadasonoike Co. Ltd. 495,000 3,036,304 Aoyama Trading Co. Ord. 209,500 5,665,768 Autobacs Seven Co. Ltd. 34,700 3,281,123 Bridgestone Corp. 586,000 8,153,643 Canon, Inc. 756,000 12,963,598 Citizen Watch Co. Ltd. Ord. 753,000 5,172,240 Daiwa House Industry Co. Ltd. (warrants) (a) 75 41,250 East Japan Railway Co. Ord. 1,100 5,206,016 Fanuc Ltd. 161,600 7,014,727 Fujitsu Ltd. 1,274,000 15,229,827 Futaba Industrial Co. Ltd. 245,000 3,697,026 Hanshin Department Store Ltd. 72,000 504,434 Hirose Electric Co. Ltd. 51,450 3,292,034 Hitachi Ltd. 2,049,000 21,081,280 Honda Motor Co. Ltd. 863,000 15,052,080 Isetan Co. Ltd. 511,000 6,809,661 Ishihara Sangyo Kaisha Ltd. (a) 657,000 1,957,062 Ito-Yokado Co. Ltd. 49,000 2,683,945 Izumi Co. Ord. 203,000 3,858,900 Japan Airlines Co. Ltd. (a) 623,000 3,754,299 Kao Corp. 226,000 2,745,970 Komatsu Ltd. Ord. 693,000 5,432,365 Marubeni Corp. 662,000 3,230,376 Marukyo Corp. 55,000 786,831 Matsushita Electric Industrial Co. Ltd. 513,000 7,288,717 Minebea Co. Ltd. 924,000 7,514,771 Mitsubishi Estate Co. Ltd. 443,000 4,731,468 Mitsubishi Heavy Industries Ltd. 898,000 6,942,551 Mitsukoshi Ltd. 577,000 4,585,243 Murata Manufacturing Co. Ltd. 233,000 8,196,267 NEC Corp. 348,000 4,603,400 Nichido Fire & Marine Insurance Co. Ltd. 912,000 6,836,314 Nikko Securities Co. Ltd. 612,000 5,720,915 Nintendo Co. Ltd. Ord. 79,900 5,887,492 Nippon Telegraph & Telephone Corp. Ord. 709 5,828,730 Nissan Motor Co. Ltd. Ord. 740,000 5,003,185 SHARES VALUE (NOTE 1) Nitto Denko Corp. 175,000 $ 2,795,061 Nomura Securities Co. Ltd. 1,176,000 21,548,381 Omron Corp. 272,000 6,369,899 Onward Kashiyama & Co. Ltd. 514,000 7,101,465 Orix Corp. 441,000 15,556,318 Pioneer Electronic Corp. 123,000 1,892,215 Rohm Co. Ltd. 207,000 12,595,855 Sankyo Co. Ltd. 371,000 8,179,413 Seino Transpotation Co. Ltd. 248,000 3,839,498 Sony Corp. 259,800 11,710,156 Sumitomo Marine and Fire Insurance Co. Ltd. 655,000 4,685,219 Sumitomo Realty & Development Co. Ltd. 1,127,000 7,420,940 Sumitomo Trust & Banking Co. Ltd. 568,000 6,567,439 Suzuki Motor Corp. 143,000 1,443,241 TDK Corp. 144,000 7,435,990 Tadano Ltd. 29,000 233,580 Takashimaya Co. Ltd. 570,000 7,931,018 Takeda Chemical Industries Ltd. 603,000 8,508,353 Tokio Marine & Fire Insurance Co. Ltd. (The) 1,849,000 19,023,566 Toshiba Corp. 2,749,000 19,959,914 Toyota Motor Corp. 707,000 13,162,510 Tsugami Corp. 336,000 1,695,556 Uny Co. Ltd. 184,000 3,173,191 Yamanouchi Pharmaceutical Co. Ltd. 367,000 8,199,108 420,930,207 KOREA (SOUTH) - 0.8% Cho Hung Bank Co. Ltd. 96,362 1,271,981 Korea Electric Power Corp. 285,000 12,524,968 Korea First Securities Co. Ltd. 16,203 249,880 Kyungki Bank 171,523 1,921,129 Seoul Securities Co. 124,496 1,887,412 17,855,370 MALAYSIA - 0.9% Kuala Lumpur Industries Holdings BHD (a) 570,000 619,065 Magnum Corp. BHD 960,000 1,631,953 Malayan Banking BHD 227,000 1,831,185 Resorts World BHD 769,000 3,752,327 Telekom Malaysia BHD 1,411,000 10,105,342 Tenega Nasional BHD 547,000 2,066,385 Time Engineering BHD 317,000 810,821 20,817,078 MEXICO - 1.2% BANACCI SA de CV: Class B 890,700 1,535,907 Class L 44,535 73,648 Cemex SA, Series B 2,180,900 6,781,597 Cifra SA Class C 3,117,100 3,198,607 Consorcio G Grupo Dina SA ADR 117,200 307,650 Empresas Ica Sociedad Controladora SA de CV sponsored ADR representing Ord. (part. certs.) 377,600 3,587,200 Grupo Carso SA de CV Class A-1 (a) 420,600 2,217,439 Grupo Dina sponsored ADR, Series L 42,244 68,647 Grupo Financiero Bancomer SA de CV (a): Class B 10,119,800 2,631,863 Series L 435,177 101,490 sponsored ADR, Series C (b) 189,800 972,725 Telefonos de Mexico SA sponsored ADR representing shares Ord. Class L 219,600 6,039,000 27,515,773 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) NETHERLANDS - 6.5% ABN-AMRO Holdings NV 79,000 $ 3,318,571 AKZO NV Ord. 182,600 20,790,230 IHC Caland NV 147,300 4,190,439 International Nederlanden Groep NV 390,578 23,286,694 KLM Royal Dutch Airlines Ord. 491,604 16,227,947 Koninklijke PPT Nederland 364,300 12,810,397 Oce Van der Grinten NV 288,500 16,542,641 Pirelli Tyre Holdings NV Ord. (a) 957,200 8,187,417 Royal Dutch Petroleum Co. Ord. 52,600 6,528,759 Unilever NV Ord. 217,200 28,445,315 Vendex International NV (b) 144,700 4,171,482 144,499,892 NORWAY - 1.9% Bergesen Group: Class A 37,600 779,118 Class B 503,000 10,341,981 Christiania Bank Free shares Ord. 2,491,700 5,803,494 Den Norske Bank Class A Free shares 1,830,400 5,027,683 Norsk Hydro AS 158,600 6,318,015 Orkla AS Class B (non-vtg.) 106,400 5,178,572 Saga Petroleum AS Class B 420,900 5,070,677 Unitor AS 286,300 3,541,097 42,060,637 PAKISTAN - 0.0% Hub Power Co. Ltd. GDR (a) 64,300 1,060,950 PHILIPPINES - 0.2% Philippine Long Distance Telephone Co. sponsored ADR 91,900 5,157,888 SINGAPORE - 0.3% Kim Engineering Holdings Ltd. 4,273,000 3,686,747 Overseas Union Bank Ltd. (For. Reg.) 456,000 2,837,907 Van Der Horst Ltd. 217,000 1,112,624 7,637,278 SPAIN - 4.2% Banco Bilbao Vizcaya SA Ord. (Reg.) 596,300 18,231,139 Banco Intercontinental Espanol 100,750 8,737,172 Corporacion Mapfrecia International de Reaseguros SA (Reg.) 334,450 17,133,708 EL Aguila SA (a) 101,321 730,009 Repsol SA Ord. 248,700 7,430,422 Tabacalera SA, Series A 389,700 13,096,475 Telefonica de Espana SA Ord. 1,504,500 18,991,229 Union Electrica Fenosa SA 2,107,000 9,809,639 94,159,793 SWEDEN - 3.3% Investor AB Class B Free shares 560,200 19,985,112 Mo Och Domsjoe AB Class B 56,200 2,865,401 SKF AB Ord. 349,300 6,638,981 Skandia Foersaekrings AB 114,600 2,912,841 Skandinaviska Enskilda Banken Class A Free shares 1,603,200 10,834,230 Svenska Cellulosa Aktiebolaget SCA Class B Ord. 323,500 5,538,632 Volvo AB Class B 1,136,900 25,638,687 74,413,884 SWITZERLAND - 8.7% Adia SA (Bearer) (a) 78,100 12,919,314 Alusuisse-Lonza Holding AG (Reg.) 22,611 17,209,428 Baloise Holding (Reg.) 7,129 14,615,548 SHARES VALUE (NOTE 1) C. S. Holdings (Reg.) 437,655 $ 44,670,462 CIBA-GEIGY AG (Reg.) 28,665 24,793,396 Fischer (Georg) AG (Reg.) 23,300 6,150,462 Holderbank Financiere Glarus AG: (Bearer) 5,325 4,273,119 (warrants)(a) 26,625 32,798 Nestle SA (Reg.) 20,175 21,124,725 Roche Holdings Ltd. (part. certs.) 2,900 21,051,474 Surveillance, Societe Generale (Bearer) 1,690 3,189,661 Swiss Bank Corp. (Bearer) 59,400 24,355,829 194,386,216 THAILAND - 1.3% Bank of Asia PCL (For. Reg.) 658,130 1,556,079 Krung Thai Bank (For. Reg.) 2,824,360 11,223,366 Phatra Thanakit PCL (For. Reg.) 56,500 442,301 SCF Finance and Securities Co. Ltd. (rights) (a) 81,215 - Siam City Bank PCL (For. Reg.) 10,964,100 13,942,031 Siam City Credit Finance and Securities Co. Ltd. (rights) (a) 64,494 - Telecomasia Corp. PCL (For. Reg.) (a) 697,300 2,064,329 29,228,106 TURKEY - 0.1% Aksigorta 1,122,250 150,875 Aksigorta (b) 2,300,000 309,211 Tofas Turk Otomobil Fabrikasi AS 16,406,800 2,109,823 Tofas Turk Otomobil Fabrikasi AS ADR (b) 603,600 362,160 2,932,069 UNITED KINGDOM - 14.2% Allied Lyons PLC (a) 996,800 8,050,511 Argyll Group PLC Ord. 966,000 4,908,543 BTR PLC Ord. 978,600 5,196,836 Barclays PLC Ord. 1,745,700 20,486,160 Barratt Developments PLC 506,900 1,554,242 Bass PLC Ord. 966,400 10,126,630 Berkeley Group PLC 430,400 2,758,402 Booker PLC 595,400 3,557,092 Boots Co. PLC (The) 518,100 4,581,505 British Airways PLC Ord. 851,300 6,121,932 British Land Ord. 513,100 2,943,765 Burmah Oil 361,252 5,623,944 Cadbury-Schweppes PLC Ord. 1,823,800 15,061,146 Christies International PLC 238,700 777,167 De la Rue PLC 738,600 10,523,726 Dixons Group PLC 1,729,717 10,470,522 English China Clay PLC 94 507 Forte PLC 3,051,200 12,152,502 Glaxo Holdings PLC 667,700 9,001,708 Grand Metropolitan PLC 1,922,500 13,308,679 Great Universal Stores PLC Ord. Class A 658,400 5,936,630 Guinness PLC Ord. 2,039,900 16,345,994 Hanson Trust PLC Ord. 1,101,300 3,372,422 Lloyds Abbey Life PLC 1,037,900 7,504,834 London International Group PLC 4,292,200 8,886,807 Mirror Group Newspaper PLC 2,380,300 6,263,837 National Westminster Bank PLC Ord. 1,576,880 15,738,615 North West Water Group PLC Ord. 721,600 6,780,206 Prudential Corp. PLC 982,800 6,143,362 Reuters Holdings PLC Ord. 716,900 6,662,395 Rolls Royce PLC Ord. 1,600,399 3,895,323 Royal Insurance Holdings PLC 1,882,600 11,619,130 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - CONTINUED Scottish Hydro-Electric PLC Ord. 1,368,900 $ 7,356,058 Scottish Power PLC ADR 1,733,200 9,560,236 Shell Transport & Trading PLC 759,800 8,886,393 South West Water PLC Ord. 680,100 5,385,239 Telegraph (The) PLC 670,700 4,324,969 Tesco PLC Ord. 1,458,795 6,916,876 Unigate Ltd. Ord. 524,400 3,472,731 Vodafone Group PLC 3,307,150 13,668,476 Whitbread Co. PLC Class A 956,200 9,362,343 Wickes PLC 1,310,200 2,578,110 317,866,505 TOTAL COMMON STOCKS (Cost $1,696,922,610) 1,926,563,106 NONCONVERTIBLE PREFERRED STOCKS - 2.1% AUSTRIA - 0.4% Creditanstalt Bankverein 180,300 8,984,536 GERMANY - 0.3% Porsche AG Ord. (a) 12,550 5,835,552 ITALY - 1.4% Banco Ambro Veneto 2,320,900 2,880,615 Fiat Spa 2,000,300 3,949,691 SAI (Sta Assicuratrice Industriale) Spa 1,190,200 5,040,541 Stet (Societa Finanziaria Telefonica) Spa 8,823,000 19,278,920 31,149,767 KOREA (SOUTH) - 0.0% Korea First Securities Co. Ltd. 66,140 713,135 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $41,938,182) 46,682,990 CLOSED-END INVESTMENT COMPANIES - 0.1% THAILAND - 0.1% Ruang Khao Unit Trust (For. Reg.) 2,633,900 1,517,646 Ruam Pattana Fund II (For. Reg.) 2,683,000 1,679,207 TOTAL CLOSED-END INVESTMENT COMPANIES (Cost $2,661,231) 3,196,853 GOVERNMENT OBLIGATIONS (D) - 4.4% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) ARGENTINA - 0.5% Argentina Republic BOCON 5 5/8%, 4/1/01 (c) B1 $ 15,898,766 10,524,758 BRAZIL - 0.2% Brazil Federative Republic IDU euro 6.6875%, 1/1/01 (c) B1 6,365,000 5,442,075 UNITED STATES OF AMERICA - 3.7% U.S. Treasury Bill, yield at date of purchase 5.41%, 11/30/95 Aaa 83,000,000 82,671,320 TOTAL GOVERNMENT OBLIGATIONS (Cost $99,278,045) 98,638,153 REPURCHASE AGREEMENTS - 7.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 166,514,193 $ 166,487,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $2,007,287,068) $ 2,241,568,102 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $15,053,240 or 0.7% of net assets. 3. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 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. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $994,834,919 and $993,417,832, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $499,307 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $2,007,903,443. Net unrealized appreciation aggregated $233,664,659, of which $338,433,546 related to appreciated investment securities and $104,768,887 related to depreciated investment securities. The fund hereby designates $12,234,000 as a capital gain dividend for the purpose of the dividend paid deduction. For the period, interest and dividends from foreign countries were $56,721,829 or $0.71 per share. Taxes accrued or paid to foreign countries were $6,455,599 or $0.08 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.2% Basic Industries 5.7 Conglomerates 0.2 Construction & Real Estate 3.8 Durables 7.3 Energy 3.1 Finance 24.0 Government Obligations 4.4 Health 3.6 Holding Companies 0.6 Industrial Machinery & Equipment 3.3 Media & Leisure 2.7 Nondurables 8.4 Precious Metals 0.2 Repurchase Agreements 7.4 Retail & Wholesale 5.6 Services 2.2 Technology 6.0 Transportation 2.5 Utilities 8.8 100.0% OVERSEAS FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $166,487,000) (cost $2,007,287,068) - $ 2,241,568,102 See accompanying schedule Cash 175,797 Receivable for investments sold 45,249,794 Receivable for fund shares sold 4,632,711 Dividends receivable 7,029,676 Interest receivable 217,337 TOTAL ASSETS 2,298,873,417 LIABILITIES Payable for investments purchased $ 11,965,211 Payable for fund shares redeemed 7,756,207 Accrued management fee 1,493,242 Other payables and accrued expenses 1,352,449 TOTAL LIABILITIES 22,567,109 NET ASSETS $ 2,276,306,308 Net Assets consist of: Paid in capital $ 1,990,440,434 Undistributed net investment income 17,366,722 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 34,224,606 Net unrealized appreciation (depreciation) on investments 234,274,546 and assets and liabilities in foreign currencies NET ASSETS, for 79,663,980 shares outstanding $ 2,276,306,308 NET ASSET VALUE, offering price $28.57 and redemption price per share ($2,276,306,308 (divided by) 79,663,980 shares)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 53,559,320 Dividends Interest 17,219,942 70,779,262 Less foreign taxes withheld (6,455,599 ) TOTAL INCOME 64,323,663 EXPENSES Management fee $ 17,348,793 Basic fee Performance adjustment (1,750,190 ) Transfer agent fees 6,065,956 Accounting fees and expenses 750,251 Non-interested trustees' compensation 27,694 Custodian fees and expenses 1,151,536 Registration fees 52,035 Audit 91,030 Legal 122,569 Miscellaneous 17,624 TOTAL EXPENSES 23,877,298 NET INVESTMENT INCOME 40,446,365 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 37,662,091 Foreign currency transactions (17,393,337 20,268,754 ) Change in net unrealized appreciation (depreciation) on: Investment securities (66,278,800 ) Assets and liabilities in foreign 5,611,623 (60,667,177 currencies ) NET GAIN (LOSS) (40,398,423 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 47,942 OTHER INFORMATION $750,000 Accounting fees paid to FSC
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 40,446,365 $ 16,979,988 Net investment income Net realized gain (loss) 20,268,754 86,756,748 Change in net unrealized appreciation (depreciation) (60,667,177) 43,064,867 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 47,942 146,801,603 Distributions to shareholders (1,572,061) (8,339,198) From net investment income In excess of net investment income - (9,043,942) From net realized gain (35,371,378) (6,172,422) TOTAL DISTRIBUTIONS (36,943,439) (23,555,562) Share transactions 1,320,123,274 1,731,601,947 Net proceeds from sales of shares Reinvestment of distributions 36,074,820 22,888,570 Cost of shares redeemed (1,326,207,752) (1,085,191,412) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 29,990,342 669,299,105 TOTAL INCREASE (DECREASE) IN NET ASSETS (6,905,155) 792,545,146 NET ASSETS Beginning of period 2,283,211,463 1,490,666,317 End of period (including under (over) distribution net investment income of $17,366,722 and $ 2,276,306,308 $ 2,283,211,463 $(5,581,700), respectively) OTHER INFORMATION Shares Sold 47,605,509 60,924,762 Issued in reinvestment of distributions 1,345,573 855,349 Redeemed (47,560,838) (38,395,055) Net increase (decrease) 1,390,244 23,385,056
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 B 1993 1992 E 1991
Net asset value, beginning of period $ 29.17 $ 27.16 $ 21.96 $ 26.92 $ 27.47 Income from Investment Operations Net investment income .31 .18 .27 .46 .54 D Net realized and unrealized gain (loss) (.44) 2.26 7.40 (3.82) .45 Total from investment operations (.13) 2.44 7.67 (3.36) .99 Less Distributions (.02) F (.15) (.37) (.44) (.46) From net investment income In excess of net investment income - (.17) - - - From net realized gain (.45) F (.11) (2.10) C (1.16) (1.08) C Total distributions (.47) (.43) (2.47) (1.60) (1.54) Net asset value, end of period $ 28.57 $ 29.17 $ 27.16 $ 21.96 $ 26.92 TOTAL RETURN A (.34)% 9.13% 39.01% (13.05)% 4.12% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 2,276,306 $ 2,283,211 $ 1,490,666 $ 801,845 $ 969,436 Ratio of expenses to average net assets 1.05% 1.24% 1.27% 1.52% 1.53% Ratio of net investment income to average net assets 1.78% .90% 1.00% 1.78% 2.19% Portfolio turnover rate 49% 49% 64% 122% 132% A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B EFFECTIVE NOVEMBER 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. C INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. D INCLUDES $.08 PER SHARE FROM RECOVERY OF FOREIGN TAXES PREVIOUSLY WITHHELD ON DIVIDEND AND INTEREST PAYMENT. E AS OF NOVEMBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION ACCOUNTING. F THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
WORLDWIDE 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value). The 3% sales charge was eliminated July 1, 1995. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31 1995 YEAR YEARS FUND WORLDWIDE 0.95% 68.23% 50.56% WORLDWIDE (INCL. 3% SALES CHARGE) -2.08% 63.18% 46.05% Morgan Stanley World Index 9.48% 64.20% 46.17% Average Global Fund 5.18% 69.63% 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 May 30, 1990. 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 Morgan Stanley World index, a broad measure of the performance of stocks across the world, weighted by each country's market capitalization (or the total value of its outstanding shares). To measure how the fund's performance stacked up against its peers, you can compare it to the average global fund, which reflects the performance of 120 funds with similar objectives tracked by Lipper Analytical Services over the past 12 months. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF OCTOBER 31 1995 YEAR YEAR FUND WORLDWIDE 0.95% 10.96% 7.83% WORLDWIDE (INCL. 3% SALES CHARGE) -2.08% 10.29% 7.23% Morgan Stanley World Index 9.48% 10.43% 7.25% Average Global Fund 5.18% 10.96% 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 Worldwide Fund (3World Index 05/30/90 9700.00 10000.00 05/31/90 9729.10 10038.61 06/30/90 9981.30 9964.14 07/31/90 10252.90 10051.93 08/31/90 9098.60 9108.00 09/30/90 8196.50 8144.51 10/31/90 8681.50 8901.68 11/30/90 8681.50 8752.34 12/31/90 8631.28 8932.45 01/31/91 8875.93 9255.96 02/28/91 9365.23 10109.62 03/31/91 9042.29 9808.57 04/30/91 9130.37 9882.21 05/31/91 9198.87 10103.10 06/30/91 8543.21 9476.34 07/31/91 9071.65 9920.84 08/31/91 9208.66 9886.25 09/30/91 9365.23 10142.44 10/31/91 9404.38 10303.82 11/30/91 8905.29 9851.69 12/31/91 9311.09 10565.69 01/31/92 9410.04 10366.97 02/29/92 9696.99 10184.99 03/31/92 9469.41 9702.08 04/30/92 9884.99 9834.16 05/31/92 10300.58 10222.20 06/30/92 9944.36 9876.60 07/31/92 9845.41 9898.58 08/31/92 9706.88 10136.03 09/30/92 9706.88 10039.86 10/31/92 9528.77 9764.70 11/30/92 9677.20 9936.32 12/31/92 9889.02 10013.50 01/31/93 10214.25 10043.98 02/28/93 10458.17 10278.91 03/31/93 11057.81 10871.83 04/30/93 11332.23 11372.70 05/31/93 11687.95 11631.78 06/30/93 11565.99 11531.21 07/31/93 11820.07 11765.78 08/31/93 12562.00 12302.20 09/30/93 12429.88 12071.96 10/31/93 12968.54 12401.72 11/30/93 12734.78 11697.27 12/31/93 13503.03 12266.78 01/31/94 14466.79 13072.98 02/28/94 14249.16 12900.91 03/31/94 13710.29 12341.84 04/30/94 14186.98 12720.47 05/31/94 14166.26 12750.32 06/30/94 13876.09 12711.99 07/31/94 14300.98 12950.75 08/31/94 14539.33 13337.82 09/30/94 14259.53 12984.42 10/31/94 14466.79 13350.78 11/30/94 13969.36 12768.79 12/31/94 13902.83 12889.44 01/31/95 13826.08 12692.88 02/28/95 13990.55 12874.84 03/31/95 14067.30 13492.27 04/30/95 14418.16 13959.36 05/31/95 14560.70 14075.61 06/30/95 14758.06 14068.12 07/31/95 15361.10 14768.84 08/31/95 14977.34 14436.63 09/30/95 15119.88 14854.00 10/31/95 14604.55 14616.93 Let's say you invested $10,000 in Fidelity Worldwide Fund on May 30, 1990, when the fund started, and paid a 3% sales charge. By October 31, 1995, the value of your investment would have grown to $14,605 - a 46.05% increase on your initial investment. That compares to $10,000 invested in the Morgan Stanley World index, which would have grown to $14,617 over the same period - - a 46.17% increase. UNDERSTANDING PERFORMANCE Many markets around the globe offer the potential for significant growth over time; however, investing in foreign markets means assuming greater risks than investing in the United States. Factors like changes in a country's financial markets, its local political and economic climate, and the fluctuating value of its currency create these risks. For these reasons an international fund's performance may be more volatile than a fund that invests exclusively in the United States. Past performance is no guarantee of future results and you may have a gain or loss when you sell your shares. (checkmark) WORLDWIDE FUND TALK: THE MANAGER'S OVERVIEW An interview with Penny Dobkin, Portfolio Manager of Fidelity Worldwide Fund Q. PENNY, HOW HAS THE FUND PERFORMED OVER THE PAST YEAR? A. For the 12 months ended October 31, 1995, the fund had a total return of 0.95%. The average global fund tracked by Lipper Analytical Services returned 5.18%, while the Morgan Stanley World Index had a total return of 9.48%, both for the same 12-month period. Q. WHY DIDN'T THE FUND PERFORM AS WELL AS ITS COMPETITORS OR THE INDEX? A. First, the fund would have performed much better with more investments in the U.S. However, I didn't believe that the U.S. market was going to outperform the rest of the world until the second half of 1995. Second, although the fund had significant investments in Finland and that market performed well, the Finnish market's performance was driven mainly by one stock, Nokia, which I didn't invest in. I didn't invest in this stock because I underestimated the growth in Nokia's cellular business. Instead, the fund held paper and forest products stocks such as Enso-Gutzeit and Repola. Although earnings for these companies came in above expectations for this year, investors felt the peak of the paper cycle will be in 1996, not 1997, so they were selling the stocks earlier this year. Another Finnish stock that disappointed was Kone, an elevator company that faced pricing competition in its business. Q. WHAT HAS THE INTERNATIONAL STOCK MARKET ENVIRONMENT BEEN LIKE OVER THE PAST YEAR? A. It's been very unusual. Historically, when the U.S. market performs well, there can be a corresponding run up in many markets outside of the U.S. as well. That didn't happen this year, and I haven't seen a lack of correlation like this in more than 10 years. There was no corresponding broad-based movement in foreign markets like there was in the U.S. You could characterize the markets as very narrow: strong performance in certain blue-chip, non-cyclical European stocks as well as currency gains helped some European indexes show positive results, whereas Latin American and Southeast Asian stock markets declined. Because of the lack of broad-based strength, I kept a fair amount of the fund's assets - about 20% at the end of the period - in cash and short-term investments. Q. LOOKING AT EUROPE, WHICH SECTORS OF THE MARKET WERE IN FAVOR OVER THE PERIOD? A. Large capitalization stocks that were defensive in nature - those that sustain demand for their products regardless of the economic backdrop, such as insurance companies and pharmaceutical manufacturers - performed the best. Also, growth stocks such as Nokia and other companies involved with cellular or telecommunications development did well. Worldwide Fund has been geared toward economically sensitive small- or mid-cap companies, which underperformed. Specifically, in France, the property stocks underperformed because the anticipated economic recovery didn't occur. As a result, there hasn't been a reduction in vacancies or a rise in property values. In fact, values have declined for the fourth consecutive year. Q. WHAT INVESTMENTS WERE POSITIVE CONTRIBUTORS TO PERFORMANCE? A. A couple of initial public offerings turned in excellent performance: SGL Carbon, which makes electrodes for the steel industry; and Bulgari, the jewelry retailer. In addition, Tab Corp., an Australian gaming company; Volker Stevin, a Dutch construction company; and Securities One, a securities broker in Thailand, also were positive contributors. By sector, Spanish banks - where the fund has had more invested than the index for a couple of years - worked well, because loan growth has turned positive and commission income related to that loan growth has accelerated. The fund also benefited from being underweighted in Japan relative to the index. At the beginning of the period, I was skeptical regarding the economic forecasts for this year. Sure enough, economic growth fell well short of expectations. My avoidance of Southeast Asian emerging markets such as Malaysia, Singapore and Indonesia helped, because they had negative returns. Q. HOW HAVE YOU CHANGED WEIGHTINGS, INVESTMENTS OR ALLOCATIONS WITHIN THE FUND? A. In the U.S., I sold the fund's investments in Exxon, because I was concerned about oil prices. I also reduced holdings of Armco Steel, due to concern about steel prices. Conversely, I've added to the fund's investments in the retailing sector, including Federated Department Stores and Dillard Department Stores. In Japan, I've invested in securities brokers such as Nomura Securities, in hopes of taking advantage of increased trading volumes as the market strengthens there. I've increased holdings in Japanese department store retailers and added specialty retailers such as the do-it-yourself stores Homac and Arc Land Sakamoto. I've been selling the fund's investments in Japanese regional banks because their interest margins have peaked, and in Japanese auto parts stocks because they're getting more pricing pressure from the car companies. Q. YOU MENTIONED THAT U.S. RETAILERS ARE A NEW FOCUS OF YOURS. THIS IS A SECTOR THAT HAS REALLY STRUGGLED. WHAT'S YOUR STRATEGY THERE? A. I'm buying these stocks precisely because they've been beaten down. If the U.S. economy revives, I believe it will be helped by consumer spending. If I can find companies that are increasing their square footage only modestly and are cutting costs, there will be an opportunity to make money. I'm not suggesting every retailer will succeed in this way, only a select few. I like the fact that the stocks have seen sharp falls; it adds to investor discouragement and makes the stocks cheaper. In general, my investment horizon is one to two years, so if it takes some time for these stocks to rebound and perform strongly, I'm willing to wait. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. I believe the U.S. economy has to show some signs of strengthening before Europe starts to strengthen as well. Even though the U.S. and overseas stock markets haven't demonstrated their usual correlation, their economies have. As always, it's difficult to make any moves predicated on currency movements. Small-capitalization stocks are very cheap in Europe; any economic pick-up will significantly help their earnings and attract investors to this sector. This year, some of these companies performed well and some did not. Even those that showed strong earnings did not attract investor interest. This is where the money should flow when Europe starts to recover, and that's where I am positioning the fund. I don't know exactly when this will happen, but of course I hope it does over the next six months. I expect Japan to come back slowly. There, I'll be focusing on domestic stocks with enough potential earnings growth to withstand declines in the value of the yen. I'll also be trying to reduce the fund's cash and short-term investment position, but it's hard to say where those assets will go, because I still do not see any broad-based trends. I expect Mexico and Hong Kong and China will become more attractive, but those investments probably will not make up a significant part of the portfolio. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in common stocks from around the world START DATE: May 30, 1990 SIZE: as of October 31, 1995, more than $659 million MANAGER: Penelope Dobkin, since 1990; manager Fidelity Europe Fund, 1986-1990; Fidelity United Kingdom Fund, 1987-1989; Fidelity Select Financial Services Portfolio, 1983-1986; joined Fidelity in 1980 (checkmark) PENNY DOBKIN ON TRENDS IN INTERNATIONAL INVESTING: "There's very little money flowing from one region to another. Most of it is staying in the U.S. The stocks that have worked this year have been those with global businesses, such as pharmaceuticals, telecommunications and property/casualty insurance. Most everything outside of the U.S. that is focused domestically in its business has not been appreciated by U.S. investors. "What would change this trend? Something critical such as a currency devaluation, in France, for instance, which is possible at this time. The devaluation would help exports, and overseas investors then would find French property more attractive. At the same time, the French have worked very hard to develop a strong currency policy, and may not be willing to give it up. Either strong economic resolutions or public sector spending will help Mexico. Investors probably are looking for business owners to commit more tangible assets before financial investments follow. "Large parts of Southeast Asia are starting to cause concern. Inflation is rising and foreign exchange reserves are dwindling in places such as Malaysia, Indonesia and Thailand. Because of these problems in Latin America and Southeast Asia, I believe Europe will be the next region to attract interest from U.S. investors. However, there has been no evidence of that thus far." (solid bullet) Philip Morris, one of the fund's largest U.S. investments, posted solid performance on the basis of strong international sales and a positive pricing environment. (solid bullet) Year to date, blue chip stocks in Hong Kong have performed relatively well. The manager generally focuses on those stocks just below the blue chip level. Toward the end of the period, she has been buying property investment companies that hold rather than develop property. (solid bullet) The fund's Canadian investments - 4% of the fund as of the end of the period - are mainly stocks with nickel or other non-ferrous metal mining businesses, such as Falconbridge, Inco and Alcan Aluminium. The separatist referendum in Quebec had little effect on these companies, largely because they are national companies and not located in Quebec. WORLDWIDE INVESTMENT CHANGES GEOGRAPHIC DIVERSIFICATION AS OF OCTOBER 31, 1995 France 4.0% Canada 4.4% Row: 1, Col: 1, Value: 35.2 Row: 1, Col: 2, Value: 3.7 Row: 1, Col: 3, Value: 3.5 Row: 1, Col: 4, Value: 12.3 Row: 1, Col: 5, Value: 10.6 Row: 1, Col: 6, Value: 13.7 Row: 1, Col: 7, Value: 6.2 Row: 1, Col: 8, Value: 6.4 Row: 1, Col: 9, Value: 4.4 Row: 1, Col: 10, Value: 4.0 Finland 6.4% United States 35.2% Germany 6.2% Japan 13.7% Spain 3.7% Switzerland 3.5% Netherlands 10.6 % Other 12.3% AS OF APRIL 30, 1995 Other 8.1% Finland 4.6% Row: 1, Col: 1, Value: 8.1 Row: 1, Col: 2, Value: 9.9 Row: 1, Col: 3, Value: 10.7 Row: 1, Col: 4, Value: 5.7 Row: 1, Col: 5, Value: 4.1 Row: 1, Col: 6, Value: 50.0 Row: 1, Col: 7, Value: 6.9 Row: 1, Col: 8, Value: 4.6 Germany 6.9% Netherlands 9.9% Japan 10.7% Switzerland 5.7% France 4.1% United States 50.0% ASSET ALLOCATION % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Stocks 80.3 64.1 Bonds 0.3 0.3 Short-term investments 19.4 35.6 TOP TEN STOCKS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Deutsche Bank AG 1.8 0.9 (Germany, Banks) Volker Stevin NV 1.6 1.4 (Netherlands, Construction) Philip Morris Companies, Inc. 1.3 0.3 (United States, Tobacco) AKZO NV Ord. 1.2 1.1 (Netherlands, Chemicals & Plastics) Nomura Securities Co. Ltd. 1.2 0.8 (Japan, Securities Industry) Allstate Corp. 1.2 0.2 (United States, Insurance) Iro AB 1.1 0.0 (Sweden, Consumer Durables) Repola OY 1.1 0.8 (Finland, Paper & Forest Products) Banco de Santander SA Ord. (Reg.) 1.1 0.8 (Spain, Banks) Enso-Gutzeit OY Class R Free shares 1.1 0.8 (Finland, Paper & Forest Products) TOP TEN MARKET SECTORS % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 16.1 14.1 Basic Industries 12.2 10.9 Retail & Wholesale 10.2 8.0 Durables 9.6 6.3 Construction & Real Estate 9.1 6.3 Industrial Machinery & Equipment 5.5 4.4 Nondurables 4.4 1.5 Utilities 3.1 0.9 Technology 2.6 1.9 Energy 2.5 3.3 WORLDWIDE FUND INVESTMENTS OCTOBER 31, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 76.1% SHARES VALUE (NOTE 1) AUSTRALIA - 0.7% QNI Ltd. 278,400 $ 533,507 Southcorp Holdings Ltd. 1,859,900 4,002,642 4,536,149 BELGIUM - 0.5% D'ieteren Trading SA 44,000 3,495,682 BRAZIL - 0.6% Coteminas PN 6,100,000 1,903,276 Refrigeracao Parana SA 730,000,000 1,723,457 3,626,733 CANADA - 4.4% Alcan Aluminium Ltd. 70,000 2,219,226 Brascan Ltd. Class A 89,700 1,401,041 Canadian Pacific Ltd. Ord. 338,500 5,381,508 Falconbridge Ltd. 220,000 4,847,527 Falconbridge Ltd. (New) 400,000 3,756,043 Imasco Ltd. 300,000 5,355,151 Inco Ltd. 115,000 3,955,932 Methanex Corp. (a) 265,600 1,777,910 28,694,338 CHINA (PEOPLES REP) - 0.5% Jilin Chemical Industrial Co. Ltd. Class H (a) 5,750,000 1,204,843 Maanshan Iron & Steel Co. Ltd. Class H 12,000,000 2,188,506 3,393,349 DENMARK - 0.6% Tele Danmark AS Class B 37,000 1,931,142 Unidanmark AS Class A 46,000 2,114,458 4,045,600 FINLAND - 6.4% Enso-Gutzeit OY Class R Free shares 880,000 6,905,539 Huhtamaki Ord. 230,000 6,829,188 Kansallis-Osake-Pankki 4,032,000 3,230,503 Kemira OY 634,030 5,333,949 Kemira OY sponsored ADR (b) 168,600 2,781,900 Kone Corp. Class B Ord. 67,050 6,114,774 Repola OY 362,600 7,023,770 Valmet OY Class A 135,000 3,753,932 41,973,555 FRANCE - 4.0% Bail Investissement SA 31,300 5,160,573 Eramet SA 40,000 2,703,533 Klepierre SA 48,350 5,446,493 Michelin SA Cie Generale des Etablissements Class B 105,000 4,247,312 Renault SA Ord. 105,000 3,290,323 Renault SA Ord. (a)(b) 10,000 313,364 Unibail 57,000 5,259,293 26,420,891 GERMANY - 3.9% Bremer Vulkan AG (a) 118,000 3,669,045 Deutsche Bank AG 265,000 11,977,816 Karstadt AG 14,300 6,233,060 SGL Carbon AG (a)(b) 9,500 622,475 Sixt AG Units 9,770 759,461 Tarkett AG (a) 20,000 477,052 Tarkett AG (a)(b) 63,000 1,502,715 25,241,624 SHARES VALUE (NOTE 1) HONG KONG - 1.8% Amoy Properties Ltd. 3,206,000 $ 3,089,351 Great Eagle Holdings Ltd. 828,000 2,270,459 Hang Lung Development Corp. 1,226,000 2,037,704 Jardine Matheson Holdings Ltd. Ord. 407,800 2,487,580 Peregrine Investments Holdings Ltd. 1,544,000 1,967,121 11,852,215 INDIA - 0.2% Indian Aluminum Ltd. GDR (b) 110,550 622,397 SCICI Ltd. 235,500 246,173 SCICI Ltd. (a): (New) 117,750 123,775 (rights) 117,750 - 992,345 ITALY - 1.4% Bulgari Spa (a) 687,003 5,948,056 De Rigo Spa sponsored ADR 1,400 28,875 Mediobanca Spa 340,000 2,269,160 Telecom Italia Ord. 706,200 1,083,765 9,329,856 JAPAN - 13.7% Akita Bank Ltd. 344,000 2,275,244 Alps Electric Co. Ltd. 180,000 1,851,943 Aomori Bank Ltd. 320,000 1,740,238 Arc Land Sakamoto Co. Ltd. 100,000 1,293,420 Bank of the Ryukyus Ltd. 58,900 2,135,417 Bridgestone Corp. 50,000 695,703 Daiichi Corp. Ord. 152,000 3,142,619 Daito Trust Construction 173,000 1,525,648 Daiwa Securities Co. Ltd. 425,000 4,997,305 FCC Co. Ltd. 34,000 1,049,434 Fukushima Bank Ltd. 24,000 98,770 Hankyu Department Stores, Inc. 147,000 1,814,904 Hanshin Department Store Ltd. 516,000 3,615,110 Hitachi Ltd. 295,000 3,035,128 Homac Corp. 84,000 1,506,247 Iwate Bank 35,000 1,886,238 Izumi Co. Ord. 100,000 1,900,936 Kajima Corp. 280,000 2,589,976 Kanto Auto Works Co. Ltd., Yokosuka 132,000 776,052 Kokuyo Co. Ltd. 50,000 1,077,850 Matsuya Co. Ltd. 251,000 1,256,783 Michinoku Bank 370,000 3,081,672 Ministop Co. Ltd. 107,000 2,600,167 Mitsubishi Electric Co. Ord. 250,000 1,871,540 Mori Seiki Co. Ltd. Ord. 103,000 2,038,705 NEC Corp. 86,000 1,137,622 Namura Shipbuilding Co. Ltd. 176,000 982,999 Nikko Securities Co. Ltd. 425,000 3,972,858 Nikku Sangyo Co. Ltd. 96,000 1,034,736 Nomura Securities Co. Ltd. 421,000 7,714,174 Obayashi Corp. 339,000 2,527,843 Omron Corp. 50,000 1,170,937 Paris Miki, Inc. 80,000 2,539,807 Sekisui House Ltd. 360,000 4,162,461 Shimachu 91,000 2,407,525 Shimzu Bank Ltd. 25,000 1,680,466 Tachi-S Co. Ltd. 120,000 905,394 Tokyo Nissan Auto Sales Co. Ltd. 244,000 1,494,292 Toyoda Automatic Loom Works Ltd. 122,000 1,912,694 Yamaichi Securities Co. Ltd. 539,000 2,830,866 Yamanouchi Pharmaceutical Co. Ltd. 150,000 3,351,134 89,682,857 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEXICO - 1.2% Cemex SA Class B sponsored ADR 500,000 $ 3,250,000 Empresas Ica Sociedad Controladora SA de CV sponsored ADR representing Ord. (part. certs.) 275,000 2,612,500 Grupo Financiero Bancomer SA de CV (a): Series L 265,911 62,015 sponsored ADR, Series C (b) 359,000 1,839,875 7,764,390 NETHERLANDS - 10.2% AKZO NV Ord. 69,400 7,901,654 Ahrend Groep NV Ord. (a) 40,000 1,414,180 BAM Groep NV 50,745 3,022,258 CVG (Crown Van Gelder) 38,000 3,683,710 De Boer Winkelbedrijven NV 87,000 4,244,440 Econosto NV 285,500 3,744,440 Geveke NV (d) 215,200 5,072,192 KBB NV Ord. 63,625 4,514,984 Koninklijke PPT Nederland 108,000 3,797,757 Koninklijke PPT Nederland (b) 74,400 2,616,233 Macintosh Confectie NV 204,900 5,971,868 Samas-Groep NV 93,613 4,092,566 Vendex International NV 160,000 4,612,558 Vendex International NV (b) 46,000 1,326,110 Volker Stevin NV 165,000 10,611,101 66,626,051 NORWAY - 0.9% Den Norske Bank Class A Free shares 1,600,000 4,394,828 Dual Invest AS Class B (non-vtg.) (a) 221,700 1,282,017 Mosvold Shipping Ltd. 221,700 213,670 5,890,515 PANAMA - 0.2% McDermott (J. Ray) SA 100,000 1,512,500 PORTUGAL - 0.7% Portugal Telecom SA sponsored ADR (a) 229,000 4,293,750 SPAIN - 3.7% Banco Bilbao Vizcaya SA Ord. (Reg.) 129,600 3,962,361 Banco de Santander SA Ord. (Reg.) 159,587 6,959,039 Banco de Valencia SA (Reg.) 442,363 5,964,648 Banco Pastor SA 50,000 2,438,525 Banco Popular Espanol 12,800 2,034,361 Prosegur Comp Securidad SA (Reg.) 125,000 3,063,524 24,422,458 SWEDEN - 1.5% Iro AB (a)(b) 600,000 7,331,091 Munksjo AB 295,200 2,137,420 9,468,511 SWITZERLAND - 3.5% C. S. Holdings (Reg.) 20,650 2,107,699 Globus Magazine (part. certs.) 3,650 2,376,595 Kuoni Reisen Holding AG Class B (Reg.) 900 1,433,348 Merkur Holdings AG Ord. (Reg.) 4,000 890,453 SIG AG (Reg.) 1,800 1,916,410 Swiss Bank Corp. (Reg.) 12,257 2,510,178 Swisslog Holding AG (Reg) 14,150 4,233,172 Von Moos Holdings AG Ord. (a)(d) 34,000 3,290,805 Winterthur Schweizerische Versicherungs-Gesellschaft (Reg.) 6,450 4,239,463 22,998,123 SHARES VALUE (NOTE 1) THAILAND - 0.2% Securities One PCL: (For. Reg.) 148,000 $ 1,329,148 (warrants) (a) 24,666 - 1,329,148 UNITED STATES OF AMERICA - 15.3% Allstate Corp. 209,394 7,695,230 Alumax, Inc. (a) 77,300 2,280,350 Aluminum Co. of America 30,000 1,530,000 Amerada Hess Corp. 92,700 4,183,088 Anadarko Petroleum Corp. 45,000 1,951,875 Armco, Inc. (a) 210,400 1,288,700 BJ Services Co. (a) 50,239 1,180,617 Baker (J.), Inc. 151,000 868,250 Burlington Industries, Inc. (a) 256,000 2,848,000 Burlington Resources, Inc. 40,000 1,440,000 Chemical Banking Corp. 65,000 3,696,875 DST Systems, Inc. 3,000 63,000 Dayton Hudson Corp. 40,900 2,811,875 Dillard Department Stores, Inc. Class A 110,000 2,983,750 Exide Corp. 59,600 2,614,950 Federated Department Stores, Inc. (a) 115,000 2,918,125 Helmerich & Payne, Inc. 32,000 828,000 Interco, Inc. 300,000 2,212,500 International Business Machines Corp. 61,700 6,000,325 Kaiser Aluminum Corp. (a) 100 1,125 Kerr-McGee Corp. 66,600 3,671,325 Lafarge Corp. 52,336 915,880 Liz Claiborne, Inc. 125,000 3,546,875 Lo Jack Corp. (a) 150,000 2,325,000 Mohawk Industries, Inc. (a) 19,500 292,500 OM Group, Inc. 90,000 2,610,000 Philip Morris Companies, Inc. 98,000 8,281,000 President Riverboat Casinos, Inc. (a) 89,000 272,563 RJR Nabisco Holdings Corp. 138,740 4,266,255 Reading & Bates Corp. (a) 51,700 594,550 Reynolds Metals Co. 102,100 5,143,288 Schering-Plough Corp. 69,000 3,700,125 Sears, Roebuck & Co. 175,500 5,967,000 Station Casinos, Inc. (a) 129,900 1,688,700 Sundstrand Corp. 12,000 735,000 Tuboscope Vetco Corp. (a) 151,000 887,125 Union Planters Corp. 54,198 1,659,814 Unisys Corp. (a) 105,000 590,625 Wang Laboratories, Inc. (a) 14,800 246,050 Westpoint Stevens, Inc. Class A 95,400 2,015,325 Wolverine Tube, Inc. (a) 26,000 926,250 99,731,885 TOTAL COMMON STOCKS (Cost $477,990,015) 497,322,525 PREFERRED STOCKS - 4.2% CONVERTIBLE PREFERRED STOCKS - 0.9% NETHERLANDS - 0.4% Samas-Groep NV 59,306 2,761,827 UNITED STATES OF AMERICA - 0.5% Reynolds Metals Co. $3.31 21,500 1,075,000 Unisys Corp., Series A, $3.75 76,600 2,106,500 3,181,500 TOTAL CONVERTIBLE PREFERRED STOCKS 5,943,327 PREFERRED STOCKS - CONTINUED SHARES VALUE (NOTE 1) NONCONVERTIBLE PREFERRED STOCKS - 3.3% GERMANY - 2.3% BMW AG 8,563 $ 3,233,959 Escada AG (non-vtg.) 26,000 4,688,177 FAG Kugelfischer Georg Schaef (a) 43,000 5,555,674 Schwabengarage AG 9,692 1,892,095 15,369,905 ITALY - 1.0% Telecom Italia Mobile SA de Risp (a) 2,900,000 3,200,253 Telecom Italia Risp 2,600,000 3,057,088 6,257,341 TOTAL NONCONVERTIBLE PREFERRED STOCKS 21,627,246 TOTAL PREFERRED STOCKS (Cost $27,508,293) 27,570,573 GOVERNMENT OBLIGATIONS (E) - 0.3% MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) MEXICO - 0.3% Mexican Government Cetes 0%, 1/11/96 (Cost $2,496,877) A-1 MXN 15,000,000 1,939,026 REPURCHASE AGREEMENTS - 19.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88%, dated 10/31/95 due 11/1/95 $ 126,841,714 126,821,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $634,816,185) $653,653,124 CURRENCY ABBREVIATIONS MXN - Mexican peso LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $18,956,160 or 2.9% of net assets. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. A company in which the fund has ownership of at least 5% of the voting securities is a affiliated company. A summary of the transactions during the period in which the issuers were affiliates is a follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Econosto NV $ - $ 484,998 $ - $ - Geveke NV 546,214 486,352 148,909 5,072,192 Von Moos Holdings AG Ord. 44,619 - - 3,290,805 TOTALS $ 590,833 $ 971,350 $ 148,909 $ 8,362,997 5. Some foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. 6. Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $373,824,081 and $350,086,310, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $113,175 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At October 31, 1995, the aggregate cost of investment securities for income tax purposes was $635,152,430. Net unrealized appreciation aggregated $18,500,694, of which $54,347,832 related to appreciated investment securities and $35,847,138 related to depreciated investment securities. The fund hereby designates $55,000 as a capital gain dividend for the purpose of the dividend paid deduction. For the period, interest and dividends from foreign countries were $10,585,709 or $0.21 per share. Taxes accrued or paid to foreign countries were $1,775,578 or $0.04 per share. MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Value of Investment in Securities Aerospace & Defense 0.8% Basic Industries 12.2 Conglomerates 0.2 Construction & Real Estate 9.1 Durables 9.6 Energy 2.5 Finance 16.1 Government Obligations 0.3 Health 1.1 Holding Companies 0.4 Industrial Machinery & Equipment 5.5 Media & Leisure 0.5 Nondurables 4.4 Repurchase Agreements 19.4 Retail & Wholesale 10.2 Services 0.9 Technology 2.6 Transportation 1.1 Utilities 3.1 100.0% WORLDWIDE FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $126,821,000) (cost $634,816,185) - $ 653,653,124 See accompanying schedule Cash 1,630,276 Receivable for investments sold 8,502,401 Receivable for fund shares sold 994,108 Dividends receivable 1,122,930 TOTAL ASSETS 665,902,839 LIABILITIES Payable for investments purchased $ 2,527,816 Payable for fund shares redeemed 3,563,742 Accrued management fee 428,380 Other payables and accrued expenses 337,678 TOTAL LIABILITIES 6,857,616 NET ASSETS $ 659,045,223 Net Assets consist of: Paid in capital $ 635,178,185 Undistributed net investment income 5,414,914 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (400,880 ) Net unrealized appreciation (depreciation) on investments 18,853,004 and assets and liabilities in foreign currencies NET ASSETS, for 49,486,663 shares outstanding $ 659,045,223 NET ASSET VALUE, offering price $13.32 and redemption price per share ($659,045,223 (divided by) 49,486,663 shares)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 INVESTMENT INCOME $ 12,157,939 Dividends (including $148,909 received from affiliated issuers) Interest 12,218,898 24,376,837 Less foreign taxes withheld (1,775,578 ) TOTAL INCOME 22,601,259 EXPENSES Management fee $ 5,378,156 Transfer agent fees 2,049,803 Accounting fees and expenses 362,793 Non-interested trustees' compensation 3,614 Custodian fees and expenses 251,852 Registration fees 41,643 Audit 53,629 Legal 36,325 Miscellaneous 5,825 Total expenses before reductions 8,183,640 Expense reductions (8,702 8,174,938 ) NET INVESTMENT INCOME 14,426,321 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including (299,395 realized gain of $94,931 on sales ) of investments in affiliated issuers) Foreign currency transactions (4,154,724 (4,454,119 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities (4,955,296 ) Assets and liabilities in 1,299,238 (3,656,058 foreign currencies ) NET GAIN (LOSS) (8,110,177 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,316,144 OTHER INFORMATION Accounting fees paid to FSC $360,752
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, 1995 1994
Operations $ 14,426,321 $ 7,442,789 Net investment income Net realized gain (loss) (4,454,119) 40,932,054 Change in net unrealized appreciation (depreciation) (3,656,058) (4,684,006) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 6,316,144 43,690,837 Distributions to shareholders (8,330,247) (2,354,702) From net investment income From net realized gain (29,879,122) (3,532,293) TOTAL DISTRIBUTIONS (38,209,369) (5,886,995) Share transactions 526,107,715 948,710,537 Net proceeds from sales of shares Reinvestment of distributions 37,492,418 5,746,798 Cost of shares redeemed (621,399,865) (530,801,158) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (57,799,732) 423,656,177 TOTAL INCREASE (DECREASE) IN NET ASSETS (89,692,957) 461,460,019 NET ASSETS Beginning of period 748,738,180 287,278,161 End of period (including undistributed net investment income of $5,414,914 and $5,498,260, respectively) $ 659,045,223 $ 748,738,180 OTHER INFORMATION Shares Sold 39,931,110 69,814,518 Issued in reinvestment of distributions 2,980,274 451,414 Redeemed (47,075,996) (39,135,881) Net increase (decrease) (4,164,612) 31,130,051
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS YEARS ENDED OCTOBER 31, SELECTED PER-SHARE DATA 1995 1994 B 1993 1992 1991
Net asset value, beginning of period $ 13.96 $ 12.76 $ 9.63 $ 9.61 $ 8.95 Income from Investment Operations Net investment income .17 .08 .11 .20 .21 Net realized and unrealized gain (loss) (.08) 1.37 3.28 (.08) .53 Total from investment operations .09 1.45 3.39 .12 .74 Less Distributions (.16) E (.10) (.24) (.10) (.08) From net investment income From net realized gain (.57) E (.15) (.02) D - - Total distributions (.73) (.25) (.26) (.10) (.08) Net asset value, end of period $ 13.32 $ 13.96 $ 12.76 $ 9.63 $ 9.61 TOTAL RETURN A, C .95% 11.55% 36.10% 1.32% 8.33% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 659,045 $ 748,738 $ 287,278 $ 103,627 $ 105,029 Ratio of expenses to average net assets 1.17% 1.32% 1.40% 1.51% 1.69% Ratio of expenses to average net assets after expense reductions 1.16% 1.32% 1.40% 1.51% 1.69% Ratio of net investment income to average net assets 2.05% 1.40% 1.99% 2.02% 2.19% Portfolio turnover rate 70% 69% 57% 130% 129% A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B EFFECTIVE NOVEMBER 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. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS). D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS For the period ended October 31, 1995 a SIGNIFICANT ACCOUNTING POLICIES. Fidelity International Growth & Income Fund, Fidelity Diversified International Fund, Fidelity International Value Fund, Fidelity Overseas Fund and Fidelity Worldwide Fund (the funds) are funds of Fidelity Investment Trust (the trust). The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Each fund is authorized to issue an unlimited number of shares. The following summarizes the significant accounting policies of the funds: 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 funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, 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, each fund is not subject to U.S. federal income taxes to the extent that it distributes all of its taxable income for its fiscal year. Each fund may be subject to foreign taxes on income, gains on investments or currency repatriation. Each fund accrues such taxes as applicable based upon its current interpretation of the tax rules and regulations that exist in markets in which it invests. The schedules of investments include 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 funds are informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Certain foreign currency gains (losses) are taxable as ordinary income and, therefore, increase (decrease) taxable ordinary income available for distribution. 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 transactions, foreign currency transactions, passive foreign investment companies (PFIC), market discount, capital loss carryforwards, and losses deferred due to wash sales and excise tax regulations. Certain funds also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 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. b OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The funds may use foreign currency contracts to facilitate transactions in foreign securities and to manage the funds' currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the funds' 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. 2. OPERATING POLICIES - CONTINUED FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the funds, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. FMR is responsible for determining that the value of these underlying securities remains at least equal to the resale price. FUTURES CONTRACTS AND OPTIONS. The funds may use futures and options contracts to manage their exposure to the stock and bond markets and to fluctuations in interest rates and currency values. Buying futures, writing puts, and buying calls tend to increase the funds' exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the funds' exposure to the underlying instrument, or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end, is shown in the schedule of investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. RESTRICTED SECURITIES. The funds are permitted to invest in privately placed restricted securities. These securities 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. Restricted securities (excluding 144A issues) at the end of the period are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. c PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities) and the market value of future contracts opened and closed is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. d FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2700% to .5200% for the period. 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 each fund. The basic fee for Diversified International and Overseas is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) based on each fund's investment performance as compared to the appropriate index over a specified period of time. For the period, each fund's management fee was equivalent to the following annualized rates expressed as a percentage of average net assets after the performance adjustment, if applicable: Diversified International, Overseas .69% International Growth & Income, International Value, Worldwide .77% SUB-ADVISER FEE. FMR, on behalf of the funds, entered into sub-advisory agreements with Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research Far East Inc., Fidelity International Investment Advisors (FIIA), and Fidelity Investment Japan Ltd. In add- ition, 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. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the funds. FDC was paid a 3% sales charge on sales of shares of each fund, except for International Growth & Income which is a no-load fund. The sales charge for Diversified International, International Value, Overseas and Worldwide had been waived through June 30, 1995. Effective July 1, 1995, Diversified International, International Value, Overseas and Worldwide became no-load funds. Shares of International Growth & Income purchased before October 12, 1990 are subject to a 1% deferred sales charge upon redemption. The amount received by FDC for sales charges and deferred sales charges are shown under the caption "Other Information" on each applicable fund's Statement of Operations. TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. During the period November 1, 1994 to December 31, 1994, FSC received fees based on the type, size, number of accounts and the number of transactions made by shareholders. 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. ACCOUNTING FEE. 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. The accounting and pricing fees paid to FSC are shown under the caption "Other Information" on each fund's Statement of Operations. BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. e TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Information regarding affiliated companies is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. f BANK BORROWINGS. Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, each 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 periods for which loans were outstanding are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. g EXPENSE REDUCTIONS. FMR directed certain portfolio trades to brokers who paid a portion of certain funds' expenses. For the period, the expenses of Diversified International, International Growth & Income and Worldwide were reduced by $35,327, $3,915, and $8,702, respectively, under this arrangement. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Investment Trust and the Shareholders of : Fidelity International Growth & Income Fund, Fidelity Diversified International Fund, Fidelity International Value Fund, Fidelity Overseas Fund, and Fidelity Worldwide Fund: We have audited the accompanying statements of assets and liabilities of Fidelity Investment Trust: Fidelity International Growth & Income Fund, Fidelity Diversified International Fund, Fidelity International Value Fund, Fidelity Overseas Fund, and Fidelity Worldwide Fund, including the schedules of portfolio investments, as of October 31, 1995, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the periods indicated. 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 audits 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 October 31, 1995 by correspondence with the custodians 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 International Growth & Income Fund, Fidelity Diversified International Fund, Fidelity International Value Fund, Fidelity Overseas Fund, and Fidelity Worldwide Fund as of October 31, 1995, the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for each of the periods indicated, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts December 20, 1995 -----END PRIVACY-ENHANCED MESSAGE-----