FIDELITY ADVISOR SERIES III, N-30D, 1996-07-19

FIDELITY ADVISOR SERIES III
N-30D, 1996-07-19

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(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)

EQUITY INCOME
FUND - CLASS A AND CLASS B
SEMIANNUAL REPORT
MAY 31, 1996
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 8 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 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 30 Notes to the financial statements.

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY 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:
Although stocks have managed to post solid returns through the first five
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term. You also can help to manage some of the risks of investing
through diversification. 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 types of 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. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
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. 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 INCOME FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate 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 class' total return
includes changes in 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 income to
measure performance.
The initial offering of Class A shares took place on September 10, 1992.
Class A shares bear a .50% 12b-1 fee (.65% prior to January 1, 1996). This
fee is reflected in the returns below for periods after September 10, 1992.
Returns prior to that date are those of Institutional Class, the original
class of the fund. Had Class A's 12b-1 fee been reflected, returns prior to
September 10, 1992 would have been lower. If Fidelity had not reimbursed
certain expenses, the five and 10 year total returns would have been lower.
Effective January 1, 1996, the maximum 4.75% sales charge on Class A shares
was reduced to 3.50%.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 PAST
MONTHS YEAR YEARS 10 YEARS

Advisor Equity Income Fund - Class 8.37% 22.24% 116.96% 227.91%
A

Advisor Equity Income Fund - Class 4.58% 17.96% 109.36% 216.44%
A
(incl. max. 3.50% sales charge)

S&P 500(registered trademark) 11.79% 28.44% 97.37% 269.71%

Equity Income Funds Average 10.11% 23.40% 86.96% 196.59%

CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, one year, five years or 10
years. For example, if you invested $1,000 in a fund that had a 5% return,
over the past year, the value of your investment would be $1,050. You can
compare Class A's returns to the performance of the Standard & Poor's 500
Index - 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 equity
income funds average, which reflects the performance of 149 funds with
similar objectives tracked by Lipper Analytical Services over the past six
months. Both benchmarks include reinvested dividends and capital gains, if
any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST PAST
YEAR 5 YEARS 10 YEARS

Advisor Equity Income Fund - Class A 22.24% 16.75% 12.61%

Advisor Equity Income Fund - Class A 17.96% 15.93% 12.21%
(incl. max. 3.50% sales charge)

S&P 500 28.44% 14.56% 13.94%

Equity Income Funds Average 23.40% 13.25% 11.18%

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
IMAHDR PRASUN SHR__CHT 19960531 19960617 151457 S00000000000001
FA Equity Income -CL A SP Standard & Poor 500
00280 SP001
1986/05/31 9650.00 10000.00
1986/06/30 9779.72 10169.00
1986/07/31 9403.02 9600.55
1986/08/31 9970.26 10312.91
1986/09/30 9502.45 9460.04
1986/10/31 9921.02 10005.88
1986/11/30 10038.96 10249.02
1986/12/31 9883.26 9987.67
1987/01/31 10854.22 11333.01
1987/02/28 11180.42 11780.67
1987/03/31 11385.19 12121.13
1987/04/30 11237.01 12013.25
1987/05/31 11179.17 12117.76
1987/06/30 11502.36 12729.71
1987/07/31 11835.52 13375.11
1987/08/31 12161.73 13874.00
1987/09/30 11876.17 13570.16
1987/10/31 9723.77 10647.15
1987/11/30 9308.37 9769.82
1987/12/31 9662.14 10513.31
1988/01/31 10322.97 10955.92
1988/02/29 10826.53 11466.46
1988/03/31 10684.88 11112.15
1988/04/30 10837.52 11235.49
1988/05/31 10970.56 11333.24
1988/06/30 11598.33 11853.44
1988/07/31 11577.61 11808.39
1988/08/31 11348.56 11406.91
1988/09/30 11683.88 11892.84
1988/10/31 11894.59 12223.46
1988/11/30 11820.52 12048.67
1988/12/31 11906.29 12259.52
1989/01/31 12669.24 13156.92
1989/02/28 12561.23 12829.31
1989/03/31 12810.94 13128.23
1989/04/30 13280.16 13809.59
1989/05/31 13597.92 14368.88
1989/06/30 13652.93 14286.97
1989/07/31 14515.22 15577.09
1989/08/31 14704.02 15882.40
1989/09/30 14514.36 15817.28
1989/10/31 13718.59 15450.32
1989/11/30 13898.80 15765.51
1989/12/31 14101.19 16143.88
1990/01/31 13209.51 15060.62
1990/02/28 13233.10 15254.91
1990/03/31 13233.10 15659.16
1990/04/30 12720.93 15267.68
1990/05/31 13558.62 16756.28
1990/06/30 13498.52 16642.34
1990/07/31 13281.00 16589.08
1990/08/31 12272.47 15089.43
1990/09/30 11344.40 14354.57
1990/10/31 11086.57 14292.85
1990/11/30 11827.32 15216.17
1990/12/31 12087.71 15640.70
1991/01/31 12702.76 16322.63
1991/02/28 13611.00 17489.70
1991/03/31 13828.22 17912.95
1991/04/30 13827.90 17955.94
1991/05/31 14585.18 18731.64
1991/06/30 13915.75 17873.73
1991/07/31 14677.31 18706.65
1991/08/31 14988.17 19149.99
1991/09/30 14910.51 18830.19
1991/10/31 15158.94 19082.51
1991/11/30 14544.22 18313.49
1991/12/31 15691.02 20408.55
1992/01/31 15848.99 20028.95
1992/02/29 16338.65 20289.33
1992/03/31 16073.20 19893.69
1992/04/30 16646.08 20478.56
1992/05/31 16793.02 20578.91
1992/06/30 16606.05 20272.28
1992/07/31 17037.37 21101.42
1992/08/31 16632.90 20668.84
1992/09/30 16741.60 20912.73
1992/10/31 16959.10 20985.93
1992/11/30 17557.76 21701.55
1992/12/31 17995.00 21968.47
1993/01/31 18556.20 22153.01
1993/02/28 19036.66 22454.29
1993/03/31 19654.93 22928.08
1993/04/30 19558.58 22373.22
1993/05/31 19862.31 22972.82
1993/06/30 20056.42 23039.44
1993/07/31 20334.13 22947.28
1993/08/31 21043.76 23816.98
1993/09/30 20904.30 23633.59
1993/10/31 21155.32 24122.81
1993/11/30 20723.01 23893.64
1993/12/31 21239.00 24182.76
1994/01/31 22215.18 25004.97
1994/02/28 21629.47 24327.33
1994/03/31 20703.27 23266.66
1994/04/30 21418.14 23564.48
1994/05/31 21558.31 23950.93
1994/06/30 21416.18 23364.14
1994/07/31 22148.36 24130.48
1994/08/31 23288.86 25119.83
1994/09/30 22893.48 24504.39
1994/10/31 23345.70 25055.74
1994/11/30 22554.32 24143.21
1994/12/31 22610.85 24501.26
1995/01/31 22957.59 25136.57
1995/02/28 23766.67 26116.15
1995/03/31 24534.23 26886.83
1995/04/30 25188.28 27678.65
1995/05/31 25885.93 28784.97
1995/06/30 26249.98 29453.64
1995/07/31 27198.42 30430.32
1995/08/31 27519.43 30506.70
1995/09/30 28365.38 31794.09
1995/10/31 28043.38 31680.58
1995/11/30 29199.65 33071.36
1995/12/31 29970.02 33708.31
1996/01/31 30858.42 34855.74
1996/02/29 30963.79 35178.86
1996/03/31 31190.17 35517.63
1996/04/30 31401.73 36041.16
1996/05/31 31643.51 36970.66
IMATRL PRASUN SHR__CHT 19960531 19960617 151502 R00000000000123

$10,000 OVER TEN YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Equity Income Fund - Class A on May 31, 1986, and the
current maximum 3.50% sales charge was paid. As the chart shows, by May 31,
1996, the value of the investment would have grown to $31,644 - a 216.44%
increase on the 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 $36,971 - a 269.71% 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 INCOME FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate 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 class' total return
includes changes in 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 income to
measure performance.
Initial offering of Class B shares took place on June 30, 1994. Class B
shares bear a 1.00% 12b-1/shareholder service fee. This fee is not
reflected in returns prior to that date. Returns between September 10, 1992
and June 30, 1994 are those of Class A, and reflect Class A's .65% 12b-1
fee. Returns prior to September 10, 1992 are those of Institutional Class,
the original class of the fund. Had Class B's 12b-1 fee been reflected,
prior returns would have been lower. Class B's contingent deferred sales
charges included in the past six months, past 1 year, past 5 years, and
past 10 years total return figures are 4%, 4%, 1% and 0%, respectively. If
Fidelity had not reimbursed certain expenses, the past five and 10 year
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Advisor Equity Income Fund - 8.07% 21.68% 115.36% 225.50%
Class B

Advisor Equity Income Fund - Class B 4.07% 17.68% 114.36% 225.50%
(incl. contingent deferred sales
charge)

S&P 500(registered trademark) 11.79% 28.44% 97.37% 269.71%

Equity Income Funds Average 10.11% 23.40% 86.96% 196.59%

CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, one year, five years or 10
years. For example, if you invested $1,000 in a fund that had a 5% return,
over the past year, the value of your investment would be $1,050. You can
compare Class B's returns to the performance of the Standard & Poor's 500
Index - 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 equity
income funds average, which reflects the performance of 149 funds with
similar objectives tracked by Lipper Analytical Services over the past six
months. Both benchmarks include reinvested dividends and capital gains, if
any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Income Fund - Class B 21.68% 16.58% 12.53%

Advisor Equity Income Fund - Class B 17.68% 16.47% 12.53%
(incl. contingent deferred sales charge)

S&P 500 28.44% 14.56% 13.94%

Equity Income Funds Average 23.40% 13.25% 11.18%

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
IMAHDR PRASUN SHR__CHT 19960531 19960617 151218 S00000000000001
FA Equity Income -CL B SP Standard & Poor 500
00180 SP001
1986/05/31 10000.00 10000.00
1986/06/30 10134.43 10169.00
1986/07/31 9744.07 9600.55
1986/08/31 10331.87 10312.91
1986/09/30 9847.09 9460.04
1986/10/31 10280.85 10005.88
1986/11/30 10403.06 10249.02
1986/12/31 10241.72 9987.67
1987/01/31 11247.90 11333.01
1987/02/28 11585.93 11780.67
1987/03/31 11798.12 12121.13
1987/04/30 11644.57 12013.25
1987/05/31 11584.63 12117.76
1987/06/30 11919.55 12729.71
1987/07/31 12264.79 13375.11
1987/08/31 12602.83 13874.00
1987/09/30 12306.91 13570.16
1987/10/31 10076.45 10647.15
1987/11/30 9645.98 9769.82
1987/12/31 10012.58 10513.31
1988/01/31 10697.38 10955.92
1988/02/29 11219.20 11466.46
1988/03/31 11072.41 11112.15
1988/04/30 11230.59 11235.49
1988/05/31 11368.45 11333.24
1988/06/30 12018.99 11853.44
1988/07/31 11997.53 11808.39
1988/08/31 11760.17 11406.91
1988/09/30 12107.65 11892.84
1988/10/31 12326.00 12223.46
1988/11/30 12249.24 12048.67
1988/12/31 12338.12 12259.52
1989/01/31 13128.74 13156.92
1989/02/28 13016.82 12829.31
1989/03/31 13275.58 13128.23
1989/04/30 13761.82 13809.59
1989/05/31 14091.11 14368.88
1989/06/30 14148.11 14286.97
1989/07/31 15041.68 15577.09
1989/08/31 15237.32 15882.40
1989/09/30 15040.79 15817.28
1989/10/31 14216.16 15450.32
1989/11/30 14402.90 15765.51
1989/12/31 14612.63 16143.88
1990/01/31 13688.62 15060.62
1990/02/28 13713.06 15254.91
1990/03/31 13713.06 15659.16
1990/04/30 13182.31 15267.68
1990/05/31 14050.38 16756.28
1990/06/30 13988.10 16642.34
1990/07/31 13762.69 16589.08
1990/08/31 12717.58 15089.43
1990/09/30 11755.86 14354.57
1990/10/31 11488.68 14292.85
1990/11/30 12256.29 15216.17
1990/12/31 12526.12 15640.70
1991/01/31 13163.48 16322.63
1991/02/28 14104.67 17489.70
1991/03/31 14329.77 17912.95
1991/04/30 14329.43 17955.94
1991/05/31 15114.18 18731.64
1991/06/30 14420.47 17873.73
1991/07/31 15209.65 18706.65
1991/08/31 15531.78 19149.99
1991/09/30 15451.31 18830.19
1991/10/31 15708.75 19082.51
1991/11/30 15071.73 18313.49
1991/12/31 16260.13 20408.55
1992/01/31 16423.82 20028.95
1992/02/29 16931.25 20289.33
1992/03/31 16656.17 19893.69
1992/04/30 17249.82 20478.56
1992/05/31 17402.09 20578.91
1992/06/30 17208.34 20272.28
1992/07/31 17655.31 21101.42
1992/08/31 17236.16 20668.84
1992/09/30 17348.81 20912.73
1992/10/31 17574.19 20985.93
1992/11/30 18194.57 21701.55
1992/12/31 18647.67 21968.47
1993/01/31 19229.23 22153.01
1993/02/28 19727.10 22454.29
1993/03/31 20367.80 22928.08
1993/04/30 20267.96 22373.22
1993/05/31 20582.71 22972.82
1993/06/30 20783.86 23039.44
1993/07/31 21071.64 22947.28
1993/08/31 21807.00 23816.98
1993/09/30 21662.49 23633.59
1993/10/31 21922.61 24122.81
1993/11/30 21474.62 23893.64
1993/12/31 22009.32 24182.76
1994/01/31 23020.91 25004.97
1994/02/28 22413.96 24327.33
1994/03/31 21454.16 23266.66
1994/04/30 22194.96 23564.48
1994/05/31 22340.22 23950.93
1994/06/30 22192.93 23364.14
1994/07/31 22951.66 24130.48
1994/08/31 24148.13 25119.83
1994/09/30 23738.27 24504.39
1994/10/31 24177.87 25055.74
1994/11/30 23357.29 24143.21
1994/12/31 23416.22 24501.26
1995/01/31 23745.60 25136.57
1995/02/28 24569.06 26116.15
1995/03/31 25379.33 26886.83
1995/04/30 26041.66 27678.65
1995/05/31 26749.16 28784.97
1995/06/30 27110.98 29453.64
1995/07/31 28092.72 30430.32
1995/08/31 28409.89 30506.70
1995/09/30 29270.55 31794.09
1995/10/31 28922.45 31680.58
1995/11/30 30118.10 33071.36
1995/12/31 30899.20 33708.31
1996/01/31 31785.87 34855.74
1996/02/29 31894.73 35178.86
1996/03/31 32112.85 35517.63
1996/04/30 32315.60 36041.16
1996/05/31 32549.55 36970.66
IMATRL PRASUN SHR__CHT 19960531 19960617 151223 R00000000000123

$10,000 OVER TEN YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Equity Income Fund - Class B on May 31, 1986. As the
chart shows, by May 31, 1996, the value of the investment would have grown
to $32,550 - a 225.50% increase on the 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 $36,971 - a
269.71% 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)
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Robert Chow, Portfolio Manager of Fidelity Advisor Equity
Income Fund
NOTE TO SHAREHOLDERS: On March 26, 1996, Bob Chow became manager of the
fund, replacing Bettina Doulton.
Q. HOW DID THE FUND PERFORM, BOB?
A. For the six months ended May 31, 1996, the fund's Class A and Class B
shares returned 8.37% and 8.07%, respectively. For the past year, the
returns for both share classes stood at 22.24% and 21.68%, respectively.
For the same time periods, the equity income funds average, as tracked by
Lipper Analytical Services, was 10.11% for six months and 23.40% for the
year. Additionally, the Standard & Poor's 500 Index stood at 11.79% for six
months and 28.44% for the year.
Q. WHY DID THE FUND UNDERPERFORM?
A. During the period, the fund had a large exposure to
interest-rate-sensitive stocks. Generally, these include finance, utility
and non-durable goods companies. When interest rates rose in the first
quarter of 1996, many of these companies were hurt. Additionally, the fund
had a sizable position in bonds. As investors recently have seen, bonds
were hurt by rising interest rates.
Q. WHAT HAVE YOU DONE SINCE TAKING OVER THE FUND?
A. In addition to lowering the bond exposure in the fund, I've attempted to
lower its overall interest-rate sensitivity and reduce some of its large
weightings in individual stocks. Although the table on page 11 indicates
the fund's top holdings represent a higher percentage of the fund's assets
than six months ago, I've actually reduced these individual positions
significantly since I became manager. I think this makes sense from a
risk/reward standpoint. Even the most conservative stocks can have large
day-to-day price fluctuations. If you have a large exposure to one
particular stock, a big downward movement is going to show up in the fund's
total return. Additionally, lowering large individual positions dovetails
with my style as a value investor. For me to build a large position in any
one stock, its valuation has to be extremly cheap.
Q. DOES THIS HOLD TRUE FOR YOUR SECTOR WEIGHTINGS AS WELL?
A. Sure. For example, I believe the consumer non-durable sector - which
contains companies that make consumer products such as clothing or food -
was very expensive, and I lowered the fund's exposure to it. At such high
valuations, one is probably going to get very little reward in exchange for
taking on a greater amount of risk.
Q. YOU'VE STATED THAT YOU ATTEMPTED TO LOWER THE FUND'S INTEREST-RATE
SENSITIVITY DURING THE PERIOD. HOWEVER, FINANCE - AN AREA THAT YOU
CHARACTERIZED AS BEING HISTORICALLY INTEREST-RATE SENSITIVE- REMAINS A
LARGE PERCENTAGE OF THE FUND . . .
A. Not all finance stocks are beholden to interest rate changes. For
example, consumer finance companies and credit card companies did well as
the economy expanded - which is also when interest rates generally rise. As
the economy grows, people spend more and thus often turn to credit to
finance their purchases. Some of the finance stocks that benefited from
heightened economic activity were American Express and Citicorp.
Additionally, over the past year, bank stocks were the beneficiaries of a
flurry of merger and acquisition activity.
Q. A HIGHER-THAN-EXPECTED EMPLOYMENT REPORT IN MARCH CAUSED CYCLICAL STOCKS
TO OUTPERFORM AS INVESTORS PERCEIVED THE ECONOMY TO BE IN THE FIRST STAGES
OF AN EXPANSION. WAS THE FUND ABLE TO TAKE ADVANTAGE OF THE RUN-UP IN
CYCLICAL STOCKS?
A. For much of the time I've managed the fund, I haven't touched cyclical
stocks because, in general, I think they became overvalued. After that
initial jump in March, however, many of these stocks have since come back
to earth. Some cyclical stocks I found attractive during the period
included WMX Technologies - formerly Waste Management - and Nucor, a steel
company.
Q. THE FUND'S POSITION IN REGIONAL BELL OPERATING COMPANIES (RBOCS) HAS
DECREASED SIGNIFICANTLY OVER THE PERIOD. ISN'T THE FUND MISSING OUT ON THE
GREAT OPPORTUNITIES OFFERED BY THE NEW TELECOMMUNICATIONS LAW AND BY ALL OF
THE MERGER ANNOUNCEMENTS WE'VE SEEN?
A. The reduction in this area was done purely for valuation reasons. In my
opinion, RBOC stocks became too expensive. Also, you mentioned the new
opportunities in this sector. I would say, one person's "opportunity" is
another person's uncertainty. In my view, it doesn't make sense to pay a
high price for stocks in an industry whose future is unclear.
Q. THE ENERGY SECTOR HAS BEEN HOT THIS YEAR WITH RISING COMMODITY PRICES
AND FAVORABLE SUPPLY/DEMAND CONDITIONS IN THE OIL INDUSTRY. GIVEN THE
EMPHASIS YOU PUT ON VALUATION, THEN, DID YOU REDUCE THE FUND'S EXPOSURE TO
THIS AREA OF THE MARKET?
A. Actually the fund's position increased slightly. Of course, many energy
stocks have performed well and many, in time, may become overvalued. The
extent of my buying activity in the energy sector consisted of stocks that
I found undervalued relative to the market, such as Baker Hughes and
Western Atlas.
Q. SINCE YOU TOOK OVER THE FUND, WAS THERE A PARTICULAR HOLDING THAT PROVED
DISAPPOINTING?
A. Unfortunately, IBM has gone down somewhat since I took over the fund.
IBM has been an important provider of information technology, but it hurt
the fund during the period.
Q. WHAT'S YOUR OUTLOOK?
A. Where the stock market goes is anybody's guess. I do believe, however,
the economy has bottomed and may be on the way up. Therefore, I intend to
look for stocks with good valuations and that may be positioned to take
advantage of an uptick in the economy.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: seeks to
maintain a yield which
exceeds the composite
dividend of the S&P 500,
while considering the
potential for achieving capital
appreciation
START DATE: April 25, 1983
SIZE: as of May 31, 1996,
more than $2 billion
MANAGER: Robert Chow,
since March 26, 1996;
joined Fidelity in 1989
(checkmark)
BOB CHOW ON HIS INVESTMENT
STYLE:
"My investment style can be
summarized in three words:
valuation, valuation,
valuation. My first order of
business when picking a
stock is to determine whether
it is cheap or expensive
relative to its underlying
assets, other similar stocks or
its potential for growth. For
this fund, I will look first at
stocks that are attractive on a
valuation basis, and then
within that group for those
with an attractive yield.
Usually, though, if a stock's
price has been beaten down,
it will already have an
attractive yield.
"I think that focusing on
valuation leaves an investor
with stocks that offer a good
risk/reward trade-off. In other
words, if the market has sold
off a stock for some time,
more likely than not that
stock's next move will be up
rather than down. However,
since this doesn't happen
every time, it's important to
use good fundamental
analysis to identify attractive,
undervalued companies."
INVESTMENT CHANGES

TOP TEN STOCKS AS OF MAY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Philip Morris Companies, Inc. 3.2 4.2

British Petroleum PLC ADR 2.3 1.8

Burlington Northern Santa Fe Corp. 2.2 1.0

Wal-Mart Stores, Inc. 2.2 0.8

American Express Co. 2.1 1.8

International Business Machines Corp. 2.1 0.7

General Re Corp 1.9 0.8

Maytag Co. 1.6 0.0

Echlin, Inc. 1.6 0.0

du pont (E.I.) de Nemours & Co. 1.5 0.8

TOP FIVE MARKET SECTORS AS OF MAY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO

Finance 16.9 18.2

Durables 9.9 2.5

Nondurables 7.9 8.9

Energy 7.9 5.6

Technology 7.7 2.5

ASSET ALLOCATION
AS OF MAY 31, 1996 * AS OF NOVEMBER 30, 1995 **
Row: 1, Col: 1, Value: 6.1
Row: 1, Col: 2, Value: 1.7
Row: 1, Col: 3, Value: 2.4
Row: 1, Col: 4, Value: 45.0
Row: 1, Col: 5, Value: 44.8
Stocks 76.6%
Bonds 7.5%
Convertible
securities 0.9%
Short-term
investments 15.0%
FOREIGN
INVESTMENTS 3.6%
Stocks 89.8%
Bonds 2.4%
Convertible
securities 1.7%
Short-term
investments 6.1%
FOREIGN
INVESTMENTS 3.3%
Row: 1, Col: 1, Value: 15.0
Row: 1, Col: 2, Value: 1.9
Row: 1, Col: 3, Value: 7.5
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 35.6
*
**
INVESTMENTS MAY 31, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 89.8%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 3.3%
AEROSPACE & DEFENSE - 1.9%
Alliant Techsystems, Inc. (a) 100,000 $ 4,800
Boeing Co. 80,000 6,820
Lockheed Martin Corp. 185,000 15,517
McDonnell Douglas Corp. 160,000 8,080
Rockwell International Corp. 100,000 5,838
41,055
DEFENSE ELECTRONICS - 0.8%
Litton Industries, Inc. (a) 120,000 5,565
Raytheon Co. 220,000 11,715
17,280
SHIP BUILDING & REPAIR - 0.6%
General Dynamics Corp. 180,000 11,093
TOTAL AEROSPACE & DEFENSE 69,428
BASIC INDUSTRIES - 7.4%
CHEMICALS & PLASTICS - 5.6%
Dow Chemical Co. 50,000 4,181
du Pont (E.I.) de Nemours & Co. 400,000 31,900
Great Lakes Chemical Corp. 430,000 27,735
Hercules, Inc. 13,800 783
Minnesota Mining & Manufacturing Co. 180,000 12,285
Monsanto Co. 40,000 6,075
Raychem Corp. 150,000 11,213
Union Carbide Corp. 440,000 18,975
Valspar Corp. 149,000 6,593
119,740
IRON & STEEL - 0.4%
Armco, Inc. (a) 500,000 2,625
Nucor Corp. 100,000 5,500
8,125
METALS & MINING - 0.8%
Alcan Aluminium Ltd. 115,000 3,764
Aluminum Co. of America 200,000 12,325
16,089
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.4%
Crown Cork & Seal Co., Inc. 200,000 $ 9,350
PAPER & FOREST PRODUCTS - 0.2%
Pentair, Inc. 150,000 4,013
TOTAL BASIC INDUSTRIES 157,317
CONGLOMERATES - 1.9%
Allied-Signal, Inc. 130,000 7,117
Tyco International Ltd. 460,000 18,170
United Technologies Corp. 90,000 9,844
Whitman Corp. 185,000 4,648
39,779
CONSTRUCTION & REAL ESTATE - 3.9%
BUILDING MATERIALS - 2.5%
CalMat Co. 400,000 7,350
Masco Corp. 825,000 25,781
Sherwin-Williams Co. 470,000 21,091
54,222
CONSTRUCTION - 0.7%
Centex Corp. 312,300 9,408
Lennar Corp. 216,000 5,373
14,781
REAL ESTATE INVESTMENT TRUSTS - 0.7%
Beacon Properties Corp. 150,000 3,788
Duke Realty Investors, Inc. 96,000 2,892
Felcor Suite Hotels, Inc. 100,000 3,087
Public Storage, Inc. 235,000 4,935
14,702
TOTAL CONSTRUCTION & REAL ESTATE 83,705
DURABLES - 9.6%
AUTOS, TIRES, & ACCESSORIES - 5.4%
Chrysler Corp. 160,000 10,660
Cummins Engine Co., Inc. 200,000 8,500
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
Dana Corp. 110,000 $ 3,685
Eaton Corp. 175,000 10,128
Echlin, Inc. 970,000 33,344
General Motors Corp. 500,000 27,563
Modine Manufacturing Co. 227,000 5,732
PACCAR, Inc. 222,500 10,958
Snap-on Tools Corp. 90,000 4,331
114,901
CONSUMER ELECTRONICS - 2.4%
Black & Decker Corp. 75,000 3,084
Maytag Co. 1,600,000 34,400
Whirlpool Corp. 250,000 14,219
51,703
HOME FURNISHINGS - 0.8%
Heilig-Meyers Co. 250,000 5,156
Leggett & Platt, Inc. 417,700 11,852
17,008
TEXTILES & APPAREL - 1.0%
Fieldcrest Cannon, Inc. (a) 200,000 4,200
Fruit of the Loom, Inc. Class A (a) 227,300 6,137
Russell Corp. 262,000 7,205
Westpoint Stevens, Inc. Class A (a) 137,000 3,185
20,727
TOTAL DURABLES 204,339
ENERGY - 7.6%
ENERGY SERVICES - 2.0%
Baker Hughes, Inc. 380,000 11,923
McDermott International, Inc. 216,000 4,698
Schlumberger Ltd. 160,000 13,340
Western Atlas, Inc. (a) 200,000 12,250
42,211
OIL & GAS - 5.6%
Amerada Hess Corp. 320,000 18,240
Atlantic Richfield Co. 70,000 8,373
British Petroleum PLC ADR 470,000 49,526
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Burlington Resources, Inc. 500,000 $ 19,000
Occidental Petroleum Corp. 490,000 12,679
Royal Dutch Petroleum Co. ADR (NY Reg.) 80,000 12,000
119,818
TOTAL ENERGY 162,029
FINANCE - 15.6%
BANKS - 3.3%
Banc One Corp. 150,000 5,550
Bank of New York Co., Inc. 290,000 15,044
BankAmerica Corp. 175,000 13,169
Chase Manhattan Corp. 75,000 5,250
Citicorp 200,000 16,800
Fleet Financial Group, Inc. 192,345 8,487
NationsBank Corp. 80,000 6,490
70,790
CREDIT & OTHER FINANCE - 3.4%
American Express Co. 980,000 44,835
Beneficial Corp. 140,000 8,155
Household International, Inc. 220,000 15,235
Mercury Finance Co. 300,000 3,750
71,975
FEDERAL SPONSORED CREDIT - 2.9%
Federal Home Loan Mortgage Corporation 350,000 28,919
Federal National Mortgage Association 900,000 27,787
Student Loan Marketing Association 75,000 5,578
62,284
INSURANCE - 5.3%
Aetna Life & Casualty Co. 75,000 5,531
Allstate Corp. 430,000 18,167
Berkley (W.R.) Corp. 100,000 4,350
CIGNA Corp. 60,000 6,893
General Re Corp. 280,000 40,880
ITT Hartford Group, Inc. 175,000 9,056
Loews Corp. 175,000 13,956
NAC Re Corp. 73,000 2,373
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Provident Companies, Inc. 200,000 $ 7,175
PXRE Corp. 20,000 500
Transnational Re Corp. Class A 180,000 4,320
113,201
SECURITIES INDUSTRY - 0.7%
Lehman Brothers Holdings, Inc. 570,000 13,965
TOTAL FINANCE 332,215
HEALTH - 3.0%
DRUGS & PHARMACEUTICALS - 2.0%
Bristol-Myers Squibb Co. 200,000 17,075
Merck & Co., Inc. 100,000 6,463
Pharmacia & Upjohn, Inc. 200,000 8,175
Schering-Plough Corp. 170,000 9,966
41,679
MEDICAL EQUIPMENT & SUPPLIES - 0.3%
Biomet, Inc. (a) 400,000 5,600
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp. 100,000 5,388
Tenet Healthcare Corp. (a) 318,000 6,837
United HealthCare Corp. 70,000 3,841
16,066
TOTAL HEALTH 63,345
INDUSTRIAL MACHINERY & EQUIPMENT - 5.3%
ELECTRICAL EQUIPMENT - 1.7%
Duracell International, Inc. 160,000 7,460
Emerson Electric Co. 90,000 7,706
General Electric Co. 260,000 21,515
36,681
INDUSTRIAL MACHINERY & EQUIPMENT - 1.9%
Caterpillar, Inc. 120,000 7,875
Cooper Industries, Inc. 70,000 2,984
Deere & Co. 150,000 6,244
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
Detroit Diesel Corp. (a) 100,000 $ 1,887
Illinois Tool Works, Inc. 80,000 5,360
Ingersoll-Rand Co. 220,000 9,268
Keystone International, Inc. 160,000 3,500
Tenneco, Inc. 51,400 2,763
39,881
POLLUTION CONTROL - 1.7%
Browning-Ferris Industries, Inc. 575,000 17,537
WMX Technologies, Inc. 550,000 19,388
36,925
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 113,487
MEDIA & LEISURE - 2.3%
ENTERTAINMENT - 0.1%
Disney (Walt) Co. 40,000 2,430
LEISURE DURABLES & TOYS - 0.1%
Fleetwood Enterprises, Inc. 49,400 1,488
LODGING & GAMING - 1.0%
ITT Corp. 350,000 21,525
PUBLISHING - 0.7%
Knight-Ridder, Inc. 61,700 4,612
Times Mirror Co. Class A 150,000 6,544
Tribune Co. 50,000 3,706
14,862
RESTAURANTS - 0.4%
Darden Restaurants, Inc. 350,000 4,156
McDonald's Corp. 100,000 4,813
8,969
TOTAL MEDIA & LEISURE 49,274
NONDURABLES - 7.9%
BEVERAGES - 1.0%
Anheuser-Busch Companies, Inc. 200,000 14,250
PepsiCo, Inc. 200,000 6,650
20,900
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - 1.4%
Chock Full-O-Nuts Corp. 221,400 $ 1,135
Dole Food, Inc. 3,300 124
General Mills, Inc. 150,000 8,606
Quaker Oats Co. 12,100 422
Sysco Corp. 550,000 18,769
29,056
HOUSEHOLD PRODUCTS - 1.6%
Church & Dwight Co., Inc. 204,400 4,088
First Brands Corp. 700,000 17,325
Tambrands, Inc. 292,000 13,468
34,881
TOBACCO - 3.9%
Philip Morris Companies, Inc. 690,000 68,569
RJR Nabisco Holdings Corp. 400,000 13,250
Schweitzer-Mauduit International, Inc. 83,000 2,324
84,143
TOTAL NONDURABLES 168,980
PRECIOUS METALS - 0.8%
Newmont Mining Corp. 290,000 17,473
RETAIL & WHOLESALE - 4.5%
GENERAL MERCHANDISE STORES - 2.9%
Dillard Department Stores, Inc. Class A 60,000 2,400
May Department Stores Co. (The) 100,000 4,737
Sears, Roebuck & Co. 152,000 7,733
Wal-Mart Stores, Inc. 1,800,000 46,575
61,445
GROCERY STORES - 0.2%
Vons Companies, Inc. (a) 124,000 4,526
RETAIL & WHOLESALE, MISCELLANEOUS - 1.4%
Best Buy Co., Inc. (a) 300,000 6,825
Home Depot, Inc. (The) 320,000 16,360
Toys "R" Us, Inc. (a) 226,200 6,560
29,745
TOTAL RETAIL & WHOLESALE 95,716
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 0.7%
LEASING & RENTAL - 0.0%
GATX Corp. 1,000 $ 45
SERVICES - 0.7%
ADT Ltd. (a) 300,000 5,775
Block (H&R), Inc. 240,000 8,370
14,145
TOTAL SERVICES 14,190
TECHNOLOGY - 7.6%
COMMUNICATIONS EQUIPMENT - 0.2%
DSC Communications Corp. (a) 140,000 4,218
COMPUTERS & OFFICE EQUIPMENT - 5.0%
Compaq Computer Corp. (a) 30,000 1,459
Digital Equipment Corp. (a) 160,000 8,340
International Business Machines Corp. 410,000 43,767
Pitney Bowes, Inc. 525,000 26,053
Silicon Graphics, Inc. (a) 1,000,000 27,500
107,119
COMPUTER SERVICES & SOFTWARE - 0.5%
Mentor Graphics Corp. (a) 200,000 3,575
Policy Management Systems Corp. (a) 126,200 6,752
10,327
ELECTRONICS - 1.6%
AMP, Inc. 235,300 9,912
Thomas & Betts Corp. 320,000 12,320
VLSI Technology, Inc. (a) 650,000 11,131
33,363
ELECTRONIC INSTRUMENTS - 0.3%
Applied Materials, Inc. (a) 100,000 3,725
KLA Instruments Corp. (a) 100,000 2,700
6,425
TOTAL TECHNOLOGY 161,452
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 4.1%
RAILROADS - 2.4%
Burlington Northern Santa Fe Corp. 550,000 $ 46,613
CSX Corp. 111,600 5,524
52,137
TRUCKING & FREIGHT - 1.7%
Arnold Industries, Inc. 533,500 8,202
Caliber System, Inc. 170,000 6,311
Consolidated Freightways, Inc. 300,000 7,125
Hunt (J.B.) Transport Services, Inc. 4,900 93
Pittston Co. (Burlington Group) 250,000 4,969
U.S. Freightways Corp. 165,000 3,589
Werner Enterprises, Inc. 220,000 5,390
35,679
TOTAL TRANSPORTATION 87,816
UTILITIES - 4.3%
CELLULAR - 0.6%
360 Degrees Communications Co. (a) 520,000 12,025
TELEPHONE SERVICES - 3.7%
Ameritech Corp. 200,000 11,300
AT&T Corp. 350,000 21,831
Bell Atlantic Corp. 250,000 15,594
NYNEX Corp. 275,000 12,684
SBC Communications, Inc. 340,000 16,788
78,197
TOTAL UTILITIES 90,222
TOTAL COMMON STOCKS
(Cost $1,695,470) 1,910,767
CONVERTIBLE PREFERRED STOCKS - 1.6%
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 0.3%
OIL & GAS - 0.3%
Atlantic Richfield Co. exchangeable $2.23 92,100 $ 2,325
Occidental Petroleum Corp. Indexed $3.00 70,000 4,524
TOTAL ENERGY 6,849
FINANCE - 1.3%
INSURANCE - 1.3%
Allstate Corp. exchangeable $2.30 681,500 26,919
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 50,000 -
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $33,768) 33,768
CORPORATE BONDS - 0.6%
MOODY'S PRINCIPAL
RATINGS AMOUNT
CONVERTIBLE BONDS - 0.1%
TECHNOLOGY - 0.1%
ELECTRONICS - 0.1%
National Semiconductor Corp.
6 1/2%, 10/1/02 (b) Ba2 $ 2,000 1,785
NONCONVERTIBLE BONDS - 0.5%
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Westpoint Stevens, Inc.
8 3/4%, 12/15/01 B1 5,200 5,122
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS AMOUNT (000S)
NONCONVERTIBLE BONDS - CONTINUED
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT - 0.1%
Tenet Healthcare Corp.
9 5/8%, 9/1/02 Ba2 $ 540 $ 574
8 5/8%, 12/1/03 Ba1 1,940 1,959
TOTAL HEALTH 2,533
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Viacom, Inc. 8%, 7/7/06 B1 2,230 2,060
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 B1 1,000 975
TOTAL NONCONVERTIBLE BONDS 10,690
TOTAL CORPORATE BONDS
(Cost $12,459) 12,475
U.S. TREASURY OBLIGATIONS - 1.9%
7 7/8%, 11/15/04 Aaa 9,300 9,897
7 1/4%, 2/15/23 Aaa 5,020 4,995
6 1/4%, 8/15/23 Aaa 2,610 2,329
7 1/2%, 11/15/24 Aaa 13,590 14,185
7 5/8%, 2/15/25 Aaa 8,830 9,369
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $43,613) 40,775
REPURCHASE AGREEMENTS - 6.1%
MATURITY VALUE (NOTE 1)
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.32%, dated
5/31/96 due 6/3/96 $ 131,028 $ 130,970
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,916,280) $ 2,128,755
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $1,785,000 or 0.1% of net
assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 1.9% AAA, AA, A 1.9%
Baa 0.0% BBB 0.0%
Ba 0.2% BB 0.5%
B 0.4% B 0.1%
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 0.0%
INCOME TAX INFORMATION
At May 31, 1996, the aggregate cost of investment securities for income tax
purposes was $1,916,859,000. Net unrealized appreciation aggregated
$211,896,000, of which $235,323,000 related to appreciated investment
securities and $23,427,000 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MAY 31, 1996 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 2,128,755
agreements of $130,970) (cost $1,916,280) -
See accompanying schedule

Cash 1

Receivable for investments sold 9,412

Receivable for fund shares sold 8,450

Dividends receivable 3,852

Interest receivable 857

Other receivables 175

TOTAL ASSETS 2,151,502

LIABILITIES

Payable for investments purchased $ 26,332

Payable for fund shares redeemed 1,739

Accrued management fee 865

Distribution fees payable 915

Other payables and accrued expenses 650

TOTAL LIABILITIES 30,501

NET ASSETS $ 2,121,001

Net Assets consist of:

Paid in capital $ 1,820,783

Undistributed net investment income 3,688

Accumulated undistributed net realized gain (loss) on 84,056
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 212,474
investments and assets and liabilities in foreign
currencies

NET ASSETS $ 2,121,001

CALCULATION OF MAXIMUM OFFERING PRICE $20.94
CLASS A:
NET ASSET VALUE, and redemption price per share
($1,401,074 (divided by) 66,914 shares)

Maximum offering price per share (100/96.50 of $20.94) $21.70

CLASS B: $20.87
NET ASSET VALUE, offering price and redemption price
per share ($421,766 (divided by) 20,210 shares)

INSTITUTIONAL CLASS: $21.10
NET ASSET VALUE, offering price and redemption price
per share ($298,161 (divided by) 14,132 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)

INVESTMENT INCOME $ 18,453
Dividends

Interest 8,112

TOTAL INCOME 26,565

EXPENSES

Management fee $ 4,551

Transfer agent fees 1,172
Class A

Class B 395

Institutional Class 199

Distribution fees 3,011
Class A

Class B 1,794

Accounting fees and expenses 350

Non-interested trustees' compensation 3

Custodian fees and expenses 39

Registration fees 194
Class A

Class B 96

Institutional Class 48

Audit 44

Legal 8

Miscellaneous 45

Total expenses before reductions 11,949

Expense reductions (174) 11,775

NET INVESTMENT INCOME 14,790

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

Investment securities 82,094

Foreign currency transactions 1 82,095

Change in net unrealized appreciation (depreciation) on:

Investment securities 39,955

Assets and liabilities in foreign currencies (1) 39,954

NET GAIN (LOSS) 122,049

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 136,839
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1996 1995
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 14,790 $ 16,529
Net investment income

Net realized gain (loss) 82,095 41,100

Change in net unrealized appreciation (depreciation) 39,954 162,836

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 136,839 220,465
FROM OPERATIONS

Distributions to shareholders (9,378) (6,671)
From net investment income
Class A

Class B (2,217) (1,442)

Institutional Class (3,531) (5,881)

From net realized gain (21,471) (3,300)
Class A

Class B (6,588) (681)

Institutional Class (7,023) (3,529)

TOTAL DISTRIBUTIONS (50,208) (21,504)

Share transactions - net increase (decrease) 586,762 836,240

TOTAL INCREASE (DECREASE) IN NET ASSETS 673,393 1,035,201

NET ASSETS

Beginning of period 1,447,608 412,407

End of period (including undistributed net investment $ 2,121,001 $ 1,447,608
income of $3,688 and $4,024, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED NOVEMBER 30, PERIOD ENDED
ENDED NOVEMBER 30,
MAY 31, 1996

(UNAUDITED) 1995 1994 F 1993 1992 E

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

Net asset value, beginning $ 19.95 $ 15.96 $ 14.86 $ 12.86 $ 12.37
of period

Income from Investment
Operations

Net investment income .17 D .31 .28 D .33 .13

Net realized and unrealized 1.46 4.26 1.03 1.97 .47
gain (loss)

Total from investment 1.63 4.57 1.31 2.30 .60
operations

Less Distributions

From net investment income (.18) (.30) (.21) (.30) (.11)

From net realized gain (.46) (.28) - - -

Total distributions (.64) (.58) (.21) (.30) (.11)

Net asset value, end of period $ 20.94 $ 19.95 $ 15.96 $ 14.86 $ 12.86

TOTAL RETURN B, C 8.37% 29.46% 8.84% 18.03% 4.88%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 1,401,074 $ 880,054 $ 179,501 $ 42,326 $ 1,462
(000 omitted)

Ratio of expenses to average 1.31% A 1.48% 1.67% 1.77% 1.55%
net assets A

Ratio of expenses to average net 1.29% A 1.47% 1.64% 1.77% 1.55%
assets after expense reductions , G G G A

Ratio of net investment income 1.64% A 1.78% 1.69% 2.02% 3.39%
to average net assets A

Portfolio turnover 126% A 80% 140% 120% 51%

Average commission rate H $ .0425

</TABLE>

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
F EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEAR ENDED PERIOD ENDED
ENDED NOVEMBER 30, NOVEMBER 30,
MAY 31, 1996

(UNAUDITED) 1995 1994 E

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

Net asset value, beginning of period $ 19.90 $ 15.94 $ 15.21

Income from Investment Operations

Net investment income .11 D .26 .08 D

Net realized and unrealized gain (loss) 1.46 4.23 .72

Total from investment operations 1.57 4.49 .80

Less Distributions

From net investment income (.14) (.25) (.07)

From net realized gain (.46) (.28) -

Total distributions (.60) (.53) (.07)

Net asset value, end of period $ 20.87 $ 19.90 $ 15.94

TOTAL RETURN B, C 8.07% 28.95% 5.25%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 421,766 $ 270,101 $ 35,373

Ratio of expenses to average net assets 1.86% A 1.85% 2.24% A

Ratio of expenses to average net assets after 1.85% A, F 1.84% F 2.18% A,
expense reductions F

Ratio of net investment income to average net 1.08% A 1.41% 1.15% A
assets

Portfolio turnover 126% A 80% 140%

Average commission rate G $ .0425

</TABLE>

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTE TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1996

(UNAUDITED) 1995 1994 E 1993 1992 1991

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

Net asset value, $ 20.09 $ 16.07 $ 14.93 $ 12.88 $ 11.08 $ 9.52
beginning of period

Income from Investment
Operations

Net investment .23 D .45 .41 D .39 .49 .63 H
income

Net realized 1.47 4.28 1.05 2.02 1.79 1.52
and unrealized
gain (loss)

Total from investment 1.70 4.73 1.46 2.41 2.28 2.15
operations

Less Distributions

From net investment (.23) (.43) (.32) (.36) (.48) (.59)
income

From net realized gain (.46) (.28) - - - -

Total distributions (.69) (.71) (.32) (.36) (.48) (.59)

Net asset value, end $ 21.10 $ 20.09 $ 16.07 $ 14.93 $ 12.88 $ 11.08
of period

TOTAL RETURN B, C 8.68% 30.43% 9.82% 18.90% 20.91% 22.97%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 298,161 $ 297,453 $ 197,533 $ 191,138 $ 139,391 $ 168,590
period (000 omitted)

Ratio of expenses to .73% A .74% .73% .80% .71% .67%
average net assets I I

Ratio of expenses to .71% A .73% .71% .79% .71% .67%
average net assets , F F F F
after expense
reductions

Ratio of net investment 2.21% A 2.52% 2.62% 3.00% 3.77% 5.66%
income to average
net assets

Portfolio turnover 126% A 80% 140% 120% 51% 91%

Average commission $ .0425
rate G

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
H INCLUDES $0.04 PER SHARE FROM FOREIGN TAXES RECOVERED.
I FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Equity Income Fund (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. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the fund are allocated on a pro rata 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 financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. 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 pro rata 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, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, 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 the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
fluctuations. Also, a contract to buy or sell can offset a previous
contract. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,667,656,000 and $1,020,137,000, respectively, of which U.S.
government and government agency obligations aggregated $30,539,000 and
$79,697,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee that
is computed daily at an annual rate of .50% of the fund's average net
assets.
DISTRIBUTION AND SERVICE PLAN. 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), Class B shares (Class B Plan),
and Institutional Class shares (collectively referred to as "the Plans").
Under the Class A Plan and Class B Plan, the fund pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. Under the Class A Plan, this fee was based on an annual rate
of .65% of the average net assets of the Class A shares for the period
December 1, 1995 to December 31, 1995. Effective January 1, 1996, the Board
of Trustees approved a revised Class A
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
distribution plan, under which the fee is based on an annual rate of .50%
of the average net assets of the Class A shares. Under the Class B Plan,
this fee is based on an annual rate of 1.00% (of which .75% represents a
distribution fee and .25% represents a shareholder service fee) of the
average net assets of the Class B shares. For the period, the fund paid FDC
$3,011,000 and $1,794,000 under the Class A Plan and Class B Plan,
respectively, of which $2,897,000 and $439,000 were paid to securities
dealers, banks and other financial institutions for the distribution of
Class A and Class B shares, respectively, and providing shareholder support
services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class A, Class B,
and Institutional Class shares. The Plans also authorize payments to third
parties that assist in the sale of the fund's shares or render shareholder
support services.
SALES LOAD. For the period December 1, 1995 through December 31, 1995, FDC
received a front-end sales charge of up to 4.75% for selling Class A shares
of the fund. Effective January 1, 1996, the Board of Trustees approved a
revised Class A sales charge. Under the revised arrangement, FDC receives a
front-end sales charge of up to 3.50% for selling Class A shares of the
fund. For the period, FDC received sales charges of $6,005,000 on sales of
Class A shares of the fund, of which $4,905,000 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 $255,000 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 account
fees and asset-based fees that vary according to the account size and type
of account of the shareholders of the respective classes of the fund. With
respect to the Class A shares, State Street has delegated certain transfer,
dividend paying, and shareholder services to FIIOC for which
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
FIIOC receives its allocable share of all such fees. FIIOC pays for
typesetting, printing and mailing of all shareholder reports, except proxy
statements. For the period, the transfer agent fees were equivalent to an
annualized rate of .20%, .23%, and .13% of average net assets for Class A,
Class B, and Institutional Class, respectively.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
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 $486,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$141,000 under this arrangement.
In addition, the fund has entered into an arrangement with its transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the class' expenses. During the period, Class A and
Institutional Class expenses were reduced by $20,000 and $13,000,
respectively, under the transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
AMOUNTS IN THOUSANDS SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED MAY 31,
NOVEMBER 30, MAY 31, NOVEMBER 30,
1996 1995 1996 1995

CLASS A
Shares sold 26,859 38,362 $ 549,771 $ 688,702
Reinvestment of distributions 1,459 550 28,958 9,311
Shares redeemed (5,522) (6,039) (113,107) (108,467)
Net increase (decrease) 22,796 32,873 $ 465,622 $ 589,546
CLASS B
Shares sold 7,183 11,926 $ 146,761 $ 213,878
Reinvestment of distributions 398 114 7,874 1,932
Shares redeemed (946) (684) (19,342) (12,443)
Net increase (decrease) 6,635 11,356 $ 135,293 $ 203,367
INSTITUTIONAL CLASS
Shares sold 3,851 5,922 $ 79,239 $ 104,505
Reinvestment of distributions 369 331 7,363 5,439
Shares redeemed (4,897) (3,735) (100,755) (66,617)
Net increase (decrease) (677) 2,518 $ (14,153) $ 43,327

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
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
* INDEPENDENT TRUSTEES
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
TAXABLE 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 Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income 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 INCOME
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 31, 1996
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

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

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

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

FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 28 Notes to the financial statements.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTH YEAR YEARS YEARS
S

Advisor Equity Income Fund - Institutional 8.68% 23.01% 123.16% 237.28%
Class

S&P 500(registered trademark) 11.79% 28.44% 97.37% 269.71%

Equity Income Funds Average 10.11% 23.40% 86.96% 196.59%

</TABLE>

CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one, five,
or 10 years. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare the Institutional Class' returns to the performance of the
Standard & Poor's 500 Index - 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 equity income funds average, which reflects the
performance of 149 funds with similar objectives tracked by Lipper
Analytical Services over the past six months. Both benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Advisor Equity Income Fund - Institutional Class 23.01% 17.41% 12.93%

S&P 500 28.44% 14.56% 13.94%

Equity Income Funds Average 23.40% 13.25% 11.18%

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.
$10,000 OVER TEN YEARS
IMAHDR PRASUN SHR__CHT 19960531 19960621 101903 S00000000000001
FA Equity Income -CL I SP Standard & Poor 500
00080 SP001
1986/05/31 10000.00 10000.00
1986/06/30 10134.43 10169.00
1986/07/31 9744.07 9600.55
1986/08/31 10331.87 10312.91
1986/09/30 9847.09 9460.04
1986/10/31 10280.85 10005.88
1986/11/30 10403.06 10249.02
1986/12/31 10241.72 9987.67
1987/01/31 11247.90 11333.01
1987/02/28 11585.93 11780.67
1987/03/31 11798.12 12121.13
1987/04/30 11644.57 12013.25
1987/05/31 11584.63 12117.76
1987/06/30 11919.55 12729.71
1987/07/31 12264.79 13375.11
1987/08/31 12602.83 13874.00
1987/09/30 12306.91 13570.16
1987/10/31 10076.45 10647.15
1987/11/30 9645.98 9769.82
1987/12/31 10012.58 10513.31
1988/01/31 10697.38 10955.92
1988/02/29 11219.20 11466.46
1988/03/31 11072.41 11112.15
1988/04/30 11230.59 11235.49
1988/05/31 11368.45 11333.24
1988/06/30 12018.99 11853.44
1988/07/31 11997.53 11808.39
1988/08/31 11760.17 11406.91
1988/09/30 12107.65 11892.84
1988/10/31 12326.00 12223.46
1988/11/30 12249.24 12048.67
1988/12/31 12338.12 12259.52
1989/01/31 13128.74 13156.92
1989/02/28 13016.82 12829.31
1989/03/31 13275.58 13128.23
1989/04/30 13761.82 13809.59
1989/05/31 14091.11 14368.88
1989/06/30 14148.11 14286.97
1989/07/31 15041.68 15577.09
1989/08/31 15237.32 15882.40
1989/09/30 15040.79 15817.28
1989/10/31 14216.16 15450.32
1989/11/30 14402.90 15765.51
1989/12/31 14612.63 16143.88
1990/01/31 13688.62 15060.62
1990/02/28 13713.06 15254.91
1990/03/31 13713.06 15659.16
1990/04/30 13182.31 15267.68
1990/05/31 14050.38 16756.28
1990/06/30 13988.10 16642.34
1990/07/31 13762.69 16589.08
1990/08/31 12717.58 15089.43
1990/09/30 11755.86 14354.57
1990/10/31 11488.68 14292.85
1990/11/30 12256.29 15216.17
1990/12/31 12526.12 15640.70
1991/01/31 13163.48 16322.63
1991/02/28 14104.67 17489.70
1991/03/31 14329.77 17912.95
1991/04/30 14329.43 17955.94
1991/05/31 15114.18 18731.64
1991/06/30 14420.47 17873.73
1991/07/31 15209.65 18706.65
1991/08/31 15531.78 19149.99
1991/09/30 15451.31 18830.19
1991/10/31 15708.75 19082.51
1991/11/30 15071.73 18313.49
1991/12/31 16260.13 20408.55
1992/01/31 16423.82 20028.95
1992/02/29 16931.25 20289.33
1992/03/31 16656.17 19893.69
1992/04/30 17249.82 20478.56
1992/05/31 17402.09 20578.91
1992/06/30 17208.34 20272.28
1992/07/31 17655.31 21101.42
1992/08/31 17236.16 20668.84
1992/09/30 17376.89 20912.73
1992/10/31 17588.25 20985.93
1992/11/30 18222.77 21701.55
1992/12/31 18690.18 21968.47
1993/01/31 19257.99 22153.01
1993/02/28 19756.47 22454.29
1993/03/31 20412.35 22928.08
1993/04/30 20340.96 22373.22
1993/05/31 20670.92 22972.82
1993/06/30 20887.19 23039.44
1993/07/31 21176.01 22947.28
1993/08/31 21943.06 23816.98
1993/09/30 21812.44 23633.59
1993/10/31 22073.67 24122.81
1993/11/30 21667.32 23893.64
1993/12/31 22204.28 24182.76
1994/01/31 23249.19 25004.97
1994/02/28 22668.69 24327.33
1994/03/31 21702.60 23266.66
1994/04/30 22462.55 23564.48
1994/05/31 22637.93 23950.93
1994/06/30 22503.20 23364.14
1994/07/31 23283.24 24130.48
1994/08/31 24519.51 25119.83
1994/09/30 24120.27 24504.39
1994/10/31 24594.08 25055.74
1994/11/30 23794.52 24143.21
1994/12/31 23868.92 24501.26
1995/01/31 24248.27 25136.57
1995/02/28 25113.20 26116.15
1995/03/31 25950.37 26886.83
1995/04/30 26653.79 27678.65
1995/05/31 27418.39 28784.97
1995/06/30 27801.62 29453.64
1995/07/31 28831.88 30430.32
1995/08/31 29185.55 30506.70
1995/09/30 30107.68 31794.09
1995/10/31 29783.27 31680.58
1995/11/30 31034.54 33071.36
1995/12/31 31863.59 33708.31
1996/01/31 32818.31 34855.74
1996/02/29 32961.48 35178.86
1996/03/31 33216.78 35517.63
1996/04/30 33456.56 36041.16
1996/05/31 33728.30 36970.66
IMATRL PRASUN SHR__CHT 19960531 19960621 101909 R00000000000123

$10,000 OVER TEN YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Equity Income Fund - Institutional Class on May 31,
1986. As the chart shows, by May 31, 1996, the value of the investment
would have grown to $33,728 - a 237.28% increase on the 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
$36,971 - a 269.71% 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)
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Robert Chow, Portfolio Manager of Fidelity Advisor Equity
Income Fund
NOTE TO SHAREHOLDERS: On March 26, 1996, Bob Chow became manager of the
fund, replacing Bettina Doulton.
Q. HOW DID THE FUND PERFORM, BOB?
A. For the six months ended May 31, 1996, the fund's Institutional Class
shares returned 8.68%. For the past year, the fund's Institutional-Class
return was 23.01%. For the same time periods, the equity income funds
average, as tracked by Lipper Analytical Services, was 10.11% for six
months and 23.40% for the year. Additionally, the Standard & Poor's 500
Index stood at 11.79% for six months and 28.44% for the year.
Q. WHY DID THE FUND UNDERPERFORM?
A. During the period, the fund had a large exposure to
interest-rate-sensitive stocks. Generally, these include finance, utility
and non-durable goods companies. When interest rates rose in the first
quarter of 1996, many of these companies were hurt. Additionally, the fund
had a sizable position in bonds. As investors recently have seen, bonds
were hurt by rising interest rates.
Q. WHAT HAVE YOU DONE SINCE TAKING OVER THE FUND
A. In addition to lowering the bond exposure in the fund, I've attempted to
lower its overall interest-rate sensitivity and reduce some of its large
weightings in individual stocks. Although the table on page 9 indicates the
fund's top holdings represent a higher percentage of the fund's assets than
six months ago, I've actually reduced these individual positions
significantly since I became manager. I think this makes sense from a
risk/reward standpoint. Even the most conservative stocks can have large
day-to-day price fluctuations. If you have a large exposure to one
particular stock, a big downward movement is going to show up in the fund's
total return. Additionally, lowering large individual positions dovetails
with my style as a value investor. For me to build a large position in any
one stock, its valuation has to be extremly cheap.
Q. DOES THIS HOLD TRUE FOR YOUR SECTOR WEIGHTINGS AS WELL?
A. Sure. For example, I believe the consumer non-durable sector - which
contains companies that make consumer products such as clothing or food -
was very expensive, and I lowered the fund's exposure to it. At such high
valuations, one is probably going to get very little reward in exchange for
taking on a greater amount of risk.
Q. YOU'VE STATED THAT YOU ATTEMPTED TO LOWER THE FUND'S INTEREST-RATE
SENSITIVITY DURING THE PERIOD. HOWEVER, FINANCE - AN AREA THAT YOU
CHARACTERIZED AS BEING HISTORICALLY INTEREST-RATE SENSITIVE- REMAINS A
LARGE PERCENTAGE OF THE FUND . . .
A. Not all finance stocks are beholden to interest rate changes. For
example, consumer finance companies and credit card companies did well as
the economy expanded - which is also when interest rates generally rise. As
the economy grows, people spend more and thus often turn to credit to
finance their purchases. Some of the finance stocks that benefited from
heightened economic activity were American Express and Citicorp.
Additionally, over the past year, bank stocks were the beneficiaries of a
flurry of merger and acquisition activity.
Q. A HIGHER-THAN-EXPECTED EMPLOYMENT REPORT IN MARCH CAUSED CYCLICAL STOCKS
TO OUTPERFORM AS INVESTORS PERCEIVED THE ECONOMY TO BE IN THE FIRST STAGES
OF AN EXPANSION. WAS THE FUND ABLE TO TAKE ADVANTAGE OF THE RUN-UP IN
CYCLICAL STOCKS?
A. For much of the time I've managed the fund, I haven't touched cyclical
stocks because, in general, I think they became overvalued. After that
initial jump in March, however, many of these stocks have since come back
to earth. Some cyclical stocks I found attractive during the period
included WMX Technologies - formerly Waste Management - and Nucor, a steel
company.
Q. THE FUND'S POSITION IN REGIONAL BELL OPERATING COMPANIES (RBOCS) HAS
DECREASED SIGNIFICANTLY OVER THE PERIOD. ISN'T THE FUND MISSING OUT ON THE
GREAT OPPORTUNITIES OFFERED BY THE NEW TELECOMMUNICATIONS LAW AND BY ALL OF
THE MERGER ANNOUNCEMENTS WE'VE SEEN?
A. The reduction in this area was done purely for valuation reasons. In my
opinion, RBOC stocks became too expensive. Also, you mentioned the new
opportunities in this sector. I would say, one person's "opportunity" is
another person's uncertainty. In my view, it doesn't make sense to pay a
high price for stocks in an industry whose future is unclear.
Q. THE ENERGY SECTOR HAS BEEN HOT THIS YEAR WITH RISING COMMODITY PRICES
AND FAVORABLE SUPPLY/DEMAND CONDITIONS IN THE OIL INDUSTRY. GIVEN THE
EMPHASIS YOU PUT ON VALUATION, THEN, DID YOU REDUCE THE FUND'S EXPOSURE TO
THIS AREA OF THE MARKET?
A. Actually the fund's position increased slightly. Of course, many energy
stocks have performed well and many, in time, may become overvalued. The
extent of my buying activity in the energy sector consisted of stocks that
I found undervalued relative to the market, such as Baker Hughes and
Western Atlas.
Q. SINCE YOU TOOK OVER THE FUND, WAS THERE A PARTICULAR HOLDING THAT PROVED
DISAPPOINTING?
A. Unfortunately, IBM has gone down somewhat since I took over the fund.
IBM has been an important provider of information technology, but it hurt
the fund during the period.
Q. WHAT'S YOUR OUTLOOK?
A. Where the stock market goes is anybody's guess. I do believe, however,
the economy has bottomed and may be on the way up. Therefore, I intend to
look for stocks with good valuations and that may be positioned to take
advantage of an uptick in the economy.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

TOP TEN STOCKS AS OF MAY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Philip Morris Companies, Inc. 3.2 4.2

British Petroleum PLC ADR 2.3 1.8

Burlington Northern Santa Fe Corp. 2.2 1.0

Wal-Mart Stores, Inc. 2.2 0.8

American Express Co. 2.1 1.8

International Business Machines Corp. 2.1 0.7

General Re Corp 1.9 0.8

Maytag Co. 1.6 0.0

Echlin, Inc. 1.6 0.0

du pont (E.I.) de Nemours & Co. 1.5 0.8

TOP FIVE MARKET SECTORS AS OF MAY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO

Finance 16.9 18.2

Durables 9.9 2.5

Nondurables 7.9 8.9

Energy 7.9 5.6

Technology 7.7 2.5

Showing Percentage of Total Value of Investment in Securities

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MAY 31, 1996 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 2,128,755
agreements of $130,970) (cost $1,916,280) -
See accompanying schedule

Cash 1

Receivable for investments sold 9,412

Receivable for fund shares sold 8,450

Dividends receivable 3,852

Interest receivable 857

Other receivables 175

TOTAL ASSETS 2,151,502

LIABILITIES

Payable for investments purchased $ 26,332

Payable for fund shares redeemed 1,739

Accrued management fee 865

Distribution fees payable 915

Other payables and accrued expenses 650

TOTAL LIABILITIES 30,501

NET ASSETS $ 2,121,001

Net Assets consist of:

Paid in capital $ 1,820,783

Undistributed net investment income 3,688

Accumulated undistributed net realized gain (loss) on 84,056
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 212,474
investments and assets and liabilities in foreign
currencies

NET ASSETS $ 2,121,001

CALCULATION OF MAXIMUM OFFERING PRICE $20.94
CLASS A:
NET ASSET VALUE, and redemption price per share
($1,401,074 (divided by) 66,914 shares)

Maximum offering price per share (100/96.50 of $20.94) $21.70

CLASS B: $20.87
NET ASSET VALUE, offering price and redemption price
per share ($421,766 (divided by) 20,210 shares)

INSTITUTIONAL CLASS: $21.10
NET ASSET VALUE, offering price and redemption price
per share ($298,161 (divided by) 14,132 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)

INVESTMENT INCOME $ 18,453
Dividends

Interest 8,112

TOTAL INCOME 26,565

EXPENSES

Management fee $ 4,551

Transfer agent fees 1,172
Class A

Class B 395

Institutional Class 199

Distribution fees 3,011
Class A

Class B 1,794

Accounting fees and expenses 350

Non-interested trustees' compensation 3

Custodian fees and expenses 39

Registration fees 194
Class A

Class B 96

Institutional Class 48

Audit 44

Legal 8

Miscellaneous 45

Total expenses before reductions 11,949

Expense reductions (174) 11,775

NET INVESTMENT INCOME 14,790

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

Investment securities 82,094

Foreign currency transactions 1 82,095

Change in net unrealized appreciation (depreciation) on:

Investment securities 39,955

Assets and liabilities in foreign currencies (1) 39,954

NET GAIN (LOSS) 122,049

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 136,839
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1996 1995
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 14,790 $ 16,529
Net investment income

Net realized gain (loss) 82,095 41,100

Change in net unrealized appreciation (depreciation) 39,954 162,836

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 136,839 220,465
FROM OPERATIONS

Distributions to shareholders (9,378) (6,671)
From net investment income
Class A

Class B (2,217) (1,442)

Institutional Class (3,531) (5,881)

From net realized gain (21,471) (3,300)
Class A

Class B (6,588) (681)

Institutional Class (7,023) (3,529)

TOTAL DISTRIBUTIONS (50,208) (21,504)

Share transactions - net increase (decrease) 586,762 836,240

TOTAL INCREASE (DECREASE) IN NET ASSETS 673,393 1,035,201

NET ASSETS

Beginning of period 1,447,608 412,407

End of period (including undistributed net investment $ 2,121,001 $ 1,447,608
income of $3,688 and $4,024, respectively)

</TABLE>

FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED NOVEMBER 30, PERIOD ENDED
ENDED NOVEMBER 30,
MAY 31, 1996

(UNAUDITED) 1995 1994 F 1993 1992 E

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

Net asset value, beginning $ 19.95 $ 15.96 $ 14.86 $ 12.86 $ 12.37
of period

Income from Investment
Operations

Net investment income .17 D .31 .28 D .33 .13

Net realized and unrealized 1.46 4.26 1.03 1.97 .47
gain (loss)

Total from investment 1.63 4.57 1.31 2.30 .60
operations

Less Distributions

From net investment income (.18) (.30) (.21) (.30) (.11)

From net realized gain (.46) (.28) - - -

Total distributions (.64) (.58) (.21) (.30) (.11)

Net asset value, end of period $ 20.94 $ 19.95 $ 15.96 $ 14.86 $ 12.86

TOTAL RETURN B, C 8.37% 29.46% 8.84% 18.03% 4.88%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 1,401,074 $ 880,054 $ 179,501 $ 42,326 $ 1,462
(000 omitted)

Ratio of expenses to average 1.31% A 1.48% 1.67% 1.77% 1.55%
net assets A

Ratio of expenses to average net 1.29% A 1.47% 1.64% 1.77% 1.55%
assets after expense reductions , G G G A

Ratio of net investment income 1.64% A 1.78% 1.69% 2.02% 3.39%
to average net assets A

Portfolio turnover 126% A 80% 140% 120% 51%

Average commission rate H $ .0425

</TABLE>

(UNAUDITED) 1995 1994 E

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

Net asset value, beginning of period $ 19.90 $ 15.94 $ 15.21

Income from Investment Operations

Net investment income .11 D .26 .08 D

Net realized and unrealized gain (loss) 1.46 4.23 .72

Total from investment operations 1.57 4.49 .80

Less Distributions

From net investment income (.14) (.25) (.07)

From net realized gain (.46) (.28) -

Total distributions (.60) (.53) (.07)

Net asset value, end of period $ 20.87 $ 19.90 $ 15.94

TOTAL RETURN B, C 8.07% 28.95% 5.25%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 421,766 $ 270,101 $ 35,373

Ratio of expenses to average net assets 1.86% A 1.85% 2.24% A

Ratio of expenses to average net assets after 1.85% A, F 1.84% F 2.18% A,
expense reductions F

Ratio of net investment income to average net 1.08% A 1.41% 1.15% A
assets

Portfolio turnover 126% A 80% 140%

Average commission rate G $ .0425

</TABLE>

(UNAUDITED) 1995 1994 E 1993 1992 1991

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

Net asset value, $ 20.09 $ 16.07 $ 14.93 $ 12.88 $ 11.08 $ 9.52
beginning of period

Income from Investment
Operations

Net investment .23 D .45 .41 D .39 .49 .63 H
income

Net realized 1.47 4.28 1.05 2.02 1.79 1.52
and unrealized
gain (loss)

Total from investment 1.70 4.73 1.46 2.41 2.28 2.15
operations

Less Distributions

From net investment (.23) (.43) (.32) (.36) (.48) (.59)
income

From net realized gain (.46) (.28) - - - -

Total distributions (.69) (.71) (.32) (.36) (.48) (.59)

Net asset value, end $ 21.10 $ 20.09 $ 16.07 $ 14.93 $ 12.88 $ 11.08
of period

TOTAL RETURN B, C 8.68% 30.43% 9.82% 18.90% 20.91% 22.97%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 298,161 $ 297,453 $ 197,533 $ 191,138 $ 139,391 $ 168,590
period (000 omitted)

Ratio of expenses to .73% A .74% .73% .80% .71% .67%
average net assets I I

Ratio of expenses to .71% A .73% .71% .79% .71% .67%
average net assets , F F F F
after expense
reductions

Ratio of net investment 2.21% A 2.52% 2.62% 3.00% 3.77% 5.66%
income to average
net assets

Portfolio turnover 126% A 80% 140% 120% 51% 91%

Average commission $ .0425
rate G

</TABLE>

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
TAXABLE 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 Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income 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)