FIDELITY ADVISOR SERIES III, N-30D, 1995-02-01

FIDELITY ADVISOR SERIES III
N-30D, 1995-02-01

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(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)

EQUITY PORTFOLIO INCOME -
CLASS A AND CLASS B
ANNUAL REPORT
NOVEMBER 30, 1994
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 9 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 13 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 14 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 32 Notes to the financial statements.

REPORT OF INDEPENDENT 38 The auditors' opinion.
ACCOUNTANTS

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, 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. FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND,
INCLUDING
CHARGES AND EXPENSES, CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE
PROSPECTUS.
READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE

DEAR SHAREHOLDER:
The unsettling period that began for investors when the Federal Reserve
Board raised short-term interest rates in February has continued into the
fourth quarter of 1994. The Board raised the federal funds rate - the rate
banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. A sixth increase in November
lifted the rate to 5.50%. The Fed rate hikes were intended to forestall
inflation that could result from an improving U.S. economy, and they led to
below-average returns for many stocks and negative returns for many bond
investments.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
If you can leave your money invested over the long term, you can avoid much
of the volatility that generally accompanies the stock market in the short
term, as we have been witnessing this year. You also can help to manage
risk through diversification of investments. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different stock funds or
in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and it is important to remember
that money market funds are not insured by any agency of the U.S.
government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR EQUITY PORTFOLIO INCOME - CLASS A
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells investments that have grown in value). You can also look at the
fund's income to measure performance.
On September 10, 1992, the fund began offering Class A shares. All
performance information for Class A prior to September 10, 1992 reflects
the performance of the Institutional Class and therefore does not reflect
Class A's 12b-1 fee and different transfer agent fee arrangements (see
Notes to Financial Statements), which if included, would have lowered Class
A's performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Class A 8.84% 62.28% 246.39%

Advisor Equity Portfolio Income - Class A
(incl. max. 4.75% sales charge) 3.67% 54.57% 229.94%

S&P 500(registered trademark) 1.05% 53.14% 287.95%

Average Equity Income Fund -1.54% 43.46% 202.60%

CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, one year, five years or 10 years. For
example, if you invested $1,000 in a fund that then had a 5% return, you
would end up with $1,050. You can compare Class A's returns to the
performance of the Standard & Poor's Composite Index of 500 stocks - a
common proxy for the U.S. stock market. To measure how Class A's
performance stacked up against its peers, you can compare it to the average
equity income fund, which currently reflects the performance of 98 funds
tracked by Lipper Analytical Services. Both benchmarks include reinvested
dividends and capital
gains, if any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Class A 8.84% 10.17% 13.23%

Advisor Equity Portfolio Income - Class A
(incl. max. 4.75% sales charge) 3.67% 9.10% 12.67%

S&P 500(registered trademark) 1.05% 8.90% 14.52%

Average Equity Income Fund -1.54% 7.37% 11.38%

AVERAGE ANNUAL TOTAL RETURNS take Class A shares' actual (or cumulative)
return and show you what would have happened if Class A shares had
performed at a constant rate each year.
$10,000 OVER TEN YEARS
Fidelity AdviStandard & Po
11/30/84 9525.00 10000.00
12/31/84 9804.06 10264.00
01/31/85 10523.71 11063.57
02/28/85 10542.50 11199.65
03/31/85 10523.60 11207.49
04/30/85 10533.10 11197.40
05/31/85 11068.36 11844.61
06/30/85 11251.07 12030.57
07/31/85 11270.41 12012.52
08/31/85 11289.84 11910.42
09/30/85 11035.26 11537.62
10/31/85 11428.67 12070.66
11/30/85 11892.93 12898.71
12/31/85 12310.92 13523.01
01/31/86 12540.94 13598.73
02/28/86 13357.70 14615.92
03/31/86 14158.12 15431.49
04/30/86 14074.53 15257.11
05/31/86 14116.51 16068.79
06/30/86 14306.29 16340.35
07/31/86 13755.23 15426.93
08/31/86 14585.02 16571.60
09/30/86 13900.68 15201.13
10/31/86 14512.99 16078.24
11/30/86 14685.51 16468.94
12/31/86 14457.75 16048.98
01/31/87 15878.11 18210.78
02/28/87 16355.29 18930.11
03/31/87 16654.85 19477.19
04/30/87 16438.08 19303.84
05/31/87 16353.47 19471.78
06/30/87 16826.26 20455.11
07/31/87 17313.61 21492.18
08/31/87 17790.81 22293.84
09/30/87 17373.07 21805.60
10/31/87 14224.44 17108.68
11/30/87 13616.77 15698.92
12/31/87 14134.29 16893.61
01/31/88 15100.99 17604.83
02/29/88 15837.62 18425.22
03/31/88 15630.39 17855.88
04/30/88 15853.69 18054.08
05/31/88 16048.30 18211.15
06/30/88 16966.63 19047.04
07/31/88 16936.34 18974.66
08/31/88 16601.26 18329.52
09/30/88 17091.79 19110.36
10/31/88 17400.03 19641.63
11/30/88 17291.66 19360.75
12/31/88 17417.13 19699.57
01/31/89 18533.21 21141.57
02/28/89 18375.22 20615.15
03/31/89 18740.50 21095.48
04/30/89 19426.91 22190.34
05/31/89 19891.74 23089.05
06/30/89 19972.21 22957.44
07/31/89 21233.61 25030.49
08/31/89 21509.80 25521.09
09/30/89 21232.35 25416.46
10/31/89 20068.27 24826.79
11/30/89 20331.89 25333.26
12/31/89 20627.95 25941.26
01/31/90 19323.56 24200.60
02/28/90 19358.07 24512.79
03/31/90 19358.06 25162.38
04/30/90 18608.84 24533.32
05/31/90 19834.26 26925.32
06/30/90 19746.34 26742.22
07/31/90 19428.13 26656.65
08/31/90 17952.80 24246.89
09/30/90 16595.17 23066.06
10/31/90 16218.01 22966.88
11/30/90 17301.61 24450.54
12/31/90 17682.51 25132.71
01/31/91 18582.24 26228.50
02/28/91 19910.87 28103.83
03/31/91 20228.63 28783.95
04/30/91 20228.15 28853.03
05/31/91 21335.95 30099.48
06/30/91 20356.67 28720.92
07/31/91 21470.73 30059.32
08/31/91 21925.46 30771.72
09/30/91 21811.86 30257.84
10/31/91 22175.28 30663.29
11/30/91 21276.03 29427.56
12/31/91 22953.62 32794.07
01/31/92 23184.70 32184.10
02/29/92 23901.01 32602.50
03/31/92 23512.69 31966.75
04/30/92 24350.72 32906.57
05/31/92 24565.68 33067.81
06/30/92 24292.17 32575.10
07/31/92 24923.13 33907.42
08/31/92 24331.45 33212.32
09/30/92 24490.46 33604.23
10/31/92 24808.63 33721.84
11/30/92 25684.38 34871.76
12/31/92 26324.00 35300.68
01/31/93 27144.95 35597.21
02/28/93 27847.78 36081.33
03/31/93 28752.22 36842.64
04/30/93 28611.28 35951.05
05/31/93 29055.60 36914.54
06/30/93 29339.55 37021.59
07/31/93 29745.79 36873.51
08/31/93 30783.87 38271.01
09/30/93 30579.87 37976.33
10/31/93 30947.07 38762.44
11/30/93 30314.67 38394.19
12/31/93 31069.47 38858.76
01/31/94 32497.49 40179.96
02/28/94 31640.68 39091.08
03/31/94 30285.78 37386.71
04/30/94 31331.53 37865.26
05/31/94 31536.58 38486.25
06/30/94 31328.66 37543.34
07/31/94 32399.73 38774.76
08/31/94 34068.12 40364.53
09/30/94 33489.73 39375.59
10/31/94 34151.25 40261.55
11/30/94 32993.58 38795.22

$10,000 OVER TEN YEARS: Let's say you invested $10,000 in Fidelity Advisor
Equity Portfolio Income - Class A on November 30, 1984, and paid the
maximum 4.75% sales charge. As the chart shows, by November 30, 1994, the
value of your investment would have grown to $32,994 - a 229.94% 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 $38,795 - a 287.95% 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)
ADVISOR EQUITY PORTFOLIO INCOME - CLASS B
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells investments that have grown in value). You can also look at the
fund's income to measure performance.
On June 30, 1994, the fund began offering Class B shares. All performance
information for Class B prior to June 30, 1994 reflects the performance of
the Institutional Class up to September 9, 1992, and the performance of
Class A thereafter, and therefore does not reflect different Class B 12b-1
fee and transfer agent fee arrangements (see Notes to the Financial
Statements), which if included, would have lowered Class B's performance.
Class B's contingent deferred sales charges included in the past 1 year,
past 5 years and past 10 years total return figures are 4%, 1% and 0%,
respectively.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Class B 8.77% 62.17% 246.17%

Advisor Equity Portfolio Income - Class B
(incl. max. contingent deferred sales charge) 4.77% 61.17% 246.17%

S&P 500(registered trademark) 1.05% 53.14% 287.95%

Average Equity Income Fund -1.54% 43.46% 202.60%

CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, one year, five years or 10 years. For
example, if you invested $1,000 in a fund that then had a 5% return, you
would end up with $1,050. You can compare Class B's returns to the
performance of the Standard & Poor's Composite Index of 500 stocks - a
common proxy for the U.S. stock market. To measure how Class B's
performance stacked up against its peers, you can compare it to the average
equity income fund, which currently reflects the performance of 98 funds
tracked by Lipper Analytical Services. Both benchmarks include reinvested
dividends and capital gains, if any, and exclude the effects of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Class B 8.77% 10.15% 13.23%

Advisor Equity Portfolio Income - Class B
(incl. max. contingent deferred sales charge) 4.77% 10.02% 13.22%

S&P 500(registered trademark) 1.05% 8.90% 14.52%

Average Equity Income Fund -1.54% 7.37% 11.38%

AVERAGE ANNUAL TOTAL RETURNS take Class B shares' actual (or cumulative)
return and show you what would have happened if Class B shares had
performed at a constant rate each year.
$10,000 OVER TEN YEARS
Fidelity AdviStandard & Po
11/30/84 9525.00 10000.00
12/31/84 9804.06 10264.00
01/31/85 10523.71 11063.57
02/28/85 10542.50 11199.65
03/31/85 10523.60 11207.49
04/30/85 10533.10 11197.40
05/31/85 11068.36 11844.61
06/30/85 11251.07 12030.57
07/31/85 11270.41 12012.52
08/31/85 11289.84 11910.42
09/30/85 11035.26 11537.62
10/31/85 11428.67 12070.66
11/30/85 11892.93 12898.71
12/31/85 12310.92 13523.01
01/31/86 12540.94 13598.73
02/28/86 13357.70 14615.92
03/31/86 14158.12 15431.49
04/30/86 14074.53 15257.11
05/31/86 14116.51 16068.79
06/30/86 14306.29 16340.35
07/31/86 13755.23 15426.93
08/31/86 14585.02 16571.60
09/30/86 13900.68 15201.13
10/31/86 14512.99 16078.24
11/30/86 14685.51 16468.94
12/31/86 14457.75 16048.98
01/31/87 15878.11 18210.78
02/28/87 16355.29 18930.11
03/31/87 16654.85 19477.19
04/30/87 16438.08 19303.84
05/31/87 16353.47 19471.78
06/30/87 16826.26 20455.11
07/31/87 17313.61 21492.18
08/31/87 17790.81 22293.84
09/30/87 17373.07 21805.60
10/31/87 14224.44 17108.68
11/30/87 13616.77 15698.92
12/31/87 14134.29 16893.61
01/31/88 15100.99 17604.83
02/29/88 15837.62 18425.22
03/31/88 15630.39 17855.88
04/30/88 15853.69 18054.08
05/31/88 16048.30 18211.15
06/30/88 16966.63 19047.04
07/31/88 16936.34 18974.66
08/31/88 16601.26 18329.52
09/30/88 17091.79 19110.36
10/31/88 17400.03 19641.63
11/30/88 17291.66 19360.75
12/31/88 17417.13 19699.57
01/31/89 18533.21 21141.57
02/28/89 18375.22 20615.15
03/31/89 18740.50 21095.48
04/30/89 19426.91 22190.34
05/31/89 19891.74 23089.05
06/30/89 19972.21 22957.44
07/31/89 21233.61 25030.49
08/31/89 21509.80 25521.09
09/30/89 21232.35 25416.46
10/31/89 20068.27 24826.79
11/30/89 20331.89 25333.26
12/31/89 20627.95 25941.26
01/31/90 19323.56 24200.60
02/28/90 19358.07 24512.79
03/31/90 19358.06 25162.38
04/30/90 18608.84 24533.32
05/31/90 19834.26 26925.32
06/30/90 19746.34 26742.22
07/31/90 19428.13 26656.65
08/31/90 17952.80 24246.89
09/30/90 16595.17 23066.06
10/31/90 16218.01 22966.88
11/30/90 17301.61 24450.54
12/31/90 17682.51 25132.71
01/31/91 18582.24 26228.50
02/28/91 19910.87 28103.83
03/31/91 20228.63 28783.95
04/30/91 20228.15 28853.03
05/31/91 21335.95 30099.48
06/30/91 20356.67 28720.92
07/31/91 21470.73 30059.32
08/31/91 21925.46 30771.72
09/30/91 21811.86 30257.84
10/31/91 22175.28 30663.29
11/30/91 21276.03 29427.56
12/31/91 22953.62 32794.07
01/31/92 23184.70 32184.10
02/29/92 23901.01 32602.50
03/31/92 23512.69 31966.75
04/30/92 24350.72 32906.57
05/31/92 24565.68 33067.81
06/30/92 24292.17 32575.10
07/31/92 24923.13 33907.42
08/31/92 24331.45 33212.32
09/30/92 24490.46 33604.23
10/31/92 24808.63 33721.84
11/30/92 25684.38 34871.76
12/31/92 26324.00 35300.68
01/31/93 27144.95 35597.21
02/28/93 27847.78 36081.33
03/31/93 28752.22 36842.64
04/30/93 28611.28 35951.05
05/31/93 29055.60 36914.54
06/30/93 29339.55 37021.59
07/31/93 29745.79 36873.51
08/31/93 30783.87 38271.01
09/30/93 30579.87 37976.33
10/31/93 30947.07 38762.44
11/30/93 30314.67 38394.19
12/31/93 31069.47 38858.76
01/31/94 32497.49 40179.96
02/28/94 31640.68 39091.08
03/31/94 30285.78 37386.71
04/30/94 31331.53 37865.26
05/31/94 31536.58 38486.25
06/30/94 31328.66 37543.34
07/31/94 32399.73 38774.76
08/31/94 34068.12 40364.53
09/30/94 33489.73 39375.59
10/31/94 34151.25 40261.55
11/30/94 32993.58 38795.22

$10,000 OVER TEN YEARS: Let's say you invested $10,000 in Fidelity Advisor
Equity Portfolio Income - Class B on November 30, 1984. As the chart shows,
by November 30, 1994, the value of your investment would have grown to
$34,617 - a 246.17% 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 $38,795 - a
287.95% 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)
The fund commenced operations on April 25, 1983 by offering Institutional
Class shares, which are sold to eligible institutional investors without a
sales charge or a 12b-1 fee.
CUMULATIVE TOTAL RETURNS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Institutional 9.82% 65.21% 252.65%
Class

</TABLE>

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Institutional 9.82% 10.56% 13.43%
Class

</TABLE>

FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
Rising interest rates contributed
to below-average returns in the
U.S. stock market during the 12
months ended November 30,
1994. The Standard & Poor's 500
stock index finished the 12-month
period with a total return of 1.05%
- - below its historical annual
average return of more than 10%.
After two months of steady gains,
stocks stumbled from February
through June 1994. During that
time, the Federal Reserve Board
raised short-term interest rates
four times in an effort to curb
possible future inflation triggered
by a strengthening economy.
Higher rates hurt stocks because
they raise the cost of borrowing
for companies and consumers,
often dampening future corporate
profits. In addition, higher rates
often make bonds and other
fixed-income investments more
attractive relative to stocks.
Despite a fifth Fed rate hike in
August, the market rallied from
July through October, fueled by
strengthening corporate earnings
and a flurry of merger and
acquisition activity. Interest rate
concerns resurfaced in
November, when the Fed raised
rates again. Although returns in
overseas markets were mixed,
foreign stocks generally fared
better than those in the U.S. The
Morgan Stanley EAFE (Europe,
Australia, Far East) index
returned 14.84% for the 12
months ended November 30,
while the Morgan Stanley
Emerging Markets Free index
was up 17.44% during the same
period.
An interview with Bettina Doulton, Portfolio Manager of Fidelity Advisor
Equity Portfolio Income
Q. BETTINA, HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
A. The fund has held up quite well in a turbulent market environment. Over
the past 12 months, Fidelity Advisor Equity Portfolio Income - Class A had
a total return of 8.84%. During the same period, Fidelity Advisor Equity
Portfolio: Income - Class B had a total return of 8.77%. Both funds
compared favorably to the average equity income fund, which returned -1.54%
for the 12 months ended November 30, according to Lipper Analytical
Services.
Q. HOW DID THE FUND MANAGE TO OUTDISTANCE MOST OF ITS PEERS?
A. Successful individual stock picking was the primary contributor to the
fund's performance over the past 12 months. Rising interest rates made the
stock market much more volatile in 1994 than 1993, and various sectors of
the market came in and out of favor very quickly. That said, the fund has
done well recently by emphasizing health care stocks, in which it had an
11.1% stake on November 30. Many of these stocks had been beaten down over
the previous 18 months or so, mainly due to concerns about impending health
care reform. By late spring, their stock valuations - prices relative to
sales and earnings - had become attractive. The health care industry had
addressed one of the key elements that reform aimed to achieve: increased
competition had led to lower prices. Health care companies' revenue growth
then improved as reform appeared to be shelved for the time being and price
erosion eased. In addition, many companies had begun to focus on cost
control. The stocks took off once the improved industry environment was
better understood and prospects for merger activity were better
appreciated.
Q. WHICH WERE AMONG THE TOP
PERFORMERS?
A. Pharmaceutical company American Cyanamid - which was the fund's fourth
largest holding six months ago - did extremely well. New management was in
the process of successfully restructuring the company's operations, making
it an attractive takeover candidate. In August, American Home Products bid
for American Cyanamid at a significant premium, allowing me to sell the
stock at a nice profit. Interestingly enough, I've bought American Home
Products because I feel that the newly merged company has an excellent
opportunity to grow earnings through aggressive cost cutting. The stock has
done well recently while offering an attractive yield. Other top performers
in the health care sector included St. Jude Medical, and pharmaceutical
companies Pfizer, Schering-Plough and Warner-Lambert.
Q. YOU MENTIONED THAT IT HAS BEEN A STOCK PICKER'S MARKET IN 1994. WHICH
INDIVIDUAL STORIES PROVED INTERESTING?
A. Fortunately, several of the fund's largest investments held up well in a
difficult market. Although their businesses are vastly different, the
common thread that ties several of them together is a successful story of
corporate restructuring. Four examples include British Petroleum, IBM,
American Express and Scott Paper. These companies are doing what it takes
to run more profitable businesses: cutting expenses, selling non-core
assets, paying down debt and buying back their own stock.
Q. SIX MONTHS AGO, YOU MENTIONED THAT CYCLICAL STOCKS - THOSE THAT TEND TO
RISE AND FALL WITH THE ECONOMY - HAD HELPED THE FUND. HOW HAVE THEY DONE
RECENTLY?
A. Due to the strengthening economy, demand for commodities such as
chemicals, metals and paper has improved, helping the business prospects of
companies in these industries. While cyclical stocks did perform well in
late 1993 and early 1994, many have suffered recently as investors have
worried that higher interest rates might diminish future earnings for these
companies. Accordingly, I've cut back on the fund's stake in cyclicals.
Instead of owning a basketful of these stocks, I'm sticking with selected
individual names that, for their own reasons, continue to appear
attractive. Examples include chemical companies Union Carbide and Lyondell,
paper manufacturer Champion International, and aluminum manufacturer Alcan.
Q. YOU'VE ALSO DECREASED THE FUND'S STAKE IN FINANCIAL STOCKS - FROM 17.0%
SIX MONTHS AGO TO 7.4% ON NOVEMBER 30. WHY?
A. Most of that decrease was due to my cutting back on bank stocks. Several
had become relatively expensive, and rising interest rates were putting
pressure on their profit margins. The financial stocks I've held onto are
mostly diversified financial services companies, such as American Express,
which I feel can sustain positive profit growth despite higher interest
rates.
Q. AMID THIS VOLATILE MARKET, WERE THERE SOME INVESTMENTS THAT DIDN'T GO
YOUR WAY?
A. There were. Perhaps the biggest was the performance of the Federal
National Mortgage Association (Fannie Mae), which was among the fund's top
10 investments on November 30. Fannie Mae purchases home mortgages, then
resells them on the secondary market. As interest rates rose in 1994,
earnings growth slowed, which caused investors to sell the stock quite
heavily. However, I still believe that housing market dynamics and the
company's business prospects are attractive over the long term; I'm still
optimistic about the stock.
Q. ANY OTHERS?
A. Some of the fund's energy stocks were volatile - but overall, relatively
flat performers over the past 12 months. The oil service company stocks in
which the fund is invested - such as Halliburton and Schlumberger - got
little help from oil prices, which didn't rise significantly during the
period. However, these companies have restructured and trimmed expenses,
which should help future earnings even if oil prices do nothing.
Q. THE FUND'S INVESTMENTS IN CASH AND SHORT-TERM INSTRUMENTS HAS RISEN OVER
THE PAST SIX MONTHS, FROM 7.1% TO 17.2%. IS THIS A DEFENSIVE MOVE?
A. I have been somewhat cautious about investing new money coming into the
fund or proceeds from stock sales. Turbulent markets, such as we've seen
recently, call for investors to be patient and very price selective. In
fact, the larger-than-normal cash position will allow me to upgrade the
fund opportunistically going forward. I believe that the market could
remain volatile over the next several months, and - as stock valuations
move up and down - this cash will allow me to buy the stocks of high
quality companies at cheap valuations.
Q. YOU MENTIONED THAT MARKET VOLATILITY COULD CONTINUE FOR A WHILE. WHAT
KEY FACTORS COULD AFFECT THE FUND'S PERFORMANCE OVER THE NEXT SIX MONTHS?
A. I think we're already seeing evidence that stocks are facing increasing
competition for investors' dollars from fixed-income investments such as
bonds, money market funds and savings accounts. When interest rates rose,
these instruments began offering more attractive yields, which I think
could continue to put pressure on the stock market in 1995. Another
important variable is the economy. The full impact of the Federal Reserve
Board's interest rate hikes on economic growth remains to be seen. If the
economy slows too much, corporate earnings may suffer, which wouldn't be
good for the market. But if the Fed can help maintain slow but steady
economic growth without triggering higher inflation, the stocks of
companies that can successfully increase earnings, while keeping costs in
line, stand to make the strongest gains.

FUND FACTS
GOAL: to provide current
income and increase the
value of the fund's shares
START DATE: April 25, 1983
SIZE: as of November 30,
1994, more than $412 million
MANAGER: Bettina Doulton,
since July 1993; joined
Fidelity in 1985
(checkmark)

BETTINA DOULTON ON REGIONAL
BELL OPERATING COMPANIES
(RBOCS):
"The fund had roughly a 4%
investment on November 30 in
what many people refer to as
Regional Bell Operating
Companies. These include
names such as Ameritech,
NYNEX and Southwestern
Bell. These stocks offer
attractive valuations, excellent
yields and improving business
prospects. The regulatory
environment appears to be
getting better, and several
RBOCs are successfully
cutting costs and growing their
businesses internationally -
particularly in the cellular area.
I'm optimistic about these
stocks heading into 1995."
(solid bullet) The fund is authorized to
invest in derivative
instruments such as futures,
options and forward foreign
currency contracts, but made
very limited use of them over
the past 12 months.
(solid bullet) The fund had a 9.1% stake
in foreign stocks on November
30. The stocks of overseas oil
companies - a commodity
that's based in U.S. dollars -
made up a large portion of this
percentage.
(solid bullet) The fund's largest holding
six months ago - General
Electric - was sold recently.
A scandal within a brokerage
house owned by the company
raised questions about the
financial position of the
company's entire financial
services arm.
INVESTMENT CHANGES

TOP FIVE STOCKS AS OF NOVEMBER 30, 1994
% OF FUND'S
% OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO

Philip Morris Companies, Inc. 3.5 2.8

British Petroleum PLC ADR 2.5 3.1

International Business Machines 2.4 0.9
Corp.

American Express Co. 2.4 2.0

Pfizer, Inc. 2.2 1.2

TOP FIVE BONDS AS OF NOVEMBER 30, 1994
(BY ISSUER, WITH MATURITIES MORE THAN ONE % OF FUND'S
YEAR) % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE BONDS
6 MONTHS AGO

U.S. Treasury Obligations 4.3 -

Westpoint Stevens, Inc. 0.4 0.7

Home Depot, Inc. 0.3 -

Stone Container Corp. 0.3 0.5

Canandaigua Wine, Inc. 0.2 0.4

TOP FIVE INDUSTRIES AS OF NOVEMBER 30, 1994
% OF FUND'S
% OF FUND'S INVESTMENTS
INVESTMENTS IN THESE INDUSTRIES
6 MONTHS AGO

Basic Industries 12.0 14.5

Energy 12.0 11.2

Health 11.1 9.6

Nondurables 8.0 6.1

Finance 7.4 17.0

ASSET ALLOCATION
AS OF NOVEMBER 30, 1994* AS OF MAY 31, 1994**
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 17.2
Row: 1, Col: 3, Value: 2.4
Row: 1, Col: 4, Value: 5.8
Row: 1, Col: 5, Value: 74.59999999999999
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 7.1
Row: 1, Col: 3, Value: 4.2
Row: 1, Col: 4, Value: 4.8
Row: 1, Col: 5, Value: 40.0
Row: 1, Col: 6, Value: 43.9
Stocks 74.6%
Bonds 5.8%
Convertible
securities 2.4%
Short-term
investments 17.2%
FOREIGN
INVESTMENTS 9.1%
Stocks 83.9%
Bonds 4.8%
Convertible
securities 4.2%
Short-term
investments 7.1%
FOREIGN
INVESTMENTS 14.4%
*
**
INVESTMENTS NOVEMBER 30, 1994

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 74.6%
SHARES VALUE (NOTE 1)

AEROSPACE & DEFENSE - 1.3%
AEROSPACE & DEFENSE - 1.0%
Alliant Techsystems, Inc. (a) 24,600 $ 870,225
Lockheed Corp. 32,200 2,213,750
Martin Marietta Corp. 23,100 1,001,963
4,085,938
DEFENSE ELECTRONICS - 0.3%
Loral Corp. 26,800 1,061,950
TOTAL AEROSPACE & DEFENSE 5,147,888
BASIC INDUSTRIES - 11.5%
CHEMICALS & PLASTICS - 8.1%
AKZO Nobel NV Ord. 10,300 1,143,044
du Pont (E.I.) de Nemours & Co. 59,800 3,221,725
Eastman Chemical Co. 16,500 777,563
Fuller (H.B.) Co. 30,200 966,400
Geon Co. 37,800 987,525
Goodrich (B.F.) Company 21,100 938,950
Grace (W.R.) & Co. 144,700 5,353,900
Hercules, Inc. 41,100 4,700,813
Hoechst AG Ord. 7,300 1,463,024
Kemira OY sponsored ADR (a)(c) 18,300 281,363
Lyondell Petrochemical Co. 60,900 1,476,825
Nalco Chemical Co. 82,200 2,671,500
Olin Corp. 14,000 712,250
Potash Corp. of Saskatchewan 20,300 722,919
Union Carbide Corp. 260,700 7,462,538
32,880,339
IRON & STEEL - 0.1%
Thyssen AG Ord. 2,500 445,276
METALS & MINING - 1.4%
Alcan Aluminium Ltd. 157,459 3,876,538
Aluminum Co. of America 23,200 1,893,700
Reynolds Metals Co. 1,600 75,400
5,845,638
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 1.9%
Champion International Corp. 77,600 $ 2,696,600
Scott Paper Co. 70,600 4,606,650
Temple-Inland, Inc. 12,100 542,988
7,846,238
TOTAL BASIC INDUSTRIES 47,017,491
CONGLOMERATES - 2.8%
Allied-Signal, Inc. 98,300 3,207,038
Crane Co. 27,100 704,600
Textron, Inc. 7,400 347,800
Tyco Laboratories, Inc. 86,862 3,995,652
United Technologies Corp. 56,000 3,276,000
11,531,090
CONSTRUCTION & REAL ESTATE - 0.7%
CONSTRUCTION - 0.2%
American Homestar Corp. (a) 75,000 656,250
REAL ESTATE INVESTMENT TRUSTS - 0.5%
Amli Residential Properties Trust (SBI) 10,900 200,288
Equity Residential Property Trust (SBI) 25,100 680,838
Home Properties of NY (REIT) 15,000 283,125
Liberty Property Trust (SBI) (REIT) 11,600 204,450
Mid-America Realty Investments, Inc. 65,000 471,250
Simon Properties Group, Inc. (REIT) 5,000 118,125
Storage USA, Inc. (REIT) 3,500 88,375
2,046,451
TOTAL CONSTRUCTION & REAL ESTATE 2,702,701
DURABLES - 2.3%
AUTOS, TIRES, & ACCESSORIES - 0.7%
Echlin, Inc. 10,300 311,575
Johnson Controls, Inc. 23,800 1,154,300
Snap-on Tools Corp. 48,100 1,515,150
2,981,025
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.4%
Sunbeam-Oster, Inc. 61,700 $ 1,496,225
TEXTILES & APPAREL - 1.2%
Jones Apparel Group, Inc. (a) 27,800 708,900
Kellwood Co. 34,300 703,150
Liz Claiborne, Inc. 87,200 1,972,900
Unifi, Inc. 19,100 475,113
Westpoint Stevens, Inc. Class A (a) 69,900 1,013,550
4,873,613
TOTAL DURABLES 9,350,863
ENERGY - 11.5%
ENERGY SERVICES - 4.5%
Halliburton Co. 220,000 7,672,500
Helmerich & Payne, Inc. 18,200 509,600
McDermott International, Inc. 103,900 2,467,625
Schlumberger Ltd. 146,900 7,804,063
Smith International, Inc. (a) 1 14
18,453,802
OIL & GAS - 7.0%
Amerada Hess Corp. 124,900 5,682,950
Amoco Corp. 19,500 1,184,625
Apache Corp. 21,010 588,280
British Petroleum PLC:
ADR 129,513 10,280,094
Ord. 157,875 1,050,502
Coastal Corp. (The) 58,000 1,493,500
Mobil Corp. 42,200 3,597,550
Pennzoil Co. 23,300 1,127,138
Royal Dutch Petroleum Co. 10,800 1,173,150
Total SA :
Class B 25,357 1,587,757
sponsored ADR 20,500 640,625
28,406,171
TOTAL ENERGY 46,859,973
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

FINANCE - 7.2%
BANKS - 0.4%
Bank of New York Co., Inc. 54,350 $ 1,515,006
BanPonce Corp. 42 1,271
Chase Manhattan Corp. 1 36
Fleet Financial Group, Inc. 320 9,960
Shawmut National Corp. (warrants) (a) 857 2,250
1,528,523
CREDIT & OTHER FINANCE - 2.4%
American Express Co. 327,025 9,688,116
GFC Financial Corp. 6,650 196,175
Household International, Inc. 8 308
9,884,599
FEDERAL SPONSORED CREDIT - 2.2%
Federal Home Loan Mortgage Corporation 32,400 1,615,950
Federal National Mortgage Association 105,100 7,475,238
9,091,188
INSURANCE - 1.5%
Allstate Corp. 34,700 819,788
General Re Corp. 17,800 2,089,275
Travelers, Inc. (The) 101,133 3,324,758
6,233,821
SAVINGS & LOANS - 0.7%
Ahmanson (H.F.) & Co. 98,800 1,642,550
GP Financial Corp. 57,100 1,163,413
2,805,963
SECURITIES INDUSTRY - 0.0%
Lehman Brothers Holdings, Inc. 10,340 153,808
TOTAL FINANCE 29,697,902
HEALTH - 11.1%
DRUGS & PHARMACEUTICALS - 8.2%
Allergan, Inc. 106,800 3,217,350
American Home Products Corp. 97,900 6,375,738
Bristol-Myers Squibb Co. 99,100 5,723,025
Pfizer, Inc. 116,200 8,990,975
Schering AG 5,500 3,445,276
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Schering-Plough Corp. 34,400 $ 2,575,700
Warner-Lambert Co. 40,400 3,125,950
33,454,014
MEDICAL EQUIPMENT & SUPPLIES - 2.9%
Baxter International, Inc. 87,700 2,258,275
Beckman Instruments, Inc. 33,700 964,663
Becton, Dickinson & Co. 53,200 2,513,700
Boston Scientific Corp. (a) 97,700 1,563,200
Pall Corp. 61,000 1,082,750
St. Jude Medical, Inc. 89,600 3,572,800
11,955,388
TOTAL HEALTH 45,409,402
INDUSTRIAL MACHINERY & EQUIPMENT - 2.2%
ELECTRICAL EQUIPMENT - 0.5%
Grainger (W.W.), Inc. 15,500 804,063
Philips Electronics 44,100 1,335,185
2,139,248
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
Caterpillar, Inc. 45,000 2,430,000
Deere & Co. 42,500 2,730,625
5,160,625
POLLUTION CONTROL - 0.4%
Safety Kleen Corp. 115,200 1,670,400
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 8,970,273
MEDIA & LEISURE - 1.0%
BROADCASTING - 0.5%
Viacom, Inc. (a):
Class A 1,664 66,352
Class B (non-vtg.) 47,207 1,817,470
Rights 20,800 31,200
1,915,022
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.0%
Cedar Fair LP (depositary units) 4,400 $ 125,950
LEISURE DURABLES & TOYS - 0.4%
Hasbro, Inc. 49,700 1,466,150
LODGING & GAMING - 0.1%
Host Marriott Corp. (a) 37,300 354,350
TOTAL MEDIA & LEISURE 3,861,472
NONDURABLES - 7.8%
FOODS - 0.5%
ConAgra, Inc. 65,000 2,006,875
HOUSEHOLD PRODUCTS - 1.0%
Avon Products, Inc. 51,600 3,192,750
Tambrands, Inc. 28,000 1,081,500
4,274,250
TOBACCO - 6.3%
Imasco Ltd. 119,800 3,384,735
Philip Morris Companies, Inc. 238,600 14,256,350
RJR Nabisco Holdings Corp. (a) 1,283,100 8,019,375
25,660,460
TOTAL NONDURABLES 31,941,585
RETAIL & WHOLESALE - 4.5%
APPAREL STORES - 0.5%
Limited, Inc. (The) 108,100 2,094,438
GENERAL MERCHANDISE STORES - 2.6%
Caldor Corp. (a) 40,300 1,173,738
Consolidated Stores Corp. (a) 74,800 1,309,000
Dayton Hudson Corp. 2,900 236,713
Dillard Department Stores, Inc. Class A 95,000 2,671,875
Price/Costco, Inc. (a) 63,500 976,313
Sears, Roebuck & Co. 55,600 2,627,100
Wal-Mart Stores, Inc. 77,800 1,799,125
10,793,864
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 1.4%
Fleming Companies, Inc. 97,445 $ 2,241,235
Great Atlantic & Pacific Tea Co., Inc. 66,200 1,472,950
Supervalu, Inc. 83,800 2,053,100
5,767,285
TOTAL RETAIL & WHOLESALE 18,655,587
SERVICES - 0.8%
PRINTING - 0.7%
Deluxe Corp. 23,000 638,250
Donnelley (R.R.) & Sons Co. 82,300 2,355,838
2,994,088
SERVICES - 0.1%
Jostens, Inc. 26,800 462,300
TOTAL SERVICES 3,456,388
TECHNOLOGY - 4.1%
COMMUNICATIONS EQUIPMENT - 0.0%
Digital Systems International, Inc. (a) 251 3,043
COMPUTERS & OFFICE EQUIPMENT - 2.9%
AST Research, Inc. (a) 8,900 134,613
Digital Equipment Corp. (a) 53,100 1,805,400
International Business Machines Corp. 137,500 9,728,125
11,668,138
ELECTRONICS - 0.4%
Thomas & Betts Corp. 23,000 1,523,750
PHOTOGRAPHIC EQUIPMENT - 0.8%
Eastman Kodak Co. 30,400 1,387,000
Polaroid Corp. 58,300 1,829,163
3,216,163
TOTAL TECHNOLOGY 16,411,094
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

TRANSPORTATION - 0.3%
RAILROADS - 0.3%
Canadian Pacific Ltd. Ord. 88,800 $ 1,379,483
UTILITIES - 5.5%
ELECTRIC UTILITY - 0.5%
Entergy Corp. 2,000 45,000
Veba Vereinigte Elektrizitaets & Bergwerks AG Ord. 5,800 1,903,457
1,948,457
TELEPHONE SERVICES - 5.0%
Ameritech Corp. 150,500 5,944,750
BellSouth Corp. 17,900 928,563
NYNEX Corp. 149,000 5,606,125
Rochester Telephone Corp. 79,200 1,722,600
Koninklijke PTT Nederland (c) 15,500 484,279
Southwestern Bell Corp. 94,900 3,926,473
Telefonica de Espana SA:
Ord. 75,900 973,671
sponsored ADR 15,900 614,138
20,200,599
TOTAL UTILITIES 22,149,056
TOTAL COMMON STOCKS
(Cost $294,186,195) 304,542,248
CONVERTIBLE PREFERRED STOCKS - 1.5%
BASIC INDUSTRIES - 0.2%
METALS & MINING - 0.2%
Alumax, Inc., Series A, $4.00 3,633 403,263
Reynolds Metals Co. $3.31 6,300 294,525
697,788
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
Chrysler Corp., Series A, $4.625 (a)(c) 10,300 1,390,500
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)

ENERGY - 0.4%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 23,100 $ 519,750
OIL & GAS - 0.3%
Atlantic Richfield Co. exchangeable 50,600 1,246,025
TOTAL ENERGY 1,765,775
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.2%
Westinghouse Electric Corp. $1.30 (c) 61,000 815,875
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 50,000 359
UTILITIES - 0.4%
GAS - 0.1%
Tejas Gas Corp. $2.625 12,400 527,000
TELEPHONE SERVICES - 0.3%
Philippine Long Distance Telephone Co. GDR 17,400 867,825
TOTAL UTILITIES 1,394,825
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $6,361,226) 6,065,122
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT
CONVERTIBLE BONDS - 0.9%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%, 1/15/04 - $ 305,000 301,950
Liberty Property Limited Partnership
8%, 7/1/01 - 115,000 102,781
404,731
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT
CONVERTIBLE BONDS - CONTINUED
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Interface, Inc. 8%, 9/15/13 Ba3 $ 143,000 $ 127,985
Unifi, Inc. 6%, 3/15/02 Baa1 760,000 755,250
883,235
ENERGY - 0.1%
ENERGY SERVICES - 0.1%
Lone Star Technologies, Inc. euro 8%, 8/27/02 - 425,000 306,000
FINANCE - 0.0%
BANKS - 0.0%
Bank of Boston Corp. 7 3/4%, 6/15/11 Baa2 130,000 150,800
MEDIA & LEISURE - 0.1%
LEISURE DURABLES & TOYS - 0.1%
Coleman Worldwide Corp. 2nd liquid yield
option notes 0%, 5/27/13 B2 1,160,000 307,400
RETAIL & WHOLESALE - 0.3%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.3%
Home Depot, Inc. 4 1/2%, 2/15/97 A1 1,160,000 1,415,200
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc. exchangeable
0%, 8/15/10 (d) Baa3 120,000 142,800
TOTAL CONVERTIBLE BONDS 3,610,166
NONCONVERTIBLE BONDS - 1.5%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 230,000 223,100
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 0.3%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%, 4/1/99 B2 $ 160,000 $ 160,000
PAPER & FOREST PRODUCTS - 0.3%
Stone Container Corp. 9 7/8%, 2/1/01 B1 1,240,000 1,134,600
TOTAL BASIC INDUSTRIES 1,294,600
CONGLOMERATES - 0.1%
Coltec Industries, Inc. 10 1/4%, 4/1/02 B1 440,000 431,200
DURABLES - 0.4%
TEXTILES & APPAREL - 0.4%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 540,000 488,700
9 3/8%, 12/15/05 B3 1,250,000 1,093,750
1,582,450
FINANCE - 0.2%
BANKS - 0.1%
Signet Banking Corp. (d):
5.9375%, 5/15/97 Baa1 180,000 177,300
5.8125%, 4/15/98 Baa1 100,000 98,000
275,300
CREDIT & OTHER FINANCE - 0.1%
Chrysler Financial Corp. 9 1/2%, 12/15/99 A3 370,000 386,132
TOTAL FINANCE 661,432
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Joy Technologies, Inc. 10 1/4%, 9/1/03 B1 580,000 606,100
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Host Marriott Corp.:
9 1/8%, 12/1/00 B1 132,000 129,030
9 7/8%, 5/1/01 B1 50,000 50,000
10 1/2%, 5/1/06 B1 100,000 99,500
278,530
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc. 8 3/4%, 12/15/03 B1 $ 1,000,000 $ 895,000
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems, Inc. 9.91%,
5/28/20 (b) - 50,000 60,125
TOTAL NONCONVERTIBLE BONDS 6,032,537
TOTAL CORPORATE BONDS
(Cost $10,056,866) 9,642,703
U.S. TREASURY OBLIGATIONS - 4.3%

6 1/4%, 2/15/03 Aaa 3,900,000 3,515,499
7 7/8% 11/15/04 Aaa 13,970,000 13,932,840
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $17,410,137) 17,448,339
REPURCHASE AGREEMENTS - 17.2%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71% dated
11/30/94 due 12/1/94 $ 70,300,149 70,289,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $398,303,424) $ 407,987,412
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $2,972,017 or 0.7% of net
assets.
(d) 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 RATINGS S&P RATINGS
Aaa, Aa, A 4.7% AAA, AA, A 4.6%
Baa 0.3% BBB 0.3%
Ba 0.2% BB 0.3%
B 1.2% B 1.2%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.2%.
INCOME TAX INFORMATION
At November 30, 1994, the aggregate cost of investment securities for
income tax purposes was $398,606,238. Net unrealized appreciation
aggregated $9,381,174, of which $20,337,971 related to appreciated
investment securities and $10,956,797 related to depreciated investment
securities.
The fund hereby designates $4,938,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1994

ASSETS

Investment in securities, at value (including repurchase $ 407,987,412
agreements of $70,289,000) (cost $398,303,424) -
See accompanying schedule

Cash 3,623

Receivable for investments sold 9,767,153

Receivable for fund shares sold 4,782,259

Dividends receivable 920,791

Interest receivable 382,930

Other receivables 100,843

TOTAL ASSETS 423,945,011

LIABILITIES

Payable for investments purchased $ 10,984,704

Payable for fund shares redeemed 152,196

Accrued management fee 166,038

Other payables and accrued expenses 234,972

TOTAL LIABILITIES 11,537,910

NET ASSETS $ 412,407,101

Net Assets consist of:

Paid in capital $ 391,166,786

Undistributed net investment income 1,346,932

Accumulated undistributed net realized gain (loss) on 10,209,691
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 9,683,692
investments and assets and liabilities in foreign
currencies

NET ASSETS $ 412,407,101

CALCULATION OF MAXIMUM OFFERING PRICE $15.96
CLASS A:
NET ASSET VALUE and redemption price per share
($179,500,792 (divided by) 11,244,710 shares)

Maximum offering price per share (100/95.25 of $15.96) $16.76

CLASS B: $15.94
NET ASSET VALUE and offering price per share
($35,373,297 (divided by) 2,218,767 shares) A

INSTITUTIONAL CLASS: $16.07
NET ASSET VALUE, offering price and redemption price per
share ($197,533,012 (divided by) 12,290,634 shares)

</TABLE>

A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1994

INVESTMENT INCOME $ 7,091,955
Dividends

Interest 2,174,427

TOTAL INCOME 9,266,382

EXPENSES

Management fee $ 1,392,206

Transfer agent fees 336,394
Class A

Class B 33,926

Institutional Class 216,950

Distribution fees 573,570
Class A

Class B 70,795

Accounting fees and expenses 168,364

Non-interested trustees' compensation 1,487

Custodian fees and expenses 44,527

Registration fees 35,523
Class A

Class B 3,118

Institutional Class 4,620

Audit 53,907

Legal 18,011

Interest 2,509

Miscellaneous 10,503

Total expenses before reductions 2,966,410

Expense reductions (74,743) 2,891,667

NET INVESTMENT INCOME 6,374,715

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 27,730,134

Foreign currency transactions 1,091 27,731,225

Change in net unrealized appreciation (depreciation) on:

Investment securities (12,716,594)

Assets and liabilities in foreign currencies (296) (12,716,890)

NET GAIN (LOSS) 15,014,335

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 21,389,050
OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1994 1993

INCREASE (DECREASE) IN NET ASSETS

Operations $ 6,374,715 $ 5,415,180
Net investment income

Net realized gain (loss) 27,731,225 21,048,870

Change in net unrealized appreciation (depreciation) (12,716,890) 2,161,828

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 21,389,050 28,625,878
FROM OPERATIONS

Distributions to shareholders from:
Net investment income

Class A (1,149,252) (348,837)

Class B (65,384) -

Institutional Class (3,608,807) (4,132,840)

TOTAL DISTRIBUTIONS (4,823,443) (4,481,677)

Share transactions - net increase (decrease) 162,377,185 68,477,213

TOTAL INCREASE (DECREASE) IN NET ASSETS 178,942,792 92,621,414

NET ASSETS

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

End of period (including undistributed net investment $ 412,407,101 $ 233,464,309
income of $1,346,932 and $2,076,538, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS

CLASS A CLASS B
CLASS A PERIOD PERIOD ENDED
YEARS ENDED NOVEMBER 30, ENDED NOVEMBER
NOVEMBER 30 30,
,

1994 1993 1992 E 1994 F

SELECTED PER-SHARE DATA

Net asset value, beginning of $ 14.86 $ 12.86 $ 12.37 $ 15.21
period

Income from Investment
Operations

Net investment income .28 B .33 .13 .08 B

Net realized and unrealized gain 1.03 1.97 .47 .72
(loss) on investments

Total from investment operations 1.31 2.30 .60 .80

Less Distributions

From net investment income (.21) (.30) (.11) (.07)

Net asset value, end of period $ 15.96 $ 14.86 $ 12.86 $ 15.94

TOTAL RETURN A, D 8.84% 18.03% 4.88% 5.25%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 179,501 $ 42,326 $ 1,462 $ 35,373
(000 omitted)

Ratio of expenses to average 1.64% 1.77% 1.55% 2.18%
net assets C G G

Ratio of expenses to average net 1.67% 1.77% 1.55% 2.24%
assets before expense G G
reductions C

Ratio of net investment income to 1.69% 2.02% 3.39% 1.15%
average net assets G G

Portfolio turnover 140% 120% 51% 140%

</TABLE>

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS.
D TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
E FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALES OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
F FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALES OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
G ANNUALIZED
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1994

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 Class A, Class B, and Institutional Class shares, each of
which has equal rights as to assets and voting privileges. Each class has
exclusive voting rights with respect to its distribution plan. The fund
commenced sale of Class B shares on June 30, 1994. Investment income,
realized and unrealized capital gains and losses, and the common expenses
of the fund are allocated on a prorata basis to each class based on the
relative net assets of each class to the total net assets of the fund. Each
class of shares differs in its respective distribution, transfer agent,
registration, and certain other class-specific fees and expenses.
The following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined
in good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities maturing within
sixty days of their purchase date are valued at amortized cost or original
cost plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective December 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
from the effects of changes in market prices of those securities, but are
included with the net realized and unrealized gain or loss on investment
securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes 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 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 dividends are declared separately for each class,
while capital gain distributions are declared at the fund level and
allocated to each class on a prorata basis based on the number of shares
held by each class 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. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Accumulated 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 the beginning of the fiscal year 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 a decrease in accumulated net realized
gain on investments of $14,807,619.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. 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 any realized gain (loss) 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 (SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the
SEC, the fund, along with other registered investment companies having
management contracts with FMR, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
fund to borrow from, or lend money to, other participating funds.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $470,148,984 and $359,408,053, respectively, of which purchases
of U.S. government and government agency obligations aggregated
$17,410,138.
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. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
the fund's Class A shares ("Class A Plan") and Class B shares ("Class B
Plan"), pursuant to which the fund pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on annual rates of .65% and 1.00% (of which .75% represents a
distribution fee and .25% represents a shareholder service fee) of the
average net assets of the Class A and Class B shares, respectively. For the
period, the fund paid FDC $573,570 and $70,795 under the Class A Plan and
Class B Plan, respectively, of which $441,208 and $16,215 were paid to
securities dealers, banks and other financial institutions for the
distribution of Class A and Class B shares, 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 Plans also authorize 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 there
were no payments made to third parties.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares of the fund. For the period, FDC received sales
charges of $2,450,544 on sales of Class A shares of the fund, of which
$2,097,866 was paid
to securities dealers, banks, and other financial institutions. FDC also
receives the proceeds of a contingent deferred sales charge levied on Class
B share redemptions occurring within five years of purchase. The charge is
based on declining rates which range from 4% to 1% of the lesser of the
cost of shares at the initial date of purchase or the net asset value of
the redeemed shares, excluding any reinvested dividends
and capital gains. For the period, FDC received contingent deferred sales
charges of $30,093 on Class B share redemptions from the fund. When Class B
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. State Street Bank and Trust Company (State Street) is
the transfer, dividend disbursing, and shareholder servicing agent for the
fund's Class A shares, while Fidelity Investments Institutional Operations
Company (FIIOC), an affiliate of FMR (collectively, with State Street,
referred to as the Transfer Agents) acts in that capacity for the fund's
Class B and Institutional Class shares. The Transfer Agents receive fees
based on the type, size, number of accounts, and the number of transactions
made by shareholders of the respective classes of
the fund. With respect to the Class A
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
shares, State Street has delegated certain transfer, dividend paying, and
shareholder services to FIIOC for which FIIOC receives its allocable share
of all such fees. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. FSC maintains the funds' accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
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 $290,182 for the period.
5. INTERFUND LENDING
PROGRAM.
The fund participated in the interfund lending program as a lender. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $6,816,000 and $5,159,444,
respectively. The weighted average interest rate was 5.0%. Interest earned
from the interfund lending program amounted to $6,411 and is included in
interest income on the Statement of Operations.
6. 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 3.8%.
7. 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
$74,743 under this arrangement.
8. SHARE TRANSACTIONS.
Share transactions for the three classes were as follows:
SHARE TRANSACTIONS
SHARES DOLLARS
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1994 A 1993 1994 A 1993
CLASS A
Shares sold 11,106,459 3,085,105 $ 175,898,673 $ 44,678,778
Reinvestment of distributions from
net investment income 65,530 21,363 1,041,516 309,240
Shares redeemed (2,775,183) (372,214) (43,121,793) (5,470,725)
Net increase (decrease) 8,396,806 2,734,254 $ 133,818,396 $ 39,517,293
CLASS B
Shares sold 2,285,793 - $ 36,859,022 $ -
Reinvestment of distributions from
net investment income 3,660 - 60,066 -
Shares redeemed (70,686) - (1,147,207) -
Net increase (decrease) 2,218,767 - $ 35,771,881 $ -
INSTITUTIONAL CLASS
Shares sold 6,423,156 6,537,638 $ 103,045,500 $ 94,762,125
Reinvestment of distributions from
net investment income 77,502 122,850 1,232,865 1,739,396
Shares redeemed (7,012,674) (4,678,967) (111,491,457) (67,541,601)
Net increase (decrease) (512,016) 1,981,521 $ (7,213,092) $ 28,959,920
A SHARE TRANSACTIONS FOR THE CLASS B ARE FOR THE PERIOD JUNE 30, 1994
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1994.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Advisor Series III 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, 1994, 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 two
years in the
period then ended and for the period September 10, 1992 (commencement of
sale of Class A shares) to November 30, 1992 (Class A) and for the period
June 30, 1994 (commencement of sale of Class B shares) to November 30, 1994
(Class B). 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, 1994 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, 1994, 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 two years in
the period then ended and for the period September 10, 1992 (commencement
of sale of Class A shares) to November 30, 1992 (Class A) and for the
period June 30, 1994 (commencement of sale of Class B shares) to November
30, 1994 (Class B), in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 9, 1995
DISTRIBUTIONS

The Board of Trustees of Fidelity Advisor Equity Portfolio Income voted to
pay to shareholders of record at the opening of business on record date,
the following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Class A 12/19/94 12/16/94 $.07 $.28
Class B 12/19/94 12/16/94 $.06 $.28
Institutional Class 12/19/94 12/16/94 $.11 $.28
A total of 100% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
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 - Class A
Fidelity Investments Institutional
Operations company
Boston, MA - Class B
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income 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)
(registered trademark)

(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)

EQUITY PORTFOLIO INCOME -
INSTITUTIONAL CLASS
ANNUAL REPORT
NOVEMBER 30, 1994
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 7 The manager's review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 11 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 12 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 25 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 30 Notes to the financial statements.

REPORT OF INDEPENDENT 36 The auditors' opinion.
ACCOUNTANTS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Institutional 9.82% 65.21% 252.65%
Class

S&P 500(registered trademark) 1.05% 53.14% 287.95%

Average Equity Income Fund -1.54% 43.46% 202.60%

</TABLE>

CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one, five, or 10 years.
For example, if you invested $1,000 in a fund that then had a 5% return,
you would end up with $1,050. You can compare the Institutional Class'
returns to the performance of the Standard & Poor's Composite Index of 500
stocks - a common proxy for the U.S. stock market. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the average equity income fund, which currently reflects the
performance of 98 funds tracked by Lipper Analytical Services. Both
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Institutional 9.82% 10.56% 13.43%
Class

S&P 500(registered trademark) 1.05% 8.90% 14.52%

Average Equity Income Fund -1.54% 7.37% 11.38%

</TABLE>

AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' actual (or
cumulative) return and show you what would have happened if Institutional
Class had performed at a constant rate
each year.
$100,000 OVER TEN YEARS
FA Equity Port.: Inc.-Standard & Poor's
11/30/84 100000.00 100000.00
12/31/84 102929.68 102640.00
01/31/85 110485.05 110635.66
02/28/85 110682.35 111996.47
03/31/85 110483.81 112074.87
04/30/85 110583.62 111974.00
05/31/85 116203.11 118446.10
06/30/85 118121.31 120305.71
07/31/85 118324.27 120125.25
08/31/85 118528.27 119104.18
09/30/85 115855.48 115376.22
10/31/85 119985.79 120706.60
11/30/85 124859.90 128987.08
12/31/85 129248.28 135230.05
01/31/86 131663.16 135987.34
02/28/86 140238.09 146159.19
03/31/86 148641.47 154314.88
04/30/86 147763.88 152571.12
05/31/86 148204.63 160687.90
06/30/86 150196.92 163403.53
07/31/86 144411.56 154269.27
08/31/86 153123.16 165716.05
09/30/86 145938.50 152011.33
10/31/86 152367.01 160782.39
11/30/86 154178.21 164689.40
12/31/86 151787.06 160489.82
01/31/87 166699.05 182107.80
02/28/87 171708.78 189301.05
03/31/87 174853.63 194771.85
04/30/87 172577.88 193038.38
05/31/87 171689.62 194717.82
06/30/87 176653.21 204551.07
07/31/87 181769.88 214921.81
08/31/87 186779.79 222938.39
09/30/87 182394.08 218056.04
10/31/87 149337.59 171086.77
11/30/87 142957.86 156989.22
12/31/87 148391.09 168936.10
01/31/88 158540.12 176048.31
02/29/88 166273.78 184252.16
03/31/88 164098.24 178558.77
04/30/88 166442.50 180540.77
05/31/88 168485.70 182111.48
06/30/88 178127.01 190470.39
07/31/88 177808.92 189746.60
08/31/88 174291.12 183295.22
09/30/88 179441.00 191103.60
10/31/88 182677.09 196416.28
11/30/88 181539.42 193607.52
12/31/88 182856.72 196995.66
01/31/89 194574.07 211415.74
02/28/89 192915.30 206151.49
03/31/89 196750.26 210954.82
04/30/89 203956.62 221903.37
05/31/89 208836.77 230890.46
06/30/89 209681.59 229574.38
07/31/89 222924.64 250304.95
08/31/89 225824.20 255210.92
09/30/89 222911.45 254164.56
10/31/89 210690.04 248267.94
11/30/89 213457.73 253332.61
12/31/89 216565.99 259412.59
01/31/90 202871.65 242006.01
02/28/90 203233.92 245127.88
03/31/90 203233.92 251623.77
04/30/90 195367.98 245333.18
05/31/90 208233.23 269253.16
06/30/90 207310.22 267422.24
07/31/90 203969.50 266566.49
08/31/90 188480.50 242468.88
09/30/90 174227.25 230660.64
10/31/90 170267.54 229668.80
11/30/90 181644.00 244505.41
12/31/90 185642.96 251327.11
01/31/91 195088.97 262284.97
02/28/91 209037.74 281038.35
03/31/91 212373.83 287839.47
04/30/91 212368.79 288530.29
05/31/91 223999.15 300994.80
06/30/91 213718.06 287209.24
07/31/91 225414.12 300593.19
08/31/91 230188.24 307717.25
09/30/91 228995.62 302578.37
10/31/91 232811.03 306632.92
11/30/91 223370.07 294275.61
12/31/91 240982.69 327940.74
01/31/92 243408.73 321841.04
02/29/92 250929.01 326024.98
03/31/92 246852.18 319667.49
04/30/92 255650.38 329065.71
05/31/92 257907.15 330678.14
06/30/92 255035.63 325751.03
07/31/92 261659.93 339074.25
08/31/92 255447.97 332123.23
09/30/92 257533.62 336042.28
10/31/92 260666.12 337218.43
11/30/92 270070.02 348717.58
12/31/92 276997.22 353006.80
01/31/93 285412.38 355972.06
02/28/93 292800.12 360813.28
03/31/93 302520.54 368426.44
04/30/93 301462.49 359510.52
05/31/93 306352.64 369145.40
06/30/93 309557.93 370215.92
07/31/93 313838.28 368735.06
08/31/93 325206.33 382710.12
09/30/93 323270.58 379763.25
10/31/93 327142.08 387624.35
11/30/93 321119.74 383941.92
12/31/93 329077.83 388587.62
01/31/94 344563.85 401799.60
02/28/94 335960.51 390910.83
03/31/94 321642.61 373867.11
04/30/94 332905.52 378652.61
05/31/94 335504.65 384862.52
06/30/94 333507.96 375433.39
07/31/94 345068.40 387747.60
08/31/94 363390.62 403645.25
09/30/94 357473.58 393755.94
10/31/94 364495.77 402615.45
11/30/94 352645.82 387952.20

$100,000 OVER TEN YEARS: Let's say you invested $100,000 in Fidelity
Advisor Equity Portfolio Income - Institutional Class on November 30, 1984.
As the chart shows, by November 30, 1994, the value of your investment
would have grown to $352,646 - a 252.65% 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 $387,952 - a 287.95% 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)
On September 10, 1992, the fund began offering Class A shares, and on June
30, 1994, the fund began offering Class B shares to retail investors. All
performance information for Class A prior to September 10, 1992 reflects
the performance of the Institutional Class and therefore does not reflect
Class A's 12b-1 fee and different transfer agent fee arrangements (see
Notes to the Financial Statements), which if included, would have lowered
Class A's performance. All performance information for Class B prior to
June 30, 1994 reflects the performance of the Institutional Class up to
September 9, 1992, and the performance of Class A thereafter, and therefore
does not reflect Class B's different 12b-1 fee and transfer agent fee
arrangements (see Notes to the Financial Statements), which if included,
would have lowered Class B's performance. Average annual total returns
include the effect of Class A's maximum 4.75% sales charge and Class B's
contingent deferred sales charges of 4%, 1% and 0% for the past 1 year,
past 5 years and past 10 years total return figures, respectively.
Cumulative total returns exclude the effect of sales charges.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Class A 8.84% 62.28% 246.39%

Advisor Equity Portfolio Income - Class B 8.77% 62.17% 246.17%

AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Portfolio Income - Class A 3.67% 9.10% 12.67%

Advisor Equity Portfolio Income - Class B 4.77% 10.02% 13.22%

FUND TALK: THE MANAGER'S OVERVIEW

MARKET RECAP
Rising interest rates contributed
to below-average returns in the
U.S. stock market during the 12
months ended November 30,
1994. The Standard & Poor's 500
stock index finished the 12-month
period with a total return of 1.05%
- - below its historical annual
average return of more than 10%.
After two months of steady gains,
stocks stumbled from February
through June 1994. During that
time, the Federal Reserve Board
raised short-term interest rates
four times in an effort to curb
possible future inflation triggered
by a strengthening economy.
Higher rates hurt stocks because
they raise the cost of borrowing
for companies and consumers,
often dampening future corporate
profits. In addition, higher rates
often make bonds and other
fixed-income investments more
attractive relative to stocks.
Despite a fifth Fed rate hike in
August, the market rallied from
July through October, fueled by
strengthening corporate earnings
and a flurry of merger and
acquisition activity. Interest rate
concerns resurfaced in
November, when the Fed raised
rates again. Although returns in
overseas markets were mixed,
foreign stocks generally fared
better than those in the U.S. The
Morgan Stanley EAFE (Europe,
Australia, Far East) index
returned 14.84% for the 12
months ended November 30,
while the Morgan Stanley
Emerging Markets Free index
was up 17.44% during the same
period.
An interview with Bettina Doulton, Portfolio Manager of Fidelity Advisor
Equity Portfolio Income
Q. BETTINA, HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
A. The fund has held up quite well in a turbulent market environment. Over
the past 12 months, Fidelity Advisor Equity Portfolio Income -
Institutional Class had a total return of 9.82%. That compared favorably to
the average equity income fund, which returned -1.54% during the same
period, according to Lipper Analytical Services.
Q. HOW DID THE FUND MANAGE TO OUTDISTANCE MOST OF ITS PEERS?
A. Successful individual stock picking was the primary contributor to the
fund's performance over the past 12 months. Rising interest rates made the
stock market much more volatile in 1994 than 1993, and various sectors of
the market came in and out of favor very quickly. That said, the fund has
done well recently by emphasizing health care stocks, in which it had an
11.1% stake on November 30. Many of these stocks had been beaten down over
the previous 18 months or so, mainly due to concerns about impending health
care reform. By late spring, their stock valuations - prices relative to
sales and earnings - had become attractive. The health care industry had
addressed one of the key elements that reform aimed to achieve: increased
competition had led to lower prices. Health care companies' revenue growth
then improved as reform appeared to be shelved for the time being and price
erosion eased. In addition, many companies had begun to focus on cost
control. The stocks took off once the improved industry environment was
better understood and prospects for merger activity were better
appreciated.
Q. WHICH WERE AMONG THE TOP
PERFORMERS?
A. Pharmaceutical company American Cyanamid - which was the fund's fourth
largest holding six months ago - did extremely well. New management was in
the process of successfully restructuring the company's operations, making
it an attractive takeover candidate. In August, American Home Products bid
for American Cyanamid at a significant premium, allowing me to sell the
stock at a nice profit. Interestingly enough, I've bought American Home
Products because I feel that the newly merged company has an excellent
opportunity to grow earnings through aggressive cost cutting. The stock has
done well recently while offering an attractive yield. Other top performers
in the health care sector included St. Jude Medical, and pharmaceutical
companies Pfizer, Schering-Plough and Warner-Lambert.
Q. YOU MENTIONED THAT IT HAS BEEN A STOCK PICKER'S MARKET IN 1994. WHICH
INDIVIDUAL STORIES PROVED INTERESTING?
A. Fortunately, several of the fund's largest investments held up well in a
difficult market. Although their businesses are vastly different, the
common thread that ties several of them together is a successful story of
corporate restructuring. Four examples include British Petroleum, IBM,
American Express and Scott Paper. These companies are doing what it takes
to run more profitable businesses: cutting expenses, selling non-core
assets, paying down debt and buying back their own stock.
Q. SIX MONTHS AGO, YOU MENTIONED THAT CYCLICAL STOCKS - THOSE THAT TEND TO
RISE AND FALL WITH THE ECONOMY - HAD HELPED THE FUND. HOW HAVE THEY DONE
RECENTLY?
A. Due to the strengthening economy, demand for commodities such as
chemicals, metals and paper has improved, helping the business prospects of
companies in these industries. While cyclical stocks did perform well in
late 1993 and early 1994, many have suffered recently as investors have
worried that higher interest rates might diminish future earnings for these
companies. Accordingly, I've cut back on the fund's stake in cyclicals.
Instead of owning a basketful of these stocks, I'm sticking with selected
individual names that, for their own reasons, continue to appear
attractive. Examples include chemical companies Union Carbide and Lyondell,
paper manufacturer Champion International, and aluminum manufacturer Alcan.
Q. YOU'VE ALSO DECREASED THE FUND'S STAKE IN FINANCIAL STOCKS - FROM 17.0%
SIX MONTHS AGO TO 7.4% ON NOVEMBER 30. WHY?
A. Most of that decrease was due to my cutting back on bank stocks. Several
had become relatively expensive, and rising interest rates were putting
pressure on their profit margins. The financial stocks I've held onto are
mostly diversified financial services companies, such as American Express,
which I feel can sustain positive profit growth despite higher interest
rates.
Q. AMID THIS VOLATILE MARKET, WERE THERE SOME INVESTMENTS THAT DIDN'T GO
YOUR WAY?
A. There were. Perhaps the biggest was the performance of the Federal
National Mortgage Association (Fannie Mae), which was among the fund's top
10 investments on November 30. Fannie Mae purchases home mortgages, then
resells them on the secondary market. As interest rates rose in 1994,
earnings growth slowed, which caused investors to sell the stock quite
heavily. However, I still believe that housing market dynamics and the
company's business prospects are attractive over the long term; I'm still
optimistic about the stock.
Q. ANY OTHERS?
A. Some of the fund's energy stocks were volatile - but overall, relatively
flat performers over the past 12 months. The oil service company stocks in
which the fund is invested - such as Halliburton and Schlumberger - got
little help from oil prices, which didn't rise significantly during the
period. However, these companies have restructured and trimmed expenses,
which should help future earnings even if oil prices do nothing.
Q. THE FUND'S INVESTMENTS IN CASH AND SHORT-TERM INSTRUMENTS HAS RISEN OVER
THE PAST SIX MONTHS, FROM 7.1% TO 17.2%. IS THIS A DEFENSIVE MOVE?
A. I have been somewhat cautious about investing new money coming into the
fund or proceeds from stock sales. Turbulent markets, such as we've seen
recently, call for investors to be patient and very price selective. In
fact, the larger-than-normal cash position will allow me to upgrade the
fund opportunistically going forward. I believe that the market could
remain volatile over the next several months, and - as stock valuations
move up and down - this cash will allow me to buy the stocks of high
quality companies at cheap valuations.
Q. YOU MENTIONED THAT MARKET VOLATILITY COULD CONTINUE FOR A WHILE. WHAT
KEY FACTORS COULD AFFECT THE FUND'S PERFORMANCE OVER THE NEXT SIX MONTHS?
A. I think we're already seeing evidence that stocks are facing increasing
competition for investors' dollars from fixed-income investments such as
bonds, money market funds and savings accounts. When interest rates rose,
these instruments began offering more attractive yields, which I think
could continue to put pressure on the stock market in 1995. Another
important variable is the economy. The full impact of the Federal Reserve
Board's interest rate hikes on economic growth remains to be seen. If the
economy slows too much, corporate earnings may suffer, which wouldn't be
good for the market. But if the Fed can help maintain slow but steady
economic growth without triggering higher inflation, the stocks of
companies that can successfully increase earnings, while keeping costs in
line, stand to make the strongest gains.

TOP FIVE STOCKS AS OF NOVEMBER 30, 1994
% OF FUND'S
% OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO

Philip Morris Companies, Inc. 3.5 2.8

British Petroleum PLC ADR 2.5 3.1

International Business Machines 2.4 0.9
Corp.

American Express Co. 2.4 2.0

Pfizer, Inc. 2.2 1.2

TOP FIVE BONDS AS OF NOVEMBER 30, 1994
(BY ISSUER, WITH MATURITIES MORE THAN ONE % OF FUND'S
YEAR) % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE BONDS
6 MONTHS AGO

U.S. Treasury Obligations 4.3 -

Westpoint Stevens, Inc. 0.4 0.7

Home Depot, Inc. 0.3 -

Stone Container Corp. 0.3 0.5

Canandaigua Wine, Inc. 0.2 0.4

TOP FIVE INDUSTRIES AS OF NOVEMBER 30, 1994
% OF FUND'S
% OF FUND'S INVESTMENTS
INVESTMENTS IN THESE INDUSTRIES
6 MONTHS AGO

Basic Industries 12.0 14.5

Energy 12.0 11.2

Health 11.1 9.6

Nondurables 8.0 6.1

Finance 7.4 17.0

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 74.6%
SHARES VALUE (NOTE 1)

6 1/4%, 2/15/03 Aaa 3,900,000 3,515,499
7 7/8% 11/15/04 Aaa 13,970,000 13,932,840
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $17,410,137) 17,448,339
REPURCHASE AGREEMENTS - 17.2%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71% dated
11/30/94 due 12/1/94 $ 70,300,149 70,289,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $398,303,424) $ 407,987,412
LEGEND
(e) Non-income producing
(f) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(g) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $2,972,017 or 0.7% of net
assets.
(h) 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 RATINGS S&P RATINGS
Aaa, Aa, A 4.7% AAA, AA, A 4.6%
Baa 0.3% BBB 0.3%
Ba 0.2% BB 0.3%
B 1.2% B 1.2%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.2%.
INCOME TAX INFORMATION
At November 30, 1994, the aggregate cost of investment securities for
income tax purposes was $398,606,238. Net unrealized appreciation
aggregated $9,381,174, of which $20,337,971 related to appreciated
investment securities and $10,956,797 related to depreciated investment
securities.
The fund hereby designates $4,938,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1994

ASSETS

Investment in securities, at value (including repurchase $ 407,987,412
agreements of $70,289,000) (cost $398,303,424) -
See accompanying schedule

Cash 3,623

Receivable for investments sold 9,767,153

Receivable for fund shares sold 4,782,259

Dividends receivable 920,791

Interest receivable 382,930

Other receivables 100,843

TOTAL ASSETS 423,945,011

LIABILITIES

Payable for investments purchased $ 10,984,704

Payable for fund shares redeemed 152,196

Accrued management fee 166,038

Other payables and accrued expenses 234,972

TOTAL LIABILITIES 11,537,910

NET ASSETS $ 412,407,101

Net Assets consist of:

Paid in capital $ 391,166,786

Undistributed net investment income 1,346,932

Accumulated undistributed net realized gain (loss) on 10,209,691
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 9,683,692
investments and assets and liabilities in foreign
currencies

NET ASSETS $ 412,407,101

CALCULATION OF MAXIMUM OFFERING PRICE $15.96
CLASS A:
NET ASSET VALUE and redemption price per share
($179,500,792 (divided by) 11,244,710 shares)

Maximum offering price per share (100/95.25 of $15.96) $16.76

CLASS B: $15.94
NET ASSET VALUE and offering price per share
($35,373,297 (divided by) 2,218,767 shares) A

INSTITUTIONAL CLASS: $16.07
NET ASSET VALUE, offering price and redemption price per
share ($197,533,012 (divided by) 12,290,634 shares)

</TABLE>

A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1994

INVESTMENT INCOME $ 7,091,955
Dividends

Interest 2,174,427

TOTAL INCOME 9,266,382

EXPENSES

Management fee $ 1,392,206

Transfer agent fees 336,394
Class A

Class B 33,926

Institutional Class 216,950

Distribution fees 573,570
Class A

Class B 70,795

Accounting fees and expenses 168,364

Non-interested trustees' compensation 1,487

Custodian fees and expenses 44,527

Registration fees 35,523
Class A

Class B 3,118

Institutional Class 4,620

Audit 53,907

Legal 18,011

Interest 2,509

Miscellaneous 10,503

Total expenses before reductions 2,966,410

Expense reductions (74,743) 2,891,667

NET INVESTMENT INCOME 6,374,715

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 27,730,134

Foreign currency transactions 1,091 27,731,225

Change in net unrealized appreciation (depreciation) on:

Investment securities (12,716,594)

Assets and liabilities in foreign currencies (296) (12,716,890)

NET GAIN (LOSS) 15,014,335

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 21,389,050
OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1994 1993

INCREASE (DECREASE) IN NET ASSETS

Operations $ 6,374,715 $ 5,415,180
Net investment income

Net realized gain (loss) 27,731,225 21,048,870

Change in net unrealized appreciation (depreciation) (12,716,890) 2,161,828

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 21,389,050 28,625,878
FROM OPERATIONS

Distributions to shareholders from:
Net investment income

Class A (1,149,252) (348,837)

Class B (65,384) -

Institutional Class (3,608,807) (4,132,840)

TOTAL DISTRIBUTIONS (4,823,443) (4,481,677)

Share transactions - net increase (decrease) 162,377,185 68,477,213

TOTAL INCREASE (DECREASE) IN NET ASSETS 178,942,792 92,621,414

NET ASSETS

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

End of period (including undistributed net investment $ 412,407,101 $ 233,464,309
income of $1,346,932 and $2,076,538, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS INSTITUTIONAL CLASS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,

1994 1993 1992 1991 1990

SELECTED PER-SHARE DATA

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

Income from Investment
Operations

Net investment income .41 B .39 .49 .63 E .69

Net realized and unrealized 1.05 2.02 1.79 1.52 (2.42)
gain (loss) on investments

Total from investment 1.46 2.41 2.28 2.15 (1.73)
operations

Less Distributions

From net investment income (.32) (.36) (.48) (.59) (.72)

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

Total distributions (.32) (.36) (.48) (.59) (1.02)

Net asset value, end of period $ 16.07 $ 14.93 $ 12.88 $ 11.08 $ 9.52

TOTAL RETURN A 9.82% 18.90% 20.91% 22.97% (14.90)%

RATIOS AND SUPPLEMENTAL
DATA

Net assets, end of period $ 197,533 $ 191,138 $ 139,391 $ 168,590 $ 253,049
(000 omitted)

Ratio of expenses to average .71% .79% .71% .67% .61%
net assets C

Ratio of expenses to average .73% .80% .79% .77% .71%
net assets before expense D D D
reductions C

Ratio of net investment income 2.62% 3.00% 3.77% 5.66% 6.11%
to average net assets

Portfolio turnover 140% 120% 51% 91% 103%

</TABLE>

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS.
D THE INVESTMENT ADVISER REDUCED THE ANNUAL MANAGEMENT FEE OF 0.50% BY
0.10% THROUGH SEPTEMBER 10, 1992.
E INCLUDES $0.04 PER SHARE FROM FOREIGN TAXES RECOVERED.
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1994

9. 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 Class A, Class B, and Institutional Class shares, each of
which has equal rights as to assets and voting privileges. Each class has
exclusive voting rights with respect to its distribution plan. The fund
commenced sale of Class B shares on June 30, 1994. Investment income,
realized and unrealized capital gains and losses, and the common expenses
of the fund are allocated on a prorata basis to each class based on the
relative net assets of each class to the total net assets of the fund. Each
class of shares differs in its respective distribution, transfer agent,
registration, and certain other class-specific fees and expenses.
The following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined
in good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities maturing within
sixty days of their purchase date are valued at amortized cost or original
cost plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective December 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
from the effects of changes in market prices of those securities, but are
included with the net realized and unrealized gain or loss on investment
securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes 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 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 dividends are declared separately for each class,
while capital gain distributions are declared at the fund level and
allocated to each class on a prorata basis based on the number of shares
held by each class 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. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Accumulated 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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 the beginning of the fiscal year 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 a decrease in accumulated net realized
gain on investments of $14,807,619.
10. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. 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 any realized gain (loss) 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 (SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the
SEC, the fund, along with other registered investment companies having
management contracts with FMR, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
fund to borrow from, or lend money to, other participating funds.
11. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $470,148,984 and $359,408,053, respectively, of which purchases
of U.S. government and government agency obligations aggregated
$17,410,138.
12. 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. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
the fund's Class A shares ("Class A Plan") and Class B shares ("Class B
Plan"), pursuant to which the fund pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on annual rates of .65% and 1.00% (of which .75% represents a
distribution fee and .25% represents a shareholder service fee) of the
average net assets of the Class A and Class B shares, respectively. For the
period, the fund paid FDC $573,570 and $70,795 under the Class A Plan and
Class B Plan, respectively, of which $441,208 and $16,215 were paid to
securities dealers, banks and other financial institutions for the
distribution of Class A and Class B shares, 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 Plans also authorize 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 there
were no payments made to third parties.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares of the fund. For the period, FDC received sales
charges of $2,450,544 on sales of Class A shares of the fund, of which
$2,097,866 was paid
to securities dealers, banks, and other financial institutions. FDC also
receives the proceeds of a contingent deferred sales charge levied on Class
B share redemptions occurring within five years of purchase. The charge is
based on declining rates which range from 4% to 1% of the lesser of the
cost of shares at the initial date of purchase or the net asset value of
the redeemed shares, excluding any reinvested dividends
and capital gains. For the period, FDC received contingent deferred sales
charges of $30,093 on Class B share redemptions from the fund. When Class B
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. State Street Bank and Trust Company (State Street) is
the transfer, dividend disbursing, and shareholder servicing agent for the
fund's Class A shares, while Fidelity Investments Institutional Operations
Company (FIIOC), an affiliate of FMR (collectively, with State Street,
referred to as the Transfer Agents) acts in that capacity for the fund's
Class B and Institutional Class shares. The Transfer Agents receive fees
based on the type, size, number of accounts, and the number of transactions
made by shareholders of the respective classes of
the fund. With respect to the Class A
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
shares, State Street has delegated certain transfer, dividend paying, and
shareholder services to FIIOC for which FIIOC receives its allocable share
of all such fees. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. FSC maintains the funds' accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
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 $290,182 for the period.
13. INTERFUND LENDING
PROGRAM.
The fund participated in the interfund lending program as a lender. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $6,816,000 and $5,159,444,
respectively. The weighted average interest rate was 5.0%. Interest earned
from the interfund lending program amounted to $6,411 and is included in
interest income on the Statement of Operations.
14. 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 3.8%.
15. 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
$74,743 under this arrangement.
16. SHARE TRANSACTIONS.
Share transactions for the three classes were as follows:
SHARE TRANSACTIONS
SHARES DOLLARS
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1994 A 1993 1994 A 1993
CLASS A
Shares sold 11,106,459 3,085,105 $ 175,898,673 $ 44,678,778
Reinvestment of distributions from
net investment income 65,530 21,363 1,041,516 309,240
Shares redeemed (2,775,183) (372,214) (43,121,793) (5,470,725)
Net increase (decrease) 8,396,806 2,734,254 $ 133,818,396 $ 39,517,293
CLASS B
Shares sold 2,285,793 - $ 36,859,022 $ -
Reinvestment of distributions from
net investment income 3,660 - 60,066 -
Shares redeemed (70,686) - (1,147,207) -
Net increase (decrease) 2,218,767 - $ 35,771,881 $ -
INSTITUTIONAL CLASS
Shares sold 6,423,156 6,537,638 $ 103,045,500 $ 94,762,125
Reinvestment of distributions from
net investment income 77,502 122,850 1,232,865 1,739,396
Shares redeemed (7,012,674) (4,678,967) (111,491,457) (67,541,601)
Net increase (decrease) (512,016) 1,981,521 $ (7,213,092) $ 28,959,920
A SHARE TRANSACTIONS FOR THE CLASS B ARE FOR THE PERIOD JUNE 30, 1994
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1994.
REPORT OF INDEPENDENT ACCOUNTANTS

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 - Class A
Fidelity Investments Institutional Operations Company
Boston, MA - Class B
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income 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)
(registered trademark)