FIDELITY ADVISOR SERIES III, N-30B-2, 1994-08-05

FIDELITY ADVISOR SERIES III
N-30B-2, 1994-08-05

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(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)

EQUITY PORTFOLIO INCOME -
INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 31, 1994
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on stock market
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 6 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 10 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 29 Notes to the financial statements.

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE

DEAR SHAREHOLDER:
The first several months of 1994 were an unsettling time for many
investors. After three years of a nearly perfect environment for stock
market investing, stock prices generally fell from February through June.
Investors disagree about whether this decline represents only a short-term
correction or signals the beginning of a longer bear market. One can
collect statistics to support either opinion, but of course, nobody knows
for sure what will happen to stock prices in the months ahead.
We do know, however, that market declines are a normal part of stock market
investing. We have historically seen corrections of 10% or more every two
years. That's why I thought this might be a good time to review three basic
investment principles that have proven helpful to successful stock market
investors in every market cycle.
First, take a long-term approach when investing in stocks and stock funds.
If you can afford to leave your money invested through the market's
inevitable ups and downs, you will greatly reduce your vulnerability to any
single decline. Over time, stock prices have gone up - and have
significantly outperformed other types of investments and stayed ahead of
inflation.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $100,000 investment. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells investments that have grown in value).
On September 10, 1992, the fund began offering Class A shares. All
performance information for Class A prior to September 10, 1992 does not
reflect Class A's 12b-1 fee and revised transfer agent fee arrangements,
which if included, would lower Class A's performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Advisor Equity Portfolio Income -
Institutional Class 4.48% 9.52% 60.65% 289.26%

S&P 500(Registered trademark) 0.24% 4.26% 66.69% 328.17%

Average Equity Income Fund -0.42% 4.66% 54.31% 242.57%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one, five, or 10 years. You
can compare the fund's returns to the performance of the Standard &
Poor's 500 Composite Stock Price Index - a common proxy for the U.S. stock
market. You can also compare them to the average equity income fund, which
reflects the performance of 99 funds tracked by Lipper Analytical Services.
Both benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income -
Institutional Class 9.52% 9.95% 14.56%

S&P 500(Registered trademark) 4.26% 10.76% 15.65%

Average Equity Income Fund 4.66% 8.96% 12.71%

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.
$100,000 OVER TEN YEARS
05/31/84 100000.00 100000.00
06/30/84 101849.84 102170.00
07/31/84 101740.33 100903.09
08/31/84 109668.15 112052.88
09/30/84 112665.15 112075.29
10/31/84 114786.70 112512.39
11/30/84 116022.17 111252.25
12/31/84 119421.25 114189.31
01/31/85 128187.16 123084.66
02/28/85 128416.07 124598.60
03/31/85 128185.73 124685.82
04/30/85 128301.53 124573.60
05/31/85 134821.38 131773.95
06/30/85 137046.93 133842.80
07/31/85 137282.40 133642.04
08/31/85 137519.09 132506.08
09/30/85 134418.06 128358.64
10/31/85 139210.15 134288.81
11/30/85 144865.19 143501.02
12/31/85 149956.69 150446.47
01/31/86 152758.48 151288.97
02/28/86 162707.29 162605.39
03/31/86 172457.07 171678.77
04/30/86 171438.87 169738.80
05/31/86 171950.24 178768.90
06/30/86 174261.75 181790.10
07/31/86 167549.45 171628.03
08/31/86 177656.84 184362.83
09/30/86 169321.04 169116.03
10/31/86 176779.53 178874.02
11/30/86 178880.92 183220.66
12/31/86 176106.66 178548.53
01/31/87 193407.88 202599.02
02/28/87 199220.29 210601.68
03/31/87 202869.01 216688.07
04/30/87 200228.62 214759.54
05/31/87 199198.03 216627.95
06/30/87 204956.92 227567.66
07/31/87 210893.40 239105.34
08/31/87 216706.00 248023.97
09/30/87 211617.60 242592.25
10/31/87 173264.73 190337.88
11/30/87 165862.84 174654.04
12/31/87 172166.59 187945.21
01/31/88 183941.71 195857.70
02/29/88 192914.48 204984.67
03/31/88 190390.37 198650.65
04/30/88 193110.23 200855.67
05/31/88 195480.80 202603.11
06/30/88 206666.85 211902.60
07/31/88 206297.80 211097.37
08/31/88 202216.36 203920.05
09/30/88 208191.36 212607.05
10/31/88 211945.94 218517.53
11/30/88 210625.99 215392.72
12/31/88 212154.34 219162.10
01/31/89 225749.07 235204.76
02/28/89 223824.53 229348.16
03/31/89 228273.93 234691.98
04/30/89 236634.90 246872.49
05/31/89 242296.96 256870.83
06/30/89 243277.13 255406.66
07/31/89 258641.99 278469.88
08/31/89 262006.12 283927.89
09/30/89 258626.68 282763.79
10/31/89 244447.14 276203.67
11/30/89 247658.27 281838.22
12/31/89 251264.54 288602.34
01/31/90 235376.06 269237.12
02/28/90 235796.38 272710.28
03/31/90 235796.37 279937.11
04/30/90 226670.14 272938.68
05/31/90 241596.69 299550.20
06/30/90 240525.78 297513.26
07/31/90 236649.80 296561.22
08/31/90 218679.14 269752.08
09/30/90 202142.20 256615.16
10/31/90 197548.07 255511.71
11/30/90 210747.27 272017.77
12/31/90 215386.95 279607.06
01/31/91 226346.41 291797.93
02/28/91 242530.07 312661.48
03/31/91 246400.68 320227.89
04/30/91 246394.83 320996.44
05/31/91 259888.62 334863.48
06/30/91 247960.29 319526.74
07/31/91 261530.30 334416.68
08/31/91 267069.35 342342.36
09/30/91 265685.66 336625.24
10/31/91 270112.37 341136.02
11/30/91 259158.78 327388.24
12/31/91 279593.31 364841.45
01/31/92 282408.05 358055.40
02/29/92 291133.25 362710.12
03/31/92 286403.22 355637.27
04/30/92 296611.08 366093.01
05/31/92 299229.44 367886.86
06/30/92 295897.84 362405.35
07/31/92 303583.50 377227.73
08/31/92 296376.25 369494.56
09/30/92 298796.07 373854.60
10/31/92 302430.46 375163.09
11/30/92 313341.07 387956.15
12/31/92 321378.17 392728.01
01/31/93 331141.62 396026.92
02/28/93 339713.05 401412.89
03/31/93 350990.89 409882.70
04/30/93 349763.32 399963.54
05/31/93 355436.97 410682.56
06/30/93 359155.82 411873.54
07/31/93 364121.98 410226.05
08/31/93 377311.44 425773.62
09/30/93 375065.53 422495.16
10/31/93 379557.34 431240.81
11/30/93 372570.09 427144.02
12/31/93 381803.24 432312.46
01/31/94 399770.45 447011.09
02/28/94 389788.67 434897.09
03/31/94 373176.74 415935.57
04/30/94 386244.21 421259.55
05/31/94 389259.78 428168.21

$100,000 OVER TEN YEARS: Let's say you invested $100,000 in Fidelity
Advisor Equity Portfolio Income - Institutional Class on May 31, 1984. As
the chart shows, by May 31, 1994, the value of your investment would have
grown to $389,260 - a 289.26% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $100,000 investment would have grown to
$428,168 - a 328.17% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
For the period ended May 31, 1994, Fidelity Advisor Equity Portfolio Income
- - Class A shares' cumulative total returns were 4.03%, 8.54%, 58.54%, and
284.14% for six months, one year, five years, and ten years, respectively.
For the period ended May 31, 1994, Class A shares' average annual returns
(which include the effect of the 4.75% sales charge) were 3.38%, 8.59%, and
13.85% for one year, five years, and ten years, respectively.
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Bettina Doulton, Portfolio Manager of Fidelity Advisor
Equity Portfolio Income
Q. BETTINA, HOW DID THE FUND PERFORM?
A. It's been a difficult past few months, but Fidelity Advisor Equity
Portfolio Income - Institutional Class did out-perform most of its peers.
Its total return for the six months ended May 31, 1994, was 4.48%. The
average equity income fund returned -0.42% during the same period,
according to Lipper Analytical Services. For the 12 months ended May 31,
the fund returned 9.52%, while the average fund rose 4.66%.
Q. MANY STOCKS LOST GROUND FROM
FEBRUARY THROUGH MAY AS INTEREST RATES BEGAN TO RISE. HOW DID THE FUND TOP
THE AVERAGE?
A. In January, I began to make a sizable bet on chemical stocks, which has
paid off. For many months now, the improving economy has boosted most
cyclical stocks - those whose earnings tend to rise and fall with economic
cycles. However, chemical companies had lagged other cyclicals in gaining
pricing power - the ability to raise prices while sustaining earnings
growth. I looked for companies that had effectively cut costs during the
recession, and whose stocks were cheap when measured by yardsticks such as
their price-to-earnings ratios. Sure enough, over the next few months the
improving economy strengthened demand, and these chemical companies were
able to raise prices and increase earnings. The stocks of Union Carbide,
duPont, Georgia Gulf, Lyondell, and Akzo Nobel - a Dutch chemical company -
were all up at least 16% year-to-date through May 31. And Union Carbide was
still among the fund's top 10 investments at the end of the period.
Q. YOU'VE ALSO INCREASED THE FUND'S STAKE IN ITS LARGEST SECTOR INVESTMENT
- - FINANCIAL STOCKS - FROM 13% SIX MONTHS AGO TO 17% ON MAY 31. WHY?
A. Broadly speaking, many investors sold financial stocks last fall on
fears that higher interest rates would hurt profits in the sector. But the
low stock valuations that resulted from that sell-off created
opportunities. I tried to find those companies that could increase their
earnings in the face of higher rates. American Express - the fund's fifth
largest investment on May 31 - is a good example. The company has just
finished a massive restructuring, and has improved its core credit card and
travel services businesses. The stock helped the fund's performance over
the past few months, and I like its prospects going forward.
Q. ANY OTHER EXAMPLES?
A. Sure. Dean Witter is another stock whose price had fallen. However, I
saw excellent growth potential in the company's Discover card division.
First quarter earnings were outstanding, and the stock has risen
accordingly. Also, I increased the fund's stake in Fannie Mae and Freddie
Mac - agencies that back home mortgages. Again, their stock valuations were
very attractive, and both agencies are showing solid earnings growth. I
think demographics are such that the number of new home mortgages should
continue increasing right through the year 2000.
Q. WHAT OTHER SECTORS DID WELL?
A. Energy provided some interesting stories. Namely, British Petroleum,
which became the fund's second largest investment during the period. BP's
stock has risen nearly 10% since the first of the year. Simply said, the
company is doing everything right. It's effectively cutting costs, selling
off non-core businesses, and cleaning up its balance sheet. In addition, BP
recently raised its dividend. I would venture to say that even if oil
prices don't move much over the next year, the company will still be in
good shape. Yet, I think the tightening gap between supply and demand for
the world's oil could drive up oil prices, which would boost BP's earnings
that much more. Schlumberger - a Dutch oil service company - is another
large energy investment that offered a fair valuation coupled with
excellent growth prospects.
Q. IN ADDITION TO RAISING THE FUND'S STAKE IN ENERGY STOCKS, YOU ALSO
INCREASED ITS INVESTMENT IN THE HEALTH-CARE SECTOR.
A. That's true. The fund's investment in health-care stocks nearly doubled
over the past six months. Many of these stocks have suffered over the past
year due to uncertainty over the course of health-care reform. However,
that has led to opportunities. For example, Pfizer and Schering-Plough are
two drug companies that offer attractively low valuations coupled with
well-established product pipelines. In an environment where it's difficult
for drug companies to raise prices on existing products, the development of
new products can help boost earnings.
Q. YOU MUST HAVE SOME REGRETS . . .
A. I do. Two of the fund's top 10 investments over the past six months -
General Electric and Philip Morris - have been disappointing performers.
G.E. turned in less-than-expected earnings growth during the first quarter,
breaking a long string of earnings successes. In addition, a scandal within
a brokerage house owned by G.E. caused investors to sell the stock.
However, the company has excellent management and good prospects for future
earnings growth. That's why it remained the fund's largest investment at
the end of May. As for Philip Morris, the underlying story remains
positive. The company is cutting costs and generating solid cash flow, plus
its stock remains very cheap. I think the stock has the strength to
overcome the controversy surrounding the tobacco industry, which has
dragged down its price in recent months.
Q. THERE'S BEEN A LOT OF TALK LATELY ABOUT DERIVATIVES. DO YOU USE THEM?
A. The fund has the authority to use derivatives, but I haven't made much
use of them recently. However, I may use some derivative instruments in the
future if I feel that they can help me manage the fund's investments more
efficiently.
Q. LET'S TALK MORE ABOUT THE FUTURE. WHAT'S YOUR OUTLOOK?
A. I think we may be in for another rough six months. The Federal Reserve
raised short-term interest rates from February through May to curb future
inflation that could result from the strengthening economy. But raising
rates is a tightrope walk - the Fed wants to slow the economy enough to
prevent inflation, but doesn't want to grind economic growth to a halt.
That said, I am now seeing some evidence that higher rates have dampened
economic growth, which is a concern because corporate earnings may suffer.
Because of this backdrop, I think stock selection will be critical going
forward. As always, I'm focusing on stocks with attractive growth
prospects, but I'm paying especially close attention to valuations. When
the market is volatile, one piece of bad news can send an expensive stock
reeling. I'll be watching closely as the full effect of higher rates on the
economy, and on stocks, becomes clearer.

FUND FACTS
GOAL: to provide current
income and increase the
value of the fund's shares
START DATE: April 25, 1983
SIZE: as of May 31, 1994,
more than $250 million
MANAGER: Bettina Doulton,
since July 1993; joined
Fidelity in 1985
(checkmark)
BETTINA DOULTON ON THE RECENT
STOCK MARKET DOWNTURN:
"By February, stock prices
relative to other measures such
as earnings were at historically
high levels. The market had
risen so consistently over the
previous three years that it
seemed like investors were
waiting for a reason to sell. The
Federal Reserve Board
provided that reason in early
February, when it raised
short-term interest rates for the
first time in five years. Bond
investors' inflation fears helped
spark a huge sell-off, and the
stock market followed suit on
fears of further rate hikes. I
believe that marked a significant
psychological rejoining of the
stock and bond markets. I think
going forward we'll see stocks
and bonds move more closely in
step, as we wait to see what
effect higher interest rates
have on all of the financial
markets, and on the economy."
(bullet) The fund's stake in foreign
stocks and bonds was 14.4%
on May 31, compared to
15.5% six months ago. Much
of that investment was made
up of energy and chemical
stocks. This includes a 1.4%
stake in French government
bonds. Prices have fallen on
these bonds, which has hurt
the fund's performance, but
they now offer better value
going forward.
INVESTMENT CHANGES

TOP FIVE STOCKS AS OF MAY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

General Electric Co. 3.2 3.1

British Petroleum PLC ADR 3.1 1.4

Philip Morris Companies, Inc. 2.8 1.9

American Cyanamid Co. 2.2 0.7

American Express Co. 2.0 0.8

TOP FIVE BONDS AS OF MAY 31, 1994

<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER, WITH MATURITIES MORE THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE BONDS
6 MONTHS AGO

French Government OAT 1.4 1.5

IMC Fertilizer Group, Inc. 0.7 0.8

Westpoint Stevens 0.7 -

Stone Container Corp. 0.5 -

Canandaigua Wine, Inc. 0.4 -

</TABLE>

TOP FIVE INDUSTRIES AS OF MAY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO

Finance 17.0 13.0

Basic Industries 14.5 9.3

Energy 11.2 8.0

Health 9.5 5.0

Utilities 8.3 11.8

ASSET ALLOCATION
AS OF MAY 31, 1994* AS OF NOVEMBER 30, 1993**
Row: 1, Col: 1, Value: 7.1
Row: 1, Col: 2, Value: 4.2
Row: 1, Col: 3, Value: 4.8
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 43.9
Row: 1, Col: 1, Value: 9.1
Row: 1, Col: 2, Value: 11.2
Row: 1, Col: 3, Value: 3.7
Row: 1, Col: 4, Value: 36.0
Row: 1, Col: 5, Value: 40.0
Stocks 83.9%
Bonds 4.8%
Convertible
securities 4.2%
Short-term
investments 7.1%
Stocks 76.0%
Bonds 3.7%
Convertible
securities 11.2%
Short-term
investments 9.1%
FOREIGN
INVESTMENTS 15.5%

FOREIGN
INVESTMENTS 14.4%
*
*
*
INVESTMENTS MAY 31, 1994 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 83.6%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
DEFENSE ELECTRONICS - 0.4%
Loral Corp. 27,900 $ 997,425 54385910
BASIC INDUSTRIES - 12.9%
CHEMICALS & PLASTICS - 10.5%
Akzo NV Ord. 22,800 2,567,554 01019910
du Pont (E.I.) de Nemours & Co. 44,900 2,783,800 26353410
Eastman Chemical Co. 42,000 2,021,250 27743210
GEON 41,500 1,234,625 37246W10
Georgia Gulf Corp. (a) 33,500 1,059,438 37320020
Grace (W.R.) & Co. 41,000 1,711,750 38388310
Great Lakes Chemical Corp. 28,500 1,571,063 39056810
Hercules, Inc. 9,100 958,913 42705610
Hoechst AG Ord. 3,000 613,119 43439010
Imperial Chemical Industries PLC:
ADR 3,600 176,400 45270450
Ord. 70,500 859,405 45270440
Lyondell Petrochemical Co. 59,600 1,549,600 55207810
Methanex Corp. (a) 66,700 766,043 59151K10
Nalco Chemical Co. 44,900 1,476,088 62985310
OM Group, Inc. (a) 43,100 958,975 67087210
Olin Corp. 14,000 686,000 68066520
Potash Corp. of Saskatchewan 20,300 530,539 73755L10
Rohm & Haas Co. 4,900 298,288 77537110
Union Carbide Corp. 154,500 4,171,500 90558110
Witco Corp. 3,400 103,275 97738510
26,097,625
IRON & STEEL - 0.3%
Lukens, Inc. 11,300 341,825 54986610
Thyssen AG Ord. 2,500 419,830 88629110
761,655
METALS & MINING - 2.0%
Alcan Aluminum Ltd. 66,700 1,550,181 01371610
Metallgesellschaft AG Ord. 5,600 778,864 59124810
Outokumpu Oy Class A (a) 16,000 270,030 69099992
Reynolds Metals Co. 52,100 2,390,088 76176310
4,989,163
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.1%
Ball Corp. 4,100 $ 117,875 05849810
Owens-Illinois, Inc. (a) 9,500 123,500 69076840
241,375
TOTAL BASIC INDUSTRIES 32,089,818
CONGLOMERATES - 1.0%
Dial Corp. (The) 20,000 910,000 25247010
Tomkins PLC Ord. 163,400 547,949 89003010
United Technologies Corp. 13,800 915,975 91301710
2,373,924
CONSTRUCTION & REAL ESTATE - 0.8%
REAL ESTATE INVESTMENT TRUSTS - 0.8%
Amli Residential Properties Trust (SBI) 5,100 114,113 00173510
Camden Property Trust (SBI) 10,700 279,538 13313110
Debartolo Realty Corp. (REIT) 8,000 120,000 24273310
Mid-America Realty Investments, Inc. 65,000 633,750 59522K10
Nationwide Health Properties, Inc. 4,700 186,238 63862010
Simon Properties Group, Inc. (REIT) (a) 22,800 624,150 82880510
Southwestern Property Trust, Inc. 3,600 46,350
2,004,139
DURABLES - 2.5%
AUTOS, TIRES, & ACCESSORIES - 1.7%
Autoliv AB (e) 13,000 297,627
BMW (a) 3,100 1,543,881 05528310
BMW AG (rights) (a) 3,100 53,095 07274392
Johnson Controls, Inc. 18,800 921,200 47836610
Valeo SA 2,000 440,634 91899010
Volkswagen AG 3,300 971,060 92866210
4,227,497
TEXTILES & APPAREL - 0.8%
Liz Claiborne, Inc. 56,900 1,244,688 53932010
Shaw Industries, Inc. 800 14,400 82028610
Unifi, Inc. 27,800 712,375 90467710
1,971,463
TOTAL DURABLES 6,198,960
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - 10.9%
ENERGY SERVICES - 2.4%
Halliburton Co. 53,900 $ 1,637,213 40621610
Helmerich & Payne, Inc. 18,200 475,475 42345210
McDermott International, Inc. 23,500 475,875 58003710
Schlumberger Ltd. 60,300 3,452,175 80685710
Smith International, Inc. (a) 1 15 83211010
6,040,753
OIL & GAS - 8.5%
Amerada Hess Corp. 60,600 2,999,700 02355110
Apache Corp. 21,010 569,896 03741110
British Petroleum PLC:
ADR 110,800 7,783,700 11088940
Ord. 156,711 912,555 11088910
Burlington Resources, Inc. 19,100 795,038 12201410
Chevron Corp. 20,700 1,800,900 16675110
Coastal Corp. (The) 24,000 678,000 19044110
Mobil Corp. 21,000 1,701,000 60705910
Murphy Oil Corp. 19,900 835,800 62671710
Phillips Petroleum Co. 29,300 952,250 71850710
Royal Dutch Petroleum Co. 10,800 1,154,250 78025770
Total Compagnie Francaise des Petroles Class B 13,600 750,770 20434510
20,933,859
TOTAL ENERGY 26,974,612
FINANCE - 15.7%
BANKS - 6.1%
Banc One Corp. 73,130 2,440,714 05943810
Bank of New York Co., Inc. 105,850 3,122,575 06405710
BanPonce Corp. 9,400 303,150 06670410
Boatmen's Bancshares, Inc. 6,800 227,800 09665010
Chase Manhattan Corp. 94 3,325
Chemical Banking Corp. 90,800 3,484,450 16372210
Comerica, Inc. 28,400 852,000 20034010
First Chicago Corp. 24,700 1,306,013 31945510
Fleet Financial Group, Inc. 32,700 1,258,950 33891510
NationsBank Corp. 19,506 1,080,145 63858510
Regions Financial Corp. 30,200 1,032,463 75894010
15,111,585
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 4.3%
American Express Co. 175,200 $ 4,839,900 02581610
Beneficial Corp. 35,600 1,312,750 08172110
Dean Witter Discover & Co. 75,100 2,928,900 24240V10
GFC Financial Corp. 48,650 1,526,394 36160910
Household International, Inc. 8 272 44181510
10,608,216
FEDERAL SPONSORED CREDIT - 1.9%
Federal Home Loan Mortgage Corporation 31,300 1,815,400 31340030
Federal National Mortgage Association 35,000 2,922,500 31358610
4,737,900
INSURANCE - 2.5%
ACE Ltd. 12,400 337,900 00499G92
Allstate Corp. 72,500 1,894,063 02000210
General Re Corp. 1,800 215,550 37056310
Lincoln National Corp. 16,800 695,100 53418710
SAFECO Corp. 19,100 1,052,888 78642910
Travelers, Inc. (The) 64,433 2,110,192 89419010
6,305,693
SAVINGS & LOANS - 0.7%
Ahmanson (H.F.) & Co. 43,800 821,250 00867710
GP Financial Corp. (a) 37,400 832,150 36193510
1,653,400
SECURITIES INDUSTRY - 0.2%
Lehman Brothers Holdings 35,040 643,860 52490810
TOTAL FINANCE 39,060,654
HEALTH - 9.6%
DRUGS & PHARMACEUTICALS - 6.2%
Allergan, Inc. 93,100 2,304,225 01849010
American Cyanamid Co. 104,200 5,431,425 02532110
Merck & Co., Inc. 26,300 802,150 58933110
Pfizer, Inc. 45,500 2,900,625 71708110
Schering-Plough Corp. 36,600 2,388,150 80660510
Warner-Lambert Co. 23,200 1,632,700 93448810
15,459,275
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 3.4%
Bausch & Lomb, Inc. 16,600 $ 821,700 07170710
Baxter International, Inc. 76,700 1,975,025 07181310
Bergen Brunswig Corp. Class A 54,700 970,925 08373910
Johnson & Johnson 28,200 1,247,850 47816010
Mallinckrodt Group, Inc. 52,200 1,552,950 56122610
McKesson Corp. 13,100 1,085,663 58155610
St. Jude Medical, Inc. 23,300 623,275 79084910
8,277,388
TOTAL HEALTH 23,736,663
INDUSTRIAL MACHINERY & EQUIPMENT - 5.7%
ELECTRICAL EQUIPMENT - 3.7%
General Electric Co. 160,000 7,940,000 36960410
Philips Electronics (a) 44,100 1,224,834 71833799
9,164,834
INDUSTRIAL MACHINERY & EQUIPMENT - 1.0%
Caterpillar, Inc. 13,700 1,464,188 14912310
Parker-Hannifin Corp. 27,600 1,190,250 70109410
2,654,438
POLLUTION CONTROL - 1.0%
Browning-Ferris Industries, Inc. 49,500 1,435,500 11588510
WMX Technologies, Inc. 35,000 958,125 92929Q10
2,393,625
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 14,212,897
MEDIA & LEISURE - 0.7%
ENTERTAINMENT - 0.3%
Cedar Fair LP (depositary units) 25,300 850,713 15018510
PUBLISHING - 0.4%
Houghton Mifflin Co. 21,600 1,012,500 44156010
TOTAL MEDIA & LEISURE 1,863,213
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - 5.2%
FOODS - 1.4%
ConAgra, Inc. 99,000 $ 2,858,625 20588710
Dole Food, Inc. 24,000 660,000 25660510
3,518,625
HOUSEHOLD PRODUCTS - 0.4%
Premark International, Inc. 13,900 986,900 74045910
TOBACCO - 3.4%
Philip Morris Companies, Inc. 140,600 6,924,550 71815410
RJR Nabisco Holdings Corp. (a) 242,300 1,393,225 74960K10
8,317,775
TOTAL NONDURABLES 12,823,300
RETAIL & WHOLESALE - 5.3%
APPAREL STORES - 1.5%
Charming Shoppes, Inc. 66,400 630,800 16113310
Limited, Inc. (The) 70,600 1,244,325 53271610
Melville Corp. 47,900 1,945,938 58574510
3,821,063
GENERAL MERCHANDISE STORES - 1.4%
Bradlees, Inc. 30,800 392,700 10449910
Dayton Hudson Corp. 18,700 1,470,288 23975310
Sears, Roebuck & Co. 29,400 1,488,375 81238710
Wal-Mart Stores, Inc. 6,900 162,150 93114210
3,513,513
GROCERY STORES - 2.0%
Fleming Companies, Inc. 72,830 1,811,646 33913010
Great Atlantic & Pacific Tea Co., Inc. 39,200 935,900 39006410
Supervalu, Inc. 68,800 2,201,600 86853610
4,949,146
RETAIL & WHOLESALE, MISCELLANEOUS - 0.4%
Circuit City Stores, Inc. 14,500 280,938 17273710
Duty Free International, Inc. 42,000 572,250 26708410
853,188
TOTAL RETAIL & WHOLESALE 13,136,910
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.6%
PRINTING - 0.5%
Donnelley (R.R.) & Sons Co. 42,900 $ 1,179,750 25786710
SERVICES - 0.1%
Jostens, Inc. 20,300 342,563 48108810
TOTAL SERVICES 1,522,313
TECHNOLOGY - 2.8%
COMPUTERS & OFFICE EQUIPMENT - 2.1%
International Business Machines Corp. 37,100 2,346,575 45920010
Xerox Corp. 27,900 2,803,950 98412110
5,150,525
PHOTOGRAPHIC EQUIPMENT - 0.7%
Polaroid Corp. 53,100 1,659,375 73109510
TOTAL TECHNOLOGY 6,809,900
TRANSPORTATION - 1.6%
RAILROADS - 1.6%
CSX Corp. 17,300 1,323,450 12640810
Canadian Pacific Ltd. Ord. 88,300 1,397,405 13644030
Union Pacific Corp. 20,400 1,203,600 90781810
3,924,455
UTILITIES - 7.9%
ELECTRIC UTILITY - 2.6%
DPL, Inc. 42,250 850,281 23329310
Entergy Corp. 40,900 1,180,988 29364G10
Illinova Corporation Holding Co. 79,700 1,643,813 45231710
Peco Energy Co. 36,400 991,900 69330410
Veba Vereinigte Elektrizetaets & Bergwerks AG Ord. 5,600 1,720,984
92239110
6,387,966
GAS - 0.2%
Consolidated Natural Gas Co. 12,800 483,200 20961510
TELEPHONE SERVICES - 5.1%
Ameritech Corp. 38,400 1,502,400 03095410
BellSouth Corp. 29,900 1,779,050 07986010
Comsat Corp., Series 1 3,300 75,075 20564D10
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
NYNEX Corp. 39,800 $ 1,502,450 67076810
Rochester Telephone Corp. 70,200 1,570,725 77175810
Southwestern Bell Corp. 65,600 2,697,800 84533310
Telefonica De Espana SA:
Ord. 75,900 1,028,774 87938210
sponsored ADR 15,900 647,925 87938220
U.S. West, Inc. 48,400 1,942,034 91288910
12,746,233
TOTAL UTILITIES 19,617,399
TOTAL COMMON STOCKS
(Cost $193,383,303) 207,346,582
PREFERRED STOCKS - 3.6%
CONVERTIBLE PREFERRED STOCKS - 3.3%
BASIC INDUSTRIES - 0.3%
METALS & MINING - 0.3%
Alumax, Inc., Series A, $4.00 3,633 414,162 02219720
Reynolds Metals Co. $3.31 6,300 307,913 76176350
722,075
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES - 0.5%
Ford Motor Co. Series A, $4.20 13,500 1,285,875 34537020
ENERGY - 0.2%
ENERGY SERVICES - 0.2%
Chiles Offshore Corp. $1.50 23,100 499,538 16888720
FINANCE - 0.6%
BANKS - 0.6%
Citicorp $5.375 (e) 12,700 1,414,463 17303451
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% 50,000 $ 344 87799010
NONDURABLES - 0.5%
TOBACCO - 0.5%
RJR Nabisco Holdings Corp., Series A, depositary shares
representing 1/4 share 213,400 1,280,400 74960K40
RETAIL & WHOLESALE - 0.5%
APPAREL STORES - 0.5%
TJX Companies, Inc., Series C, $3.125 22,300 1,209,775 87254020
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
Burlington Northern Railroad Co. 6.2% 17,400 1,126,650 12189760
UTILITIES - 0.2%
GAS - 0.2%
Tejas Gas Corp. $2.625 12,400 585,900 87907550
TOTAL CONVERTIBLE PREFERRED STOCKS 8,125,020
NONCONVERTIBLE PREFERRED STOCKS - 0.3%
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Porsche AG:
NV 125 56,559 73380193
Ord. 500 232,311 73380110
288,870
FINANCE - 0.2%
BANKS - 0.2%
Riggs National Corp. 10 3/4% 19,700 458,025
TOTAL NONCONVERTIBLE PREFERRED STOCKS 746,895
TOTAL PREFERRED STOCKS
(Cost $8,492,766) 8,871,915
CORPORATE BONDS - 4.3%
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C)
CONVERTIBLE BONDS - 0.9%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%, 1/15/04 - $ 305,000 $ 346,175 151895AA
DURABLES - 0.4%
TEXTILES & APPAREL - 0.4%
Interface, Inc. 8%, 9/15/93 Ba3 263,000 257,740 458665AA
Unifi, Inc. 6%, 3/15/02 Baa1 760,000 771,400 904677AC
1,029,140
ENERGY - 0.1%
ENERGY SERVICES - 0.1%
Lone Star Technologies, Inc. euro 8%, 8/27/02 - 425,000 348,500
5423129A
FINANCE - 0.2%
BANKS - 0.2%
Bank of Boston Corp. 7 3/4%, 6/15/11 Baa2 130,000 157,950 060716AF
Bank of New York Co., Inc. 7 1/2%, 8/15/01 Baa1 220,000 339,900
064057AK
497,850
TRANSPORTATION - 0.1%
TRUCKING & FREIGHT - 0.1%
Greyhound Lines, Inc. 8 1/2%, 3/31/07 B3 210,000 180,600 398048AD
TOTAL CONVERTIBLE BONDS 2,402,265
NONCONVERTIBLE BONDS - 3.4%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 230,000 232,300 892349AC
BASIC INDUSTRIES - 1.3%
CHEMICALS & PLASTICS - 0.7%
IMC Fertilizer Group, Inc. 9 1/4%, 10/1/00 B3 1,960,000 1,842,400
449669AH
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.1%
Owens Illinois, Inc. 10 1/4%, 4/1/99 B2 $ 160,000 $ 163,200 690768AG
PAPER & FOREST PRODUCTS - 0.5%
Stone Container Corp. 9 7/8%, 2/1/01 B1 1,240,000 1,178,000 861589AK
TOTAL BASIC INDUSTRIES 3,183,600
CONGLOMERATES - 0.2%
Coltec Industries, Inc. 10 1/4%, 4/1/02 Ba2 440,000 446,600 196879AB
DURABLES - 0.6%
TEXTILES & APPAREL - 0.6%
Westpoint Stevens:
8 3/4%, 12/15/01 B1 540,000 492,750 961238AA
9 3/8%, 12/15/05 B3 1,250,000 1,131,250 961238AB
1,624,000
FINANCE - 0.3%
BANKS - 0.1%
Signet Banking Corp.:
5 1/4%, 5/15/97 Baa1 180,000 179,325 065446AP
5 1/4%, 4/15/98 Baa1 100,000 99,625 065446AN
278,950
CREDIT & OTHER FINANCE - 0.2%
Chrysler Financial Corp. 9 1/2%, 12/15/99 A3 370,000 401,246 171205CY
TOTAL FINANCE 680,196
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
Joy Technologies, Inc. 10 1/4%, 9/1/03 B1 580,000 556,800 481206AD
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Host Marriott Corp.:
9 1/8%, 12/1/00 B1 $ 160,000 $ 157,000 441080AD
9 7/8%, 5/1/01 B1 60,000 58,875 441080AE
10 1/2%, 5/1/06 B1 120,000 118,500 441080AH
334,375
NONDURABLES - 0.4%
BEVERAGES - 0.4%
Canandaigua Wine, Inc. 8 3/4%, 12/15/03 B1 1,000,000 890,000 137219AB
UTILITIES - 0.2%
GAS - 0.2%
Columbia Gas Systems, Inc. 9.91%, 5/28/20 (b) - 50,000 61,000 19765ABN
Ferrellgas, Inc. 12%, 8/1/96 - 180,000 196,200 315290AD
SFP Pipeline Holdings, Inc. exchangeable
0%, 8/15/00 (f) Baa3 120,000 147,600 784163AA
404,800
TOTAL NONCONVERTIBLE BONDS 8,352,671
TOTAL CORPORATE BONDS
(Cost $11,241,478) 10,754,936
FOREIGN GOVERNMENT OBLIGATIONS (G) - 1.4%
French Government OAT:
8 1/2%, 4/25/03 Aaa FRF 12,350,000 2,363,248 351996AQ
8 1/2%, 4/25/23 Aaa FRF 5,490,000 1,041,570 351996AC
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $3,424,437) 3,404,818
REPURCHASE AGREEMENTS - 7.1%
MATURITY VALUE (NOTE 1)
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 4.26% dated
5/31/94 due 6/1/94 $ 17,707,095 $ 17,705,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $234,246,984) $ 248,083,251
CURRENCY ABBREVIATIONS
FRF - French franc
LEGEND
1. Non-income producing
2. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
3. Principal amount is stated in United States dollars unless otherwise
noted.
4. Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
5. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $1,712,090 or 0.7% of net
assets.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. Most foreign obligations have not been individually rated by S&P or
Moody's. The ratings listed are assigned to securities by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of the
sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 1.5% AAA, AA, A 1.5%
Baa 0.7% BBB 0.5%
Ba 0.3% BB 0.5%
B 2.8% B 2.8%
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 0.4%.
Distribution of investments by country, as a percentage of total value of
investment in securities, is as follows:
United States 85.6%
United Kingdom 4.1
Netherlands 3.3
Germany 2.7
France 1.7
Canada 1.7
Others (individually less than 1%) 0.9
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31, 1994, the aggregate cost of investment securities for income tax
purposes was $234,474,327. Net unrealized appreciation aggregated
$13,608,924, of which $20,929,683 related to appreciated investment
securities and $7,320,759 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>
MAY 31, 1994 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 248,083,251
agreements of $17,705,000) (cost $234,246,984)
(Notes 1 and 2) - See accompanying schedule

Cash 827

Receivable for investments sold 9,381,773

Receivable for fund shares sold 1,445,933

Dividends receivable 799,306

Interest receivable 320,907

Other receivables 251,197

TOTAL ASSETS 260,283,194

LIABILITIES

Payable for investments purchased $ 9,510,457

Payable for fund shares redeemed 47,111

Accrued management fee 101,830

Other payables and accrued expenses 134,546

TOTAL LIABILITIES 9,793,944

NET ASSETS $ 250,489,250

Net Assets consist of (Note 1):

Paid in capital $ 237,074,164

Undistributed net investment income 1,455,809

Accumulated undistributed net realized gain (loss) on (1,876,990)
investments

Net unrealized appreciation (depreciation) on investment 13,836,267
securities

NET ASSETS $ 250,489,250

CALCULATION OF MAXIMUM OFFERING PRICE $15.38
CLASS A:
NET ASSET VALUE, and redemption price per share
($74,946,313 (divided by) 4,872,530 shares)

Maximum offering price per share (100/95.25 of $15.38) $16.15

INSTITUTIONAL CLASS: $15.49
NET ASSET VALUE, offering price and redemption price per
share ($175,542,937 (divided by) 11,332,299 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1994 (UNAUDITED)

INVESTMENT INCOME $ 3,368,940
Dividends

Interest 832,799

TOTAL INCOME 4,201,739

EXPENSES

Management fee (Note 4) $ 600,364

Transfer agent fees (Note 4) 97,527
Class A

Institutional Class 129,821

Distribution fees - Class A (Note 4) 198,054

Accounting fees and expenses (Note 4) 72,749

Non-interested trustees' compensation 750

Custodian fees and expenses 15,706

Registration fees - Class A 12,204

Registration fees - Institutional Class 14,857

Audit 16,454

Legal 13,755

Interest (Note 5) 2,509

Miscellaneous 10,213

Total expenses before reductions 1,184,963

Expense reductions (Note 6) (22,668)

TOTAL EXPENSES 1,162,295

NET INVESTMENT INCOME 3,039,444

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 15,842,591
(NOTES 1 AND 3)
Net realized gain (loss) on investment securities

Change in net unrealized appreciation (depreciation) on (8,564,315)
investment securities

NET GAIN (LOSS) 7,278,276

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 10,317,720
OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1994 1993
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 3,039,444 $ 5,415,180
Net investment income

Net realized gain (loss) on investments 15,842,591 21,048,870

Change in net unrealized appreciation (depreciation) (8,564,315) 2,161,828
on
investments

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,317,720 28,625,878
FROM OPERATIONS

Distributions to shareholders from:
Net investment income

Class A (325,881) (348,837)

Institutional Class (1,245,005) (4,132,840)

Share transactions - net increase (decrease) (Note 7) 8,278,107 68,477,213

TOTAL INCREASE (DECREASE) IN NET ASSETS 17,024,941 92,621,414

NET ASSETS

Beginning of period 233,464,309 140,842,895

End of period (including undistributed net investment $ 250,489,250 $ 233,464,309
income of $1,455,809 and $2,076,538, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1994

(UNAUDITED) 1993 1992 1991 1990 1989

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

Net asset value, $ 14.93 $ 12.88 $ 11.08 $ 9.52 $ 12.27 $ 11.10
beginning of period

Income from
Investment
Operations

Net investment .20 .39 .49 .63** .69 .75
income

Net realized and .47 2.02 1.79 1.52 (2.42) 1.17
unrealized gain
(loss) on invest-
ments

Total from .67 2.41 2.28 2.15 (1.73) 1.92
investment
operations

Less Distributions

From net investment (.11) (.36) (.48) (.59) (.72) (.75)

income

From net realized - - - - (.30) -
gain

Total distributions (.11) (.36) (.48) (.59) (1.02) (.75)

Net asset value, end $ 15.49 $ 14.93 $ 12.88 $ 11.08 $ 9.52 $ 12.27
of period

TOTAL RETURN (dagger)
(dagger)(dagger) 4.48% 18.90% 20.91% 22.97% (14.90)% 17.58%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 176 $ 191 $ 139 $ 169 $ 253 $ 464
period (in millions)

Ratio of expenses to .76%*(diamond) .79% .71% .67% .61% .55%
average net assets (double dagger) (double dagger) (double dagger) (double dagger)

Ratio of expenses to .78%*(diamond) .80% .79% .77% .71% .65%
average net assets (double dagger) (double dagger) (double dagger) (double dagger)
before expense
reductions

Ratio of net 2.78%* 3.00% 3.77% 5.66% 6.11% 6.09%
investment income
to average net
assets

Portfolio turnover 148%* 120% 51% 91% 103% 93%

</TABLE>

* ANNUALIZED
** INCLUDES $.04 PER SHARE FROM FOREIGN TAXES RECOVERED.
(diamond) SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS.
(dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(dagger)(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
(double dagger) THE INVESTMENT ADVISER REDUCED THE ANNUAL MANAGEMENT FEE OF
.50% BY .10% THROUGH SEPTEMBER 10, 1992.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1994 (Unaudited)

1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Equity Portfolio Income (the fund) is a fund of Fidelity
Advisor Series III (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers two classes of shares each of which has equal rights as to
earnings, assets and voting privileges 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.
On February 17, 1994, creation of an additional class of Retail shares
(Class B) was approved by the Board of Trustees. Offering of the new class
commences on June 30, 1994. Class B shares are subject to an annual
distribution fee of .75%, an annual service fee of .25%, and a contingent
deferred sales charge upon redemption within five years of purchase which
decreases from a maximum of 4% to 0%. At the end of six years, Class B
shares of a fund automatically convert to Class A shares of the same fund.
The following summarizes the significant accounting policies of the fund:
ALLOCATED EARNINGS AND EXPENSES. Investment income, expenses (other than
expenses incurred under each class' 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 and 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 practicable 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
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.
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
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.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions, market discount, partnerships, non-taxable
dividends and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income 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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective December
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,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of November 30, 1993 have been reclassified to
reflect an increase in paid in capital of $16,896,906, a decrease in
undistributed net investment income of $2,089,287 and an increase in
accumulated net realized (loss) on investments of $14,807,619.
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.
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 SEC), 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 $176,797,247 and $165,638,441,
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, Class A
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, Class A paid FDC $198,054 of which
$148,589 was paid to securities dealers, banks and other financial
institutions for selling shares of Class A and providing shareholder
support services.
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 $15,441 for the
period.
SALES LOAD. FDC received sales charges for selling shares of Class A. 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 $707,923 of which
$607,739 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 Class A, respectively.
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 $115,968 for the period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $4,934,000 and $3,919,333,
respectively. The weighted average interest rate was 3.84%.
6. 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
$22,668 under this arrangement.
7. SHARE TRANSACTIONS.
Share transactions for both classes were as follows:

SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1994 1993 1994 1993
CLASS A
Shares sold 3,752,194 3,085,105 $ 57,484,657 $ 44,678,778
Reinvestment of distributions 18,726 21,363 291,777 309,240
Shares redeemed (1,746,294) (372,214) (26,616,597) (5,470,725)
Net increase (decrease) 2,024,626 2,734,254 $ 31,159,837 $ 39,517,293
INSTITUTIONAL CLASS
Shares sold 2,202,307 6,537,638 $ 34,393,074 $ 94,762,125
Reinvestment of distributions 26,219 122,850 410,102 1,739,396
Shares redeemed (3,698,877) (4,678,967) (57,684,906) (67,541,601)
Net increase (decrease) (1,470,351) 1,981,521 $ (22,881,730) $ 28,959,920
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
Chase Manhattan Bank, N.A.
New York, NY
EQUITY FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
FIXED-INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(registered trademark)

(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)

EQUITY PORTFOLIO INCOME -
INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 31, 1994
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on stock market
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 6 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 10 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 29 Notes to the financial statements.

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 (or income) and capital gains (the profits
the fund earns when it sells investments that have grown in value).
On September 10, 1992, the fund began offering Class A shares. All
performance information for Class A prior to September 10, 1992 does not
reflect Class A's 12b-1 fee and revised transfer agent fee arrangements,
which if included, would lower Class A's performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Advisor Equity Portfolio Income -
Class A 4.03% 8.54% 58.54% 284.14%

Advisor Equity Portfolio Income -
Class A (incl. 4.75% sales charge) -0.91% 3.38% 51.01% 265.89%

S&P 500(Registered trademark) 0.24% 4.26% 66.69% 328.17%

Average Equity Income Fund -0.42% 4.66% 54.31% 242.57%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, 5 years or 10
years. You can compare the fund's returns to the performance of the
Standard & Poor's 500 Composite Stock Price Index - a common proxy for
the U.S. stock market. You can also compare them to the average equity
income fund, which reflects the performance of 99 funds tracked by Lipper
Analytical Services. Both benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Class A 8.54% 9.65% 14.41%

Advisor Equity Portfolio Income - Class A
(incl. 4.75% sales charge) 3.38% 8.59% 13.85%

S&P 500(Registered trademark) 4.26% 10.76% 15.65%

Average Equity Income Fund 4.66% 8.96% 12.71%

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
05/31/84 9525.00 10000.00
06/30/84 9701.20 10217.00
07/31/84 9690.77 10090.31
08/31/84 10445.90 11205.29
09/30/84 10731.36 11207.53
10/31/84 10933.44 11251.24
11/30/84 11051.12 11125.22
12/31/84 11374.88 11418.93
01/31/85 12209.84 12308.47
02/28/85 12231.64 12459.86
03/31/85 12209.70 12468.58
04/30/85 12220.73 12457.36
05/31/85 12841.74 13177.40
06/30/85 13053.72 13384.28
07/31/85 13076.16 13364.20
08/31/85 13098.70 13250.61
09/30/85 12803.33 12835.86
10/31/85 13259.78 13428.88
11/30/85 13798.41 14350.10
12/31/85 14283.38 15044.65
01/31/86 14550.25 15128.90
02/28/86 15497.87 16260.54
03/31/86 16426.54 17167.88
04/30/86 16329.56 16973.88
05/31/86 16378.27 17876.89
06/30/86 16598.44 18179.01
07/31/86 15959.10 17162.80
08/31/86 16921.82 18436.28
09/30/86 16127.83 16911.60
10/31/86 16838.26 17887.40
11/30/86 17038.41 18322.07
12/31/86 16774.16 17854.85
01/31/87 18422.10 20259.90
02/28/87 18975.74 21060.17
03/31/87 19323.28 21668.81
04/30/87 19071.78 21475.95
05/31/87 18973.62 21662.80
06/30/87 19522.15 22756.77
07/31/87 20087.59 23910.53
08/31/87 20641.24 24802.40
09/30/87 20156.57 24259.22
10/31/87 16503.46 19033.79
11/30/87 15798.43 17465.40
12/31/87 16398.86 18794.52
01/31/88 17520.44 19585.77
02/29/88 18375.09 20498.47
03/31/88 18134.67 19865.06
04/30/88 18393.73 20085.57
05/31/88 18619.52 20260.31
06/30/88 19685.00 21190.26
07/31/88 19649.84 21109.74
08/31/88 19261.09 20392.01
09/30/88 19830.21 21260.70
10/31/88 20187.83 21851.75
11/30/88 20062.11 21539.27
12/31/88 20207.68 21916.21
01/31/89 21502.58 23520.48
02/28/89 21319.26 22934.82
03/31/89 21743.07 23469.20
04/30/89 22539.44 24687.25
05/31/89 23078.75 25687.08
06/30/89 23172.11 25540.67
07/31/89 24635.60 27846.99
08/31/89 24956.04 28392.79
09/30/89 24634.15 28276.38
10/31/89 23283.56 27620.37
11/30/89 23589.42 28183.82
12/31/89 23932.91 28860.23
01/31/90 22419.54 26923.71
02/28/90 22459.57 27271.03
03/31/90 22459.58 27993.71
04/30/90 21590.31 27293.87
05/31/90 23012.06 29955.02
06/30/90 22910.05 29751.33
07/31/90 22540.86 29656.12
08/31/90 20829.16 26975.21
09/30/90 19254.02 25661.52
10/31/90 18816.42 25551.17
11/30/90 20073.64 27201.78
12/31/90 20515.57 27960.71
01/31/91 21559.46 29179.79
02/28/91 23100.95 31266.15
03/31/91 23469.62 32022.79
04/30/91 23469.06 32099.64
05/31/91 24754.34 33486.35
06/30/91 23618.17 31952.67
07/31/91 24910.70 33441.67
08/31/91 25438.29 34234.24
09/30/91 25306.49 33662.52
10/31/91 25728.14 34113.60
11/30/91 24684.81 32738.82
12/31/91 26631.20 36484.15
01/31/92 26899.30 35805.54
02/29/92 27730.38 36271.01
03/31/92 27279.84 35563.73
04/30/92 28252.13 36609.30
05/31/92 28501.53 36788.69
06/30/92 28184.19 36240.53
07/31/92 28916.25 37722.77
08/31/92 28229.76 36949.46
09/30/92 28414.26 37385.46
10/31/92 28783.40 37516.31
11/30/92 29799.46 38795.61
12/31/92 30541.56 39272.80
01/31/93 31494.04 39602.69
02/28/93 32309.48 40141.29
03/31/93 33358.82 40988.27
04/30/93 33195.31 39996.35
05/31/93 33710.80 41068.26
06/30/93 34040.25 41187.35
07/31/93 34511.59 41022.60
08/31/93 35715.99 42577.36
09/30/93 35479.31 42249.52
10/31/93 35905.34 43124.08
11/30/93 35171.61 42714.40
12/31/93 36047.35 43231.25
01/31/94 37704.16 44701.11
02/28/94 36710.08 43489.71
03/31/94 35138.10 41593.56
04/30/94 36351.40 42125.95
05/31/94 36589.30 42816.82

$10,000 OVER TEN YEARS: Let's say you invested $10,000 in Fidelity Advisor
Equity Portfolio Income - Class A on May 31, 1984, and paid a 4.75% sales
charge. As the chart shows, by May 31, 1994, the value of your investment
would have grown to $36,589 - a 265.89% increase on your initial
investment. For comparison, look at how the S&P 500 did over the same
period. With dividends reinvested, the same $10,000 investment would have
grown to $42,817 - a 328.17% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
For the period ended May 31, 1994, Fidelity Advisor Equity Portfolio Income
- - Institutional Class shares' cumulative total returns were 4.48%, 9.52%,
60.65%, and 289.26% for six months, one year, five years, and ten years,
respectively. For the period ended May 31, 1994, Institutional Class
shares' average annual returns were 9.52%, 9.95%, and 14.56% for one year,
five years, and ten years, respectively.
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Bettina Doulton, Portfolio Manager of Fidelity Advisor
Equity Portfolio Income
Q. BETTINA, HOW DID THE FUND PERFORM?
A. It's been a difficult past few months, but Fidelity Advisor Equity
Portfolio Income - Class A did out-perform most of its peers. Its total
return for the six months ended May 31, 1994, was 4.03%. The average equity
income fund returned -0.42% during the same period, according to Lipper
Analytical Services. For the 12 months ended May 31, the fund returned
8.54%, while the average fund rose 4.66%.
Q. MANY STOCKS LOST GROUND FROM FEBRUARY THROUGH MAY AS INTEREST RATES
BEGAN TO RISE. HOW DID THE FUND TOP THE AVERAGE?
A. In January, I began to make a sizable bet on chemical stocks, which has
paid off. For many months now, the improving economy has boosted most
cyclical stocks - those whose earnings tend to rise and fall with economic
cycles. However, chemical companies had lagged other cyclicals in gaining
pricing power - the ability to raise prices while sustaining earnings
growth. I looked for companies that had effectively cut costs during the
recession, and whose stocks were cheap when measured by yardsticks such as
their price-to-earnings ratios. Sure enough, over the next few months the
improving economy strengthened demand, and these chemical companies were
able to raise prices and increase earnings. The stocks of Union Carbide,
duPont, Georgia Gulf, Lyondell, and Akzo Nobel - a Dutch chemical company -
were all up at least 16% year-to-date through May 31. And Union Carbide was
still among the fund's top 10 investments at the end of the period.
Q. YOU'VE ALSO INCREASED THE FUND'S STAKE IN ITS LARGEST SECTOR INVESTMENT
- - FINANCIAL STOCKS - FROM 13% SIX MONTHS AGO TO 17% ON MAY 31. WHY?
A. Broadly speaking, many investors sold financial stocks last fall on
fears that higher interest rates would hurt profits in the sector. But the
low stock valuations that resulted from that sell-off created
opportunities. I tried to find those companies that could increase their
earnings in the face of higher rates. American Express - the fund's fifth
largest investment on May 31 - is a good example. The company has just
finished a massive restructuring, and has improved its core credit card and
travel services businesses. The stock helped the fund's performance over
the past few months, and I like its prospects going forward.
Q. ANY OTHER EXAMPLES?
A. Sure. Dean Witter is another stock whose price had fallen. However, I
saw excellent growth potential in the company's Discover card division.
First quarter earnings were outstanding, and the stock has risen
accordingly. Also, I increased the fund's stake in Fannie Mae and Freddie
Mac - agencies that back home mortgages. Again, their stock valuations were
very attractive, and both agencies are showing solid earnings growth. I
think demographics are such that the number of new home mortgages should
continue increasing right through the year 2000.
Q. WHAT OTHER SECTORS DID WELL?
A. Energy provided some interesting stories. Namely, British Petroleum,
which became the fund's second largest investment during the period. BP's
stock has risen nearly 10% since the first of the year. Simply said, the
company is doing everything right. It's effectively cutting costs, selling
off non-core businesses, and cleaning up its balance sheet. In addition, BP
recently raised its dividend. I would venture to say that even if oil
prices don't move much over the next year, the company will still be in
good shape. Yet, I think the tightening gap between supply and demand for
the world's oil could drive up oil prices, which would boost BP's earnings
that much more. Schlumberger - a Dutch oil service company - is another
large energy investment that offered a fair valuation coupled with
excellent growth prospects.
Q. IN ADDITION TO RAISING THE FUND'S STAKE IN ENERGY STOCKS, YOU ALSO
INCREASED ITS INVESTMENT IN THE HEALTH-CARE SECTOR.
A. That's true. The fund's investment in health-care stocks nearly doubled
over the past six months. Many of these stocks have suffered over the past
year due to uncertainty over the course of health-care reform. However,
that has led to opportunities. For example, Pfizer and Schering-Plough are
two drug companies that offer attractively low valuations coupled with
well-established product pipelines. In an environment where it's difficult
for drug companies to raise prices on existing products, the development of
new products can help boost earnings.
Q. YOU MUST HAVE SOME REGRETS . . .
A. I do. Two of the fund's top 10 investments over the past six months -
General Electric and Philip Morris - have been disappointing performers.
G.E. turned in less-than-expected earnings growth during the first quarter,
breaking a long string of earnings successes. In addition, a scandal within
a brokerage house owned by G.E. caused investors to sell the stock.
However, the company has excellent management and good prospects for future
earnings growth. That's why it remained the fund's largest investment at
the end of May. As for Philip Morris, the underlying story remains
positive. The company is cutting costs and generating solid cash flow, plus
its stock remains very cheap. I think the stock has the strength to
overcome the controversy surrounding the tobacco industry, which has
dragged down its price in recent months.
Q. THERE'S BEEN A LOT OF TALK LATELY ABOUT DERIVATIVES. DO YOU USE THEM?
A. The fund has the authority to use derivatives, but I haven't made much
use of them recently. However, I may use some derivative instruments in the
future if I feel that they can help me manage the fund's investments more
efficiently.
Q. LET'S TALK MORE ABOUT THE FUTURE. WHAT'S YOUR OUTLOOK?
A. I think we may be in for another rough six months. The Federal Reserve
raised short-term interest rates from February through May to curb future
inflation that could result from the strengthening economy. But raising
rates is a tightrope walk - the Fed wants to slow the economy enough to
prevent inflation, but doesn't want to grind economic growth to a halt.
That said, I am now seeing some evidence that higher rates have dampened
economic growth, which is a concern because corporate earnings may suffer.
Because of this backdrop, I think stock selection will be critical going
forward. As always, I'm focusing on stocks with attractive growth
prospects, but I'm paying especially close attention to valuations. When
the market is volatile, one piece of bad news can send an expensive stock
reeling. I'll be watching closely as the full effect of higher rates on the
economy, and on stocks, becomes clearer.

TOP FIVE STOCKS AS OF MAY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

General Electric Co. 3.2 3.1

British Petroleum PLC ADR 3.1 1.4

Philip Morris Companies, Inc. 2.8 1.9

American Cyanamid Co. 2.2 0.7

American Express Co. 2.0 0.8

TOP FIVE BONDS AS OF MAY 31, 1994

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(BY ISSUER, WITH MATURITIES MORE THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE BONDS
6 MONTHS AGO

French Government OAT 1.4 1.5

IMC Fertilizer Group, Inc. 0.7 0.8

Westpoint Stevens 0.7 -

Stone Container Corp. 0.5 -

Canandaigua Wine, Inc. 0.4 -

</TABLE>

TOP FIVE INDUSTRIES AS OF MAY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO

Finance 17.0 13.0

Basic Industries 14.5 9.3

Energy 11.2 8.0

Health 9.5 5.0

Utilities 8.3 11.8

FOREIGN
INVESTMENTS 14.4%
*
*
*
INVESTMENTS MAY 31, 1994 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

STATEMENT OF ASSETS AND LIABILITIES

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MAY 31, 1994 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 248,083,251
agreements of $17,705,000) (cost $234,246,984)
(Notes 1 and 2) - See accompanying schedule

Cash 827

Receivable for investments sold 9,381,773

Receivable for fund shares sold 1,445,933

Dividends receivable 799,306

Interest receivable 320,907

Other receivables 251,197

TOTAL ASSETS 260,283,194

LIABILITIES

Payable for investments purchased $ 9,510,457

Payable for fund shares redeemed 47,111

Accrued management fee 101,830

Other payables and accrued expenses 134,546

TOTAL LIABILITIES 9,793,944

NET ASSETS $ 250,489,250

Net Assets consist of (Note 1):

Paid in capital $ 237,074,164

Undistributed net investment income 1,455,809

Accumulated undistributed net realized gain (loss) on (1,876,990)
investments

Net unrealized appreciation (depreciation) on investment 13,836,267
securities

NET ASSETS $ 250,489,250

CALCULATION OF MAXIMUM OFFERING PRICE $15.38
CLASS A:
NET ASSET VALUE, and redemption price per share
($74,946,313 (divided by) 4,872,530 shares)

Maximum offering price per share (100/95.25 of $15.38) $16.15

INSTITUTIONAL CLASS: $15.49
NET ASSET VALUE, offering price and redemption price per
share ($175,542,937 (divided by) 11,332,299 shares)

</TABLE>

STATEMENT OF OPERATIONS

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SIX MONTHS ENDED MAY 31, 1994 (UNAUDITED)

INVESTMENT INCOME $ 3,368,940
Dividends

Interest 832,799

TOTAL INCOME 4,201,739

EXPENSES

Management fee (Note 4) $ 600,364

Transfer agent fees (Note 4) 97,527
Class A

Institutional Class 129,821

Distribution fees - Class A (Note 4) 198,054

Accounting fees and expenses (Note 4) 72,749

Non-interested trustees' compensation 750

Custodian fees and expenses 15,706

Registration fees - Class A 12,204

Registration fees - Institutional Class 14,857

Audit 16,454

Legal 13,755

Interest (Note 5) 2,509

Miscellaneous 10,213

Total expenses before reductions 1,184,963

Expense reductions (Note 6) (22,668)

TOTAL EXPENSES 1,162,295

NET INVESTMENT INCOME 3,039,444

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 15,842,591
(NOTES 1 AND 3)
Net realized gain (loss) on investment securities

Change in net unrealized appreciation (depreciation) on (8,564,315)
investment securities

NET GAIN (LOSS) 7,278,276

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 10,317,720
OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

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SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1994 1993
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 3,039,444 $ 5,415,180
Net investment income

Net realized gain (loss) on investments 15,842,591 21,048,870

Change in net unrealized appreciation (depreciation) (8,564,315) 2,161,828
on
investments

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,317,720 28,625,878
FROM OPERATIONS

Distributions to shareholders from:
Net investment income

Class A (325,881) (348,837)

Institutional Class (1,245,005) (4,132,840)

Share transactions - net increase (decrease) (Note 7) 8,278,107 68,477,213

TOTAL INCREASE (DECREASE) IN NET ASSETS 17,024,941 92,621,414

NET ASSETS

Beginning of period 233,464,309 140,842,895

End of period (including undistributed net investment $ 250,489,250 $ 233,464,309
income of $1,455,809 and $2,076,538, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS CLASS A

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SIX MONTHS ENDED YEAR ENDED PERIOD
MAY 31, 1994 NOVEMBER ENDED
30, NOVEMBER
30,

(UNAUDITED) 1993 1992(dagger)(dagger)

SELECTED PER-SHARE DATA

Net asset value, beginning of period $ 14.86 $ 12.86 $ 12.37

Income from Investment Operations

Net investment income .17 .33 .13

Net realized and unrealized gain (loss) on .43 1.97 .47
investments

Total from investment operations .60 2.30 .60

Less Distributions

From net investment income (.08) (.30) (.11)

Net asset value, end of period $ 15.38 $ 14.86 $ 12.86

TOTAL RETURN (dagger)(double dagger) 4.03% 18.03% 4.88%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 74,946 $ 42,326 $ 1,462

Ratio of expenses to average net assets 1.66%*(diamond) 1.77% 1.55%*
(diamond)

Ratio of expenses to average net assets 1.68%*(diamond) 1.77% 1.55%*
before expense reductions

Ratio of net investment income to average 1.87%* 2.02% 3.39%*
net assets

Portfolio turnover 148%* 120% 51%

</TABLE>

* ANNUALIZED
(diamond) SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS.
(dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(dagger)(dagger) FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALES
OF CLASS A SHARES) TO NOVEMBER 30, 1992.
(double dagger) TOTAL RETURNS DO NOT INCLUDE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1994 (Unaudited)

SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1994 1993 1994 1993
CLASS A
Shares sold 3,752,194 3,085,105 $ 57,484,657 $ 44,678,778
Reinvestment of distributions 18,726 21,363 291,777 309,240
Shares redeemed (1,746,294) (372,214) (26,616,597) (5,470,725)
Net increase (decrease) 2,024,626 2,734,254 $ 31,159,837 $ 39,517,293
INSTITUTIONAL CLASS
Shares sold 2,202,307 6,537,638 $ 34,393,074 $ 94,762,125
Reinvestment of distributions 26,219 122,850 410,102 1,739,396
Shares redeemed (3,698,877) (4,678,967) (57,684,906) (67,541,601)
Net increase (decrease) (1,470,351) 1,981,521 $ (22,881,730) $ 28,959,920
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
State Street Bank and Trust Company
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
EQUITY FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
FIXED-INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(registered trademark)