(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
EQUITY INCOME
FUND - CLASS A, CLASS T (FORMERLY CLASS A), AND CLASS B
ANNUAL REPORT
NOVEMBER 30, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 10 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 34 Notes to the financial statements.
REPORT OF INDEPENDENT 40 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 41
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns throughout 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, as we witnessed last year. 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
securities 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 3, 1996.
Class A shares bear a 0.25% 12b-1 fee that is reflected in returns after
September 3, 1996. Returns between September 10, 1992 (the date Class T
shares were first offered) and September 3, 1996 are those of Class T and
reflect Class T's 0.50% 12b-1 fee (0.65% prior to January 1, 1996). Returns
prior to September 10, 1992 are those of the 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 class expenses, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Class A 18.80% 138.51% 245.54%
Advisor Equity Income Fund - Class A 12.56% 125.98% 227.40%
(incl. max. 5.25% sales charge)
S&P 500(registered trademark) 27.86% 130.90% 310.22%
Equity Income Funds Average 22.28% 105.93% 207.73%
</TABLE>
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 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
widely recognized, unmanaged index of common stocks. 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 156 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past 12 months. 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, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Class A 18.80% 18.99% 13.20%
Advisor Equity Income Fund - Class A 12.56% 17.71% 12.59%
(incl. max. 5.25% sales charge)
S&P 500 27.86% 18.21% 15.16%
Equity Income Funds Average 22.28% 15.43% 11.62%
</TABLE>
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 19961130 19961209 164953 S00000000000001
FA Equity Income -CL A SP Standard & Poor 500
00246 SP001
1986/11/30 9475.00 10000.00
1986/12/31 9328.05 9745.00
1987/01/31 10244.47 11057.65
1987/02/28 10552.34 11494.43
1987/03/31 10745.61 11826.62
1987/04/30 10605.75 11721.36
1987/05/31 10551.16 11823.34
1987/06/30 10856.20 12420.42
1987/07/31 11170.64 13050.13
1987/08/31 11478.53 13536.90
1987/09/30 11209.00 13240.44
1987/10/31 9177.52 10388.45
1987/11/30 8785.46 9532.44
1987/12/31 9119.35 10257.86
1988/01/31 9743.06 10689.72
1988/02/29 10218.33 11187.86
1988/03/31 10084.63 10842.15
1988/04/30 10228.70 10962.50
1988/05/31 10354.27 11057.87
1988/06/30 10946.77 11565.43
1988/07/31 10927.22 11521.48
1988/08/31 10711.04 11129.75
1988/09/30 11027.52 11603.88
1988/10/31 11226.39 11926.47
1988/11/30 11156.48 11755.92
1988/12/31 11237.43 11961.65
1989/01/31 11957.52 12837.24
1989/02/28 11855.58 12517.59
1989/03/31 12091.26 12809.25
1989/04/30 12534.12 13474.05
1989/05/31 12834.03 14019.75
1989/06/30 12885.95 13939.84
1989/07/31 13699.80 15198.61
1989/08/31 13877.99 15496.50
1989/09/30 13698.99 15432.96
1989/10/31 12947.93 15074.92
1989/11/30 13118.01 15382.45
1989/12/31 13309.03 15751.63
1990/01/31 12467.45 14694.69
1990/02/28 12489.71 14884.25
1990/03/31 12489.71 15278.69
1990/04/30 12006.31 14896.72
1990/05/31 12796.94 16349.15
1990/06/30 12740.22 16237.98
1990/07/31 12534.91 16186.01
1990/08/31 11583.04 14722.80
1990/09/30 10707.11 14005.80
1990/10/31 10463.77 13945.57
1990/11/30 11162.90 14846.46
1990/12/31 11408.66 15260.67
1991/01/31 11989.16 15926.04
1991/02/28 12846.38 17064.75
1991/03/31 13051.40 17477.72
1991/04/30 13051.09 17519.66
1991/05/31 13765.83 18276.51
1991/06/30 13134.01 17439.45
1991/07/31 13852.79 18252.13
1991/08/31 14146.18 18684.70
1991/09/30 14072.89 18372.67
1991/10/31 14307.36 18618.86
1991/11/30 13727.17 17868.52
1991/12/31 14809.55 19912.68
1992/01/31 14958.64 19542.31
1992/02/29 15420.80 19796.35
1992/03/31 15170.26 19410.33
1992/04/30 15710.95 19980.99
1992/05/31 15849.64 20078.90
1992/06/30 15673.17 19779.72
1992/07/31 16080.27 20588.71
1992/08/31 15698.51 20166.64
1992/09/30 15801.11 20404.61
1992/10/31 16006.39 20476.03
1992/11/30 16571.42 21174.26
1992/12/31 16984.10 21434.70
1993/01/31 17513.78 21614.75
1993/02/28 17967.24 21908.71
1993/03/31 18550.78 22370.99
1993/04/30 18459.85 21829.61
1993/05/31 18746.51 22414.64
1993/06/30 18929.72 22479.65
1993/07/31 19191.83 22389.73
1993/08/31 19861.59 23238.30
1993/09/30 19729.97 23059.36
1993/10/31 19966.89 23536.69
1993/11/30 19558.86 23313.09
1993/12/31 20045.86 23595.18
1994/01/31 20967.20 24397.42
1994/02/28 20414.40 23736.25
1994/03/31 19540.22 22701.35
1994/04/30 20214.94 22991.92
1994/05/31 20347.23 23368.99
1994/06/30 20213.09 22796.45
1994/07/31 20904.13 23544.18
1994/08/31 21980.57 24509.49
1994/09/30 21607.40 23909.00
1994/10/31 22034.21 24446.96
1994/11/30 21287.29 23556.60
1994/12/31 21340.64 23905.94
1995/01/31 21667.91 24525.82
1995/02/28 22431.54 25481.60
1995/03/31 23155.97 26233.56
1995/04/30 23773.28 27006.14
1995/05/31 24431.75 28085.57
1995/06/30 24775.34 28738.00
1995/07/31 25670.50 29690.95
1995/08/31 25973.48 29765.47
1995/09/30 26771.90 31021.58
1995/10/31 26467.99 30910.83
1995/11/30 27559.31 32267.82
1995/12/31 28286.41 32889.29
1996/01/31 29124.89 34008.85
1996/02/29 29224.34 34324.11
1996/03/31 29438.01 34654.65
1996/04/30 29637.68 35165.46
1996/05/31 29865.88 36072.38
1996/06/30 29694.98 36209.81
1996/07/31 28579.27 34610.06
1996/08/31 29122.82 35339.99
1996/09/30 30153.05 37328.92
1996/10/31 30756.68 38358.45
1996/11/29 32740.06 41022.00
IMATRL PRASUN SHR__CHT 19961130 19961209 164956 R00000000000123
$10,000 OVER TEN YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Equity Income Fund - Class A on November 30, 1986, and
the current maximum 5.25% sales charge was paid. As the chart shows, by
November 30, 1996, the value of the investment would have grown to $32,740
- - a 227.40% 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 $41,022 - a 310.22% 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 T
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
securities that have grown in value). You can also look at income to
measure performance.
The initial offering of Class T shares took place on September 10, 1992.
Class T shares bear a 0.50% 12b-1 fee (0.65% prior to January 1, 1996) that
is reflected in returns after September 10, 1992. Returns prior to that
date are those of the Institutional Class, the original class of the fund.
Had Class T's 12b-1 fee been reflected, returns prior to September 10, 1992
would have been lower. If Fidelity had not reimbursed certain class
expenses, the past five and past 10 year total returns would have been
lower. Effective January 1, 1996, the maximum 4.75% sales charge on Class T
shares was reduced to 3.50%.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Class T 18.89% 138.69% 245.80%
Advisor Equity Income Fund - Class T 14.73% 130.33% 233.70%
(incl. max. 3.50% sales charge)
S&P 500(registered trademark) 27.86% 130.90% 310.22%
Equity Income Funds Average 22.28% 105.93% 207.73%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage terms
over a set period - in this case, one year, five years or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return, over the
past year, the value of your investment would be $1,050. You can compare
Class T's returns to the performance of the Standard & Poor's 500 Index - a
widely recognized, unmanaged index of common stocks. To measure how Class
T's performance stacked up against its peers, you can compare it to the
equity income funds average, which reflects the performance of 156 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past 12 months. Both benchmarks include reinvested dividends and
capital gains, if any, and exclude the effects of sales charges.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Class T 18.89% 19.01% 13.21%
Advisor Equity Income Fund - Class T 14.73% 18.16% 12.81%
(incl. max. 3.50% sales charge)
S&P 500 27.86% 18.21% 15.16%
Equity Income Funds Average 22.28% 15.43% 11.62%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' actual (or cumulative)
return and show you what would have happened if Class T shares had
performed at a constant rate each year.
$10,000 OVER TEN YEARS
IMAHDR PRASUN SHR__CHT 19961130 19961210 090228 S00000000000001
FA Equity Income -CL T SP Standard & Poor 500
00280 SP001
1986/11/30 9650.00 10000.00
1986/12/31 9500.34 9745.00
1987/01/31 10433.68 11057.65
1987/02/28 10747.24 11494.43
1987/03/31 10944.07 11826.62
1987/04/30 10801.63 11721.36
1987/05/31 10746.04 11823.34
1987/06/30 11056.71 12420.42
1987/07/31 11376.96 13050.13
1987/08/31 11690.53 13536.90
1987/09/30 11416.03 13240.44
1987/10/31 9347.03 10388.45
1987/11/30 8947.72 9532.44
1987/12/31 9287.78 10257.86
1988/01/31 9923.01 10689.72
1988/02/29 10407.06 11187.86
1988/03/31 10270.89 10842.15
1988/04/30 10417.62 10962.50
1988/05/31 10545.50 11057.87
1988/06/30 11148.95 11565.43
1988/07/31 11129.04 11521.48
1988/08/31 10908.87 11129.75
1988/09/30 11231.20 11603.88
1988/10/31 11433.74 11926.47
1988/11/30 11362.54 11755.92
1988/12/31 11444.98 11961.65
1989/01/31 12178.37 12837.24
1989/02/28 12074.55 12517.59
1989/03/31 12314.58 12809.25
1989/04/30 12765.63 13474.05
1989/05/31 13071.07 14019.75
1989/06/30 13123.95 13939.84
1989/07/31 13952.83 15198.61
1989/08/31 14134.31 15496.50
1989/09/30 13952.00 15432.96
1989/10/31 13187.07 15074.92
1989/11/30 13360.30 15382.45
1989/12/31 13554.84 15751.63
1990/01/31 12697.72 14694.69
1990/02/28 12720.39 14884.25
1990/03/31 12720.39 15278.69
1990/04/30 12228.06 14896.72
1990/05/31 13033.30 16349.15
1990/06/30 12975.52 16237.98
1990/07/31 12766.43 16186.01
1990/08/31 11796.98 14722.80
1990/09/30 10904.87 14005.80
1990/10/31 10657.03 13945.57
1990/11/30 11369.08 14846.46
1990/12/31 11619.37 15260.67
1991/01/31 12210.60 15926.04
1991/02/28 13083.65 17064.75
1991/03/31 13292.45 17477.72
1991/04/30 13292.14 17519.66
1991/05/31 14020.08 18276.51
1991/06/30 13376.59 17439.45
1991/07/31 14108.64 18252.13
1991/08/31 14407.46 18684.70
1991/09/30 14332.81 18372.67
1991/10/31 14571.62 18618.86
1991/11/30 13980.71 17868.52
1991/12/31 15083.08 19912.68
1992/01/31 15234.93 19542.31
1992/02/29 15705.62 19796.35
1992/03/31 15450.45 19410.33
1992/04/30 16001.13 19980.99
1992/05/31 16142.38 20078.90
1992/06/30 15962.65 19779.72
1992/07/31 16377.27 20588.71
1992/08/31 15988.46 20166.64
1992/09/30 16092.95 20404.61
1992/10/31 16302.02 20476.03
1992/11/30 16877.49 21174.26
1992/12/31 17297.79 21434.70
1993/01/31 17837.25 21614.75
1993/02/28 18299.09 21908.71
1993/03/31 18893.41 22370.99
1993/04/30 18800.79 21829.61
1993/05/31 19092.75 22414.64
1993/06/30 19279.34 22479.65
1993/07/31 19546.29 22389.73
1993/08/31 20228.43 23238.30
1993/09/30 20094.37 23059.36
1993/10/31 20335.67 23536.69
1993/11/30 19920.11 23313.09
1993/12/31 20416.10 23595.18
1994/01/31 21354.46 24397.42
1994/02/28 20791.44 23736.25
1994/03/31 19901.13 22701.35
1994/04/30 20588.30 22991.92
1994/05/31 20723.04 23368.99
1994/06/30 20586.42 22796.45
1994/07/31 21290.23 23544.18
1994/08/31 22386.54 24509.49
1994/09/30 22006.48 23909.00
1994/10/31 22441.18 24446.96
1994/11/30 21680.46 23556.60
1994/12/31 21734.80 23905.94
1995/01/31 22068.11 24525.82
1995/02/28 22845.84 25481.60
1995/03/31 23583.66 26233.56
1995/04/30 24212.37 27006.14
1995/05/31 24882.99 28085.57
1995/06/30 25232.93 28738.00
1995/07/31 26144.63 29690.95
1995/08/31 26453.20 29765.47
1995/09/30 27266.37 31021.58
1995/10/31 26956.85 30910.83
1995/11/30 28068.32 32267.82
1995/12/31 28808.85 32889.29
1996/01/31 29662.82 34008.85
1996/02/29 29764.11 34324.11
1996/03/31 29981.71 34654.65
1996/04/30 30185.08 35165.46
1996/05/31 30417.50 36072.38
1996/06/30 30243.44 36209.81
1996/07/31 29107.12 34610.06
1996/08/31 29660.71 35339.99
1996/09/30 30724.43 37328.92
1996/10/31 31352.95 38358.45
1996/11/29 33370.06 41022.00
IMATRL PRASUN SHR__CHT 19961130 19961210 090231 R00000000000123
$10,000 OVER TEN YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Equity Income Fund - Class T on November 30, 1986, and
the current maximum 3.50% sales charge was paid. As the chart shows, by
November 30, 1996, the value of the investment would have grown to $33,370
- - a 233.70% 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 $41,022 - a 310.22% 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
securities 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 that is reflected in
returns after June 30, 1994. Returns between September 10, 1992 (the date
Class T shares were first offered) and June 30, 1994 are those of Class T,
and reflect Class T's prior 0.65% 12b-1 fee. Returns prior to September 10,
1992 are those of the Institutional Class, the original class of the fund.
Had Class B's 12b-1 fee been reflected, returns prior to June 30, 1994
would have been lower. Effective January 2, 1997, Class B's contingent
deferred sales charge is based on a declining scale that ranges from 5% to
1% on Class B shares redeemed within six years of purchase. This scale is
revised from the previous scale of 4% to 1% on shares redeemed within five
years of purchase. Class B's contingent deferred sales charge included in
the past one year, past five years, and past 10 years total return figures
are 5%, 2% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses, the past five and past 10 year total returns would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Class B 18.22% 136.23% 242.25%
Advisor Equity Income Fund - Class B 13.22% 134.23% 242.25%
(incl. contingent deferred sales charge) 1
S&P 500(registered trademark) 27.86% 130.90% 310.22%
Equity Income Funds Average 22.28% 105.93% 207.73%
</TABLE>
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 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
widely recognized, unmanaged index of common stocks. 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 156 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past 12 months. 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, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Class B 18.22% 18.76% 13.09%
Advisor Equity Income Fund - Class B 13.22% 18.56% 13.09%
(incl. contingent deferred sales charge) 1
S&P 500 27.86% 18.21% 15.16%
Equity Income Funds Average 22.28% 15.43% 11.62%
</TABLE>
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.
1 HAD CLASS B'S CONTINGENT DEFERRED SALES CHARGE SCALE PRIOR TO JANUARY 2,
1997 BEEN REFLECTED, THE CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURNS FOR
THE PAST ONE, FIVE, AND 10 YEARS WOULD HAVE BEEN 14.22% AND 14.22%, 135.23%
AND 18.66%, AND 242.25% AND 13.09%, RESPECTIVELY.
$10,000 OVER TEN YEARS
IMAHDR PRASUN SHR__CHT 19961130 19961209 165145 S00000000000001
FA Equity Income -CL B SP Standard & Poor 500
00180 SP001
1986/11/30 10000.00 10000.00
1986/12/31 9844.91 9745.00
1987/01/31 10812.10 11057.65
1987/02/28 11137.03 11494.43
1987/03/31 11341.01 11826.62
1987/04/30 11193.40 11721.36
1987/05/31 11135.79 11823.34
1987/06/30 11457.73 12420.42
1987/07/31 11789.60 13050.13
1987/08/31 12114.54 13536.90
1987/09/30 11830.08 13240.44
1987/10/31 9686.04 10388.45
1987/11/30 9272.25 9532.44
1987/12/31 9624.65 10257.86
1988/01/31 10282.91 10689.72
1988/02/29 10784.52 11187.86
1988/03/31 10643.41 10842.15
1988/04/30 10795.46 10962.50
1988/05/31 10927.98 11057.87
1988/06/30 11553.32 11565.43
1988/07/31 11532.69 11521.48
1988/08/31 11304.52 11129.75
1988/09/30 11638.54 11603.88
1988/10/31 11848.44 11926.47
1988/11/30 11774.65 11755.92
1988/12/31 11860.09 11961.65
1989/01/31 12620.08 12837.24
1989/02/28 12512.49 12517.59
1989/03/31 12761.22 12809.25
1989/04/30 13228.63 13474.05
1989/05/31 13545.15 14019.75
1989/06/30 13599.95 13939.84
1989/07/31 14458.89 15198.61
1989/08/31 14646.96 15496.50
1989/09/30 14458.04 15432.96
1989/10/31 13665.36 15074.92
1989/11/30 13844.87 15382.45
1989/12/31 14046.47 15751.63
1990/01/31 13158.25 14694.69
1990/02/28 13181.75 14884.25
1990/03/31 13181.75 15278.69
1990/04/30 12671.57 14896.72
1990/05/31 13506.01 16349.15
1990/06/30 13446.14 16237.98
1990/07/31 13229.46 16186.01
1990/08/31 12224.84 14722.80
1990/09/30 11300.38 14005.80
1990/10/31 11043.55 13945.57
1990/11/30 11781.43 14846.46
1990/12/31 12040.80 15260.67
1991/01/31 12653.47 15926.04
1991/02/28 13558.19 17064.75
1991/03/31 13774.56 17477.72
1991/04/30 13774.24 17519.66
1991/05/31 14528.58 18276.51
1991/06/30 13861.75 17439.45
1991/07/31 14620.36 18252.13
1991/08/31 14930.01 18684.70
1991/09/30 14852.65 18372.67
1991/10/31 15100.12 18618.86
1991/11/30 14487.78 17868.52
1991/12/31 15630.13 19912.68
1992/01/31 15787.49 19542.31
1992/02/29 16275.25 19796.35
1992/03/31 16010.83 19410.33
1992/04/30 16581.48 19980.99
1992/05/31 16727.86 20078.90
1992/06/30 16541.61 19779.72
1992/07/31 16971.26 20588.71
1992/08/31 16568.35 20166.64
1992/09/30 16676.63 20404.61
1992/10/31 16893.29 20476.03
1992/11/30 17489.63 21174.26
1992/12/31 17925.17 21434.70
1993/01/31 18484.20 21614.75
1993/02/28 18962.78 21908.71
1993/03/31 19578.66 22370.99
1993/04/30 19482.69 21829.61
1993/05/31 19785.24 22414.64
1993/06/30 19978.59 22479.65
1993/07/31 20255.23 22389.73
1993/08/31 20962.10 23238.30
1993/09/30 20823.19 23059.36
1993/10/31 21073.23 23536.69
1993/11/30 20642.60 23313.09
1993/12/31 21156.58 23595.18
1994/01/31 22128.98 24397.42
1994/02/28 21545.54 23736.25
1994/03/31 20622.93 22701.35
1994/04/30 21335.03 22991.92
1994/05/31 21474.65 23368.99
1994/06/30 21333.07 22796.45
1994/07/31 22062.41 23544.18
1994/08/31 23212.52 24509.49
1994/09/30 22818.54 23909.00
1994/10/31 23241.11 24446.96
1994/11/30 22452.32 23556.60
1994/12/31 22508.97 23905.94
1995/01/31 22825.59 24525.82
1995/02/28 23617.14 25481.60
1995/03/31 24396.02 26233.56
1995/04/30 25032.69 27006.14
1995/05/31 25712.77 28085.57
1995/06/30 26060.58 28738.00
1995/07/31 27004.28 29690.95
1995/08/31 27309.16 29765.47
1995/09/30 28136.47 31021.58
1995/10/31 27801.86 30910.83
1995/11/30 28951.18 32267.82
1995/12/31 29702.02 32889.29
1996/01/31 30554.34 34008.85
1996/02/29 30658.98 34324.11
1996/03/31 30868.65 34654.65
1996/04/30 31063.55 35165.46
1996/05/31 31288.43 36072.38
1996/06/30 31093.68 36209.81
1996/07/31 29907.01 34610.06
1996/08/31 30477.81 35339.99
1996/09/30 31544.49 37328.92
1996/10/31 32176.88 38358.45
1996/11/29 34224.64 41022.00
IMATRL PRASUN SHR__CHT 19961130 19961209 165149 R00000000000123
$10,000 OVER TEN YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Equity Income Fund - Class B on November 30, 1986. As
the chart shows, by November 30, 1996, the value of the investment would
have grown to $34,225 - a 242.25% 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
$41,022 - a 310.22% 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
MARKET RECAP
Paced by the robust performance
of blue chip stocks, the U.S. stock
market posted strong gains for
the year that ended November
30, 1996. The Standard & Poor's
500 Index returned 27.86%
during the period - well above its
long-term average of about 12%.
The stock market spent much of
the past year breaking price and
trading volume records. Solid
corporate earnings reports, large
cash inflows into mutual funds,
widespread optimism and a
generally favorable interest rate
environment propelled share
prices higher. Large capitalization
stocks thrived as investors
sought their lower volatility and
higher degree of liquidity over
smaller cap stocks in an
environment where it was
sometimes difficult to discern the
health of the economy. The Dow
Jones Industrial Average closed
above 6500 for the first time in
November. While short-term
confusion over the direction of
interest rates created a volatile
backdrop in the summer months,
stocks rallied again when the
Federal Reserve Board left
short-term interest rates
unchanged and it appeared
inflation would not be an issue for
the remainder of 1996.
Smaller-company stocks posted
strong gains at the beginning of
1996, but trended downward in
the spring and summer because
their earnings tend to be more
affected by the higher borrowing
costs brought on by higher rates.
When interest rate fears
subsided, these stocks
rebounded, only to fade toward
the end of the period due to
earnings concerns and a general
flight to quality.
An interview with Robert Chow, Portfolio Manager of Fidelity Advisor Equity
Income Fund
Q. WHAT CAN YOU TELL US ABOUT THE FUND'S PERFORMANCE, BOB?
A. On a risk-adjusted basis, I think it did pretty well. On an absolute
basis, however, it underperformed the market. For the year that ended
November 30, 1996, the fund's Class A, Class T and Class B shares had total
returns of 18.80%, 18.89% and 18.22%, respectively. Additionally, for the
same period, the Standard & Poor's 500 Index returned 27.86% and the return
of the equity income funds average, according to Lipper Analytical
Services, was 22.28%. The fund's underperformance in the past year reflects
the underperformance of many interest-rate-sensitive stocks in the early
part of 1996 when interest rates rose unexpectedly.
Q. WHAT DO YOU MEAN BY A "RISK-ADJUSTED BASIS"?
A. That means looking at the fund's return relative to the amount of
volatility it had. During the period, I was able to bring the fund's
volatility to relatively lower levels.
Q. HOW DOES THE CONCEPT OF RISK VERSUS REWARD PLAY INTO HOW YOU EVALUATE
STOCKS?
A. When I look at a stock, I develop a valuation range that I think the
stock should trade in. If the stock trades at the high end of that
valuation range, as many of the stocks in the S&P 500 currently do, I don't
believe there is enough incremental return in the stock to justify the risk
that its price may fall from its lofty peaks - and, therefore, I will sell
it or I won't buy it. So the ideal situation would be to find stocks with
low volatility and a good valuation risk/reward.
Q. WHAT WERE SOME MAJOR CHANGES YOU MADE SINCE YOU BEGAN MANAGING THE FUND
IN MARCH?
A. I made the fund's finance position less interest rate sensitive.
Contrary to popular belief, not all financial stocks move in lockstep with
the market's interest rate outlook. I also increased the fund's holdings in
American Express because the company has shown it can gain market share on
Visa and Mastercard. I also bought some insurance company stocks because
many of these companies appeared undervalued.
Q. YOUR FAITH IN IBM SEEMS TO HAVE PAID OFF . . .
A. It certainly has. Early in the year, the stock traded at beaten-down
levels of below $100. Since then, Big Blue has
been one of the top performing stocks in the market on the momentum of
improving fundamentals and the market's belief in IBM's "one-stop shopping"
approach to corporate technology.
Q. WHAT'S BEEN THE STORY BEHIND THE FUND'S ENERGY POSITION?
A. Energy stocks have performed very well as their businesses have improved
with the rising price of oil. I've gradually begun cutting back on some of
these stocks as many of them have reached the upper end of their historical
valuation ranges. Additionally, one must consider some of the variables
that determine energy demand. If we have a warm winter, demand for oil and
natural gas may slump.
Q. WAS THERE A PARTICULAR STOCK THAT DIDN'T LIVE UP TO EXPECTATIONS?
A. Sure. Silicon Graphics, a workstation producer, hasn't worked out as
well as I would have liked. The company recently ran into some roadblocks
in the midst of the launch of several new products. The poor execution of
the roll-out of these products has been somewhat frustrating.
Q. HOW ARE YOU POSITIONING THE FUND GOING FORWARD?
A. I will continue to strive to increase the stability of the fund, as
downside risk and volatility are both key considerations in all my
investment decisions. As a value investor, shareholders can expect me to
look for opportunities in the market where
I find the best risk/reward tradeoff. I won't just invest in a sector that
might be in vogue for the time being.
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 November 30,
1996, more than $2.5 billion
MANAGER: Robert Chow,
since March 1996; joined
Fidelity in 1989
(checkmark)
BOB CHOW ON FINDING VALUE IN
A HIGH-FLYING MARKET:
"A lot of people ask me how,
as a value investor, can I find
undervalued companies in
such an overvalued market?
Good question. I think what
shareholders should keep in
mind is that not all sectors and
individual stocks move up
with the general market. For
example, take IBM. It's doing
well as of the end of the
period, but when I was
acquiring more of it earlier in
the year it was a very
controversial position. Few
analysts were excited about
it. Later on, however, as The
Wall Street Journal reported,
the market has been
"panicking in" to IBM while I
had been in it all along.
Another example is the retail
sector. The market was
worried this past summer that
Christmas was going to be
disappointing. How could
anyone know? In my book,
this was a definite valuation
opportunity."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF NOVEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
British Petroleum PLC ADR 2.6 2.3
International Business Machines Corp. 2.5 2.1
Wal-Mart Stores, Inc. 2.4 2.2
American Express Co. 2.3 2.1
Philip Morris Companies, Inc. 2.2 3.2
General Re Corp. 1.9 1.9
Allstate Corp. exchangeable $2.30 1.7 1.3
General Motors Corp. 1.4 1.3
du pont (E.I.) de Nemours & Co. 1.3 1.5
Federal National Mortgage Association 1.3 1.3
TOP FIVE MARKET SECTORS AS OF NOVEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Finance 18.5 16.9
Durables 8.1 9.9
Energy 7.9 7.9
Technology 7.0 7.7
Basic Industries 6.7 7.4
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1996 * AS OF MAY 31, 1996 **
Row: 1, Col: 1, Value: 9.4
Row: 1, Col: 2, Value: 2.1
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 4, Value: 36.5
Row: 1, Col: 5, Value: 50.0
Stocks 89.8%
Bonds 2.4%
Convertible
securities 1.7%
Short-term
investments 6.1%
FOREIGN
INVESTMENTS 3.3%
Stocks 86.5%
Bonds 2.0%
Convertible
securities 2.1%
Short-term
investments 9.4%
FOREIGN
INVESTMENTS 3.6%
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
*
**
INVESTMENTS NOVEMBER 30, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 86.5%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 2.6%
AEROSPACE & DEFENSE - 1.7%
Alliant Techsystems, Inc. (a) 100,000 $ 5,363
Boeing Co. 80,000 7,950
Lockheed Martin Corp. 170,000 15,405
McDonnell Douglas Corp. 100,000 5,288
Rockwell International Corp. 130,000 8,353
42,359
DEFENSE ELECTRONICS - 0.5%
Litton Industries, Inc. (a) 120,000 5,610
Raytheon Co. 160,000 8,180
13,790
SHIP BUILDING & REPAIR - 0.4%
General Dynamics Corp. 140,000 10,325
TOTAL AEROSPACE & DEFENSE 66,474
BASIC INDUSTRIES - 6.7%
CHEMICALS & PLASTICS - 3.6%
Dow Chemical Co. 50,000 4,188
du Pont (E.I.) de Nemours & Co. 350,000 32,987
Great Lakes Chemical Corp. 80,000 4,290
Monsanto Co. 200,000 7,950
Raychem Corp. 100,000 8,525
Union Carbide Corp. 420,000 19,371
Valspar Corp. 170,000 9,754
Witco Corp. 130,000 3,949
91,014
IRON & STEEL - 0.4%
Armco, Inc. (a) 325,000 1,463
Nucor Corp. 150,000 8,156
9,619
METALS & MINING - 0.7%
Alcan Aluminium Ltd. 100,000 3,527
Aluminum Co. of America 220,000 13,998
17,525
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.6%
Crown Cork & Seal Co., Inc. 140,000 $ 7,420
Tupperware Corp. 150,000 7,950
15,370
PAPER & FOREST PRODUCTS - 1.4%
Champion International Corp. 200,000 8,600
Chesapeake Corp. 330,000 10,065
Consolidated Papers, Inc. 80,000 3,970
MacMillan Bloedel Ltd. 337,600 4,816
Mead Corp. 100,000 5,925
Pentair, Inc. 120,000 3,480
36,856
TOTAL BASIC INDUSTRIES 170,384
CONGLOMERATES - 1.6%
AlliedSignal, Inc. 140,000 10,255
Tyco International Ltd. 330,000 18,068
United Technologies Corp. 60,000 8,415
Whitman Corp. 150,000 3,450
40,188
CONSTRUCTION & REAL ESTATE - 3.7%
BUILDING MATERIALS - 2.0%
CalMat Co. 400,000 7,300
Masco Corp. 720,000 26,280
Sherwin-Williams Co. 250,000 14,188
York International Corp. 80,000 4,200
51,968
CONSTRUCTION - 0.7%
Centex Corp. 230,000 8,280
Lennar Corp. 350,000 9,100
17,380
REAL ESTATE INVESTMENT TRUSTS - 1.0%
Beacon Properties Corp. 180,000 5,692
Duke Realty Investors, Inc. 111,836 4,012
Felcor Suite Hotels, Inc. 100,000 3,563
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Highwoods Properties, Inc. 180,000 $ 5,535
Public Storage, Inc. 250,000 6,343
25,145
TOTAL CONSTRUCTION & REAL ESTATE 94,493
DURABLES - 7.9%
AUTOS, TIRES, & ACCESSORIES - 5.0%
Chrysler Corp. 410,000 14,555
Cummins Engine Co., Inc. 180,000 8,145
Eaton Corp. 140,000 9,695
Echlin, Inc. 750,000 25,219
General Motors Corp. 620,000 35,727
Modine Manufacturing Co. 310,000 7,711
PACCAR, Inc. 200,000 13,300
Snap-on Tools Corp. 320,000 11,600
125,952
CONSUMER DURABLES - 0.6%
Minnesota Mining & Manufacturing Co. 180,000 15,075
CONSUMER ELECTRONICS - 0.9%
Black & Decker Corp. 70,000 2,651
Maytag Co. 950,000 18,169
Whirlpool Corp. 30,000 1,500
22,320
HOME FURNISHINGS - 0.6%
Heilig-Meyers Co. 200,000 2,775
Leggett & Platt, Inc. 420,000 12,863
15,638
TEXTILES & APPAREL - 0.8%
Fruit of the Loom, Inc. Class A (a) 250,000 8,906
Russell Corp. 262,000 7,533
Westpoint Stevens, Inc. Class A (a) 130,000 3,900
20,339
TOTAL DURABLES 199,324
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 7.6%
ENERGY SERVICES - 1.7%
Baker Hughes, Inc. 302,200 $ 11,068
Schlumberger Ltd. 130,000 13,520
Western Atlas, Inc. (a) 270,000 19,035
43,623
OIL & GAS - 5.9%
Amerada Hess Corp. 320,000 18,840
Atlantic Richfield Co. 30,000 4,174
British Petroleum PLC ADR 470,000 65,212
Burlington Resources, Inc. 500,000 26,500
Enron Oil & Gas Co. 150,000 3,994
Occidental Petroleum Corp. 500,000 12,000
Royal Dutch Petroleum Co. ADR 100,000 16,988
147,708
TOTAL ENERGY 191,331
FINANCE - 16.8%
BANKS - 3.6%
Banc One Corp. 40,000 1,905
Bank of New York Co., Inc. 580,000 20,807
BankAmerica Corp. 160,000 16,480
Chase Manhattan Corp. 90,000 8,505
Citicorp 200,000 21,850
Fleet Financial Group, Inc. 218,600 12,105
NationsBank Corp. 80,000 8,290
89,942
CREDIT & OTHER FINANCE - 3.9%
American Express Co. 1,109,300 57,960
Associates First Capital Corp. 140,000 6,773
Beneficial Corp. 40,000 2,485
Household International, Inc. 220,000 20,845
Mercury Finance Co. 750,000 8,719
Transamerica Corp. 30,000 2,381
99,163
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 2.8%
Federal Home Loan Mortgage Corporation 260,000 $ 29,705
Federal National Mortgage Association 780,000 32,175
Student Loan Marketing Association 90,000 8,651
70,531
INSURANCE - 5.8%
Aetna, Inc. 60,000 4,328
Allstate Corp. 420,000 25,304
Berkley (W.R.) Corp. 100,000 5,250
CIGNA Corp. 30,000 4,241
Chubb Corp. (The) 90,000 4,883
Cincinnati Financial Corp. 40,000 2,410
General Re Corp. 280,000 47,250
ITT Hartford Group, Inc. 140,000 9,573
Loews Corp. 170,000 15,768
NY Magic, Inc. 43,800 788
PXRE Corp. 242,400 5,848
Provident Companies, Inc. 320,000 13,400
Transnational Re Corp. Class A 262,506 6,595
145,638
SECURITIES INDUSTRY - 0.7%
Lehman Brothers Holdings, Inc. 620,000 18,058
TOTAL FINANCE 423,332
HEALTH - 3.7%
DRUGS & PHARMACEUTICALS - 2.2%
Bristol-Myers Squibb Co. 200,000 22,749
Merck & Co., Inc. 80,000 6,640
Pharmacia & Upjohn, Inc. 210,000 8,111
Schering-Plough Corp. 230,000 16,388
Sigma Aldrich Corp. 10,000 625
54,513
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Allegiance Corp. (a) 167,800 3,796
Biomet, Inc. 400,000 6,600
Pall Corp. 220,000 5,748
16,144
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 0.9%
Columbia/HCA Healthcare Corp. 230,000 $ 9,200
Tenet Healthcare Corp. (a) 570,000 12,754
21,954
TOTAL HEALTH 92,611
INDUSTRIAL MACHINERY & EQUIPMENT - 5.0%
ELECTRICAL EQUIPMENT - 2.0%
Amphenol Corp. Class A (a) 230,000 4,916
Duracell International, Inc. 170,000 11,326
Emerson Electric Co. 90,000 8,831
General Electric Co. 190,000 19,760
Scientific-Atlanta, Inc. 300,000 4,650
49,483
INDUSTRIAL MACHINERY & EQUIPMENT - 1.2%
Caterpillar, Inc. 110,000 8,704
Cooper Industries, Inc. 70,000 2,905
Deere & Co. 90,000 4,016
Detroit Diesel Corp. (a) 100,000 1,975
IDEX Corp. 100,000 3,938
Ingersoll-Rand Co. 220,000 10,230
31,768
POLLUTION CONTROL - 1.8%
Browning-Ferris Industries, Inc. 580,000 15,588
WMX Technologies, Inc. 830,000 29,880
45,468
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 126,719
MEDIA & LEISURE - 2.4%
BROADCASTING - 0.1%
Viacom, Inc. Class B (non-vtg.) (a) 90,000 3,398
ENTERTAINMENT - 0.2%
Carmike Cinemas, Inc. Class A (a) 50,000 1,363
Disney (Walt) Co. 40,000 2,950
4,313
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.1%
Fleetwood Enterprises, Inc. 50,000 $ 1,525
LODGING & GAMING - 0.6%
Circus Circus Enterprises, Inc. (a) 90,000 3,285
ITT Corp. (a) 260,000 11,992
15,277
PUBLISHING - 1.4%
ACNielsen Corp. 161,000 2,797
Cognizant Corp. (a) 350,000 12,075
Dun & Bradstreet Corp. 360,000 8,145
Knight-Ridder, Inc. 120,000 5,040
Times Mirror Co. Class A 150,000 7,856
35,913
RESTAURANTS - 0.0%
Uno Restaurant Corp. (a) 100,000 688
TOTAL MEDIA & LEISURE 61,114
NONDURABLES - 6.0%
BEVERAGES - 0.7%
Anheuser-Busch Companies, Inc. 220,000 9,323
Coors (Adolph) Co. Class B 150,000 2,981
PepsiCo, Inc. 200,000 5,975
18,279
FOODS - 1.4%
Chock Full-O-Nuts Corp. (a) 221,400 1,024
General Mills, Inc. 150,000 9,525
Quaker Oats Co. 160,000 6,300
Sysco Corp. 550,000 18,769
35,618
HOUSEHOLD PRODUCTS - 1.1%
Church & Dwight Co., Inc. 220,000 4,950
Clorox Co. 40,000 4,170
First Brands Corp. 360,000 10,305
Procter & Gamble Co. 60,000 6,525
Tambrands, Inc. 30,000 1,283
27,233
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
TOBACCO - 2.8%
Philip Morris Companies, Inc. 550,000 $ 56,718
RJR Nabisco Holdings Corp. 270,000 8,640
Schweitzer-Mauduit International, Inc. 170,000 5,610
70,968
TOTAL NONDURABLES 152,098
PRECIOUS METALS - 0.7%
Newmont Mining Corp. 320,000 15,319
Santa Fe Pacific Gold Corp. 200,000 2,300
17,619
RETAIL & WHOLESALE - 5.6%
DRUG STORES - 0.2%
Revco (D.S.), Inc. (a) 150,000 5,175
GENERAL MERCHANDISE STORES - 3.4%
Dillard Department Stores, Inc. Class A 260,000 7,963
May Department Stores Co. (The) 100,000 4,875
Nordstrom, Inc. 100,000 4,350
Sears, Roebuck & Co. 180,000 8,955
Wal-Mart Stores, Inc. 2,370,000 60,435
86,578
GROCERY STORES - 0.7%
Albertson's, Inc. 160,000 5,580
Food Lion, Inc. Class B 400,000 3,575
Great Atlantic & Pacific Tea Co., Inc. 80,000 2,620
Vons Companies, Inc. (a) 100,000 5,263
17,038
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Best Buy Co., Inc. (a) 300,000 3,788
Fabri-Centers of America, Inc. Class B (non-vtg.) (a) 300,000 4,388
Home Depot, Inc. (The) 200,000 10,424
Office Depot, Inc. (a) 80,000 1,560
Tandy Corp. 50,000 2,106
Toys "R" Us, Inc. (a) 300,000 10,349
32,615
TOTAL RETAIL & WHOLESALE 141,406
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 0.7%
LEASING & RENTAL - 0.2%
GATX Corp. 100,000 $ 4,988
SERVICES - 0.5%
Block (H&R), Inc. 410,800 12,015
TOTAL SERVICES 17,003
TECHNOLOGY - 6.9%
COMMUNICATIONS EQUIPMENT - 0.1%
Lucent Technologies, Inc. 70,000 3,588
COMPUTER SERVICES & SOFTWARE - 0.5%
Electronic Data Systems Corp. 80,000 3,870
Metromail Corp. (a) 240,000 5,550
Policy Management Systems Corp. (a) 100,000 4,000
13,420
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Exabyte Corp. (a) 207,300 3,006
International Business Machines Corp. 400,000 63,749
Pitney Bowes, Inc. 390,000 23,010
Silicon Graphics, Inc. (a) 460,000 9,143
98,908
ELECTRONIC INSTRUMENTS - 0.4%
Applied Materials, Inc. (a) 100,000 3,813
KLA Instruments Corp. (a) 100,000 3,550
Teradyne, Inc. (a) 90,000 2,126
9,489
ELECTRONICS - 1.7%
AMP, Inc. 310,000 11,858
Avnet, Inc. 140,000 8,190
Cypress Semiconductor Corp. (a) 120,000 1,470
Storage Technology Corp. (a) 30,000 1,496
Thomas & Betts Corp. 350,000 15,837
VLSI Technology, Inc. (a) 200,000 4,600
43,451
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.3%
Eastman Kodak Co. 50,000 $ 4,050
Imation Corp. (a) 77,400 2,341
6,391
TOTAL TECHNOLOGY 175,247
TRANSPORTATION - 4.1%
AIR TRANSPORTATION - 0.8%
AMR Corp. (a) 120,000 10,950
Delta Air Lines, Inc. 100,000 7,525
Viad Corp. 100,000 1,575
20,050
RAILROADS - 1.4%
Burlington Northern Santa Fe Corp. 200,000 17,975
CSX Corp. 380,000 17,765
35,740
TRUCKING & FREIGHT - 1.9%
Arnold Industries, Inc. 900,000 14,287
Caliber System, Inc. 10,000 194
Consolidated Freightways, Inc. 500,000 12,063
Federal Express Corp. (a) 4,000 177
Hunt (J.B.) Transport Services, Inc. 170,000 2,380
Pittston Co. (Burlington Group) 260,000 5,103
USFreightways Corp. 320,000 8,300
Werner Enterprises, Inc. 330,000 5,321
47,825
TOTAL TRANSPORTATION 103,615
UTILITIES - 4.5%
CELLULAR - 0.8%
AirTouch Communications, Inc. (a) 280,000 7,175
360 Degrees Communications Co. (a) 520,000 12,350
19,525
ELECTRIC UTILITY - 0.3%
American Electric Power Co., Inc. 190,000 7,885
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 3.4%
AT&T Corp. 200,000 $ 7,850
Ameritech Corp. 130,000 7,654
Bell Atlantic Corp. 250,000 15,719
MCI Communications Corp. 136,000 4,148
NYNEX Corp. 580,000 26,897
SBC Communications, Inc. 440,000 23,155
85,423
TOTAL UTILITIES 112,833
TOTAL COMMON STOCKS
(Cost $1,761,108) 2,185,791
CONVERTIBLE PREFERRED STOCKS - 2.0%
ENERGY - 0.3%
OIL & GAS - 0.3%
Atlantic Richfield Co. exchangeable $2.23 80,000 1,800
Occidental Petroleum Corp. Indexed $3.00 70,000 4,585
6,385
FINANCE - 1.7%
INSURANCE - 1.7%
Allstate Corp. exchangeable $2.30 860,000 42,570
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 50,000 -
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $40,310) 48,955
CORPORATE BONDS - 0.4%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - 0.1%
TECHNOLOGY - 0.1%
ELECTRONICS - 0.1%
National Semiconductor Corp.
6 1/2%, 10/1/02 (c) Ba2 $ 2,000 $ 1,945
NONCONVERTIBLE BONDS - 0.3%
DURABLES - 0.2%
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. 8 3/4%, 12/15/01 Ba3 5,200 5,330
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Viacom, Inc. 8%, 7/7/06 B1 2,230 2,155
TOTAL NONCONVERTIBLE BONDS 7,485
TOTAL CORPORATE BONDS
(Cost $8,880) 9,430
U.S. TREASURY OBLIGATIONS - 1.7%
7 7/8%, 11/15/04 Aaa 9,300 10,381
7 1/4%, 2/15/23 Aaa 5,020 5,417
6 1/4%, 8/15/23 Aaa 2,610 2,531
7 1/2%, 11/15/24 Aaa 13,590 15,378
7 5/8%, 2/15/25 Aaa 8,830 10,150
TOTAL TREASURY OBLIGATIONS
(Cost $43,613) 43,857
CASH EQUIVALENTS - 9.4%
SHARES
Taxable Central Cash Fund (b)
(Cost $238,340) 238,340,000 238,340
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,092,251) $ 2,526,373
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.46%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
3. 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 $1,945,000 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 1.7% AAA, AA, A 1.7%
Baa 0.0% BBB 0.0%
Ba 0.3% BB 0.4%
B 0.1% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At November 30, 1996, the aggregate cost of investment securities for
income tax purposes was $2,094,917,000. Net unrealized appreciation
aggregated $431,456,000, of which $458,882,000 related to appreciated
investment securities and $27,426,000 related to depreciated investment
securities.
The fund hereby designates approximately $15,681,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending November 30,
1997 approximately $6,650,000 of losses recognized during the period
November 1, 1996 to November 30, 1996.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1996
ASSETS $ 2,526,373
Investment in securities, at value (cost $2,092,251) -
See accompanying schedule
Receivable for investments sold 8,565
Receivable for fund shares sold 3,651
Dividends receivable 3,662
Interest receivable 1,287
Other receivables 198
Receivable from investment adviser for expense reductions 5
TOTAL ASSETS 2,543,741
LIABILITIES $ 3
Payable to custodian bank
Payable for investments purchased 18,683
Payable for fund shares redeemed 1,629
Accrued management fee 1,017
Distribution fees payable 1,078
Other payables and accrued expenses 717
TOTAL LIABILITIES 23,127
NET ASSETS $ 2,520,614
Net Assets consist of: $ 2,010,429
Paid in capital
Undistributed net investment income 4,640
Accumulated undistributed net realized gain (loss) on 71,425
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 434,120
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 2,520,614
CALCULATION OF MAXIMUM OFFERING PRICE $22.78
CLASS A:
NET ASSET VALUE and redemption price per share
($3,306 (divided by) 145.1 shares)
Maximum offering price per share (100/94.75 of $22.78) $24.04
CLASS B: $22.73
NET ASSET VALUE and offering price per share ($500,447
(divided by)
22,016 shares) A
CLASS T: $22.83
NET ASSET VALUE and redemption price per share
($1,672,994 (divided by) 73,296 shares)
Maximum offering price per share (100/96.50 of $22.83) $23.66
INSTITUTIONAL CLASS: $23.00
NET ASSET VALUE, offering price and redemption price per
share ($343,867 (divided by) 14,951 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME $ 40,074
Dividends
Interest 15,251
TOTAL INCOME 55,325
EXPENSES
Management fee $ 10,188
Transfer agent fees 1
Class A
Class B 887
Class T 2,670
Institutional Class 437
Distribution fees 1
Class A
Class B 4,008
Class T 6,743
Accounting fees and expenses 752
Non-interested trustees' compensation 7
Custodian fees and expenses 57
Registration fees 14
Class A
Class B 108
Class T 252
Institutional Class 57
Audit 70
Legal 19
Miscellaneous 80
Total expenses before reductions 26,351
Expense reductions (325) 26,026
NET INVESTMENT INCOME 29,299
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 69,744
Foreign currency transactions (2) 69,742
Change in net unrealized appreciation (depreciation) on:
Investment securities 261,602
Assets and liabilities in foreign currencies (1) 261,601
NET GAIN (LOSS) 331,343
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 360,642
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 29,299 $ 16,529
Net investment income
Net realized gain (loss) 69,742 41,100
Change in net unrealized appreciation (depreciation) 261,601 162,836
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 360,642 220,465
FROM OPERATIONS
Distributions to shareholders (4) -
From net investment income
Class A
Class B (4,108) (1,442)
Class T (18,521) (6,671)
Institutional Class (6,335) (5,881)
From net realized gain
Class B (6,588) (681)
Class T (21,465) (3,300)
Institutional Class (7,023) (3,529)
TOTAL DISTRIBUTIONS (64,044) (21,504)
Share transactions - net increase (decrease) 776,408 836,240
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,073,006 1,035,201
NET ASSETS
Beginning of period 1,447,608 412,407
End of period (including undistributed net investment $ 2,520,614 $ 1,447,608
income of $4,640 and $4,024, respectively)
FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED
NOVEMBER 30,
1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 20.38
Income from Investment Operations
Net investment income .06 F
Net realized and unrealized gain (loss) 2.44
Total from investment operations 2.50
Less Distributions
From net investment income (.10)
Net asset value, end of period $ 22.78
TOTAL RETURN B, C 12.31%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,306
Ratio of expenses to average net assets 1.46% A, D
, E
Ratio of expenses to average net assets after expense reductions 1.44% A, H
Ratio of net investment income to average net assets 1.27% A
Portfolio turnover 78%
Average commission rate I $ .0424
</TABLE>
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD 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 LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS
REIMBURSEMENT THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN
HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
G FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO NOVEMBER 30, 1996.
H 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).
I 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 19.90 $ 15.94 $ 15.21
Income from Investment Operations
Net investment income .19 D .26 .08 D
Net realized and unrealized gain (loss) 3.33 4.23 .72
Total from investment operations 3.52 4.49 .80
Less Distributions
From net investment income (.23) (.25) (.07)
From net realized gain (.46) (.28) -
Total distributions (.69) (.53) (.07)
Net asset value, end of period $ 22.73 $ 19.90 $ 15.94
TOTAL RETURN B, C 18.22% 28.95% 5.25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 500,447 $ 270,101 $ 35,373
Ratio of expenses to average net assets 1.81% 1.85% 2.24% A
Ratio of expenses to average net assets after 1.79% F 1.84% 2.18% A
expense reductions F , F
Ratio of net investment income to average net assets .92% 1.41% 1.15% A
Portfolio turnover 78% 80% 140%
Average commission rate G $ .0424
</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 - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 F 1993 1992 E
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 .30 D .31 .28 D .33 .13
Net realized and unrealized 3.35 4.26 1.03 1.97 .47
gain (loss)
Total from investment 3.65 4.57 1.31 2.30 .60
operations
Less Distributions
From net investment income (.31) (.30) (.21) (.30) (.11)
From net realized gain (.46) (.28) - - -
Total distributions (.77) (.58) (.21) (.30) (.11)
Net asset value, end of period $ 22.83 $ 19.95 $ 15.96 $ 14.86 $ 12.86
TOTAL RETURN B, C 18.89% 29.46% 8.84% 18.03% 4.88%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 1,672,994 $ 880,054 $ 179,501 $ 42,326 $ 1,462
(000 omitted)
Ratio of expenses to average 1.27% 1.48% 1.67% 1.77% 1.55%
net assets A
Ratio of expenses to average 1.26% 1.47% 1.64% 1.77% 1.55%
net assets after expense G G G A
reductions
Ratio of net investment income 1.45% 1.78% 1.69% 2.02% 3.39%
to average net assets A
Portfolio turnover 78% 80% 140% 120% 51%
Average commission rate H $ .0424
</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 T
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 - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 C 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 20.09 $ 16.07 $ 14.93 $ 12.88 $ 11.08
of period
Income from Investment
Operations
Net investment income .42 B .45 .41 B .39 .49
Net realized and unrealized 3.37 4.28 1.05 2.02 1.79
gain (loss)
Total from investment 3.79 4.73 1.46 2.41 2.28
operations
Less Distributions
From net investment income (.42) (.43) (.32) (.36) (.48)
From net realized gain (.46) (.28) - - -
Total distributions (.88) (.71) (.32) (.36) (.48)
Net asset value, end of period $ 23.00 $ 20.09 $ 16.07 $ 14.93 $ 12.88
TOTAL RETURN A 19.54% 30.43% 9.82% 18.90% 20.91%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 343,867 $ 297,453 $ 197,533 $ 191,138 $ 139,391
(000 omitted)
Ratio of expenses to average .71% .74% .73% .80% .71%
net assets F
Ratio of expenses to average .70% .73% .71% .79% .71%
net assets after expense D D D D
reductions
Ratio of net investment income 2.02% 2.52% 2.62% 3.00% 3.77%
to average net assets
Portfolio turnover 78% 80% 140% 120% 51%
Average commission rate E $ .0424
</TABLE>
A 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).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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.
D 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).
E 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.
F 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 November 30, 1996
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, Class T, 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 a new Class A of shares on September 3, 1996. On
this date, the original Class A was renamed Class T. Investment income,
realized and unrealized capital gains and losses, the common expenses of
the fund, and certain fund-level expense reductions 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, expenses, and expense reductions.
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 with remaining maturities
of sixty days or less for which quotations are not readily available 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
investment income accrued and the U.S. dollar amount actually received. The
effects of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or loss
on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, 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. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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 litigation
proceeds, market discount, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations. 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign securities. 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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
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 for 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.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund)
managed by FMR. The Cash Fund is an open-end money market fund available
only to investment companies and other accounts managed by FMR and its
affiliates. The Cash Fund seeks preservation of capital, liquidity, and
current income by investing in U.S. Treasury securities and repurchase
agreements for these securities, and may be utilized by the fund as an
additional cash management option. Dividends from the Cash Fund are
declared daily and paid monthly from net interest income. Income
distributions received by the fund are recorded as interest income.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,731,000 and $1,435,261,000, 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),
Class T shares (Class T Plan), and Institutional Class shares (collectively
referred to as "the Plans"). Under the Class A, Class B, and Class T Plans,
the fund pays Fidelity Distributors Corporation (FDC), an affiliate of FMR,
a distribution and service fee. This fee is based on annual rates of .25%,
1.00% (of which .75% represents a distribution fee and .25% represents a
shareholder service fee), and .50% (.65% prior to January 1, 1996) of the
average net assets of the Class A, Class B and Class T shares,
respectively. For the period, the fund paid FDC $1,000, $4,008,000, and
$6,743,000 under the Class A, Class B, and Class T Plans, of which $1,000,
$993,000, and $6,628,000 were paid to securities dealers, banks and other
financial institutions for the distribution of Class A, Class B, and Class
T 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,
Class T, 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. FDC receives a front-end sales charge of up to 5.25% and 3.50%
(4.75% prior to January 1, 1996) for selling Class A and Class T shares of
the fund, respectively, and the proceeds of a contingent deferred sales
charge levied on Class B share redemptions occurring within five years of
purchase. The Class B 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. Effective January 2, 1997, the
Board of Trustees approved a revised Class B contingent deferred sales
charge for shares purchased on or after January 2, 1997. Under the revised
arrangement, FDC receives the proceeds of a contingent deferred sales
charge levied on Class B share redemptions occurring within six years of
purchase. The Class B charge is based on declining rates which range from
5% to 1% of the lesser of the cost of shares at the initial date of the
purchase or the net asset value of the redeemed shares, excluding any
reinvested dividends and capital gains.
For the period, FDC received sales charges of $108,000 and $8,111,000 on
sales of Class A and Class T shares of the fund, of which $97,000 and
$6,538,000 were paid to securities dealers, banks, and other financial
institutions. FDC also received contingent deferred sales charges of
$651,000 on Class B share redemptions from the fund. When Class B
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the transfer, dividend disbursing, and
shareholder servicing agent for the fund's Class A , Class B, and
Institutional Class Shares, while State Street Bank and Trust Company
(State Street) (collectively, with FIIOC, referred to as the Transfer
Agents) acts in that capacity for the fund's Class T shares. The Transfer
Agents receive account fees and asset-based fees that vary according to
account size and type of account of the shareholders of the respective
classes of the fund. With respect to the Class T shares, State Street has
delegated certain transfer, dividend disbursing, 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. For the period, the transfer agent fees
were equivalent to annual rates of .24%, .22%, .20%, and .14% of the
average net assets of Class A, Class B, Class T, and Institutional Class,
respectively.
Effective January 1, 1997, FIIOC will replace State Street as the transfer
agent for the fund's Class T shares.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $686,000 for the period.
5. EXPENSE REDUCTIONS.
FMR agreed to reimburse expenses in accordance with a state expense
limitation. FMR retains the ability to be repaid by the fund, or any class,
for these expense reductions in the event that expenses fall below the
state limitation prior to the end of the fiscal year. For the period, the
reimbursement reduced the expenses of Class A by $12,000.
FMR has also voluntarily agreed to reimburse certain transfer agent,
distribution and registration expenses for Class A. For the period, the
reimbursement reduced these expenses by $1,000.
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
$272,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of expenses. During
5. EXPENSE REDUCTIONS -
CONTINUED
the period, the fund's custodian fees were reduced by $1,000 under the
custodian arrangement, and Class B, Class T, and Institutional Class
expenses were reduced by $6,000, $18,000, and $15,000, respectively, under
the transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AMOUNTS IN THOUSANDS SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 A 1995 1996 A 1995
CLASS A 150 - $ 3,202 $ -
Shares sold
Reinvestment of distributions - - 3 -
Shares redeemed (5) - (105) -
Net increase (decrease) 145 - $ 3,100 $ -
CLASS B 11,769 11,926 $ 243,202 $ 213,878
Shares sold
Reinvestment of distributions 478 114 9,527 1,932
Shares redeemed (3,806) (684) (79,827) (12,443)
Net increase (decrease) 8,441 11,356 $ 172,902 $ 203,367
CLASS T 44,565 38,362 $ 918,821 $ 688,702
Shares sold
Reinvestment of distributions 1,866 550 37,447 9,311
Shares redeemed (17,253) (6,039) (358,513) (108,467)
Net increase (decrease) 29,178 32,873 $ 597,755 $ 589,546
INSTITUTIONAL CLASS 7,490 5,922 $ 155,473 $ 104,505
Shares sold
Reinvestment of distributions 432 331 8,672 5,439
Shares redeemed (7,780) (3,735) (161,494) (66,617)
Net increase (decrease) 142 2,518 $ 2,651 $ 43,327
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series III and the Shareholders of
Fidelity Advisor Equity Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series III: Fidelity Advisor Equity Income Fund, including
the schedule of portfolio investments, as of November 30, 1996, 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 of Class A, Class B, Class T and Institutional
Class for each of the periods indicated therein. 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, 1996 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 Income Fund as of
November 30, 1996, 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 of Class A, Class B, Class T and
Institutional Class for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P
Boston, Massachusetts
January 8, 1997
DISTRIBUTIONS
The Board of Trustees of Advisor Equity Income Fund 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 12/23/96 12/20/96 $.11 $.59
Class B 12/23/96 12/20/96 $.05 $.59
Class T 12/23/96 12/20/96 $.08 $.59
A total of 6.99% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
A total of 38% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.
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 T
Fidelity Investments Institutional
Operations Company
Boston, MA - Class A & Class B
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced 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 Municipal Bond 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)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
EQUITY INCOME
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
NOVEMBER 30, 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 23 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
DISTRIBUTIONS 37
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns throughout 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, as we witnessed last year. 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 - INSTITUTIONAL CLASS
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
securities that have grown in value). You can also look at income to
measure performance. If Fidelity had not reimbursed certain class expenses,
the past five and 10 year total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Institutional 19.54% 146.15% 256.62%
Class
S&P 500(registered trademark) 27.86% 130.90% 310.22%
Equity Income Funds Average 22.28% 105.93% 207.73%
</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 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 widely recognized, unmanaged index of common stocks.
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 156 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. over the past 12 months. Both
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effects of sales charges.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Equity Income Fund - Institutional Class 19.54% 19.74% 13.56%
S&P 500 27.86% 18.21% 15.16%
Equity Income Funds Average 22.28% 15.43% 11.62%
</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.
$10,000 OVER TEN YEARS
IMAHDR PRASUN SHR__CHT 19961130 19961209 165339 S00000000000001
FA Equity Income -CL I SP Standard & Poor 500
00080 SP001
1986/11/30 10000.00 10000.00
1986/12/31 9844.91 9745.00
1987/01/31 10812.10 11057.65
1987/02/28 11137.03 11494.43
1987/03/31 11341.01 11826.62
1987/04/30 11193.40 11721.36
1987/05/31 11135.79 11823.34
1987/06/30 11457.73 12420.42
1987/07/31 11789.60 13050.13
1987/08/31 12114.54 13536.90
1987/09/30 11830.08 13240.44
1987/10/31 9686.04 10388.45
1987/11/30 9272.25 9532.44
1987/12/31 9624.65 10257.86
1988/01/31 10282.91 10689.72
1988/02/29 10784.52 11187.86
1988/03/31 10643.41 10842.15
1988/04/30 10795.46 10962.50
1988/05/31 10927.98 11057.87
1988/06/30 11553.32 11565.43
1988/07/31 11532.69 11521.48
1988/08/31 11304.52 11129.75
1988/09/30 11638.54 11603.88
1988/10/31 11848.44 11926.47
1988/11/30 11774.65 11755.92
1988/12/31 11860.09 11961.65
1989/01/31 12620.08 12837.24
1989/02/28 12512.49 12517.59
1989/03/31 12761.22 12809.25
1989/04/30 13228.63 13474.05
1989/05/31 13545.15 14019.75
1989/06/30 13599.95 13939.84
1989/07/31 14458.89 15198.61
1989/08/31 14646.96 15496.50
1989/09/30 14458.04 15432.96
1989/10/31 13665.36 15074.92
1989/11/30 13844.87 15382.45
1989/12/31 14046.47 15751.63
1990/01/31 13158.25 14694.69
1990/02/28 13181.75 14884.25
1990/03/31 13181.75 15278.69
1990/04/30 12671.57 14896.72
1990/05/31 13506.01 16349.15
1990/06/30 13446.14 16237.98
1990/07/31 13229.46 16186.01
1990/08/31 12224.84 14722.80
1990/09/30 11300.38 14005.80
1990/10/31 11043.55 13945.57
1990/11/30 11781.43 14846.46
1990/12/31 12040.80 15260.67
1991/01/31 12653.47 15926.04
1991/02/28 13558.19 17064.75
1991/03/31 13774.56 17477.72
1991/04/30 13774.24 17519.66
1991/05/31 14528.58 18276.51
1991/06/30 13861.75 17439.45
1991/07/31 14620.36 18252.13
1991/08/31 14930.01 18684.70
1991/09/30 14852.65 18372.67
1991/10/31 15100.12 18618.86
1991/11/30 14487.78 17868.52
1991/12/31 15630.13 19912.68
1992/01/31 15787.49 19542.31
1992/02/29 16275.25 19796.35
1992/03/31 16010.83 19410.33
1992/04/30 16581.48 19980.99
1992/05/31 16727.86 20078.90
1992/06/30 16541.61 19779.72
1992/07/31 16971.26 20588.71
1992/08/31 16568.35 20166.64
1992/09/30 16703.63 20404.61
1992/10/31 16906.80 20476.03
1992/11/30 17516.74 21174.26
1992/12/31 17966.04 21434.70
1993/01/31 18511.84 21614.75
1993/02/28 18991.01 21908.71
1993/03/31 19621.48 22370.99
1993/04/30 19552.86 21829.61
1993/05/31 19870.03 22414.64
1993/06/30 20077.93 22479.65
1993/07/31 20355.55 22389.73
1993/08/31 21092.88 23238.30
1993/09/30 20967.33 23059.36
1993/10/31 21218.43 23536.69
1993/11/30 20827.83 23313.09
1993/12/31 21343.99 23595.18
1994/01/31 22348.41 24397.42
1994/02/28 21790.40 23736.25
1994/03/31 20861.74 22701.35
1994/04/30 21592.25 22991.92
1994/05/31 21760.83 23368.99
1994/06/30 21631.33 22796.45
1994/07/31 22381.14 23544.18
1994/08/31 23569.51 24509.49
1994/09/30 23185.74 23909.00
1994/10/31 23641.19 24446.96
1994/11/30 22872.61 23556.60
1994/12/31 22944.13 23905.94
1995/01/31 23308.78 24525.82
1995/02/28 24140.20 25481.60
1995/03/31 24944.93 26233.56
1995/04/30 25621.10 27006.14
1995/05/31 26356.07 28085.57
1995/06/30 26724.46 28738.00
1995/07/31 27714.80 29690.95
1995/08/31 28054.77 29765.47
1995/09/30 28941.17 31021.58
1995/10/31 28629.33 30910.83
1995/11/30 29832.12 32267.82
1995/12/31 30629.05 32889.29
1996/01/31 31546.78 34008.85
1996/02/29 31684.40 34324.11
1996/03/31 31929.81 34654.65
1996/04/30 32160.30 35165.46
1996/05/31 32421.51 36072.38
1996/06/30 32252.89 36209.81
1996/07/31 31049.19 34610.06
1996/08/31 31666.47 35339.99
1996/09/30 32808.80 37328.92
1996/10/31 33491.03 38358.45
1996/11/29 35661.74 41257.97
IMATRL PRASUN SHR__CHT 19961130 19961209 165341 R00000000000123
$10,000 OVER TEN YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Equity Income Fund - Institutional Class on November
30, 1986. As the chart shows, by November 30, 1996, the value of the
investment would have grown to $35,662 - a 256.62% 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 $41,022 - a 310.22% 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
MARKET RECAP
Paced by the robust performance
of blue chip stocks, the U.S. stock
market posted strong gains for
the year that ended November
30, 1996. The Standard & Poor's
500 Index returned 27.86%
during the period - well above its
long-term average of about 12%.
The stock market spent much of
the past year breaking price and
trading volume records. Solid
corporate earnings reports, large
cash inflows into mutual funds,
widespread optimism and a
generally favorable interest rate
environment propelled share
prices higher. Large capitalization
stocks thrived as investors
sought their lower volatility and
higher degree of liquidity over
smaller cap stocks in an
environment where it was
sometimes difficult to discern the
health of the economy. The Dow
Jones Industrial Average closed
above 6500 for the first time in
November. While short-term
confusion over the direction of
interest rates created a volatile
backdrop in the summer months,
stocks rallied again when the
Federal Reserve Board left
short-term interest rates
unchanged and it appeared
inflation would not be an issue for
the remainder of 1996.
Smaller-company stocks posted
strong gains at the beginning of
1996, but trended downward in
the spring and summer because
their earnings tend to be more
affected by the higher borrowing
costs brought on by higher rates.
When interest rate fears
subsided, these stocks
rebounded, only to fade toward
the end of the period due to
earnings concerns and a general
flight to quality.
An interview with Robert Chow, Portfolio Manager of Fidelity Advisor Equity
Income Fund
Q. WHAT CAN YOU TELL US ABOUT THE FUND'S PERFORMANCE, BOB?
A. On a risk-adjusted basis, I think it did pretty well. On an absolute
basis, however, it underperformed the market. For the year that ended
November 30, 1996, the fund's Institutional Class shares returned 19.54%.
Additionally, for the same period, the Standard & Poor's 500 Index returned
27.86% and the return of the equity income funds average, according to
Lipper Analytical Services, was 22.28%. The fund's underperformance in the
past year is reflective of the underperformance of many
interest-rate-sensitive stocks in the early part of 1996 when interest
rates rose unexpectedly.
Q. WHAT DO YOU MEAN BY A "RISK-ADJUSTED BASIS"?
A. That means looking at the fund's return relative to the amount of
volatility it had. During the period, I was able to bring the fund's
volatility to relatively lower levels.
Q. HOW DOES THE CONCEPT OF RISK VERSUS REWARD PLAY INTO HOW YOU EVALUATE
STOCKS?
A. When I look at a stock, I develop a valuation range that I think the
stock should trade in. If the stock trades at the high end of that
valuation range, as many of the stocks in the S&P 500 currently do, I don't
believe there is enough incremental return in the stock to justify the risk
that its price may fall from its lofty peaks - and, therefore, I will sell
it or I won't buy it. So the ideal situation would be to find stocks with
low volatility and a good valuation risk/reward.
Q. WHAT WERE SOME MAJOR CHANGES YOU MADE SINCE YOU BEGAN MANAGING THE FUND
IN MARCH?
A. I made the fund's finance position less interest rate sensitive.
Contrary to popular belief, not all financial stocks move in lockstep with
the market's interest rate outlook. I also increased the fund's holdings in
American Express because the company has shown it can gain market share on
Visa and Mastercard. I also bought some insurance company stocks because
many of these companies appeared undervalued.
Q. YOUR FAITH IN IBM SEEMS TO HAVE PAID OFF . . .
A. It certainly has. Early in the year, the stock traded at beaten-down
levels of below $100. Since then, Big Blue has
been one of the top performing stocks in the market on the momentum of
improving fundamentals and the market's belief in IBM's "one-stop shopping"
approach to corporate technology.
Q. WHAT'S BEEN THE STORY BEHIND THE FUND'S ENERGY POSITION?
A. Energy stocks have performed very well as their businesses have improved
with the rising price of oil. I've gradually begun cutting back on some of
these stocks as many of them have reached the upper end of their historical
valuation ranges. Additionally, one must consider some of the variables
that determine energy demand. If we have a warm winter, demand for oil and
natural gas may slump.
Q. WAS THERE A PARTICULAR STOCK THAT DIDN'T LIVE UP TO EXPECTATIONS?
A. Sure. Silicon Graphics, a workstation producer, hasn't worked out as
well as I would have liked. The company recently ran into some roadblocks
in the midst of the launch of several new products. The poor execution of
the roll-out of these products has been somewhat frustrating.
Q. HOW ARE YOU POSITIONING THE FUND GOING FORWARD?
A. I will continue to strive to increase the stability of the fund, as
downside risk and volatility are both key considerations in all my
investment decisions. As a value investor, shareholders can expect me to
look for opportunities in the market where
I find the best risk/reward tradeoff. I won't just invest in a sector that
might be in vogue for the time being.
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 November 30,
1996, more than $2.5 billion
MANAGER: Robert Chow,
since March 1996; joined
Fidelity in 1989
(checkmark)
BOB CHOW ON FINDING VALUE IN
A HIGH-FLYING MARKET:
"A lot of people ask me how,
as a value investor, can I find
undervalued companies in
such an overvalued market?
Good question. I think what
shareholders should keep in
mind is that not all sectors and
individual stocks move up
with the general market. For
example, take IBM. It's doing
well as of the end of the
period, but when I was
acquiring more of it earlier in
the year it was a very
controversial position. Few
analysts were excited about
it. Later on, however, as The
Wall Street Journal reported,
the market has been
"panicking in" to IBM while I
had been in it all along.
Another example is the retail
sector. The market was
worried this past summer that
Christmas was going to be
disappointing. How could
anyone know? In my book,
this was a definite valuation
opportunity."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF NOVEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
British Petroleum PLC ADR 2.6 2.3
International Business Machines Corp. 2.5 2.1
Wal-Mart Stores, Inc. 2.4 2.2
American Express Co. 2.3 2.1
Philip Morris Companies, Inc. 2.2 3.2
General Re Corp. 1.9 1.9
Allstate Corp. exchangeable $2.30 1.7 1.3
General Motors Corp. 1.4 1.3
du pont (E.I.) de Nemours & Co. 1.3 1.5
Federal National Mortgage Association 1.3 1.3
TOP FIVE MARKET SECTORS AS OF NOVEMBER 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Finance 18.5 16.9
Durables 8.1 9.9
Energy 7.9 7.9
Technology 7.0 7.7
Basic Industries 6.7 7.4
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1996 * AS OF MAY 31, 1996 **
Row: 1, Col: 1, Value: 9.4
Row: 1, Col: 2, Value: 2.1
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 4, Value: 36.5
Row: 1, Col: 5, Value: 50.0
Stocks 89.8%
Bonds 2.4%
Convertible
securities 1.7%
Short-term
investments 6.1%
FOREIGN
INVESTMENTS 3.3%
Stocks 86.5%
Bonds 2.0%
Convertible
securities 2.1%
Short-term
investments 9.4%
FOREIGN
INVESTMENTS 3.6%
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
*
**
INVESTMENTS NOVEMBER 30, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 86.5%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 2.6%
AEROSPACE & DEFENSE - 1.7%
Alliant Techsystems, Inc. (a) 100,000 $ 5,363
Boeing Co. 80,000 7,950
Lockheed Martin Corp. 170,000 15,405
McDonnell Douglas Corp. 100,000 5,288
Rockwell International Corp. 130,000 8,353
42,359
DEFENSE ELECTRONICS - 0.5%
Litton Industries, Inc. (a) 120,000 5,610
Raytheon Co. 160,000 8,180
13,790
SHIP BUILDING & REPAIR - 0.4%
General Dynamics Corp. 140,000 10,325
TOTAL AEROSPACE & DEFENSE 66,474
BASIC INDUSTRIES - 6.7%
CHEMICALS & PLASTICS - 3.6%
Dow Chemical Co. 50,000 4,188
du Pont (E.I.) de Nemours & Co. 350,000 32,987
Great Lakes Chemical Corp. 80,000 4,290
Monsanto Co. 200,000 7,950
Raychem Corp. 100,000 8,525
Union Carbide Corp. 420,000 19,371
Valspar Corp. 170,000 9,754
Witco Corp. 130,000 3,949
91,014
IRON & STEEL - 0.4%
Armco, Inc. (a) 325,000 1,463
Nucor Corp. 150,000 8,156
9,619
METALS & MINING - 0.7%
Alcan Aluminium Ltd. 100,000 3,527
Aluminum Co. of America 220,000 13,998
17,525
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.6%
Crown Cork & Seal Co., Inc. 140,000 $ 7,420
Tupperware Corp. 150,000 7,950
15,370
PAPER & FOREST PRODUCTS - 1.4%
Champion International Corp. 200,000 8,600
Chesapeake Corp. 330,000 10,065
Consolidated Papers, Inc. 80,000 3,970
MacMillan Bloedel Ltd. 337,600 4,816
Mead Corp. 100,000 5,925
Pentair, Inc. 120,000 3,480
36,856
TOTAL BASIC INDUSTRIES 170,384
CONGLOMERATES - 1.6%
AlliedSignal, Inc. 140,000 10,255
Tyco International Ltd. 330,000 18,068
United Technologies Corp. 60,000 8,415
Whitman Corp. 150,000 3,450
40,188
CONSTRUCTION & REAL ESTATE - 3.7%
BUILDING MATERIALS - 2.0%
CalMat Co. 400,000 7,300
Masco Corp. 720,000 26,280
Sherwin-Williams Co. 250,000 14,188
York International Corp. 80,000 4,200
51,968
CONSTRUCTION - 0.7%
Centex Corp. 230,000 8,280
Lennar Corp. 350,000 9,100
17,380
REAL ESTATE INVESTMENT TRUSTS - 1.0%
Beacon Properties Corp. 180,000 5,692
Duke Realty Investors, Inc. 111,836 4,012
Felcor Suite Hotels, Inc. 100,000 3,563
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Highwoods Properties, Inc. 180,000 $ 5,535
Public Storage, Inc. 250,000 6,343
25,145
TOTAL CONSTRUCTION & REAL ESTATE 94,493
DURABLES - 7.9%
AUTOS, TIRES, & ACCESSORIES - 5.0%
Chrysler Corp. 410,000 14,555
Cummins Engine Co., Inc. 180,000 8,145
Eaton Corp. 140,000 9,695
Echlin, Inc. 750,000 25,219
General Motors Corp. 620,000 35,727
Modine Manufacturing Co. 310,000 7,711
PACCAR, Inc. 200,000 13,300
Snap-on Tools Corp. 320,000 11,600
125,952
CONSUMER DURABLES - 0.6%
Minnesota Mining & Manufacturing Co. 180,000 15,075
CONSUMER ELECTRONICS - 0.9%
Black & Decker Corp. 70,000 2,651
Maytag Co. 950,000 18,169
Whirlpool Corp. 30,000 1,500
22,320
HOME FURNISHINGS - 0.6%
Heilig-Meyers Co. 200,000 2,775
Leggett & Platt, Inc. 420,000 12,863
15,638
TEXTILES & APPAREL - 0.8%
Fruit of the Loom, Inc. Class A (a) 250,000 8,906
Russell Corp. 262,000 7,533
Westpoint Stevens, Inc. Class A (a) 130,000 3,900
20,339
TOTAL DURABLES 199,324
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 7.6%
ENERGY SERVICES - 1.7%
Baker Hughes, Inc. 302,200 $ 11,068
Schlumberger Ltd. 130,000 13,520
Western Atlas, Inc. (a) 270,000 19,035
43,623
OIL & GAS - 5.9%
Amerada Hess Corp. 320,000 18,840
Atlantic Richfield Co. 30,000 4,174
British Petroleum PLC ADR 470,000 65,212
Burlington Resources, Inc. 500,000 26,500
Enron Oil & Gas Co. 150,000 3,994
Occidental Petroleum Corp. 500,000 12,000
Royal Dutch Petroleum Co. ADR 100,000 16,988
147,708
TOTAL ENERGY 191,331
FINANCE - 16.8%
BANKS - 3.6%
Banc One Corp. 40,000 1,905
Bank of New York Co., Inc. 580,000 20,807
BankAmerica Corp. 160,000 16,480
Chase Manhattan Corp. 90,000 8,505
Citicorp 200,000 21,850
Fleet Financial Group, Inc. 218,600 12,105
NationsBank Corp. 80,000 8,290
89,942
CREDIT & OTHER FINANCE - 3.9%
American Express Co. 1,109,300 57,960
Associates First Capital Corp. 140,000 6,773
Beneficial Corp. 40,000 2,485
Household International, Inc. 220,000 20,845
Mercury Finance Co. 750,000 8,719
Transamerica Corp. 30,000 2,381
99,163
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 2.8%
Federal Home Loan Mortgage Corporation 260,000 $ 29,705
Federal National Mortgage Association 780,000 32,175
Student Loan Marketing Association 90,000 8,651
70,531
INSURANCE - 5.8%
Aetna, Inc. 60,000 4,328
Allstate Corp. 420,000 25,304
Berkley (W.R.) Corp. 100,000 5,250
CIGNA Corp. 30,000 4,241
Chubb Corp. (The) 90,000 4,883
Cincinnati Financial Corp. 40,000 2,410
General Re Corp. 280,000 47,250
ITT Hartford Group, Inc. 140,000 9,573
Loews Corp. 170,000 15,768
NY Magic, Inc. 43,800 788
PXRE Corp. 242,400 5,848
Provident Companies, Inc. 320,000 13,400
Transnational Re Corp. Class A 262,506 6,595
145,638
SECURITIES INDUSTRY - 0.7%
Lehman Brothers Holdings, Inc. 620,000 18,058
TOTAL FINANCE 423,332
HEALTH - 3.7%
DRUGS & PHARMACEUTICALS - 2.2%
Bristol-Myers Squibb Co. 200,000 22,749
Merck & Co., Inc. 80,000 6,640
Pharmacia & Upjohn, Inc. 210,000 8,111
Schering-Plough Corp. 230,000 16,388
Sigma Aldrich Corp. 10,000 625
54,513
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Allegiance Corp. (a) 167,800 3,796
Biomet, Inc. 400,000 6,600
Pall Corp. 220,000 5,748
16,144
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 0.9%
Columbia/HCA Healthcare Corp. 230,000 $ 9,200
Tenet Healthcare Corp. (a) 570,000 12,754
21,954
TOTAL HEALTH 92,611
INDUSTRIAL MACHINERY & EQUIPMENT - 5.0%
ELECTRICAL EQUIPMENT - 2.0%
Amphenol Corp. Class A (a) 230,000 4,916
Duracell International, Inc. 170,000 11,326
Emerson Electric Co. 90,000 8,831
General Electric Co. 190,000 19,760
Scientific-Atlanta, Inc. 300,000 4,650
49,483
INDUSTRIAL MACHINERY & EQUIPMENT - 1.2%
Caterpillar, Inc. 110,000 8,704
Cooper Industries, Inc. 70,000 2,905
Deere & Co. 90,000 4,016
Detroit Diesel Corp. (a) 100,000 1,975
IDEX Corp. 100,000 3,938
Ingersoll-Rand Co. 220,000 10,230
31,768
POLLUTION CONTROL - 1.8%
Browning-Ferris Industries, Inc. 580,000 15,588
WMX Technologies, Inc. 830,000 29,880
45,468
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 126,719
MEDIA & LEISURE - 2.4%
BROADCASTING - 0.1%
Viacom, Inc. Class B (non-vtg.) (a) 90,000 3,398
ENTERTAINMENT - 0.2%
Carmike Cinemas, Inc. Class A (a) 50,000 1,363
Disney (Walt) Co. 40,000 2,950
4,313
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.1%
Fleetwood Enterprises, Inc. 50,000 $ 1,525
LODGING & GAMING - 0.6%
Circus Circus Enterprises, Inc. (a) 90,000 3,285
ITT Corp. (a) 260,000 11,992
15,277
PUBLISHING - 1.4%
ACNielsen Corp. 161,000 2,797
Cognizant Corp. (a) 350,000 12,075
Dun & Bradstreet Corp. 360,000 8,145
Knight-Ridder, Inc. 120,000 5,040
Times Mirror Co. Class A 150,000 7,856
35,913
RESTAURANTS - 0.0%
Uno Restaurant Corp. (a) 100,000 688
TOTAL MEDIA & LEISURE 61,114
NONDURABLES - 6.0%
BEVERAGES - 0.7%
Anheuser-Busch Companies, Inc. 220,000 9,323
Coors (Adolph) Co. Class B 150,000 2,981
PepsiCo, Inc. 200,000 5,975
18,279
FOODS - 1.4%
Chock Full-O-Nuts Corp. (a) 221,400 1,024
General Mills, Inc. 150,000 9,525
Quaker Oats Co. 160,000 6,300
Sysco Corp. 550,000 18,769
35,618
HOUSEHOLD PRODUCTS - 1.1%
Church & Dwight Co., Inc. 220,000 4,950
Clorox Co. 40,000 4,170
First Brands Corp. 360,000 10,305
Procter & Gamble Co. 60,000 6,525
Tambrands, Inc. 30,000 1,283
27,233
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
TOBACCO - 2.8%
Philip Morris Companies, Inc. 550,000 $ 56,718
RJR Nabisco Holdings Corp. 270,000 8,640
Schweitzer-Mauduit International, Inc. 170,000 5,610
70,968
TOTAL NONDURABLES 152,098
PRECIOUS METALS - 0.7%
Newmont Mining Corp. 320,000 15,319
Santa Fe Pacific Gold Corp. 200,000 2,300
17,619
RETAIL & WHOLESALE - 5.6%
DRUG STORES - 0.2%
Revco (D.S.), Inc. (a) 150,000 5,175
GENERAL MERCHANDISE STORES - 3.4%
Dillard Department Stores, Inc. Class A 260,000 7,963
May Department Stores Co. (The) 100,000 4,875
Nordstrom, Inc. 100,000 4,350
Sears, Roebuck & Co. 180,000 8,955
Wal-Mart Stores, Inc. 2,370,000 60,435
86,578
GROCERY STORES - 0.7%
Albertson's, Inc. 160,000 5,580
Food Lion, Inc. Class B 400,000 3,575
Great Atlantic & Pacific Tea Co., Inc. 80,000 2,620
Vons Companies, Inc. (a) 100,000 5,263
17,038
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Best Buy Co., Inc. (a) 300,000 3,788
Fabri-Centers of America, Inc. Class B (non-vtg.) (a) 300,000 4,388
Home Depot, Inc. (The) 200,000 10,424
Office Depot, Inc. (a) 80,000 1,560
Tandy Corp. 50,000 2,106
Toys "R" Us, Inc. (a) 300,000 10,349
32,615
TOTAL RETAIL & WHOLESALE 141,406
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 0.7%
LEASING & RENTAL - 0.2%
GATX Corp. 100,000 $ 4,988
SERVICES - 0.5%
Block (H&R), Inc. 410,800 12,015
TOTAL SERVICES 17,003
TECHNOLOGY - 6.9%
COMMUNICATIONS EQUIPMENT - 0.1%
Lucent Technologies, Inc. 70,000 3,588
COMPUTER SERVICES & SOFTWARE - 0.5%
Electronic Data Systems Corp. 80,000 3,870
Metromail Corp. (a) 240,000 5,550
Policy Management Systems Corp. (a) 100,000 4,000
13,420
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Exabyte Corp. (a) 207,300 3,006
International Business Machines Corp. 400,000 63,749
Pitney Bowes, Inc. 390,000 23,010
Silicon Graphics, Inc. (a) 460,000 9,143
98,908
ELECTRONIC INSTRUMENTS - 0.4%
Applied Materials, Inc. (a) 100,000 3,813
KLA Instruments Corp. (a) 100,000 3,550
Teradyne, Inc. (a) 90,000 2,126
9,489
ELECTRONICS - 1.7%
AMP, Inc. 310,000 11,858
Avnet, Inc. 140,000 8,190
Cypress Semiconductor Corp. (a) 120,000 1,470
Storage Technology Corp. (a) 30,000 1,496
Thomas & Betts Corp. 350,000 15,837
VLSI Technology, Inc. (a) 200,000 4,600
43,451
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.3%
Eastman Kodak Co. 50,000 $ 4,050
Imation Corp. (a) 77,400 2,341
6,391
TOTAL TECHNOLOGY 175,247
TRANSPORTATION - 4.1%
AIR TRANSPORTATION - 0.8%
AMR Corp. (a) 120,000 10,950
Delta Air Lines, Inc. 100,000 7,525
Viad Corp. 100,000 1,575
20,050
RAILROADS - 1.4%
Burlington Northern Santa Fe Corp. 200,000 17,975
CSX Corp. 380,000 17,765
35,740
TRUCKING & FREIGHT - 1.9%
Arnold Industries, Inc. 900,000 14,287
Caliber System, Inc. 10,000 194
Consolidated Freightways, Inc. 500,000 12,063
Federal Express Corp. (a) 4,000 177
Hunt (J.B.) Transport Services, Inc. 170,000 2,380
Pittston Co. (Burlington Group) 260,000 5,103
USFreightways Corp. 320,000 8,300
Werner Enterprises, Inc. 330,000 5,321
47,825
TOTAL TRANSPORTATION 103,615
UTILITIES - 4.5%
CELLULAR - 0.8%
AirTouch Communications, Inc. (a) 280,000 7,175
360 Degrees Communications Co. (a) 520,000 12,350
19,525
ELECTRIC UTILITY - 0.3%
American Electric Power Co., Inc. 190,000 7,885
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 3.4%
AT&T Corp. 200,000 $ 7,850
Ameritech Corp. 130,000 7,654
Bell Atlantic Corp. 250,000 15,719
MCI Communications Corp. 136,000 4,148
NYNEX Corp. 580,000 26,897
SBC Communications, Inc. 440,000 23,155
85,423
TOTAL UTILITIES 112,833
TOTAL COMMON STOCKS
(Cost $1,761,108) 2,185,791
CONVERTIBLE PREFERRED STOCKS - 2.0%
ENERGY - 0.3%
OIL & GAS - 0.3%
Atlantic Richfield Co. exchangeable $2.23 80,000 1,800
Occidental Petroleum Corp. Indexed $3.00 70,000 4,585
6,385
FINANCE - 1.7%
INSURANCE - 1.7%
Allstate Corp. exchangeable $2.30 860,000 42,570
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 50,000 -
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $40,310) 48,955
CORPORATE BONDS - 0.4%
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - 0.1%
TECHNOLOGY - 0.1%
ELECTRONICS - 0.1%
National Semiconductor Corp.
6 1/2%, 10/1/02 (c) Ba2 $ 2,000 $ 1,945
NONCONVERTIBLE BONDS - 0.3%
DURABLES - 0.2%
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. 8 3/4%, 12/15/01 Ba3 5,200 5,330
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Viacom, Inc. 8%, 7/7/06 B1 2,230 2,155
TOTAL NONCONVERTIBLE BONDS 7,485
TOTAL CORPORATE BONDS
(Cost $8,880) 9,430
U.S. TREASURY OBLIGATIONS - 1.7%
7 7/8%, 11/15/04 Aaa 9,300 10,381
7 1/4%, 2/15/23 Aaa 5,020 5,417
6 1/4%, 8/15/23 Aaa 2,610 2,531
7 1/2%, 11/15/24 Aaa 13,590 15,378
7 5/8%, 2/15/25 Aaa 8,830 10,150
TOTAL TREASURY OBLIGATIONS
(Cost $43,613) 43,857
CASH EQUIVALENTS - 9.4%
SHARES
Taxable Central Cash Fund (b)
(Cost $238,340) 238,340,000 238,340
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,092,251) $ 2,526,373
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.46%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
3. 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 $1,945,000 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 1.7% AAA, AA, A 1.7%
Baa 0.0% BBB 0.0%
Ba 0.3% BB 0.4%
B 0.1% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At November 30, 1996, the aggregate cost of investment securities for
income tax purposes was $2,094,917,000. Net unrealized appreciation
aggregated $431,456,000, of which $458,882,000 related to appreciated
investment securities and $27,426,000 related to depreciated investment
securities.
The fund hereby designates approximately $15,681,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending November 30,
1997 approximately $6,650,000 of losses recognized during the period
November 1, 1996 to November 30, 1996.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1996
ASSETS $ 2,526,373
Investment in securities, at value (cost $2,092,251) -
See accompanying schedule
Receivable for investments sold 8,565
Receivable for fund shares sold 3,651
Dividends receivable 3,662
Interest receivable 1,287
Other receivables 198
Receivable from investment adviser for expense reductions 5
TOTAL ASSETS 2,543,741
LIABILITIES $ 3
Payable to custodian bank
Payable for investments purchased 18,683
Payable for fund shares redeemed 1,629
Accrued management fee 1,017
Distribution fees payable 1,078
Other payables and accrued expenses 717
TOTAL LIABILITIES 23,127
NET ASSETS $ 2,520,614
Net Assets consist of: $ 2,010,429
Paid in capital
Undistributed net investment income 4,640
Accumulated undistributed net realized gain (loss) on 71,425
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 434,120
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 2,520,614
CALCULATION OF MAXIMUM OFFERING PRICE $22.78
CLASS A:
NET ASSET VALUE and redemption price per share
($3,306 (divided by) 145.1 shares)
Maximum offering price per share (100/94.75 of $22.78) $24.04
CLASS B: $22.73
NET ASSET VALUE and offering price per share ($500,447
(divided by)
22,016 shares) A
CLASS T: $22.83
NET ASSET VALUE and redemption price per share
($1,672,994 (divided by) 73,296 shares)
Maximum offering price per share (100/96.50 of $22.83) $23.66
INSTITUTIONAL CLASS: $23.00
NET ASSET VALUE, offering price and redemption price per
share ($343,867 (divided by) 14,951 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME $ 40,074
Dividends
Interest 15,251
TOTAL INCOME 55,325
EXPENSES
Management fee $ 10,188
Transfer agent fees 1
Class A
Class B 887
Class T 2,670
Institutional Class 437
Distribution fees 1
Class A
Class B 4,008
Class T 6,743
Accounting fees and expenses 752
Non-interested trustees' compensation 7
Custodian fees and expenses 57
Registration fees 14
Class A
Class B 108
Class T 252
Institutional Class 57
Audit 70
Legal 19
Miscellaneous 80
Total expenses before reductions 26,351
Expense reductions (325) 26,026
NET INVESTMENT INCOME 29,299
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 69,744
Foreign currency transactions (2) 69,742
Change in net unrealized appreciation (depreciation) on:
Investment securities 261,602
Assets and liabilities in foreign currencies (1) 261,601
NET GAIN (LOSS) 331,343
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 360,642
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 29,299 $ 16,529
Net investment income
Net realized gain (loss) 69,742 41,100
Change in net unrealized appreciation (depreciation) 261,601 162,836
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 360,642 220,465
FROM OPERATIONS
Distributions to shareholders (4) -
From net investment income
Class A
Class B (4,108) (1,442)
Class T (18,521) (6,671)
Institutional Class (6,335) (5,881)
From net realized gain
Class B (6,588) (681)
Class T (21,465) (3,300)
Institutional Class (7,023) (3,529)
TOTAL DISTRIBUTIONS (64,044) (21,504)
Share transactions - net increase (decrease) 776,408 836,240
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,073,006 1,035,201
NET ASSETS
Beginning of period 1,447,608 412,407
End of period (including undistributed net investment $ 2,520,614 $ 1,447,608
income of $4,640 and $4,024, respectively)
FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED
NOVEMBER 30,
1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 20.38
Income from Investment Operations
Net investment income .06 F
Net realized and unrealized gain (loss) 2.44
Total from investment operations 2.50
Less Distributions
From net investment income (.10)
Net asset value, end of period $ 22.78
TOTAL RETURN B, C 12.31%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,306
Ratio of expenses to average net assets 1.46% A, D
, E
Ratio of expenses to average net assets after expense reductions 1.44% A, H
Ratio of net investment income to average net assets 1.27% A
Portfolio turnover 78%
Average commission rate I $ .0424
</TABLE>
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD 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 LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS
REIMBURSEMENT THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN
HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
G FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO NOVEMBER 30, 1996.
H 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).
I 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 19.90 $ 15.94 $ 15.21
Income from Investment Operations
Net investment income .19 D .26 .08 D
Net realized and unrealized gain (loss) 3.33 4.23 .72
Total from investment operations 3.52 4.49 .80
Less Distributions
From net investment income (.23) (.25) (.07)
From net realized gain (.46) (.28) -
Total distributions (.69) (.53) (.07)
Net asset value, end of period $ 22.73 $ 19.90 $ 15.94
TOTAL RETURN B, C 18.22% 28.95% 5.25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 500,447 $ 270,101 $ 35,373
Ratio of expenses to average net assets 1.81% 1.85% 2.24% A
Ratio of expenses to average net assets after 1.79% F 1.84% 2.18% A
expense reductions F , F
Ratio of net investment income to average net assets .92% 1.41% 1.15% A
Portfolio turnover 78% 80% 140%
Average commission rate G $ .0424
</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 - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 F 1993 1992 E
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 .30 D .31 .28 D .33 .13
Net realized and unrealized 3.35 4.26 1.03 1.97 .47
gain (loss)
Total from investment 3.65 4.57 1.31 2.30 .60
operations
Less Distributions
From net investment income (.31) (.30) (.21) (.30) (.11)
From net realized gain (.46) (.28) - - -
Total distributions (.77) (.58) (.21) (.30) (.11)
Net asset value, end of period $ 22.83 $ 19.95 $ 15.96 $ 14.86 $ 12.86
TOTAL RETURN B, C 18.89% 29.46% 8.84% 18.03% 4.88%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 1,672,994 $ 880,054 $ 179,501 $ 42,326 $ 1,462
(000 omitted)
Ratio of expenses to average 1.27% 1.48% 1.67% 1.77% 1.55%
net assets A
Ratio of expenses to average 1.26% 1.47% 1.64% 1.77% 1.55%
net assets after expense G G G A
reductions
Ratio of net investment income 1.45% 1.78% 1.69% 2.02% 3.39%
to average net assets A
Portfolio turnover 78% 80% 140% 120% 51%
Average commission rate H $ .0424
</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 T
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 - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 C 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 20.09 $ 16.07 $ 14.93 $ 12.88 $ 11.08
of period
Income from Investment
Operations
Net investment income .42 B .45 .41 B .39 .49
Net realized and unrealized 3.37 4.28 1.05 2.02 1.79
gain (loss)
Total from investment 3.79 4.73 1.46 2.41 2.28
operations
Less Distributions
From net investment income (.42) (.43) (.32) (.36) (.48)
From net realized gain (.46) (.28) - - -
Total distributions (.88) (.71) (.32) (.36) (.48)
Net asset value, end of period $ 23.00 $ 20.09 $ 16.07 $ 14.93 $ 12.88
TOTAL RETURN A 19.54% 30.43% 9.82% 18.90% 20.91%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 343,867 $ 297,453 $ 197,533 $ 191,138 $ 139,391
(000 omitted)
Ratio of expenses to average .71% .74% .73% .80% .71%
net assets F
Ratio of expenses to average .70% .73% .71% .79% .71%
net assets after expense D D D D
reductions
Ratio of net investment income 2.02% 2.52% 2.62% 3.00% 3.77%
to average net assets
Portfolio turnover 78% 80% 140% 120% 51%
Average commission rate E $ .0424
</TABLE>
A 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).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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.
D 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).
E 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.
F 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 November 30, 1996
7. 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, Class T, 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 a new Class A of shares on September 3, 1996. On
this date, the original Class A was renamed Class T. Investment income,
realized and unrealized capital gains and losses, the common expenses of
the fund, and certain fund-level expense reductions 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, expenses, and expense reductions.
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 with remaining maturities
of sixty days or less for which quotations are not readily available 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
investment income accrued and the U.S. dollar amount actually received. The
effects of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or loss
on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, 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. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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 litigation
proceeds, market discount, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations. 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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.
8. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign securities. 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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
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 for 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.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund)
managed by FMR. The Cash Fund is an open-end money market fund available
only to investment companies and other accounts managed by FMR and its
affiliates. The Cash Fund seeks preservation of capital, liquidity, and
current income by investing in U.S. Treasury securities and repurchase
agreements for these securities, and may be utilized by the fund as an
additional cash management option. Dividends from the Cash Fund are
declared daily and paid monthly from net interest income. Income
distributions received by the fund are recorded as interest income.
9. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,731,000 and $1,435,261,000, respectively, of which U.S.
government and government agency obligations aggregated $30,539,000 and
$79,697,000, respectively.
10. 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),
Class T shares (Class T Plan), and Institutional Class shares (collectively
referred to as "the Plans"). Under the Class A, Class B, and Class T Plans,
the fund pays Fidelity Distributors Corporation (FDC), an affiliate of FMR,
a distribution and service fee. This fee is based on annual rates of .25%,
1.00% (of which .75% represents a distribution fee and .25% represents a
shareholder service fee), and .50% (.65% prior to January 1, 1996) of the
average net assets of the Class A, Class B and Class T shares,
respectively. For the period, the fund paid FDC $1,000, $4,008,000, and
$6,743,000 under the Class A, Class B, and Class T Plans, of which $1,000,
$993,000, and $6,628,000 were paid to securities dealers, banks and other
financial institutions for the distribution of Class A, Class B, and Class
T 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,
Class T, 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. FDC receives a front-end sales charge of up to 5.25% and 3.50%
(4.75% prior to January 1, 1996) for selling Class A and Class T shares of
the fund, respectively, and the proceeds of a contingent deferred sales
charge levied on Class B share redemptions occurring within five years of
purchase. The Class B 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. Effective January 2, 1997, the
Board of Trustees approved a revised Class B contingent deferred sales
charge for shares purchased on or after January 2, 1997. Under the revised
arrangement, FDC receives the proceeds of a contingent deferred sales
charge levied on Class B share redemptions occurring within six years of
purchase. The Class B charge is based on declining rates which range from
5% to 1% of the lesser of the cost of shares at the initial date of the
purchase or the net asset value of the redeemed shares, excluding any
reinvested dividends and capital gains.
For the period, FDC received sales charges of $108,000 and $8,111,000 on
sales of Class A and Class T shares of the fund, of which $97,000 and
$6,538,000 were paid to securities dealers, banks, and other financial
institutions. FDC also received contingent deferred sales charges of
$651,000 on Class B share redemptions from the fund. When Class B
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the transfer, dividend disbursing, and
shareholder servicing agent for the fund's Class A , Class B, and
Institutional Class Shares, while State Street Bank and Trust Company
(State Street) (collectively, with FIIOC, referred to as the Transfer
Agents) acts in that capacity for the fund's Class T shares. The Transfer
Agents receive account fees and asset-based fees that vary according to
account size and type of account of the shareholders of the respective
classes of the fund. With respect to the Class T shares, State Street has
delegated certain transfer, dividend disbursing, 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. For the period, the transfer agent fees
were equivalent to annual rates of .24%, .22%, .20%, and .14% of the
average net assets of Class A, Class B, Class T, and Institutional Class,
respectively.
Effective January 1, 1997, FIIOC will replace State Street as the transfer
agent for the fund's Class T shares.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $686,000 for the period.
11. EXPENSE REDUCTIONS.
FMR agreed to reimburse expenses in accordance with a state expense
limitation. FMR retains the ability to be repaid by the fund, or any class,
for these expense reductions in the event that expenses fall below the
state limitation prior to the end of the fiscal year. For the period, the
reimbursement reduced the expenses of Class A by $12,000.
FMR has also voluntarily agreed to reimburse certain transfer agent,
distribution and registration expenses for Class A. For the period, the
reimbursement reduced these expenses by $1,000.
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
$272,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of expenses. During
5. EXPENSE REDUCTIONS -
CONTINUED
the period, the fund's custodian fees were reduced by $1,000 under the
custodian arrangement, and Class B, Class T, and Institutional Class
expenses were reduced by $6,000, $18,000, and $15,000, respectively, under
the transfer agent arrangement.
12. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AMOUNTS IN THOUSANDS SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 A 1995 1996 A 1995
CLASS A 150 - $ 3,202 $ -
Shares sold
Reinvestment of distributions - - 3 -
Shares redeemed (5) - (105) -
Net increase (decrease) 145 - $ 3,100 $ -
CLASS B 11,769 11,926 $ 243,202 $ 213,878
Shares sold
Reinvestment of distributions 478 114 9,527 1,932
Shares redeemed (3,806) (684) (79,827) (12,443)
Net increase (decrease) 8,441 11,356 $ 172,902 $ 203,367
CLASS T 44,565 38,362 $ 918,821 $ 688,702
Shares sold
Reinvestment of distributions 1,866 550 37,447 9,311
Shares redeemed (17,253) (6,039) (358,513) (108,467)
Net increase (decrease) 29,178 32,873 $ 597,755 $ 589,546
INSTITUTIONAL CLASS 7,490 5,922 $ 155,473 $ 104,505
Shares sold
Reinvestment of distributions 432 331 8,672 5,439
Shares redeemed (7,780) (3,735) (161,494) (66,617)
Net increase (decrease) 142 2,518 $ 2,651 $ 43,327
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series III and the Shareholders of
Fidelity Advisor Equity Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series III: Fidelity Advisor Equity Income Fund, including
the schedule of portfolio investments, as of November 30, 1996, 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 of Class A, Class B, Class T and Institutional
Class for each of the periods indicated therein. 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, 1996 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 Income Fund as of
November 30, 1996, 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 of Class A, Class B, Class T and
Institutional Class for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 8, 1997
DISTRIBUTIONS
The Board of Trustees of Advisor Equity Income Fund 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
Inst. Class 12/23/96 12/20/96 $.11 $.59
A total of 6.99% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
A total of 38% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.
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
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced 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 Municipal Bond 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)
