FIDELITY ADVISOR INSTITUTIONAL EQUITY PORTFOLIO INCOME
ANNUAL REPORT
NOVEMBER 30, 1993
PERFORMANCE UPDATE
$100,000 OVER TEN YEARS
$395,468
$341,026
$100,000 OVER TEN YEARS: LET'S SAY YOU INVESTED $100,000 IN FIDELITY
ADVISOR INSTITUTIONAL EQUITY PORTFOLIO INCOME (INSTITUTIONAL CLASS) ON
NOVEMBER 30, 1983. BY NOVEMBER 30, 1993, THE VALUE OF YOUR INVESTMENT WOULD
HAVE GROWN TO $341,026 - A 241.03% INCREASE ON YOUR INITIAL INVESTMENT. FOR
COMPARISON, LOOK AT HOW A $100,000 INVESTMENT IN THE S&P 500 (WITH
DIVIDENDS REINVESTED) DID OVER THE SAME PERIOD. IT WOULD HAVE GROWN TO
$395,468 - A 295.47% INCREASE.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED NOVEMBER 30, 1993
One Five Ten
Year Years Years
INSTITUTIONAL EQUITY
PORTFOLIO INCOME 18.90% 76.89% 241.03
%
S&P 500(Registered trademark) 10.10% 98.31 295.47
% %
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED NOVEMBER 30, 1993
One Five Ten
Year Years Years
INSTITUTIONAL EQUITY
PORTFOLIO INCOME 18.90% 12.08% 13.05%
S&P 500(Registered trademark) 10.10% 14.67% 14.74%
TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS
AND CAPITAL GAINS. FIGURES FOR THE S&P 500, AN UNMANAGED INDEX OF
COMMON STOCK PRICES, INCLUDE REINVESTMENT OF DIVIDENDS. S&P 500 IS A
REGISTERED TRADEMARK OF STANDARD & POOR'S CORPORATION.
AVERAGE ANNUAL TOTAL RETURNS FOR MORE THAN ONE YEAR ASSUME A STEADY
COMPOUNDED RATE OF RETURN AND ARE NOT THE FUND'S YEAR-BY-YEAR RESULTS,
WHICH FLUCTUATED OVER THE PERIODS SHOWN.
FOR THE PERIOD ENDED NOVEMBER 30, 1993, FIDELITY ADVISOR EQUITY PORTFOLIO
INCOME (RETAIL CLASS) SHARES' CUMULATIVE TOTAL RETURNS WERE 18.03%, 75.31%,
AND 237.99% FOR ONE YEAR, FIVE YEARS, AND TEN YEARS, RESPECTIVELY. FOR THE
PERIOD ENDED NOVEMBER 30, 1993, RETAIL CLASS SHARES' AVERAGE ANNUAL TOTAL
RETURNS (WHICH INCLUDE THE EFFECT OF THE 4.75% SALES CHARGE) WERE 12.42%,
10.80%, AND 12.40% FOR ONE YEAR, FIVE YEARS, AND TEN YEARS, RESPECTIVELY.
ALL PERFORMANCE NUMBERS ARE HISTORICAL; THE FUND'S SHARE PRICE AND RETURN
WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
AN INTERVIEW WITH
BETTINA DOULTON,
PORTFOLIO MANAGER OF
FIDELITY ADVISOR INSTITUTIONAL EQUITY PORTFOLIO INCOME
WE'VE PROVIDED THE FOLLOWING MARKET RECAP AS CONTEXT FOR THE MANAGER'S
INTERVIEW:
LOW INFLATION, FALLING INTEREST RATES AND A GRADUALLY IMPROVING ECONOMY
BOOSTED U.S. STOCKS DURING THE 12 MONTHS ENDED NOVEMBER 30, 1993. THE
STANDARD & POOR'S 500 INDEX - A BROAD MEASURE OF U.S. STOCK PERFORMANCE
- - ROSE 10.10%, IN LINE WITH THE MARKET'S LONG-TERM AVERAGE ANNUAL RETURN.
CONTINUED POOR PERFORMANCE BY TOBACCO, DRUG AND BRAND-NAME CONSUMER
PRODUCTS STOCKS WAS OFFSET BY IMPRESSIVE RESULTS IN OTHER SECTORS,
INCLUDING TECHNOLOGY, ALTHOUGH SEMICONDUCTORS GAVE BACK PART OF THEIR GAINS
IN OCTOBER AND NOVEMBER. OTHER MARKET LEADERS WERE FINANCE, NOTABLY
SECURITIES BROKERS; AUTOS; ENTERTAINMENT; AND PRECIOUS METALS.
COMMUNICATIONS STOCKS SOARED AS TRADITIONAL TELEPHONE UTILITIES, CELLULAR
COMMUNICATIONS COMPANIES AND ENTERTAINMENT COMPANIES SCRAMBLED TO FORM
STRATEGIC ALLIANCES. MERGERS AND ACQUISITIONS ACTIVITY RESUMED AT A PACE
REMINISCENT OF THE 1980S. THE NASDAQ COMPOSITE INDEX, WHICH TRACKS OVER-THE
COUNTER STOCKS, ROSE 15.57% FOR THE YEAR, COMPARED TO 14.73% FOR THE DOW
JONES INDUSTRIAL AVERAGE, AN INDEX OF 30 BLUE-CHIP STOCKS. BOTH TRAILED THE
MORGAN STANLEY EAFE (EUROPE, AUSTRALIA, FAR EAST) INDEX, WHICH ROSE 24.27%.
TWO WIDELY WATCHED BENCHMARKS BROKE RECORDS DURING THE PERIOD: SLOW GROWTH
AND THE PROSPECT OF HIGHER TAXES HELPED PUSH THE YIELD ON THE 30-YEAR
TREASURY BELOW 6% IN EARLY SEPTEMBER; MEANWHILE, THE DOW CLOSED ABOVE 3700
FOR THE FIRST TIME IN MID-NOVEMBER, AND FINISHED THE MONTH AT 3684.
Q. BETTINA, HOW DID THE FUND PERFORM?
A. Quite well. The fund delivered a total return of 18.90% during the 12
months ended November 30, 1993. That beat the 13.66% average total return
for the equity income funds tracked by Lipper Analytical Services, and a
10.10% total return for the Standard and Poor's 500-stock index.
Q. WHAT HELPED THE FUND OUTPERFORM THE AVERAGE?
A. One of the biggest factors was the decision early in 1993 to avoid
buying stocks of health-care companies or firms that manufacture consumer
non-
durable goods such as tobacco and food. Those stocks were terrible
investments for much of the year, and by staying clear of them the fund
picked up a lot of ground. Beyond that, the fund had more than 50% of its
investments in sectors that benefited from the economy's growing strength.
Among them were banks and other financial services companies such as
Citicorp, Household International and Wells Fargo, which I sold at a profit
before the end of the period. Those firms worked through their credit
quality problems as the economy emerged from the last recession, and were
well-positioned to benefit from lower interest rates and rising fees from
their fast-growing, non-bank businesses such as trust services.
Q. WHERE ELSE WERE YOU SUCCESSFUL?
A. I also invested in U.S. auto manufacturers Chrysler and Ford. Auto
stocks typically are among the first to rebound as the economy picks up
steam. Moreover, both Chrysler and Ford have cut costs, taken back market
share from overseas competi- tors and introduced strong new products. The
fund also profited from owning shares of industrial companies that are
sensitive to the economy such as General Electric. The firm has a strong
and growing presence in overseas markets, and its industrial business has
performed well due to continued cost cutting. And while many investors were
skeptical about G.E.'s financial services division, it also has performed
well, boosting the company's overall earnings.
Q. MANY OF THE NAMES YOU MENTION ARE NO LONGER AMONG THE FUND'S TOP
HOLDINGS. WHY THE CHANGE?
A. I sold or deemphasized some stocks which had posted sizable gains during
the first part of the year and replaced them with stocks trading at more
attractive valuations, as measured by yardsticks such as price-to-earnings
ratios. Specifically, I sold some of the large bank positions including
First Fidelity, NationsBank and First Interstate, all of which had
outperformed the broader market and no longer appeared as compelling.
Overall, I reduced the fund's stake in financial stocks from 21% a year ago
to about 13% at the end of November. Partly, that was because I believe the
benefits of lower interest rates and improving credit quality have largely
been realized. But also, given the sluggish demand for loans, relative
earnings growth appears to be slowing.
Q. WHAT KINDS OF STOCKS DID YOU BUY TO REPLACE THE BANK STOCKS AND OTHER
MAJOR HOLDINGS YOU SOLD OFF?
A. A variety. Lately, it's been more difficult to find broad investment
themes that I'm confident will be as successful as those that worked for us
in 1993. For example, it's no longer such an easy decision to avoid food
and tobacco or health-care stocks, which have declined by more than 20%.
And the most obvious bargains I spotted early in the year are no longer as
cheap. As a result, I've become more opportunistic, picking stocks on a
case-by-case basis. For example, I recently added tobacco stocks such as
Philip Morris and RJR Nabisco, which are trading at attractive prices. Both
firms were hurt by price wars in the domestic cigarette market. But those
wars have abated, and the firms are cutting costs, which should help their
profits going into 1994.
Q. ARE YOU FINDING OPPORTUNITIES IN OVERSEAS SECURITIES?
A. The fund's exposure to foreign securities was about 11% six months ago
and had risen to 15% by the end of November. Most of our foreign
investments are in Europe, because I think real interest rates must decline
further in countries like France, Germany, the Netherlands and the United
Kingdom to reignite those economies. For example, in France, I've invested
in ten-year French government bonds as well as financial services stocks,
such as Paribas, that will benefit from lower rates, and early cyclicals,
like Peugeot and Valeo. My foreign stocks also include British Petroleum,
which has lowered its costs, strengthened its financial position, and
should be able to increase its oil and gas production.
Q. WHAT OTHER KINDS OF STOCKS DO YOU LIKE IN THIS MARKET?
A. I like companies whose managers are doing things to turn around their
businesses. For example, Sears has spun off divisions and begun to improve
the performance of its retail stores. Tenneco has made enormous progress
towards improving the profitability of its weakest division, J.I. Case.
Right now, I'm also interested in businesses such as Eastman Kodak and
American Cyanamid, where new management is working to boost profitability.
These often are depressed stocks that pay relatively high yields, which is
also a plus.
Q. HAVE YOU INCREASED THE FUND'S EXPOSURE TO SMALL OR MEDIUM-SIZED
COMPANIES SINCE YOU TOOK THE REINS LAST AUGUST?
A. Not really. But I have reduced the number of stocks in the fund from
around 290 to about 230, and I'd like to get rid of another 30 names. I've
tried to concentrate more of the fund in the top 50 or so holdings. That
way, my best ideas really drive the fund's performance.
Q. WHAT'S AHEAD FOR THE FUND?
A. I don't know how the stock market will perform. But it wouldn't take
much to upset the current bullish consensus, which says that we are in an
ideal investment world, with economic growth accompanied by low interest
rates and inflation. Meanwhile, I'll stay very focused on the importance of
value. If a stock is cheap, then it's not likely to fall as far as more
expensive issues if the market does run into trouble.
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCK HOLDINGS AS OF NOVEMBER 30, 1993
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 3.1 2.1
Citicorp $5.375 2.4 2.7
Philip Morris Companies, Inc. 1.9 0.0
British Petroleum PLC ADR 1.4 0.7
Chrysler Corp., Series A, $4.625 1.3 1.0
Penney (J.C.) Co., Inc. 1.3 0.8
Entergy Corp. 1.0 1.2
CSX Corp. 1.0 0.7
Sears, Roebuck & Co. 1.0 0.8
Tenneco, Inc. 1.0 0.9
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN INDUSTRIES AS OF NOVEMBER 30, 1993
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO
Finance 13.0 19.0
Utilities 11.8 11.4
Basic Industries 9.3 7.3
Industrial Machinery & Equipment 8.1 6.9
Energy 8.0 9.2
Conglomerates 5.6 5.5
Retail & Wholesale 5.6 4.7
Health 5.0 2.8
Durables 4.5 7.0
Media & Leisure 3.8 1.4
</TABLE>
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
INVESTMENTS/NOVEMBER 30, 1993
(Showing Percentage of Total Value of Investment in Securities)
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - 76.0%
AEROSPACE & DEFENSE - 1.1%
DEFENSE ELECTRONICS - 1.1%
Loral Corp. 67,000 $ 2,211,000 54385910
Raytheon Co. 7,200 441,000 75511110
2,652,000
BASIC INDUSTRIES - 8.1%
CHEMICALS & PLASTICS - 4.2%
Akzo NV Ord. 13,800 1,276,044 01019910
Betz Laboratories, Inc. 1,400 58,709 08777910
GEON 39,300 903,900 37246W10
Hercules, Inc. 19,000 2,033,000 42705610
Imperial Chemical Industries PLC:
ADR. 3,600 162,450 45270450
Ord. 70,500 784,675 45270440
Lyondell Petrochemical Co. 22,200 446,775 55207810
OM Group, Inc. (b) 32,200 603,750 67087210
PPG Industries, Inc. 3,500 247,625 69350610
Potash Corp. of Saskatchewan 20,300 423,629 73755L10
Union Carbide Corp. 85,900 1,782,425 90558110
Vigoro Corp. 32,050 901,406 92675410
9,624,388
IRON & STEEL - 1.5%
British Steel PLC:
ADR 11,800 213,875 11101530
Ord. 56,100 24,656 11101510
Lukens, Inc. 21,700 808,325 54986610
Mannesmann AG:
ADR 637 135,382 56311595
Ord. 5,100 1,102,638 56377510
Thyssen AG Ord. 2,500 346,200 88629110
USX-U.S. Steel Group 25,500 918,000 90337T10
3,549,076
METALS & MINING - 1.0%
Alcan Aluminium Ltd. 32,300 671,028 01371610
Aluminum Co. of America 7,048 488,074 02224910
Reynolds Metals Co. 27,000 1,211,625 76176310
2,370,727
PAPER & FOREST PRODUCTS - 1.4%
Georgia-Pacific Corp. 25,700 1,888,950 37329810
International Paper Co. 21,600 1,441,800 46014610
3,330,750
TOTAL BASIC INDUSTRIES 18,874,941
CONGLOMERATES - 5.4%
Allied-Signal, Inc. 22,600 1,607,425 01951210
Canadian Pacific Ltd. Ord. 84,300 1,380,545 13644030
Dial Corp. (The) 40,700 $ 1,561,863 25247010
Hanson Trust PLC:
sponsored ADR 66,400 1,394,400 41135230
Ord. 91,033 383,843 41135210
ITT Corp. 18,500 1,646,500 45067910
Textron, Inc. 33,400 1,841,175 88320310
Tomkins PLC Ord. 163,400 565,753 89003010
United Technologies Corp. 33,800 2,091,375 91301710
12,472,879
CONSTRUCTION & REAL ESTATE - 2.5%
BUILDING MATERIALS - 1.1%
Armstrong World Industries, Inc. 39,200 1,798,300 04247610
Lafarge Corp. 34,000 680,000 50586210
2,478,300
REAL ESTATE INVESTMENT TRUSTS - 1.4%
American Health Properties, Inc. 10,100 258,813 02649410
Carr Realty Corp. 11,100 259,463 14441K10
Dial Real Estate Investment Trust, Inc. 65,000 666,250 25247810
Federal Realty Investment Trust 17,900 472,113 31374720
Health Care Property Investors, Inc. 10,400 288,600 42191510
Manufactured Home Community 4,700 187,413 56468210
Nationwide Health Properties, Inc. 13,200 498,300 63862010
Property Trust of America (SBI) 127 2,381 74344510
Taubman Centers, Inc. 8,500 107,313 87666410
Vornado Realty Trust 11,400 424,650 92904210
Weingarten Realty Investors (SBI) 2,700 102,938 94874110
3,268,234
TOTAL CONSTRUCTION & REAL ESTATE 5,746,534
DURABLES - 2.3%
AUTOS, TIRES, & ACCESSORIES - 1.7%
Echlin, Inc. 8,000 265,000 27874910
Peugeot SA Ord. (b) 3,600 427,103 71682510
TRW, Inc. 19,700 1,295,275 87264910
Valeo SA 5,700 1,106,236 91899010
Volkswagen AG (b) 3,300 767,155 92866210
3,860,769
TEXTILES & APPAREL - 0.6%
Fruit of the Loom, Inc. Class A (b) 22,800 752,400 35941610
Unifi, Inc. 30,400 756,200 90467710
1,508,600
TOTAL DURABLES 5,369,369
ENERGY - 7.4%
COAL - 0.2%
Pittston Co. Minerals Group 17,300 384,925 72570120
ENERGY SERVICES - 1.4%
Baker Hughes, Inc. 37,300 741,338 05722410
Halliburton Co. 27,500 849,063 40621610
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
McDermott International, Inc. 23,500 $ 634,500 58003710
Schlumberger Ltd. 15,000 862,509 80685710
Tidewater, Inc. 12,200 244,000 88642310
3,331,410
OIL & GAS - 5.8%
Amerada Hess Corp. 27,400 1,277,525 02355110
Apache Corp. 3,649 79,822 03741110
British Petroleum PLC:
ADR 54,800 3,246,900 11088940
Ord. 154,872 764,064 11088910
Chevron Corp. 20,700 1,798,313 16675110
Kerr-McGee Corp. 19,100 892,925 49238610
Louisiana Land & Exploration Co. 5,700 225,863 54626810
Murphy Oil Corp. 19,900 798,488 62671710
Noble Affiliates, Inc. 6,895 170,651 65489410
Repsol SA:
sponsored ADR 36,200 1,036,225 76026T20
Ord. 24,400 686,982 76026T10
Royal Dutch Petroleum Co. 8,900 898,900 78025770
Total Compagnie Francaise des Petroles
Class B (b) 13,600 692,451 20434510
YPF Sociedad Anonima sponsored ADR
representing Class D shares 33,100 819,225 98424510
13,388,334
TOTAL ENERGY 17,104,669
FINANCE - 9.8%
BANKS - 4.0%
Bank of New York Co., Inc. 32,425 1,799,588 06405710
BanPonce Corp. 21,300 633,675 06670410
Chase Manhattan Corp. 13,630 456,605 16161010
First Chicago Corp. 24,700 1,021,963 31945510
First Union Corp. 27,619 1,122,022 33735810
Mellon Bank Corp. 20,339 1,139,249 58550910
Midlantic Corp. (b) 13,000 308,750 59780E10
Morgan (J.P.) & Co., Inc. 35 2,481 61688010
NationsBank Corp. 524 24,694 63858510
Paribas SA (Cie Financiere) Class A (b) 13,500 1,048,013 73999192
Signet Banking Corp. 21,700 699,825 82668110
Westpac Banking Corp. 378,000 1,058,925 96121410
9,315,790
CREDIT & OTHER FINANCE - 3.9%
American Express Co. 55,600 $ 1,744,450 02581610
Argentaria Corp. Bancaria de Esp (b) 35,300 1,508,375 21991392
Beneficial Corp. 17,800 1,312,750 08172110
Dean Witter Discover & Co. 17,982 683,316 24240V10
GFC Financial Corp. 48,650 1,313,550 36160910
Household International, Inc. 53,017 1,749,561 44181510
Primerica Corp. 20,233 809,333 74158910
9,121,335
INSURANCE - 1.3%
Allstate Corp. (b) 6,400 188,800 02000210
American Bankers Insurance Group, Inc. 18,664 447,936 02445610
Capital Holding Corp. 13,800 527,850 14018610
NWNL Companies, Inc. 13,800 410,550 62945T10
St. Paul Companies, Inc. (The) 16,400 1,455,500 79286010
3,030,636
SAVINGS & LOANS - 0.4%
Ahmanson (H.F.) & Co. 43,800 826,725 00867710
SECURITIES INDUSTRY - 0.2%
PaineWebber Group, Inc. 12,800 340,800 69562910
TOTAL FINANCE 22,635,286
HEALTH - 5.0%
DRUGS & PHARMACEUTICALS - 3.1%
Allergan, Inc. 50,400 1,121,400 01849010
American Cyanamid Co. 29,900 1,569,750 02532110
IMCERA Group, Inc. 54,800 1,890,600 45245410
Schering-Plough Corp. 18,200 1,217,125 80660510
Warner-Lambert Co. 20,800 1,380,600 93448810
7,179,475
MEDICAL EQUIPMENT & SUPPLIES - 1.2%
Bergen Brunswig Corp. Class A 24,600 442,800 08373910
Johnson & Johnson 36,800 1,605,400 47816010
McKesson Corp. 13,100 738,513 58155610
2,786,713
MEDICAL FACILITIES MANAGEMENT - 0.7%
HCA - Hospital Corporation of America
Class A (b) 57,700 1,702,150 40412010
TOTAL HEALTH 11,668,338
INDUSTRIAL MACHINERY & EQUIPMENT - 7.7%
ELECTRICAL EQUIPMENT - 4.8%
Alcatel Alsthom CGE 7,900 1,035,913 01390492
Antec Corp. (b) 2,000 55,000 03664P10
General Electric Co. 72,800 7,152,600 36960410
General Signal Corp. 28,000 980,000 37083810
Philips Electronics 44,100 857,290 71833799
Philips NV (NY shs.) (b) 58,300 1,136,850 71833750
11,217,653
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 2.9%
Caterpillar, Inc. 20,600 $ 1,756,150 14912310
Deere & Co. 24,900 1,764,788 24419910
Parker-Hannifin Corp. 27,600 993,600 70109410
Tenneco, Inc. 46,200 2,223,375 88037010
6,737,913
TOTAL INDUSTRIAL MACHINERY &
EQUIPMENT 17,955,566
MEDIA & LEISURE - 3.6%
ENTERTAINMENT - 0.4%
Cedar Fair LP 25,300 863,363 15018510
LEISURE DURABLES & TOYS - 1.0%
Brunswick Corp. 97,600 1,659,200 11704310
Outboard Marine Corp. 31,800 612,150 69002010
2,271,350
PUBLISHING - 2.2%
Gannett Co., Inc. 29,200 1,624,250 36473010
MaClean Hunter Ltd. 76,600 680,985 55474980
McGraw-Hill, Inc. 19,000 1,325,250 58064510
Times Mirror Co., Series A 42,700 1,334,375 88736010
Tribune Co. 1,500 83,625 89604710
5,048,485
TOTAL MEDIA & LEISURE 8,183,198
NONDURABLES - 3.2%
BEVERAGES - 0.2%
Seagram Co. Ltd. 17,700 490,286 81185010
HOUSEHOLD PRODUCTS - 1.1%
Avon Products, Inc. 10,300 513,713 05430310
Gillette Company 22,500 1,406,250 37576610
Premark International, Inc. 7,400 579,050 74045910
2,499,013
TOBACCO - 1.9%
Philip Morris Companies, Inc. 80,500 4,497,938 71815410
TOTAL NONDURABLES 7,487,237
RETAIL & WHOLESALE - 4.7%
APPAREL STORES - 0.9%
Charming Shoppes, Inc. 39,200 529,200 16113310
Limited, Inc. (The) 69,100 1,572,025 53271610
2,101,225
GENERAL MERCHANDISE STORES - 3.2%
Bradlees, Inc. 11,800 179,950 10449910
Carter Hawley Hale Stores, Inc. (b) 67,800 813,600 14622730
Dayton Hudson Corp. 11,300 806,538 23975310
May Department Stores Co. (The) 9,600 406,800 57777810
Penney (J.C.) Co., Inc. 55,500 $ 2,962,313 70816010
Sears, Roebuck & Co. 41,000 2,229,375 81238710
7,398,576
GROCERY STORES - 0.2%
Promodes SA Ord. (b) 2,200 394,667 74699692
RETAIL & WHOLESALE, MISCELLANEOUS - 0.4%
Pinault Printemps SA 3,500 487,301 72199393
Sotheby's Holdings, Inc. Class A 25,700 379,075 83589810
866,376
TOTAL RETAIL & WHOLESALE 10,760,844
SERVICES - 1.1%
LEASING & RENTAL - 0.6%
GATX Corp. 22,100 828,750 36144810
Ryder Systems, Inc. 20,200 590,850 78354910
1,419,600
PRINTING - 0.4%
Alco Standard Corp. 19,700 962,838 01378810
SERVICES - 0.1%
ADT Ltd. (b) 24,300 215,663 00091530
TOTAL SERVICES 2,598,101
TECHNOLOGY - 1.7%
COMPUTER SERVICES & SOFTWARE - 0.1%
Sterling Software, Inc. (b) 9,509 265,063 85954710
COMPUTERS & OFFICE EQUIPMENT - 0.7%
Xerox Corp. 20,600 1,699,500 98412110
PHOTOGRAPHIC EQUIPMENT - 0.9%
Eastman Kodak Co. 33,500 2,039,313 27746110
TOTAL TECHNOLOGY 4,003,876
TRANSPORTATION - 1.1%
RAILROADS - 1.0%
CSX Corp. 28,400 2,357,200 12640810
TRUCKING & FREIGHT - 0.1%
Airborne Freight Corp. 10,000 330,000 00926610
TOTAL TRANSPORTATION 2,687,200
UTILITIES - 11.3%
ELECTRIC UTILITY - 4.9%
American Electric Power Co., Inc. 14,200 512,975 02553710
Baltimore Gas & Electric Co. 9,800 247,450 05916510
Central & South West Corp. 14,600 434,350 15235710
DPL, Inc. 37,050 717,844 23329310
Entergy Corp. 65,100 2,400,563 29364F10
FPL Group, Inc. 9,500 352,688 30257110
Houston Industries, Inc. 30,700 1,393,013 44216110
Illinois Power Co. 69,900 1,537,800 45209210
PSI Resources, Inc. 8,700 224,025 69363210
Niagara Mohawk Power Corp. 17,600 360,800 65352210
PacifiCorp. 21,300 404,700 69511410
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Philadelphia Electric Co. 36,400 $ 1,019,200 71753710
Portland General Corp. 10,000 195,000 73650610
Texas Utilities Co. 6,450 275,738 88284810
Veba Vereinigte Elektrizetaets &
Bergwerks AG Ord. 5,300 1,408,863 92239110
11,485,009
GAS - 1.9%
Coastal Corp. (The) 41,900 1,126,063 19044110
Consolidated Natural Gas Co. 12,800 590,400 20961510
El Paso Natural Gas Co. 3,700 134,125 28369587
Enron Corp. 14,000 435,750 29356110
MCN Corp. 8,900 309,275 55267J10
Pacific Enterprises 12,900 330,563 69423210
Panhandle Eastern Corp. 52,400 1,113,500 69846210
Santa Fe Pacific Pipeline Partners, LP 1,000 38,375 80217710
Williams Companies, Inc. 13,000 352,625 96945710
4,430,676
TELEPHONE SERVICES - 4.5%
Ameritech Corp. 19,300 1,476,450 03095410
Bell Atlantic Corp. 21,200 1,272,000 07785310
BellSouth Corp. 24,300 1,388,138 07986010
Comsat Corp., Series 1 48,600 1,536,975 20564D10
Pacific Telesis Group 24,900 1,413,075 69489010
Southwestern Bell Corp. 38,700 1,644,750 84533310
U.S. West, Inc. 35,300 1,650,275 91288910
10,381,663
TOTAL UTILITIES 26,297,348
TOTAL COMMON STOCKS
(Cost $156,802,710) 176,497,386
CONVERTIBLE PREFERRED STOCKS - 9.8%
BASIC INDUSTRIES - 0.3%
METALS & MINING - 0.3%
Alumax, Inc., Series A, $4.00 3,633 337,869 02219720
Cyprus Amax Minerals Co., Series A, $4.00 (e) 7,266 426,878 23280920
764,747
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE - 0.1%
Rouse Co. Series A 5,600 310,800 77927320
DURABLES - 2.1%
AUTOS, TIRES, & ACCESSORIES - 2.1%
Chrysler Corp., Series A, $4.625 (e) 20,800 $ 3,088,800 17119670
Ford Motor Co. (Del.), Series A, $4.20 17,200 1,763,000 34537020
4,851,800
ENERGY - 0.4%
ENERGY SERVICES - 0.3%
Chiles Offshore Corp. $1.50 (b) 23,100 571,725 16888720
Reading & Bates Corp. $1.625 3,500 91,875 75528188
663,600
OIL & GAS - 0.1%
Unocal Corp. $3.50 (e) 4,500 261,000 91528920
TOTAL ENERGY 924,600
FINANCE - 2.5%
BANKS - 2.5%
Citicorp $5.375 (e) 51,900 5,527,350 17303451
Citicorp depository shares representing 1/12
Series 15, $1.217 10,100 196,950 17303443
5,724,300
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (b) 50,000 308 87799010
NONDURABLES - 0.4%
TOBACCO - 0.4%
RJR Nabisco Holdings Corp., Series A,
depository shares representing
1/4 share pfd. 146,500 1,007,188 74960K40
RETAIL & WHOLESALE - 0.7%
APPAREL STORES - 0.7%
TJX Companies, Inc., Series C, $3.125 25,000 1,700,000 87254020
SERVICES - 0.5%
LEASING & RENTAL - 0.2%
Gatx Corp. exchangeable $3.875 9,000 483,750 36144840
PRINTING - 0.3%
Alco Standard Corp., Series AA, $2.30 9,400 608,650 01378850
TOTAL SERVICES 1,092,400
TRANSPORTATION - 2.5%
AIR TRANSPORTATION - 1.7%
AMR Corp. $3.00 (b)(e) 32,700 1,692,225 00176588
UAL, Inc. cumulative 6 1/4% (e) 18,900 2,218,388 90254930
3,910,613
RAILROADS - 0.8%
Burlington Northern Railroad Co. 6.2% 27,900 1,900,688 12189760
TOTAL TRANSPORTATION 5,811,301
MOODY'S
VALUE RATING PRINCIPAL VALUE
SHARES (NOTE 1) (UNAUDITED)(D) AMOUNT (A) (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
UTILITIES - 0.3%
GAS - 0.3%
Tejas Gas Corp. Delaware $2.625 13,000 $ 646,771 87907550
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $20,601,434) 22,834,215
MOODY'S
RATINGS PRINCIPAL
(UNAUDITED) (D) AMOUNT (A)
CORPORATE BONDS - 3.6%
CONVERTIBLE BONDS - 1.4%
CONSTRUCTION & REAL ESTATE - 0.2%
CONSTRUCTION - 0.2%
Continental Homes Holding Corp.
6 7/8%, 3/15/02 B3 $ 500,000 538,750 21148CAB
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Southwestern Property Trust, Inc.
8%, 1/15/03 - 40,000 50,200 845734AA
TOTAL CONSTRUCTION & REAL ESTATE 588,950
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Interface, Inc. 8%, 9/15/13 Ba3 263,000 273,520 458665AA
ENERGY - 0.2%
ENERGY SERVICES - 0.2%
Lone Star Technologies, Inc. euro
8%, 8/27/02 - 425,000 378,250 5423129A
FINANCE - 0.4%
BANKS - 0.4%
Bank of Boston Corp. 7 3/4%,
6/15/11 Baa2 130,000 142,025 060716AF
Bank of New York Co., Inc.
7 1/2%, 8/15/01 Baa1 220,000 341,550 064057AK
C.S. Holdings euro 4 7/8%,
11/9/02 A2 355,000 527,175 175997AC
1,010,750
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Liebert Corp. 8%, 11/15/10 Aa2 100,000 212,000 531735AA
RETAIL & WHOLESALE - 0.2%
APPAREL STORES - 0.2%
Petrie Stores Corp. sinking fund
8%, 12/15/10 Ba2 $ 300,000 $ 396,000 716434AC
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Sterling Software, Inc. 5 3/4%,
2/1/03 B1 160,000 190,400 859547AD
TRANSPORTATION - 0.1%
TRUCKING & FREIGHT - 0.1%
Greyhound Lines, Inc. 8 1/2%,
3/31/07 B3 210,000 285,600 398048AD
TOTAL CONVERTIBLE BONDS 3,335,470
NONCONVERTIBLE BONDS - 2.2%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 230,000 238,050 892349AC
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.8%
IMC Fertilizer Group, Inc. 9 1/4%,
10/1/00 B3 1,960,000 1,962,450 449669AH
PACKAGING & CONTAINERS - 0.1%
Owens Illinois, Inc.
10 1/4%, 4/1/99 B2 160,000 168,000 690768AG
TOTAL BASIC INDUSTRIES 2,130,450
CONGLOMERATES - 0.2%
Coltec Industries, Inc. 10 1/4%,
4/1/02 Ba2 440,000 466,400 196879AB
FINANCE - 0.3%
BANKS - 0.1%
Signet Banking Corp. (f):
5 1/4%, 5/15/97 Baa2 180,000 180,450 065446AP
5 1/4%, 4/15/98 Baa2 100,000 100,250 065446AN
280,700
CREDIT & OTHER FINANCE - 0.2%
Chrysler Financial Corp.
9 1/2%, 12/15/99 Baa2 370,000 427,165 171205CY
TOTAL FINANCE 707,865
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
Joy Technologies, Inc.
10 1/4%, 9/1/03 B1 580,000 600,300 481206AD
MOODY'S
RATING PRINCIPAL VALUE
(UNAUDITED) (D) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
nonCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Bally's Grand, Inc. 1st mtg.
12%, 8/20/01 (b) D $ 42,000 $ 43,420 05873JAC
Host Marriott Corp.:
9 1/8%, 12/1/00 B1 160,000 159,800 441080AD
9 7/8%, 5/1/01 B1 60,000 60,300 441080AE
10 1/2%, 5/1/06 B1 120,000 122,100 441080AH
385,620
UTILITIES - 0.2%
GAS - 0.2%
Columbia Gas Systems Inc.,
9.91%, 5/28/20 (c) - 50,000 57,477 19765ABN
Ferrellgas, Inc. 12%, 8/1/96 - 180,000 197,100 315290AD
SFP Pipeline Holdings, Inc.
exch. 0%, 8/15/10 (f) Baa3 120,000 154,800 784163AA
409,377
TOTAL NONCONVERTIBLE BONDS 4,938,062
TOTAL CORPORATE BONDS
(Cost $7,968,951) 8,273,532
FOREIGN GOVERNMENT OBLIGATIONS - 1.9%
French Government OAT:
8 1/2%, 4/25/03 Aaa FRF 12,350,000 2,446,865 351996AQ
8 1/2%, 4/25/23 Aaa FRF 5,490,000 1,141,823 351996AC
Mexican Government Cetes 0%,
1/6/94 to 2/3/94 - MXN 2,306,000 729,879 597998TC
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $4,150,023) 4,318,567
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 8.7%
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 3.24% dated
11/30/93 due 12/1/93 $ 20,193,817 20,192,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $209,715,118) $ 232,115,700
LEGEND:
(a) Principal amount is stated in United States dollars unless otherwise
noted.
FRF - French franc
MXN - Mexican peso
(b) Non-income producing
(c) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(d) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(e) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $13,214,641 or 5.7% of net
assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
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 S&P
RATINGS RATINGS
Aaa, Aa, A 1.9% AAA, AA, A 1.8%
Baa 0.6% BBB 0.4%
Ba 0.5% BB 0.3%
B 1.9% B 1.8%
Caa 0.0% CCC 0.2%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.3%.
Distribution of investments by country, as a percentage of total value of
investment in securities, is as follows:
United States 84.5%
France 3.9
United Kingdom 3.4
Netherlands 2.2
Germany 1.6
Canada 1.6
Spain 1.4
Others (individually less than 1%) 1.4
TOTAL 100.0%
INCOME TAX INFORMATION:
At November 30, 1993, the aggregate cost of investment securities for
income tax purposes was $210,224,882. Net unrealized appreciation
aggregated $21,890,818, of which $25,770,772 related to appreciated
investment securities and $3,879,954 related to depreciated investment
securities.
At November 30, 1993, the fund had a capital loss carryforward of
approximately $17,548,000 of which $15,472,000 and $2,076,000 will expire
on November 30, 1998 and 1999, respectively.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C> <C>
November 30, 1993
ASSETS
Investment in securities, at value (including repurchase agreements of $20,192,000)
(cost $209,715,118) (Notes 1 and $ 232,115,700
2) - See accompanying schedule
Cash 781
Receivable for investments sold 4,233,034
Receivable for fund shares sold 1,102,297
Dividends receivable 682,981
Interest receivable 261,919
Other receivables 305,586
Total assets 238,702,298
LIABILITIES
Payable for investments purchased $ 4,707,963
Payable for fund shares redeemed 333,191
Accrued management fee 96,959
Other payables and accrued expenses 99,876
Total liabilities 5,237,989
NET ASSETS $ 233,464,309
Net Assets consist of:
Paid in capital $ 211,899,151
Undistributed net investment income 2,076,538
Accumulated undistributed net realized gain (loss) on investments (2,911,962)
Net unrealized appreciation (depreciation) on investment securities 22,400,582
NET ASSETS $ 233,464,309
CALCULATION OF MAXIMUM OFFERING PRICE $14.93
INSTITUTIONAL CLASS
NET ASSET VALUE, offering price and redemption price per share ($191,138,015 (divided by) 12,802,650 shares)
RETAIL CLASS $14.86
NET ASSET VALUE and redemption price per share ($42,326,294 (divided by) 2,847,904 shares)
Maximum offering price per share (100/95.25 of $14.86) $15.60
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended November 30, 1993
INVESTMENT INCOME $ 5,825,191
Dividends
Interest 1,258,623
Total income 7,083,814
EXPENSES
Management fee (Note 4) $ 933,830
Transfer agent fees (Note 4) 239,364
Institutional Class
Retail Class 53,164
Distribution fees - Retail Class (Note 4) 123,058
Accounting fees and expenses (Note 4) 113,026
Custodian fees and expenses 75,957
Registration fees 45,433
Institutional Class
Retail Class 42,453
Audit 40,612
Legal 14,335
Miscellaneous 4,876
Total expenses before reductions 1,686,108
Expense reductions (Note 5) (17,474) 1,668,634
Net investment income 5,415,180
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1, 2 AND 3)
Net realized gain (loss) on:
Investment securities 22,036,234
Foreign currency contracts (987,364) 21,048,870
Change in net unrealized appreciation (depreciation) on investment securities 2,161,828
Net gain (loss) 23,210,698
Net increase (decrease) in net assets resulting from operations $ 28,625,878
</TABLE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS 1993 1992
Operations $ 5,415,180 $ 5,538,726
Net investment income
Net realized gain (loss) on investments 21,048,870 13,671,251
Change in net unrealized appreciation (depreciation) on investments 2,161,828 11,040,241
Net increase (decrease) in net assets resulting from operations 28,625,878 30,250,218
Distributions to shareholders from:
Net investment income
Institutional Class (4,132,840) (5,817,071)
Retail Class (348,837) (6,990)
Share transactions - net increase (decrease) (Note 6) 68,477,213 (52,172,803)
Total increase (decrease) in net assets 92,621,414 (27,746,646)
NET ASSETS
Beginning of period 140,842,895 168,589,541
End of period (including undistributed net investment income of $2,076,538 and
$1,143,035, respectively) $ 233,464,309 $ 140,842,895
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED NOVEMBER 30, 1993
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Equity Portfolio Income (the fund) is a fund of Fidelity
Advisor Series III (the trust) (formerly Fidelity Franklin Street Trust)
and is authorized to issue an unlimited number of shares. The trust is
registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a
Massachusetts business trust.
The fund offers both Institutional Class and Retail Class shares which have
equal rights as to earnings and assets except that each class bears
different distribution and transfer agent expenses and certain registration
fees. Each class has exclusive voting rights with respect to its
distribution plans.
The following summarizes the significant accounting policies of the fund:
ALLOCATED EARNINGS AND EXPENSES. Investment income, expenses (other than
expenses incurred under each class's Distribution and Service Plans,
Transfer Agent Agreements and certain registration fees) and realized and
unrealized gains or losses on investments are allocated to each class of
shares based upon their relative net assets.
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities, other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practical to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes where recovery of such taxes is not assured.
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.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars reflects the total exposure the
fund has in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $265,599,801 and $208,103,129, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee that
is computed daily at an annual rate of .50% of the fund's average net
assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, the
Retail Class pays Fidelity Distributors Corporation (FDC), an affiliate of
FMR, a distribution and service fee that is based on an annual rate of .65%
of its average net assets. For the period, the Retail Class paid FDC
$123,058 of which $94,623 was paid to securities dealers, banks and other
financial institutions for selling shares of the Retail Class and providing
shareholder support services.
In addition, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $1,855 for the
period.
SALES LOAD. FDC received sales charges for selling shares of the Retail
Class. The sales charge rates ranged from 2.00% to 4.75% based on purchase
amounts of less than $1,000,000. Purchase amounts of $1,000,000 or more are
not charged a sales load. For the period, FDC received $792,962 of which
$675,205 was paid to securities dealers, banks and other financial
institutions.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, and State Street Bank and Trust Company
(State Street) are the transfer, dividend disbursing and shareholder
servicing agents for the Institutional Class and Retail Class,
respectively. Under revised fee schedules which became effective January 1,
1993, FIIOC and State Street receive fees based on the type, size, number
of accounts and the number of transactions made by shareholders. FIIOC, on
behalf of State Street, also collects fees from the fund and pays State
Street for its services. FIIOC pays for typesetting, printing and mailing
of all shareholder reports, except proxy statements.
ACCOUNTING FEE. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. 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 $126,832 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$17,474 under this arrangement.
6. SHARE TRANSACTIONS.
Share transactions for both classes were as follows:
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, 1993 NOVEMBER 30, 1992 (A) NOVEMBER 30, 1993 NOVEMBER 30,
1992 (A)
INSTITUTIONAL CLASS
Shares sold 6,537,638 3,648,299 $ 94,762,125 $ 44,472,149
Reinvestment of distributions from net investment income 122,850 169,868
1,739,396 2,063,999
Shares redeemed (4,678,967) (8,206,118) (67,541,601) (100,118,593)
Net increase (decrease) 1,981,521 (4,387,951) $ 28,959,920 $
(53,582,445)
RETAIL CLASS
Shares sold 3,085,105 113,305 $ 44,678,778 $ 1,405,266
Reinvestment of distributions from net investment income 21,363 439
309,240 5,562
Shares redeemed (372,214) (94) (5,470,725) (1,186)
Net increase (decrease) 2,734,254 113,650 $ 39,517,293 $ 1,409,642
(a) Share transactions for the Retail Class are for the period September
10, 1992 (commencement of sale of shares) to November 30, 1992.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series III (formerly Fidelity Franklin
Street Trust) and the Shareholders of Fidelity Advisor Equity Portfolio
Income:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series III: Fidelity Advisor Equity Portfolio Income,
including the schedule of portfolio investments, as of November 30, 1993,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended (Institutional Class) and for the year ended November 30,
1993 and for the period September 10, 1992 (commencement of sale of Retail
Class shares) to November 30, 1992 (Retail Class). These financial
statements and financial highlights are the responsibility of the fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1993 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series III: Fidelity Advisor Equity Portfolio Income as
of November 30, 1993, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years
in the period then ended (Institutional Class) and for the year ended
November 30, 1993 and for the period September 10, 1992 (commencement of
sale of Retail Class shares) to November 30, 1992 (Retail Class), in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 7, 1994
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Gary L. French, TREASURER
John H. Costello, ASSISTANT TREASURER
Arthur S. Loring, SECRETARY
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND
SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional
Operations Company
Boston, MA
CUSTODIAN
The Chase Manhattan Bank, N.A.
New York, NY
