(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
EQUITY INCOME
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 31, 1998
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 20 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 29 NOTES TO THE FINANCIAL STATEMENTS.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
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:
While low interest rates and subdued inflation provided support for
stock and bond markets in the U.S. during the first five months of
1998, concerns about continuing economic and political difficulties in
Asia colored their performance. The stock market reached record
heights due to stronger-than-expected corporate earnings, but
retreated at times when concerns surfaced about how the Asian
volatility would affect business prospects. The bond market benefited
from these retreats, as investors sought alternatives offering lower
volatility.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories 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, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY 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.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). If Fidelity had not reimbursed certain class expenses, the
past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - INST CL 13.63% 27.54% 150.59% 355.63%
S&P 500(REGISTERED TRADEMARK) 15.06% 30.69% 172.18% 451.71%
EQUITY INCOME FUNDS AVERAGE 11.02% 24.65% 125.73% 305.36%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years, or 10 years. For example, if you had 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 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a
peer group of 221 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - INST CL 27.54% 20.17% 16.38%
S&P 500 30.69% 22.17% 18.62%
EQUITY INCOME FUNDS AVERAGE 24.65% 17.56% 14.84%
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative
return and show you what would have happened if Institutional Class
had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL I S&P 500
00080 SP001
1988/05/31 10000.00 10000.00
1988/06/30 10572.23 10459.00
1988/07/31 10553.35 10419.26
1988/08/31 10344.56 10065.00
1988/09/30 10650.22 10493.77
1988/10/31 10842.29 10785.50
1988/11/30 10774.77 10631.26
1988/12/31 10852.95 10817.31
1989/01/31 11548.40 11609.14
1989/02/28 11449.95 11320.07
1989/03/31 11677.56 11583.83
1989/04/30 12105.28 12185.03
1989/05/31 12394.92 12678.52
1989/06/30 12445.07 12606.26
1989/07/31 13231.07 13744.60
1989/08/31 13403.16 14013.99
1989/09/30 13230.29 13956.54
1989/10/31 12504.92 13632.75
1989/11/30 12669.19 13910.85
1989/12/31 12853.67 14244.71
1990/01/31 12040.88 13288.89
1990/02/28 12062.38 13460.32
1990/03/31 12062.38 13817.02
1990/04/30 11595.52 13471.59
1990/05/31 12359.10 14785.07
1990/06/30 12304.32 14684.54
1990/07/31 12106.04 14637.54
1990/08/31 11186.73 13314.31
1990/09/30 10340.77 12665.90
1990/10/31 10105.75 12611.44
1990/11/30 10780.97 13426.14
1990/12/31 11018.32 13800.73
1991/01/31 11578.96 14402.44
1991/02/28 12406.85 15432.22
1991/03/31 12604.85 15805.67
1991/04/30 12604.55 15843.61
1991/05/31 13294.84 16528.05
1991/06/30 12684.64 15771.07
1991/07/31 13378.82 16506.00
1991/08/31 13662.18 16897.19
1991/09/30 13591.39 16615.01
1991/10/31 13817.85 16837.65
1991/11/30 13257.51 16159.09
1991/12/31 14302.85 18007.69
1992/01/31 14446.84 17672.75
1992/02/29 14893.19 17902.49
1992/03/31 14651.22 17553.40
1992/04/30 15173.41 18069.47
1992/05/31 15307.36 18158.01
1992/06/30 15136.93 17887.45
1992/07/31 15530.09 18619.05
1992/08/31 15161.40 18237.36
1992/09/30 15285.19 18452.56
1992/10/31 15471.11 18517.14
1992/11/30 16029.25 19148.58
1992/12/31 16440.39 19384.11
1993/01/31 16939.85 19546.93
1993/02/28 17378.33 19812.77
1993/03/31 17955.26 20230.82
1993/04/30 17892.46 19741.23
1993/05/31 18182.70 20270.30
1993/06/30 18372.95 20329.08
1993/07/31 18626.99 20247.77
1993/08/31 19301.71 21015.16
1993/09/30 19186.82 20853.34
1993/10/31 19416.60 21285.00
1993/11/30 19059.16 21082.80
1993/12/31 19531.50 21337.90
1994/01/31 20450.62 22063.39
1994/02/28 19940.00 21465.47
1994/03/31 19090.20 20529.57
1994/04/30 19758.68 20792.35
1994/05/31 19912.94 21133.35
1994/06/30 19794.43 20615.58
1994/07/31 20480.57 21291.77
1994/08/31 21568.03 22164.73
1994/09/30 21216.85 21621.70
1994/10/31 21633.63 22108.19
1994/11/30 20930.31 21303.01
1994/12/31 20995.75 21618.93
1995/01/31 21329.44 22179.51
1995/02/28 22090.25 23043.84
1995/03/31 22826.65 23723.87
1995/04/30 23445.41 24422.54
1995/05/31 24117.96 25398.71
1995/06/30 24455.07 25988.72
1995/07/31 25361.31 26850.50
1995/08/31 25672.41 26917.90
1995/09/30 26483.54 28053.83
1995/10/31 26198.18 27953.68
1995/11/30 27298.83 29180.85
1995/12/31 28028.09 29742.87
1996/01/31 28867.88 30755.32
1996/02/29 28993.82 31040.42
1996/03/31 29218.39 31339.34
1996/04/30 29429.30 31801.28
1996/05/31 29668.34 32621.44
1996/06/30 29514.03 32745.72
1996/07/31 28412.55 31299.02
1996/08/31 28977.41 31959.11
1996/09/30 30022.74 33757.77
1996/10/31 30647.03 34688.81
1996/11/30 32633.41 37310.94
1996/12/31 32304.84 36571.81
1997/01/31 33417.28 38856.82
1997/02/28 33680.76 39161.45
1997/03/31 32371.54 37552.31
1997/04/30 33753.43 39794.18
1997/05/31 35723.36 42216.85
1997/06/30 37501.21 44108.17
1997/07/31 40216.76 47617.85
1997/08/31 38637.61 44950.30
1997/09/30 40689.46 47412.23
1997/10/31 38926.79 45828.66
1997/11/30 40096.97 47950.07
1997/12/31 40910.52 48773.37
1998/01/31 40830.81 49312.81
1998/02/28 43735.96 52869.25
1998/03/31 45738.34 55576.68
1998/04/30 45961.22 56135.78
1998/05/29 45563.22 55170.81
IMATRL PRASUN SHR__CHT 19980531 19980615 162536 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Institutional Class
on May 31, 1988. As the chart shows, by May 31, 1998, the value of the
investment would have grown to $45,563 - a 355.63% increase on the
initial investment. For comparison, look at how the Standard & Poor's
500 Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would have grown to
$55,171 - a 451.71% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. 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
Although renewed concerns about
economic difficulties in Asia late
in the period tempered the rapid
growth of U.S. equity markets, the
Standard & Poor's 500 Index - a
measure of the U.S. stock market -
still managed to return 15.06%
during the six months that ended
May 31, 1998. As feared, some
U.S. corporations with business
exposure to Asia did report
disappointing earnings and their
stocks were harshly punished.
However, investors seemed to
adopt a new attitude - one that
overlooked short-term troubles
and focused on longer-term growth
- - helping many of these stocks to
rebound quickly. In addition, the
continued strength of the U.S.
economy, combined with low
interest rates and low inflation,
seemed to buoy the stock market
for much of the period. The upward
climb of the stock market
stagnated in mid- and late May
when investors were inundated
with worrisome news about the
stability of Asian markets.
Specifically, the president of
Indonesia resigned amidst civil
strife and a battle over nuclear
testing erupted between Pakistan
and India. Concerns about falling
demand for U.S. exports
particularly hurt technology
companies, especially during the
intensified investigation of
Microsoft by the Justice
Department in May. As a result of
concerns about these tumultuous
events and their potential impact
on the U.S. economy, the Dow
Jones Industrial Average produced a
negative return in May for the first
time in 1998 - although the Dow
was still up 13.29% for the first five
months of 1998.
An interview with Robert Chow, Portfolio Manager of Fidelity Advisor
Equity Income Fund
Q. BOB, HOW DID THE FUND PERFORM?
A. For the six months that ended May 31, 1998, the fund's
Institutional Class shares returned 13.63%. To compare, the equity
income funds average tracked by Lipper Analytical Services returned
11.02%, while the Standard & Poor's 500 Index returned 15.06%. For the
past year, the fund's Institutional Class shares returned 27.54%.
Comparatively, the equity income funds average returned 24.65% and the
S&P 500 returned 30.69%.
Q. WHAT FACTORS DROVE THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. I believe the fund performed better than its competitors during the
period because of good stock selection and an advantageous market
backdrop. Looking at the period as a whole, gains in the market were
relatively broad, unlike in 1996 and 1997 when large-capitalization
pharmaceutical and bank stocks were the primary drivers of market
averages like the S&P 500. In the past six months, the market enjoyed
a wider participation, helping the fund because it tends to be more
balanced in value-oriented stocks throughout the market. Nevertheless,
during the latter stages of the period, investors gravitated back to a
narrow group of large-cap growth stocks, hurting the fund's
performance relative to the S&P 500.
Q. THE FUND'S SECTOR WEIGHTINGS REMAINED FAIRLY STABLE OVER THE
PERIOD. WHY WAS THAT?
A. You have to keep in mind that I am a value investor - looking for
stocks that are cheap. As a result, I have made very few sector
shifts. For example, the fund was weighted roughly the same in
financial services stocks - around 19% - at the end of the period as
it was at the beginning. The same was true with energy stocks, which
comprised about 8% at both the beginning and the end of the period. In
addition, when you look at the top 10 holdings in the fund you will
see very few changes.
Q. WHICH STOCKS WERE SOLID PERFORMERS FOR THE FUND?
A. Unilever - which moved into the fund's top 10 during the period -
was one. Half of its income comes from Europe, where economies have
been accelerating rapidly after being in the doldrums for years. And
its valuation recovered from very low levels, compared to other
consumer product companies. IBM was another stock that did well,
helped by its significant cash flow and an active program of buying
back its shares - a strategy that helps increase the value of the
remaining outstanding shares.
Q. DID ANY STOCKS PROVE TO BE DISAPPOINTMENTS DURING THE PERIOD?
A. Philip Morris was one. Litigation plays a big part in the
performance of this and other tobacco stocks, so investor sentiment
about them can shift very quickly depending on breaking news about
lawsuits or a congressional settlement. Over the period, there was a
significant negative shift in attitude due to high-profile
negotiations in Congress. Nevertheless, I believed the stock continued
to represent significant value at the end of the period, so it
remained a big holding in the fund. Looking at the price-to-earnings
ratio (P/E) - a measure of how much an investor is paying for a
company's earning power - the stock remained very attractive to me at
the end of the period.
Q. WAL-MART SLIPPED OUT OF THE TOP 10. WHY WAS THAT?
A. Wal-Mart is a great company that has historically been one of the
top two or three holdings in the fund. Over the past year, however,
and particularly the past six months, the stock has done terrifically
well, bumping it to the top of its historical valuation range. At its
current price, I feel the reward for owning the stock is not offset by
the risks involved with maintaining it as one of my top positions.
Given my goal of keeping the fund's risk in check, I have had to pare
it back. The company's fundamentals remained superb, though, as the
company continued gaining market share, generating positive cash flow
and benefiting from extremely strong management.
Q. WHAT IS YOUR OUTLOOK?
A. With the S&P sustaining strong gains of 30% a year for several
years - resulting in historically high valuations - it's difficult for
value investors like myself to keep pace. As blue chip stocks continue
to get more expensive, value investors have a tougher time finding
significant bargains. Having said all that, I believe that my top
positions continue to have plenty of upside potential, and I continue
to invest with a view toward controlling risk while achieving a
healthy return.
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.
BOB CHOW ON
VALUE INVESTING:
"As a value investor, I focus
primarily on determining a
valuation range for stocks that I'm
interested in, looking to establish a
low and a high price based on the
fundamentals of the company. If
the stock is currently trading in
the top 25% of that range, I will sell
the stock or not buy it. If the
valuation falls in the middle 50%
of the range, then I will stand aside
and watch it. But if the price falls
within the bottom 25%, then it
becomes a buy candidate.
"Everything depends on what I pay
for a stock. Think about
purchasing a piece of property. If
you want to maximize your
investment over a two-year period,
you can either buy a beautiful
house in an expensive
neighborhood or you could buy a
fixer-upper in a part of town that is
not as nice. Which will you make
more money on? It depends
entirely on what you pay for it.
"That line of reasoning applies
to individual stocks. A company
may be great, but I believe that
the basis on whether it is a good
investment or not depends entirely
on the valuation at the time of
the purchase."
FUND FACTS
GOAL: seeks to maintain a
yield that exceeds the
composite dividend of the S&P
500, while considering the
potential for achieving
capital appreciation.
START DATE: April 25, 1983
SIZE: as of May 31, 1998,
more than $4.0 billion
MANAGER: Robert Chow, since
1996; joined Fidelity in 1989
(checkmark)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF MAY 31,1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
CITICORP 3.1 2.1
PMI GROUP, INC. 2.8 0.0
FLEET FINANCIAL GROUP, INC. 2.3 1.9
AMERICAN HOME PRODUCTS CORP. 1.9 1.5
BRITISH PETROLEUM PLC ADR 1.8 2.5
INTERNATIONAL BUSINESS MACHINES CORP. 1.8 2.3
FEDERATED DEPARTMENT STORES, INC. 1.8 0.8
U S WEST COMMUNICATIONS GROUP 1.7 1.8
UNILEVER NV ADR 1.7 1.2
PHILIP MORRIS COMPANIES, INC. 1.7 2.7
TOP FIVE MARKET SECTORS AS OF MAY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
FINANCE 19.4 18.4
TECHNOLOGY 8.8 7.2
ENERGY 8.5 8.6
NONDURABLES 7.5 7.3
DURABLES 7.3 5.9
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1998 * AS OF NOVEMBER 30, 1997 **
ROW: 1, COL: 1, VALUE: 95.7
ROW: 1, COL: 2, VALUE: 0.0
ROW: 1, COL: 3, VALUE: 4.3
STOCKS 93.0%
CONVERTIBLE
SECURITIES 1.1%
SHORT-TERM
INVESTMENTS 5.9%
FOREIGN
INVESTMENTS 6.3%
STOCKS 95.7%
CONVERTIBLE
SECURITIES 0.0%
SHORT-TERM
INVESTMENTS 4.3%
FOREIGN
INVESTMENTS 8.0%
ROW: 1, COL: 1, VALUE: 93.0
ROW: 1, COL: 2, VALUE: 1.1
ROW: 1, COL: 3, VALUE: 5.9
*
**
INVESTMENTS MAY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
COMMON STOCKS - 95.7%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 3.4%
AEROSPACE & DEFENSE - 2.3%
AlliedSignal, Inc. 280,000 $ 11,970
GenCorp, Inc. 800,000 23,850
Goodrich (B.F.) Co. 60,000 3,075
Lockheed Martin Corp. 200,000 22,450
United Technologies Corp. 360,000 33,840
95,185
DEFENSE ELECTRONICS - 1.0%
Litton Industries, Inc. (a) 540,000 31,287
Raytheon Co. Class B 130,000 7,109
38,396
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 130,000 5,777
TOTAL AEROSPACE & DEFENSE 139,358
BASIC INDUSTRIES - 6.2%
CHEMICALS & PLASTICS - 2.4%
du Pont (E.I.) de Nemours & Co. 270,000 20,790
Ferro Corp. 720,000 20,610
Monsanto Co. 180,000 9,968
Olin Corp. 240,000 10,380
Union Carbide Corp. 600,000 29,963
Witco Corp. 130,000 4,931
96,642
IRON & STEEL - 0.2%
Nucor Corp. 200,000 10,300
METALS & MINING - 1.4%
Alumax, Inc. 900,000 42,131
Aluminum Co. of America 220,000 15,263
57,394
PAPER & FOREST PRODUCTS - 2.2%
Champion International Corp. 300,000 14,400
Chesapeake Corp. 700,000 24,850
Georgia-Pacific Corp. 320,000 20,540
Georgia-Pacific Corp. (Timber Group) 320,000 7,540
Pentair, Inc. 480,000 21,060
88,390
TOTAL BASIC INDUSTRIES 252,726
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 4.0%
BUILDING MATERIALS - 2.1%
American Standard Companies, Inc. 320,000 $ 15,440
CalMat Co. 220,000 5,528
Masco Corp. 380,000 21,375
RPM, Inc. 750,000 12,750
USG Corp. 580,000 30,812
85,905
CONSTRUCTION - 0.6%
Centex Corp. 220,000 7,865
Lennar Corp. 350,000 9,275
Okumura Gumi 2,000,000 6,266
23,406
ENGINEERING - 0.2%
Fluor Corp. 200,000 9,538
REAL ESTATE - 0.2%
LNR Property Corp. 350,000 9,056
REAL ESTATE INVESTMENT TRUSTS - 0.9%
Duke Realty Investors, Inc. 223,672 5,060
Felcor Suite Hotels, Inc. 100,000 3,444
Ocwen Asset Investment Corp. 500,000 8,500
Public Storage, Inc. 240,000 7,200
RFS Hotel Investors, Inc. 93,800 1,864
Starwood Hotels & Resorts Trust 200,000 9,438
35,506
TOTAL CONSTRUCTION & REAL ESTATE 163,411
DURABLES - 7.3%
AUTOS, TIRES, & ACCESSORIES - 5.0%
Chrysler Corp. 573,700 31,912
Eaton Corp. 140,000 12,574
Ford Motor Co. 800,000 41,500
ITT Industries, Inc. 1,200,000 44,250
Modine Manufacturing Co. 80,000 2,720
Pep Boys-Manny, Moe & Jack 300,000 6,675
TRW, Inc. 1,200,000 64,275
203,906
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER DURABLES - 0.5%
Minnesota Mining & Manufacturing Co. 230,000 $ 21,303
CONSUMER ELECTRONICS - 1.1%
Electrolux AB 240,000 23,834
Maytag Co. 420,000 21,184
45,018
HOME FURNISHINGS - 0.6%
Leggett & Platt, Inc. 440,000 22,110
TEXTILES & APPAREL - 0.1%
NIKE, Inc. Class B 100,000 4,600
TOTAL DURABLES 296,937
ENERGY - 8.5%
ENERGY SERVICES - 0.7%
Baker Hughes, Inc. 240,000 8,640
Schlumberger Ltd. 130,000 10,147
Western Atlas, Inc. (a) 120,000 10,388
29,175
OIL & GAS - 7.8%
Amerada Hess Corp. 420,000 22,705
British Petroleum PLC ADR 840,000 74,445
Burlington Resources, Inc. 300,000 12,638
Chevron Corp. 420,000 33,548
Kerr-McGee Corp. 100,000 6,325
Nationale Elf Aquitaine 260,000 36,070
Occidental Petroleum Corp. 1,500,000 41,438
Royal Dutch Petroleum Co. 400,000 22,425
Texaco, Inc. 360,000 20,790
Tosco Corp. 400,000 12,700
Total SA sponsored ADR 560,000 34,895
317,979
TOTAL ENERGY 347,154
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 19.4%
BANKS - 6.0%
Bank of New York Co., Inc. 557,800 $ 34,096
Citicorp 860,000 128,246
Chase Manhattan Corp. 200,000 27,188
Comerica, Inc. 225,000 14,794
NationsBank Corp. 380,000 28,785
Wells Fargo & Co. 30,000 10,845
243,954
CREDIT & OTHER FINANCE - 4.2%
American Express Co. 540,000 55,418
Fleet Financial Group, Inc. 1,150,000 94,300
Household International, Inc. 90,000 12,178
Transamerica Corp. 80,000 9,200
171,096
FEDERAL SPONSORED CREDIT - 2.0%
Fannie Mae 780,000 46,703
Freddie Mac 750,000 34,125
80,828
INSURANCE - 6.7%
Aetna, Inc. 100,000 7,817
Allstate Corp. 460,000 43,298
CIGNA Corp. 240,000 16,440
General Re Corp. 50,000 10,994
Hartford Financial Services Group, Inc. 300,000 33,019
Loews Corp. 170,000 15,428
PMI Group, Inc. 1,500,000 112,781
PXRE Corp. 660,000 20,790
Provident Companies, Inc. 370,000 13,644
274,211
SECURITIES INDUSTRY - 0.5%
Lehman Brothers Holdings, Inc. 250,000 17,734
TOTAL FINANCE 787,823
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 5.8%
DRUGS & PHARMACEUTICALS - 3.8%
American Home Products Corp. 1,560,000 $ 75,367
Bristol-Myers Squibb Co. 400,000 43,000
Merck & Co., Inc. 300,000 35,119
153,486
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Allegiance Corp. 190,000 9,500
MEDICAL FACILITIES MANAGEMENT - 1.8%
Columbia/HCA Healthcare Corp. 350,000 11,441
Humana, Inc. 500,000 15,531
Tenet Healthcare Corp. (a) 400,000 14,000
United HealthCare Corp. 490,000 31,360
72,332
TOTAL HEALTH 235,318
HOLDING COMPANIES - 0.4%
PartnerRe Ltd. 300,000 14,625
INDUSTRIAL MACHINERY & EQUIPMENT - 6.3%
ELECTRICAL EQUIPMENT - 2.2%
Alcatel Alsthom Compagnie Generale d'Electricite
SA sponsored ADR 560,000 24,220
Emerson Electric Co. 230,000 13,972
General Electric Co. 640,000 53,360
L-3 Communications Holdings, Inc. 1,700 48
91,600
INDUSTRIAL MACHINERY & EQUIPMENT - 2.6%
Caterpillar, Inc. 320,000 17,580
Deere & Co. 110,000 5,706
Harnischfeger Industries, Inc. 420,000 13,230
Ingersoll-Rand Co. 220,000 9,914
Toro Co. 80,000 2,795
Tyco International Ltd. 580,000 32,118
UNOVA, Inc. 1,033,100 22,857
104,200
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 1.5%
Browning-Ferris Industries, Inc. 900,000 $ 32,006
USA Waste Services, Inc. (a) 500,000 23,594
Waste Management, Inc. 180,000 5,850
61,450
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 257,250
MEDIA & LEISURE - 1.6%
BROADCASTING - 0.2%
Gaylord Entertainment Co. 300,000 10,106
PUBLISHING - 1.4%
ACNielsen Corp. (a) 1,100,000 28,393
Dun & Bradstreet Corp. 350,000 11,813
Knight-Ridder, Inc. 120,000 6,848
Times Mirror Co. Class A 150,000 9,600
56,654
TOTAL MEDIA & LEISURE 66,760
NONDURABLES - 7.5%
BEVERAGES - 1.0%
Anheuser-Busch Companies, Inc. 580,000 26,644
Whitman Corp. 700,000 15,181
41,825
FOODS - 1.0%
General Mills, Inc. 500,000 34,125
Quaker Oats Co. 130,000 7,499
41,624
HOUSEHOLD PRODUCTS - 3.7%
Church & Dwight Co., Inc. 596,700 18,087
Clorox Co. 260,000 21,710
Premark International, Inc. 471,400 15,114
Rubbermaid, Inc. 800,000 26,100
Unilever NV ADR 900,000 71,044
152,055
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
TOBACCO - 1.8%
Philip Morris Companies, Inc. 1,900,000 $ 71,013
TOTAL NONDURABLES 306,517
PRECIOUS METALS - 0.2%
Newmont Mining Corp. 280,000 6,983
RETAIL & WHOLESALE - 7.0%
APPAREL STORES - 0.2%
TJX Companies, Inc. 180,000 8,415
DRUG STORES - 0.8%
CVS Corp. 100,000 7,019
Rite Aid Corp. 670,000 23,994
31,013
GENERAL MERCHANDISE STORES - 4.3%
Federated Department Stores, Inc. (a) 1,400,000 72,538
May Department Stores Co. (The) 200,000 12,863
Nordstrom, Inc. 180,000 12,971
Sears, Roebuck & Co. 350,000 21,634
Wal-Mart Stores, Inc. 1,050,000 57,947
177,953
GROCERY STORES - 0.6%
Albertson's, Inc. 130,000 6,021
Richfood Holdings, Inc. Class A 250,000 6,109
Safeway, Inc. (a) 320,000 11,660
23,790
RETAIL & WHOLESALE, MISCELLANEOUS - 1.1%
Boise Cascade Office Products Corp. (a) 250,000 4,281
Fabri-Centers of America, Inc. Class B (non-vtg) (a) 320,000 8,260
Home Depot, Inc. 240,000 18,855
Officemax, Inc. (a) 800,000 13,150
44,546
TOTAL RETAIL & WHOLESALE 285,717
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 1.0%
LEASING & RENTAL - 0.2%
Danka Business Systems PLC sponsored ADR 400,000 $ 6,750
PRINTING - 0.8%
Donnelley (R.R.) & Sons Co. 450,000 20,250
Reynolds & Reynolds Co. Class A 700,000 14,656
34,906
TOTAL SERVICES 41,656
TECHNOLOGY - 8.8%
COMPUTER SERVICES & SOFTWARE - 0.4%
Electronic Data Systems Corp. 460,000 16,732
COMPUTERS & OFFICE EQUIPMENT - 5.5%
Apple Computer, Inc. (a) 700,000 18,638
Compaq Computer Corp. 300,000 8,194
International Business Machines Corp. 630,000 73,946
Pitney Bowes, Inc. 1,200,000 56,400
Unisys Corp. (a) 1,880,000 46,060
Wang Laboratories, Inc. (a) 880,000 21,120
224,358
ELECTRONIC INSTRUMENTS - 0.4%
KLA-Tencor Corp. (a) 70,000 2,362
Varian Associates, Inc. 250,000 12,016
14,378
ELECTRONICS - 1.9%
AMP, Inc. 820,000 31,160
Motorola, Inc. 400,000 21,175
Texas Instruments, Inc. 350,000 17,981
Thomas & Betts Corp. 160,000 8,550
78,866
PHOTOGRAPHIC EQUIPMENT - 0.6%
Eastman Kodak Co. 320,000 22,840
TOTAL TECHNOLOGY 357,174
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 2.2%
AIR TRANSPORTATION - 0.5%
AMR Corp. (a) 80,000 $ 12,315
Delta Air Lines, Inc. 80,000 9,200
21,515
RAILROADS - 1.0%
Burlington Northern Santa Fe Corp. 240,000 23,880
CSX Corp. 280,000 13,335
Union Pacific Corp. 100,000 4,838
42,053
TRUCKING & FREIGHT - 0.7%
Arnold Industries, Inc. 620,000 9,687
Consolidated Freightways Corp. (a) 1,010,000 14,898
Pittston Co. (Burlington Group) 160,000 2,810
27,395
TOTAL TRANSPORTATION 90,963
UTILITIES - 6.1%
ELECTRIC UTILITY - 0.2%
American Electric Power Co., Inc. 220,000 9,983
TELEPHONE SERVICES - 5.9%
AT&T Corp. 700,000 42,612
Bell Atlantic Corp. 560,000 51,310
BellSouth Corp. 660,000 42,570
MCI Communications Corp. 260,000 13,902
Sprint Corp. 240,000 17,220
U S WEST Communications Group 1,400,000 71,050
238,664
TOTAL UTILITIES 248,647
TOTAL COMMON STOCKS
(Cost $2,884,783) 3,899,019
CONVERTIBLE PREFERRED STOCKS - 0.0%
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a)
(Cost $235) 50,000 $ -
CASH EQUIVALENTS - 4.3%
Taxable Central Cash Fund
(Cost$173,871) (b) 173,871,474 173,871
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,058,889) $ 4,072,890
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield of the Taxable Central Cash
Fund was 5.56%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
INCOME TAX INFORMATION
At May 31, 1998, the aggregate cost of investment securities for
income tax purposes was $3,060,476,000. Net unrealized appreciation
aggregated $1,012,414,000, of which $1,061,960,000 related to
appreciated investment securities and $49,546,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MAY 31, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $3,058,889) - $ 4,072,890
SEE ACCOMPANYING SCHEDULE
CASH 36
RECEIVABLE FOR INVESTMENTS SOLD 1,069
RECEIVABLE FOR FUND SHARES SOLD 7,485
DIVIDENDS RECEIVABLE 7,211
INTEREST RECEIVABLE 731
OTHER RECEIVABLES 114
PREPAID EXPENSES 6
TOTAL ASSETS 4,089,542
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 23,636
PAYABLE FOR FUND SHARES REDEEMED 10,394
ACCRUED MANAGEMENT FEE 1,699
DISTRIBUTION FEES PAYABLE 1,839
OTHER PAYABLES AND ACCRUED EXPENSES 805
TOTAL LIABILITIES 38,373
NET ASSETS $ 4,051,169
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 2,844,916
UNDISTRIBUTED NET INVESTMENT INCOME 4,694
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 187,564
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 1,013,995
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS $ 4,051,169
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MAY 31, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $28.19
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($51,052 (DIVIDED BY) 1,811 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/94.25 OF $28.19) $29.91
CLASS T: $28.38
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,634,646 (DIVIDED BY) 92,847 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $28.38) $29.41
CLASS B: $28.23
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($843,548 (DIVIDED BY) 29,881 SHARES) A
CLASS C: $28.28
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($18,320 (DIVIDED BY) 647.9 SHARES) A
INSTITUTIONAL CLASS: $28.62
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($503,603 (DIVIDED BY) 17,594 SHARES)
</TABLE>
A REDEMPTION PRICE PER-SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 32,616
DIVIDENDS
INTEREST 4,500
TOTAL INCOME 37,116
EXPENSES
MANAGEMENT FEE $ 9,362
TRANSFER AGENT FEES 3,276
DISTRIBUTION FEES 10,048
ACCOUNTING FEES AND EXPENSES 406
NON-INTERESTED TRUSTEES' COMPENSATION 9
CUSTODIAN FEES AND EXPENSES 29
REGISTRATION FEES 256
AUDIT 35
LEGAL 8
MISCELLANEOUS 29
TOTAL EXPENSES BEFORE REDUCTIONS 23,458
EXPENSE REDUCTIONS (315) 23,143
NET INVESTMENT INCOME 13,973
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 189,291
FOREIGN CURRENCY TRANSACTIONS (61) 189,230
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 253,122
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES (6) 253,116
NET GAIN (LOSS) 442,346
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 456,319
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 13,973 $ 30,780
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 189,230 243,508
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 253,116 326,758
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 456,319 601,046
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (12,858) (31,851)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN (218,223) (64,869)
TOTAL DISTRIBUTIONS (231,081) (96,720)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 463,179 337,812
TOTAL INCREASE (DECREASE) IN NET ASSETS 688,417 842,138
NET ASSETS
BEGINNING OF PERIOD 3,362,752 2,520,614
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 4,051,169 $ 3,362,752
INCOME OF $4,694 AND $3,579, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED YEARS ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 1996 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.69 $ 22.78 $ 20.38
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME E .13 .23 .06
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.21 4.61 2.44
TOTAL FROM INVESTMENT OPERATIONS 3.34 4.84 2.50
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.12) (.34) (.10)
FROM NET REALIZED GAIN (1.72) (.59) -
TOTAL DISTRIBUTIONS (1.84) (.93) (.10)
NET ASSET VALUE, END OF PERIOD $ 28.19 $ 26.69 $ 22.78
TOTAL RETURN B, C 13.42% 22.05% 12.31%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 51,052 $ 25,659 $ 3,306
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.08% A 1.26% G 1.46% A, D, G
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.06% A, H 1.25% H 1.44% A, H
AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE .97% A .93% 1.27% A
NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78%
AVERAGE COMMISSION RATE I $ .0454 $ .0430 $ .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 LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
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 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.
<ERROR: WIDE TABLE>
ERROR: THE FOLLOWING TABLE: "ASSETS" IS TOO WIDE!
TABLE WIDTH IS 233 CHARACTERS.
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 26.85 $ 22.83 $ 19.95 $ 15.96 $ 14.86 $ 12.86
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT .11 D .26 D .30 D .31 .28 D .33
INCOME
NET REALIZED AND 3.24 4.62 3.35 4.26 1.03 1.97
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVESTMENT 3.35 4.88 3.65 4.57 1.31 2.30
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.10) (.27) (.31) (.30) (.21) (.30)
INCOME
FROM NET (1.72) (.59) (.46) (.28) - -
REALIZED GAIN
TOTAL DISTRIBUTIONS (1.82) (.86) (.77) (.58) (.21) (.30)
NET ASSET VALUE, $ 28.38 $ 26.85 $ 22.83 $ 19.95 $ 15.96 $ 14.86
END OF PERIOD
TOTAL RETURN B, C 13.37% 22.12% 18.89% 29.46% 8.84% 18.03%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 2,634,646 $ 2,190,070 $ 1,672,994 $ 880,054 $ 179,501 $ 42,326
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO 1.23% A 1.23% 1.27% 1.48% 1.67% 1.77%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO 1.22% A, E 1.21% E 1.26% E 1.47% E 1.64% E 1.77%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT .80% A 1.05% 1.45% 1.78% 1.69% 2.02%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78% 80% 140% 120%
AVERAGE COMMISSION $ .0454 $ .0430 $ .0424
RATE F
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 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).
F 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 26.73 $ 22.73 $ 19.90 $ 15.94 $ 15.21
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .04 D .13 D .19 D .26 .08 D
NET REALIZED AND UNREALIZED 3.22 4.61 3.33 4.23 .72
GAIN (LOSS)
TOTAL FROM INVESTMENT 3.26 4.74 3.52 4.49 .80
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.04) (.15) (.23) (.25) (.07)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (1.76) (.74) (.69) (.53) (.07)
NET ASSET VALUE, END OF PERIOD $ 28.23 $ 26.73 $ 22.73 $ 19.90 $ 15.94
TOTAL RETURN B, C 13.06% 21.52% 18.22% 28.95% 5.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 843,548 $ 682,308 $ 500,447 $ 270,101 $ 35,373
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.77% A 1.74% F 1.81% 1.85% 2.24% A
NET ASSETS
RATIO OF EXPENSES TO AVERAGE 1.75% A, G 1.73% G 1.79% G 1.84% G 2.18% A, G
NET ASSETS AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT INCOME .27% A .53% .92% 1.41% 1.15% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78% 80% 140%
AVERAGE COMMISSION RATE H $ .0454 $ .0430 $ .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 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 AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.84 $ 26.65
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .03 .02
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.22 .17
TOTAL FROM INVESTMENT OPERATIONS 3.25 .19
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.09) -
FROM NET REALIZED GAIN (1.72) -
TOTAL DISTRIBUTIONS (1.81) -
NET ASSET VALUE, END OF PERIOD $ 28.28 $ 26.84
TOTAL RETURN B, C 12.98% .71%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 18,320 $ 684
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.85% A, F 1.85% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.83% A, G 1.81% A, G
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .24% A 1.24% A
PORTFOLIO TURNOVER 54% A 55%
AVERAGE COMMISSION RATE H $ .0454 $ .0430
</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 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 NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 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.
<ERROR: WIDE TABLE>
ERROR: THE FOLLOWING TABLE: "ASSETS" IS TOO WIDE!
TABLE WIDTH IS 231 CHARACTERS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 27.07 $ 23.00 $ 20.09 $ 16.07 $ 14.93 $ 12.88
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT .18 D .39 D .42 D .45 .41 D .39
INCOME
NET REALIZED AND 3.26 4.68 3.37 4.28 1.05 2.02
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVESTMENT 3.44 5.07 3.79 4.73 1.46 2.41
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.17) (.41) (.42) (.43) (.32) (.36)
INCOME
FROM NET (1.72) (.59) (.46) (.28) - -
REALIZED GAIN
TOTAL DISTRIBUTIONS (1.89) (1.00) (.88) (.71) (.32) (.36)
NET ASSET VALUE, $ 28.62 $ 27.07 $ 23.00 $ 20.09 $ 16.07 $ 14.93
END OF PERIOD
TOTAL RETURN B, C 13.63% 22.87% 19.54% 30.43% 9.82% 18.90%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 503,603 $ 464,031 $ 343,867 $ 297,453 $ 197,533 $ 191,138
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .69% A .69% .71% .74% .73% .80%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .68% A, E .67% E .70% E .73% E .71% E .79% E
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT 1.33% A 1.60% 2.02% 2.52% 2.62% 3.00%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78% 80% 140% 120%
AVERAGE COMMISSION $ .0454 $ .0430 $ .0424
RATE F
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 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 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).
F 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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 1998 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Equity Income Fund (the fund) is a fund of Fidelity
Advisor Series III (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, 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
matters that affect that class. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, 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, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Under the Plan, deferred amounts are treated as though
equivalent dollar amounts have been invested in shares of a
cross-section of Fidelity funds, including shares of the fund.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class C and shares of Class C for distribution under federal and state
securities law. These expenses are amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
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, futures and options transactions,
market discount, non-taxable dividends and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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-denominated
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.
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 FMR, may transfer uninvested cash
balances into one or more joint trading accounts. These balances are
invested in one or more repurchase agreements 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 Fidelity Investments Money Management, Inc.,
(formerly FMR Texas, Inc.) an affiliate of 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. Income distributions from the Cash Fund are declared daily
and paid monthly from net interest income. Income distributions earned
by the fund are recorded as interest income in the accompanying
financial statements.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,237,519,000 and $953,983,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .25%
CLASS T .50%
CLASS B 1.00% *
CLASS C 1.00% *
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 47,000 $ -
CLASS T 6,121,000 98,000
CLASS B 3,838,000 2,878,000
CLASS C 42,000 42,000
$ 10,048,000 $ 3,018,000
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $ 12,000
CLASS T 173,000
CLASS B 179,000
CLASS C 12,000
$ 376,000
SALES LOAD. FDC receives a front-end sales charge of up to 5.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
from 5% to 1% for Class B and 1% for Class C, 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. In addition, purchases of Class A and Class T shares that were
subject to a finder's fee bear a contingent deferred sales charge on
assets that do not remain in the fund for at least one year. The Class
A and Class T contingent deferred sales charge is based on 0.25% 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. A portion of the sales charges paid to
FDC are paid to securities dealers, banks, and other financial
institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED BY
FDC FDC
CLASS A $ 383,000 $ 152,000
CLASS T 869,000 233,000
CLASS B 513,000 513,000*
CLASS C 1,000 1,000*
$ 1,766,000 $ 899,000
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent (collectively referred to
as the transfer agent) for the fund's Class A, Class T, Class B, Class
C and Institutional Class. FIIOC receives account fees and asset-based
fees that vary according to the account size and type of account of
the shareholders of the respective classes of the fund. FIIOC pays for
typesetting, printing and mailing of all shareholder reports, except
proxy statements. For the period, the following amounts were paid to
FIIOC:
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 43,000 .23% *
CLASS T 2,137,000 .18% *
CLASS B 745,000 .20% *
CLASS C 9,000 .23% *
INSTITUTIONAL CLASS 342,000 .14% *
$ 3,276,000
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. Fidelity Service Company, Inc., 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 $304,000 for the
period.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each of the following classes:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS C 1.85% $ 13,000
FMR has also 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 $301,000 under this arrangement.
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $1,000 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1998 1997
FROM NET INVESTMENT INCOME
CLASS A $ 146,000 $ 131,000
CLASS T 8,652,000 20,835,000
CLASS B 1,085,000 3,503,000
CLASS C 16,000 -
INSTITUTIONAL CLASS 2,959,000 7,382,000
TOTAL $ 12,858,000 $ 31,851,000
FROM NET REALIZED GAIN
CLASS A $ 1,745,000 $ 98,000
CLASS T 142,228,000 43,072,000
CLASS B 44,523,000 13,038,000
CLASS C 120,000 -
INSTITUTIONAL CLASS 29,607,000 8,661,000
TOTAL $ 218,223,000 $ 64,869,000
TOTAL $ 231,081,000 $ 96,720,000
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
AMOUNT IN THOUSANDS SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 A 1998 1997 A
CLASS A 904 919 $ 24,672 $ 22,745
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 71 9 1,792 208
SHARES REDEEMED (125) (112) (3,450) (2,828)
NET INCREASE (DECREASE) 850 816 $ 23,014 $ 20,125
CLASS T 16,033 28,655 $ 437,093 $ 693,828
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 5,685 2,675 143,735 60,512
SHARES REDEEMED (10,427) (23,070) (284,667) (558,854)
NET INCREASE (DECREASE) 11,291 8,260 $ 296,161 $ 195,486
CLASS B 4,282 5,544 $ 116,756 $ 135,409
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,601 700 40,251 15,570
SHARES REDEEMED (1,524) (2,738) (41,493) (66,167)
NET INCREASE (DECREASE) 4,359 3,506 $ 115,514 $ 84,812
CLASS C 627 25 $ 17,223 $ 678
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 5 - 126 -
SHARES REDEEMED (9) - (253) -
NET INCREASE (DECREASE) 623 25 $ 17,096 $ 678
INSTITUTIONAL CLASS 2,483 11,368 $ 68,952 $ 260,181
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,095 515 27,908 11,887
SHARES REDEEMED (3,127) (9,691) (85,466) (235,357)
NET INCREASE (DECREASE) 451 2,192 $ 11,394 $ 36,711
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 10,000
CLASS T 134,000
CLASS B 61,000
CLASS C 15,000
INSTITUTIONAL CLASS 36,000
$ 256,000
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
Robert C. Pozen, Senior Vice President
Richard A. Spillane, Jr., Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
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 International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
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 Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
EQUITY INCOME
FUND - CLASS A, CLASS T, CLASS B AND CLASS C
SEMIANNUAL REPORT
MAY 31, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 12 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 15 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST SIX MONTHS.
INVESTMENTS 16 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 26 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 35 NOTES TO THE FINANCIAL STATEMENTS.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
While low interest rates and subdued inflation provided support for
stock and bond markets in the U.S. during the first five months of
1998, concerns about continuing economic and political difficulties in
Asia colored their performance. The stock market reached record
heights due to stronger-than-expected corporate earnings, but
retreated at times when concerns surfaced about how the Asian
volatility would affect business prospects. The bond market benefited
from these retreats, as investors sought alternatives offering lower
volatility.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories 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, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY 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.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). 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 shares' 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,
which does not bear a 12b-1 fee. Had Class A shares' 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 one
year, past five year and past 10 year total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL A 13.42% 26.98% 141.76% 337.71%
FIDELITY ADV EQUITY INCOME - CL A 6.90% 19.68% 127.86% 312.54%
(INCL. MAX. 5.75% SALES CHARGE)
S&P 500 (REGISTERED TRADEMARK) 15.06% 30.69% 172.18% 451.71%
EQUITY INCOME FUNDS AVERAGE 11.02% 24.65% 125.73% 305.36%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had 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 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past six
months average represents a peer group of 221 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL A 26.98% 19.31% 15.91%
FIDELITY ADV EQUITY INCOME - CL A 19.68% 17.91% 15.23%
(INCL. MAX. 5.75% SALES CHARGE)
S&P 500 30.69% 22.17% 18.62%
EQUITY INCOME FUNDS AVERAGE 24.65% 17.56% 14.84%
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show
you what would have happened if Class A had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL A S&P 500
00246 SP001
1988/05/31 9425.00 10000.00
1988/06/30 9964.33 10459.00
1988/07/31 9946.54 10419.26
1988/08/31 9749.75 10065.00
1988/09/30 10037.83 10493.77
1988/10/31 10218.86 10785.50
1988/11/30 10155.22 10631.26
1988/12/31 10228.91 10817.31
1989/01/31 10884.37 11609.14
1989/02/28 10791.58 11320.07
1989/03/31 11006.10 11583.83
1989/04/30 11409.22 12185.03
1989/05/31 11682.22 12678.52
1989/06/30 11729.47 12606.26
1989/07/31 12470.28 13744.60
1989/08/31 12632.48 14013.99
1989/09/30 12469.54 13956.54
1989/10/31 11785.89 13632.75
1989/11/30 11940.71 13910.85
1989/12/31 12114.58 14244.71
1990/01/31 11348.53 13288.89
1990/02/28 11368.79 13460.32
1990/03/31 11368.79 13817.02
1990/04/30 10928.78 13471.59
1990/05/31 11648.45 14785.07
1990/06/30 11596.82 14684.54
1990/07/31 11409.94 14637.54
1990/08/31 10543.50 13314.31
1990/09/30 9746.18 12665.90
1990/10/31 9524.67 12611.44
1990/11/30 10161.07 13426.14
1990/12/31 10384.77 13800.73
1991/01/31 10913.17 14402.44
1991/02/28 11693.46 15432.22
1991/03/31 11880.07 15805.67
1991/04/30 11879.79 15843.61
1991/05/31 12530.39 16528.05
1991/06/30 11955.27 15771.07
1991/07/31 12609.54 16506.00
1991/08/31 12876.60 16897.19
1991/09/30 12809.89 16615.01
1991/10/31 13023.32 16837.65
1991/11/30 12495.20 16159.09
1991/12/31 13480.44 18007.69
1992/01/31 13616.15 17672.75
1992/02/29 14036.83 17902.49
1992/03/31 13808.77 17553.40
1992/04/30 14300.94 18069.47
1992/05/31 14427.18 18158.01
1992/06/30 14266.55 17887.45
1992/07/31 14637.11 18619.05
1992/08/31 14289.62 18237.36
1992/09/30 14383.01 18452.56
1992/10/31 14569.86 18517.14
1992/11/30 15084.19 19148.58
1992/12/31 15459.83 19384.11
1993/01/31 15941.97 19546.93
1993/02/28 16354.73 19812.77
1993/03/31 16885.90 20230.82
1993/04/30 16803.13 19741.23
1993/05/31 17064.07 20270.30
1993/06/30 17230.83 20329.08
1993/07/31 17469.42 20247.77
1993/08/31 18079.07 21015.16
1993/09/30 17959.26 20853.34
1993/10/31 18174.92 21285.00
1993/11/30 17803.51 21082.80
1993/12/31 18246.80 21337.90
1994/01/31 19085.46 22063.39
1994/02/28 18582.26 21465.47
1994/03/31 17786.55 20529.57
1994/04/30 18400.71 20792.35
1994/05/31 18521.13 21133.35
1994/06/30 18399.02 20615.58
1994/07/31 19028.05 21291.77
1994/08/31 20007.88 22164.73
1994/09/30 19668.20 21621.70
1994/10/31 20056.71 22108.19
1994/11/30 19376.82 21303.01
1994/12/31 19425.38 21618.93
1995/01/31 19723.28 22179.51
1995/02/28 20418.37 23043.84
1995/03/31 21077.79 23723.87
1995/04/30 21639.70 24422.54
1995/05/31 22239.07 25398.71
1995/06/30 22551.83 25988.72
1995/07/31 23366.65 26850.50
1995/08/31 23642.44 26917.90
1995/09/30 24369.20 28053.83
1995/10/31 24092.57 27953.68
1995/11/30 25085.94 29180.85
1995/12/31 25747.78 29742.87
1996/01/31 26511.02 30755.32
1996/02/29 26601.54 31040.42
1996/03/31 26796.03 31339.34
1996/04/30 26977.79 31801.28
1996/05/31 27185.51 32621.44
1996/06/30 27029.94 32745.72
1996/07/31 26014.37 31299.02
1996/08/31 26509.13 31959.11
1996/09/30 27446.90 33757.77
1996/10/31 27996.36 34688.81
1996/11/30 29801.73 37310.94
1996/12/31 29472.58 36571.81
1997/01/31 30458.15 38856.82
1997/02/28 30701.17 39161.45
1997/03/31 29480.59 37552.31
1997/04/30 30727.58 39794.18
1997/05/31 32489.64 42216.85
1997/06/30 34088.18 44108.17
1997/07/31 36563.86 47617.85
1997/08/31 35094.77 44950.30
1997/09/30 36931.30 47412.23
1997/10/31 35336.85 45828.66
1997/11/30 36372.56 47950.07
1997/12/31 37091.80 48773.37
1998/01/31 37003.78 49312.81
1998/02/28 39632.30 52869.25
1998/03/31 41429.90 55576.68
1998/04/30 41620.15 56135.78
1998/05/29 41254.29 55170.81
IMATRL PRASUN SHR__CHT 19980531 19980611 093939 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class A on May 31,
1988, and the current 5.75% sales charge was paid. As the chart shows,
by May 31, 1998, the value of the investment would have grown to
$41,254 - a 312.54% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $55,171 - a 451.71%
increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. 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)
FIDELITY 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.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). 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 which does not bear a 12b-1 fee. Had
Class T shares' 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 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL T 13.37% 26.88% 141.97% 338.09%
FIDELITY ADV EQUITY INCOME - CL T 9.40% 22.44% 133.50% 322.75%
(INCL. MAX. 3.50% SALES CHARGE)
S&P 500 15.06% 30.69% 172.18% 451.71%
EQUITY INCOME FUNDS AVERAGE 11.02% 24.65% 125.73% 305.36%
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had 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 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past six
months average represents a peer group of 221 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL T 26.88% 19.33% 15.92%
FIDELITY ADV EQUITY INCOME - CL T 22.44% 18.48% 15.51%
(INCL. MAX. 3.50% SALES CHARGE)
S&P 500 30.69% 22.17% 18.62%
EQUITY INCOME FUNDS AVERAGE 24.65% 17.56% 14.84%
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show
you what would have happened if Class T had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL T S&P 500
00280 SP001
1988/05/31 9650.00 10000.00
1988/06/30 10202.20 10459.00
1988/07/31 10183.99 10419.26
1988/08/31 9982.50 10065.00
1988/09/30 10277.46 10493.77
1988/10/31 10462.81 10785.50
1988/11/30 10397.65 10631.26
1988/12/31 10473.10 10817.31
1989/01/31 11144.21 11609.14
1989/02/28 11049.20 11320.07
1989/03/31 11268.85 11583.83
1989/04/30 11681.59 12185.03
1989/05/31 11961.10 12678.52
1989/06/30 12009.49 12606.26
1989/07/31 12767.98 13744.60
1989/08/31 12934.05 14013.99
1989/09/30 12767.23 13956.54
1989/10/31 12067.25 13632.75
1989/11/30 12225.77 13910.85
1989/12/31 12403.79 14244.71
1990/01/31 11619.45 13288.89
1990/02/28 11640.20 13460.32
1990/03/31 11640.20 13817.02
1990/04/30 11189.68 13471.59
1990/05/31 11926.53 14785.07
1990/06/30 11873.67 14684.54
1990/07/31 11682.33 14637.54
1990/08/31 10795.20 13314.31
1990/09/30 9978.84 12665.90
1990/10/31 9752.05 12611.44
1990/11/30 10403.64 13426.14
1990/12/31 10632.68 13800.73
1991/01/31 11173.70 14402.44
1991/02/28 11972.61 15432.22
1991/03/31 12163.68 15805.67
1991/04/30 12163.40 15843.61
1991/05/31 12829.52 16528.05
1991/06/30 12240.67 15771.07
1991/07/31 12910.56 16506.00
1991/08/31 13184.00 16897.19
1991/09/30 13115.70 16615.01
1991/10/31 13334.22 16837.65
1991/11/30 12793.49 16159.09
1991/12/31 13802.25 18007.69
1992/01/31 13941.20 17672.75
1992/02/29 14371.93 17902.49
1992/03/31 14138.43 17553.40
1992/04/30 14642.34 18069.47
1992/05/31 14771.60 18158.01
1992/06/30 14607.13 17887.45
1992/07/31 14986.54 18619.05
1992/08/31 14630.75 18237.36
1992/09/30 14726.37 18452.56
1992/10/31 14917.69 18517.14
1992/11/30 15444.28 19148.58
1992/12/31 15828.89 19384.11
1993/01/31 16322.54 19546.93
1993/02/28 16745.16 19812.77
1993/03/31 17289.02 20230.82
1993/04/30 17204.27 19741.23
1993/05/31 17471.43 20270.30
1993/06/30 17642.18 20329.08
1993/07/31 17886.46 20247.77
1993/08/31 18510.67 21015.16
1993/09/30 18388.00 20853.34
1993/10/31 18608.80 21285.00
1993/11/30 18228.53 21082.80
1993/12/31 18682.40 21337.90
1994/01/31 19541.08 22063.39
1994/02/28 19025.87 21465.47
1994/03/31 18211.16 20529.57
1994/04/30 18839.98 20792.35
1994/05/31 18963.28 21133.35
1994/06/30 18838.26 20615.58
1994/07/31 19482.30 21291.77
1994/08/31 20485.52 22164.73
1994/09/30 20137.73 21621.70
1994/10/31 20535.51 22108.19
1994/11/30 19839.40 21303.01
1994/12/31 19889.12 21618.93
1995/01/31 20194.13 22179.51
1995/02/28 20905.81 23043.84
1995/03/31 21580.98 23723.87
1995/04/30 22156.30 24422.54
1995/05/31 22769.98 25398.71
1995/06/30 23090.20 25988.72
1995/07/31 23924.48 26850.50
1995/08/31 24206.85 26917.90
1995/09/30 24950.96 28053.83
1995/10/31 24667.72 27953.68
1995/11/30 25684.81 29180.85
1995/12/31 26362.45 29742.87
1996/01/31 27143.91 30755.32
1996/02/29 27236.59 31040.42
1996/03/31 27435.72 31339.34
1996/04/30 27621.82 31801.28
1996/05/31 27834.50 32621.44
1996/06/30 27675.22 32745.72
1996/07/31 26635.40 31299.02
1996/08/31 27141.98 31959.11
1996/09/30 28115.37 33757.77
1996/10/31 28690.51 34688.81
1996/11/30 30536.34 37310.94
1996/12/31 30213.28 36571.81
1997/01/31 31219.48 38856.82
1997/02/28 31467.58 39161.45
1997/03/31 30209.56 37552.31
1997/04/30 31494.78 39794.18
1997/05/31 33318.96 42216.85
1997/06/30 34962.81 44108.17
1997/07/31 37484.90 47617.85
1997/08/31 35988.27 44950.30
1997/09/30 37873.12 47412.23
1997/10/31 36234.32 45828.66
1997/11/30 37289.82 47950.07
1997/12/31 38036.89 48773.37
1998/01/31 37947.36 49312.81
1998/02/28 40623.90 52869.25
1998/03/31 42468.96 55576.68
1998/04/30 42647.71 56135.78
1998/05/29 42275.31 55170.81
IMATRL PRASUN SHR__CHT 19980531 19980615 164208 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class T on May 31,
1988, and the current 3.50% sales charge was paid. As the chart shows,
by May 31, 1998, the value of the investment would have grown to
$42,275 - a 322.75% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $55,171 - a 451.71%
increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. 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)
FIDELITY 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.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). Initial offering of Class B shares took place on June 30,
1994. Class B shares bear a 1.00% 12b-1 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 shares' prior 0.65% 12b-1 fee. Returns
prior to September 10, 1992 are those of the Institutional Class, the
original class of the fund, which does not bear a 12b-1 fee. Had Class
B shares' 12b-1 fee been reflected, returns prior to June 30, 1994
would have been lower. Class B shares' contingent deferred sales
charge included in the past six months, past one year, past five
years, and past 10 years total return figures are 5%, 5%, 2% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past one year, past five year and past 10 year total returns would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL B 13.06% 26.16% 137.66% 330.29%
FIDELITY ADV EQUITY INCOME - CL B 8.06% 21.16% 135.66% 330.29%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500 15.06% 30.69% 172.18% 451.71%
EQUITY INCOME FUNDS AVERAGE 11.02% 24.65% 125.73% 305.36%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had 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 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past six
months average represents a peer group of 221 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL B 26.16% 18.90% 15.71%
FIDELITY ADV EQUITY INCOME - CL B 21.16% 18.70% 15.71%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500 30.69% 22.17% 18.62%
EQUITY INCOME FUNDS AVERAGE 24.65% 17.56% 14.84%
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and
shows you what would have happened if Class B had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL B S&P 500
00180 SP001
1988/05/31 10000.00 10000.00
1988/06/30 10572.23 10459.00
1988/07/31 10553.35 10419.26
1988/08/31 10344.56 10065.00
1988/09/30 10650.22 10493.77
1988/10/31 10842.29 10785.50
1988/11/30 10774.77 10631.26
1988/12/31 10852.95 10817.31
1989/01/31 11548.40 11609.14
1989/02/28 11449.95 11320.07
1989/03/31 11677.56 11583.83
1989/04/30 12105.28 12185.03
1989/05/31 12394.92 12678.52
1989/06/30 12445.07 12606.26
1989/07/31 13231.07 13744.60
1989/08/31 13403.16 14013.99
1989/09/30 13230.29 13956.54
1989/10/31 12504.92 13632.75
1989/11/30 12669.19 13910.85
1989/12/31 12853.67 14244.71
1990/01/31 12040.88 13288.89
1990/02/28 12062.38 13460.32
1990/03/31 12062.38 13817.02
1990/04/30 11595.52 13471.59
1990/05/31 12359.10 14785.07
1990/06/30 12304.32 14684.54
1990/07/31 12106.04 14637.54
1990/08/31 11186.73 13314.31
1990/09/30 10340.77 12665.90
1990/10/31 10105.75 12611.44
1990/11/30 10780.97 13426.14
1990/12/31 11018.32 13800.73
1991/01/31 11578.96 14402.44
1991/02/28 12406.85 15432.22
1991/03/31 12604.85 15805.67
1991/04/30 12604.55 15843.61
1991/05/31 13294.84 16528.05
1991/06/30 12684.64 15771.07
1991/07/31 13378.82 16506.00
1991/08/31 13662.18 16897.19
1991/09/30 13591.39 16615.01
1991/10/31 13817.85 16837.65
1991/11/30 13257.51 16159.09
1991/12/31 14302.85 18007.69
1992/01/31 14446.84 17672.75
1992/02/29 14893.19 17902.49
1992/03/31 14651.22 17553.40
1992/04/30 15173.41 18069.47
1992/05/31 15307.36 18158.01
1992/06/30 15136.93 17887.45
1992/07/31 15530.09 18619.05
1992/08/31 15161.40 18237.36
1992/09/30 15260.48 18452.56
1992/10/31 15458.74 18517.14
1992/11/30 16004.44 19148.58
1992/12/31 16403.00 19384.11
1993/01/31 16914.55 19546.93
1993/02/28 17352.50 19812.77
1993/03/31 17916.08 20230.82
1993/04/30 17828.25 19741.23
1993/05/31 18105.11 20270.30
1993/06/30 18282.05 20329.08
1993/07/31 18535.19 20247.77
1993/08/31 19182.04 21015.16
1993/09/30 19054.92 20853.34
1993/10/31 19283.73 21285.00
1993/11/30 18889.67 21082.80
1993/12/31 19360.00 21337.90
1994/01/31 20249.82 22063.39
1994/02/28 19715.93 21465.47
1994/03/31 18871.67 20529.57
1994/04/30 19523.30 20792.35
1994/05/31 19651.07 21133.35
1994/06/30 19521.51 20615.58
1994/07/31 20188.91 21291.77
1994/08/31 21241.35 22164.73
1994/09/30 20880.83 21621.70
1994/10/31 21267.51 22108.19
1994/11/30 20545.71 21303.01
1994/12/31 20597.55 21618.93
1995/01/31 20887.28 22179.51
1995/02/28 21611.62 23043.84
1995/03/31 22324.36 23723.87
1995/04/30 22906.96 24422.54
1995/05/31 23529.29 25398.71
1995/06/30 23847.56 25988.72
1995/07/31 24711.12 26850.50
1995/08/31 24990.12 26917.90
1995/09/30 25747.18 28053.83
1995/10/31 25440.98 27953.68
1995/11/30 26492.70 29180.85
1995/12/31 27179.78 29742.87
1996/01/31 27959.72 30755.32
1996/02/29 28055.48 31040.42
1996/03/31 28247.34 31339.34
1996/04/30 28425.69 31801.28
1996/05/31 28631.47 32621.44
1996/06/30 28453.26 32745.72
1996/07/31 27367.36 31299.02
1996/08/31 27889.69 31959.11
1996/09/30 28865.79 33757.77
1996/10/31 29444.48 34688.81
1996/11/30 31318.35 37310.94
1996/12/31 30985.65 36571.81
1997/01/31 32006.69 38856.82
1997/02/28 32233.59 39161.45
1997/03/31 30941.19 37552.31
1997/04/30 32233.36 39794.18
1997/05/31 34107.73 42216.85
1997/06/30 35754.36 44108.17
1997/07/31 38329.58 47617.85
1997/08/31 36778.76 44950.30
1997/09/30 38699.58 47412.23
1997/10/31 36990.99 45828.66
1997/11/30 38058.86 47950.07
1997/12/31 38809.71 48773.37
1998/01/31 38687.54 49312.81
1998/02/28 41398.72 52869.25
1998/03/31 43257.42 55576.68
1998/04/30 43440.32 56135.78
1998/05/29 43028.78 55170.81
IMATRL PRASUN SHR__CHT 19980531 19980611 094035 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class B on May 31,
1988. As the chart shows, by May 31, 1998, the value of the
investment, would have been $43,029 - a 330.29% increase on the
initial investment. For comparison, look at how the Standard & Poor's
500 Index did over the same period. With dividends, and capital gains,
if any, reinvested, the same $10,000 investment would have grown to
$55,171 - a 451.71% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. 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)
FIDELITY ADVISOR EQUITY INCOME FUND - CLASS C
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.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). The initial offering of Class C shares took place on November
3, 1997. Class C shares bear a 1.00% 12b-1 fee that is reflected in
returns after November 3, 1997. Returns between June 30, 1994 (the
date Class B shares were first offered) and November 3, 1997 are those
of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns
between September 10, 1992 (the date Class T shares were first
offered) and June 30, 1994 are those of Class T shares, and reflect
Class T shares' prior 0.65% 12b-1 fee. Returns prior to September 10,
1992 are those of the Institutional Class, the original class of the
fund which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee
been reflected, returns prior to June 30, 1994 would have been lower.
Class C shares' contingent deferred sales charge included in the past
six months and past one year total return figures is 1.00%. If
Fidelity had not reimbursed certain class expenses, the total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL C 12.98% 26.11% 137.57% 330.13%
FIDELITY ADV EQUITY INCOME - CL C 11.98% 25.11% 137.57% 330.13%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500(REGISTERED TRADEMARK) 15.06% 30.69% 172.18% 451.71%
EQUITY INCOME FUNDS AVERAGE 11.02% 24.65% 125.73% 305.36%
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had 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 C's returns to the performance
of the Standard & Poor's 500 Index - a widely recognized, unmanaged
index of common stocks. To measure how Class C's performance stacked
up against its peers, you can compare it to the equity income funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past six
months average represents a peer group of 221 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL C 26.11% 18.89% 15.71%
FIDELITY ADV EQUITY INCOME - CL C 25.11% 18.89% 15.71%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500 30.69% 22.17% 18.62%
EQUITY INCOME FUNDS AVERAGE 24.65% 17.56% 14.84%
AVERAGE ANNUAL TOTAL RETURNS take Class C's cumulative return and
shows you what would have happened if Class C had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL C S&P 500
00480 SP001
1988/05/31 10000.00 10000.00
1988/06/30 10572.23 10459.00
1988/07/31 10553.35 10419.26
1988/08/31 10344.56 10065.00
1988/09/30 10650.22 10493.77
1988/10/31 10842.28 10785.50
1988/11/30 10774.76 10631.26
1988/12/31 10852.95 10817.31
1989/01/31 11548.40 11609.14
1989/02/28 11449.94 11320.07
1989/03/31 11677.55 11583.83
1989/04/30 12105.27 12185.03
1989/05/31 12394.92 12678.52
1989/06/30 12445.05 12606.26
1989/07/31 13231.06 13744.60
1989/08/31 13403.15 14013.99
1989/09/30 13230.28 13956.54
1989/10/31 12504.91 13632.75
1989/11/30 12669.19 13910.85
1989/12/31 12853.66 14244.71
1990/01/31 12040.87 13288.89
1990/02/28 12062.37 13460.32
1990/03/31 12062.37 13817.02
1990/04/30 11595.51 13471.59
1990/05/31 12359.09 14785.07
1990/06/30 12304.31 14684.54
1990/07/31 12106.03 14637.54
1990/08/31 11186.73 13314.31
1990/09/30 10340.76 12665.90
1990/10/31 10105.75 12611.44
1990/11/30 10780.96 13426.14
1990/12/31 11018.31 13800.73
1991/01/31 11578.95 14402.44
1991/02/28 12406.84 15432.22
1991/03/31 12604.84 15805.67
1991/04/30 12604.55 15843.61
1991/05/31 13294.84 16528.05
1991/06/30 12684.63 15771.07
1991/07/31 13378.81 16506.00
1991/08/31 13662.17 16897.19
1991/09/30 13591.38 16615.01
1991/10/31 13817.84 16837.65
1991/11/30 13257.50 16159.09
1991/12/31 14302.84 18007.69
1992/01/31 14446.83 17672.75
1992/02/29 14893.18 17902.49
1992/03/31 14651.22 17553.40
1992/04/30 15173.40 18069.47
1992/05/31 15307.35 18158.01
1992/06/30 15136.92 17887.45
1992/07/31 15530.08 18619.05
1992/08/31 15161.39 18237.36
1992/09/30 15260.47 18452.56
1992/10/31 15458.73 18517.14
1992/11/30 16004.43 19148.58
1992/12/31 16402.99 19384.11
1993/01/31 16914.55 19546.93
1993/02/28 17352.49 19812.77
1993/03/31 17916.07 20230.82
1993/04/30 17828.25 19741.23
1993/05/31 18105.11 20270.30
1993/06/30 18282.03 20329.08
1993/07/31 18535.18 20247.77
1993/08/31 19182.02 21015.16
1993/09/30 19054.91 20853.34
1993/10/31 19283.72 21285.00
1993/11/30 18889.65 21082.80
1993/12/31 19359.98 21337.90
1994/01/31 20249.81 22063.39
1994/02/28 19715.92 21465.47
1994/03/31 18871.65 20529.57
1994/04/30 19523.28 20792.35
1994/05/31 19651.05 21133.35
1994/06/30 19521.49 20615.58
1994/07/31 20188.90 21291.77
1994/08/31 21241.34 22164.73
1994/09/30 20880.82 21621.70
1994/10/31 21267.50 22108.19
1994/11/30 20545.69 21303.01
1994/12/31 20597.54 21618.93
1995/01/31 20887.26 22179.51
1995/02/28 21611.61 23043.84
1995/03/31 22324.34 23723.87
1995/04/30 22906.94 24422.54
1995/05/31 23529.27 25398.71
1995/06/30 23847.55 25988.72
1995/07/31 24711.10 26850.50
1995/08/31 24990.11 26917.90
1995/09/30 25747.16 28053.83
1995/10/31 25440.96 27953.68
1995/11/30 26492.68 29180.85
1995/12/31 27179.76 29742.87
1996/01/31 27959.70 30755.32
1996/02/29 28055.46 31040.42
1996/03/31 28247.32 31339.34
1996/04/30 28425.67 31801.28
1996/05/31 28631.45 32621.44
1996/06/30 28453.24 32745.72
1996/07/31 27367.34 31299.02
1996/08/31 27889.67 31959.11
1996/09/30 28865.77 33757.77
1996/10/31 29444.47 34688.81
1996/11/30 31318.32 37310.94
1996/12/31 30985.63 36571.81
1997/01/31 32006.67 38856.82
1997/02/28 32233.57 39161.45
1997/03/31 30941.16 37552.31
1997/04/30 32233.34 39794.18
1997/05/31 34107.70 42216.85
1997/06/30 35754.34 44108.17
1997/07/31 38329.55 47617.85
1997/08/31 36778.74 44950.30
1997/09/30 38699.55 47412.23
1997/10/31 36990.96 45828.66
1997/11/30 38072.06 47950.07
1997/12/31 38820.94 48773.37
1998/01/31 38699.12 49312.81
1998/02/28 41402.59 52869.25
1998/03/31 43256.51 55576.68
1998/04/30 43423.81 56135.78
1998/05/29 43013.15 55170.81
IMATRL PRASUN SHR__CHT 19980531 19980611 094133 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class C on May 31,
1988. As the chart shows, by May 31, 1998, the value of the
investment, would have been $43,013 - a 330.13% increase on the
initial investment. For comparison, look at how the Standard & Poor's
500 Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would have grown to
$55,171 - a 451.71% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. 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
Although renewed concerns about
economic difficulties in Asia late
in the period tempered the rapid
growth of U.S. equity markets, the
Standard & Poor's 500 Index - a
measure of the U.S. stock market -
still managed to return 15.06%
during the six months that ended
May 31, 1998. As feared, some
U.S. corporations with business
exposure to Asia did report
disappointing earnings and their
stocks were harshly punished.
However, investors seemed to
adopt a new attitude - one that
overlooked short-term troubles
and focused on longer-term growth
- - helping many of these stocks to
rebound quickly. In addition, the
continued strength of the U.S.
economy, combined with low
interest rates and low inflation,
seemed to buoy the stock market
for much of the period. The upward
climb of the stock market
stagnated in mid- and late May
when investors were inundated
with worrisome news about the
stability of Asian markets.
Specifically, the president of
Indonesia resigned amidst civil
strife and a battle over nuclear
testing erupted between Pakistan
and India. Concerns about falling
demand for U.S. exports
particularly hurt technology
companies, especially during the
intensified investigation of
Microsoft by the Justice
Department in May. As a result of
concerns about these tumultuous
events and their potential impact
on the U.S. economy, the Dow
Jones Industrial Average produced a
negative return in May for the first
time in 1998 - although the Dow
was still up 13.29% for the first five
months of 1998.
An interview with Robert Chow, Portfolio Manager of Fidelity Advisor
Equity Income Fund
Q. BOB, HOW DID THE FUND PERFORM?
A. For the six months that ended May 31, 1998, the fund's Class A,
Class T, Class B and Class C shares returned 13.42%, 13.37%, 13.06%
and 12.98%, respectively. To compare, the equity income funds average
tracked by Lipper Analytical Services returned 11.02% during the same
six-month period, while the Standard & Poor's 500 Index returned
15.06%. For the past year, the fund's Class A, Class T, Class B and
Class C shares returned 26.98%, 26.88%, 26.16% and 26.11%,
respectively. Comparatively, the equity income funds average returned
24.65% and the S&P 500 returned 30.69%.
Q. WHAT FACTORS DROVE THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. I believe the fund performed better than its competitors during the
period because of good stock selection and an advantageous market
backdrop. Looking at the period as a whole, gains in the market were
relatively broad, unlike in 1996 and 1997 when large-capitalization
pharmaceutical and bank stocks were the primary drivers of market
averages like the S&P 500. In the past six months, the market enjoyed
a wider participation, helping the fund because it tends to be more
balanced in value-oriented stocks throughout the market. Nevertheless,
during the latter stages of the period, investors gravitated back to a
narrow group of large-cap growth stocks, hurting the fund's
performance relative to the S&P 500.
Q. THE FUND'S SECTOR WEIGHTINGS REMAINED FAIRLY STABLE OVER THE
PERIOD. WHY WAS THAT?
A. You have to keep in mind that I am a value investor - looking for
stocks that are cheap. As a result, I have made very few sector
shifts. For example, the fund was weighted roughly the same in
financial services stocks - around 19% - at the end of the period as
it was at the beginning. The same was true with energy stocks, which
comprised about 8% at both the beginning and the end of the period. In
addition, when you look at the top 10 holdings in the fund you will
see very few changes.
Q. WHICH STOCKS WERE SOLID PERFORMERS FOR THE FUND?
A. Unilever - which moved into the fund's top 10 during the period -
was one. Half of its income comes from Europe, where economies have
been accelerating rapidly after being in the doldrums for years. And
its valuation recovered from very low levels, compared to other
consumer product companies. IBM was another stock that did well,
helped by its significant cash flow and an active program of buying
back its shares - a strategy that helps increase the value of the
remaining outstanding shares.
Q. DID ANY STOCKS PROVE TO BE DISAPPOINTMENTS DURING THE PERIOD?
A. Philip Morris was one. Litigation plays a big part in the
performance of this and other tobacco stocks, so investor sentiment
about them can shift very quickly depending on breaking news about
lawsuits or a congressional settlement. Over the period, there was a
significant negative shift in attitude due to high-profile
negotiations in Congress. Nevertheless, I believed the stock continued
to represent significant value at the end of the period, so it
remained a big holding in the fund. Looking at the price-to-earnings
ratio (P/E) - a measure of how much an investor is paying for a
company's earning power - the stock remained very attractive to me at
the end of the period.
Q. WAL-MART SLIPPED OUT OF THE TOP 10. WHY WAS THAT?
A. Wal-Mart is a great company that has historically been one of the
top two or three holdings in the fund. Over the past year, however,
and particularly the past six months, the stock has done terrifically
well, bumping it to the top of its historical valuation range. At its
current price, I feel the reward for owning the stock is not offset by
the risks involved with maintaining it as one of my top positions.
Given my goal of keeping the fund's risk in check, I have had to pare
it back. The company's fundamentals remained superb, though, as the
company continued gaining market share, generating positive cash flow
and benefiting from extremely strong management.
Q. WHAT IS YOUR OUTLOOK?
A. With the S&P sustaining strong gains of 30% a year for several
years - resulting in historically high valuations - it's difficult for
value investors like myself to keep pace. As blue chip stocks continue
to get more expensive, value investors have a tougher time finding
significant bargains. Having said all that, I believe that my top
positions continue to have plenty of upside potential, and I continue
to invest with a view toward controlling risk while achieving a
healthy return.
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.
BOB CHOW ON
VALUE INVESTING:
"As a value investor, I focus
primarily on determining a
valuation range for stocks that I'm
interested in, looking to establish a
low and a high price based on the
fundamentals of the company. If
the stock is currently trading in
the top 25% of that range, I will sell
the stock or not buy it. If the
valuation falls in the middle 50%
of the range, then I will stand aside
and watch it. But if the price falls
within the bottom 25%, then it
becomes a buy candidate.
"Everything depends on what I pay
for a stock. Think about
purchasing a piece of property. If
you want to maximize your
investment over a two-year period,
you can either buy a beautiful
house in an expensive
neighborhood or you could buy a
fixer-upper in a part of town that is
not as nice. Which will you make
more money on? It depends
entirely on what you pay for it.
"That line of reasoning applies
to individual stocks. A company
may be great, but I believe that
the basis on whether it is a good
investment or not depends entirely
on the valuation at the time of
the purchase."
FUND FACTS
GOAL: seeks to maintain a
yield that exceeds the
composite dividend of the S&P
500, while considering the
potential for achieving
capital appreciation.
START DATE: April 25, 1983
SIZE: as of May 31, 1998,
more than $4.0 billion
MANAGER: Robert Chow, since
1996; joined Fidelity in 1989
(checkmark)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF MAY 31,1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
CITICORP 3.1 2.1
PMI GROUP, INC. 2.8 0.0
FLEET FINANCIAL GROUP, INC. 2.3 1.9
AMERICAN HOME PRODUCTS CORP. 1.9 1.5
BRITISH PETROLEUM PLC ADR 1.8 2.5
INTERNATIONAL BUSINESS MACHINES CORP. 1.8 2.3
FEDERATED DEPARTMENT STORES, INC. 1.8 0.8
U S WEST COMMUNICATIONS GROUP 1.7 1.8
UNILEVER NV ADR 1.7 1.2
PHILIP MORRIS COMPANIES, INC. 1.7 2.7
TOP FIVE MARKET SECTORS AS OF MAY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
FINANCE 19.4 18.4
TECHNOLOGY 8.8 7.2
ENERGY 8.5 8.6
NONDURABLES 7.5 7.3
DURABLES 7.3 5.9
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1998 * AS OF NOVEMBER 30, 1997 **
ROW: 1, COL: 1, VALUE: 95.7
ROW: 1, COL: 2, VALUE: 0.0
ROW: 1, COL: 3, VALUE: 4.3
STOCKS 93.0%
CONVERTIBLE
SECURITIES 1.1%
SHORT-TERM
INVESTMENTS 5.9%
FOREIGN
INVESTMENTS 6.3%
STOCKS 95.7%
CONVERTIBLE
SECURITIES 0.0%
SHORT-TERM
INVESTMENTS 4.3%
FOREIGN
INVESTMENTS 8.0%
ROW: 1, COL: 1, VALUE: 93.0
ROW: 1, COL: 2, VALUE: 1.1
ROW: 1, COL: 3, VALUE: 5.9
*
**
INVESTMENTS MAY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
COMMON STOCKS - 95.7%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 3.4%
AEROSPACE & DEFENSE - 2.3%
AlliedSignal, Inc. 280,000 $ 11,970
GenCorp, Inc. 800,000 23,850
Goodrich (B.F.) Co. 60,000 3,075
Lockheed Martin Corp. 200,000 22,450
United Technologies Corp. 360,000 33,840
95,185
DEFENSE ELECTRONICS - 1.0%
Litton Industries, Inc. (a) 540,000 31,287
Raytheon Co. Class B 130,000 7,109
38,396
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 130,000 5,777
TOTAL AEROSPACE & DEFENSE 139,358
BASIC INDUSTRIES - 6.2%
CHEMICALS & PLASTICS - 2.4%
du Pont (E.I.) de Nemours & Co. 270,000 20,790
Ferro Corp. 720,000 20,610
Monsanto Co. 180,000 9,968
Olin Corp. 240,000 10,380
Union Carbide Corp. 600,000 29,963
Witco Corp. 130,000 4,931
96,642
IRON & STEEL - 0.2%
Nucor Corp. 200,000 10,300
METALS & MINING - 1.4%
Alumax, Inc. 900,000 42,131
Aluminum Co. of America 220,000 15,263
57,394
PAPER & FOREST PRODUCTS - 2.2%
Champion International Corp. 300,000 14,400
Chesapeake Corp. 700,000 24,850
Georgia-Pacific Corp. 320,000 20,540
Georgia-Pacific Corp. (Timber Group) 320,000 7,540
Pentair, Inc. 480,000 21,060
88,390
TOTAL BASIC INDUSTRIES 252,726
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 4.0%
BUILDING MATERIALS - 2.1%
American Standard Companies, Inc. 320,000 $ 15,440
CalMat Co. 220,000 5,528
Masco Corp. 380,000 21,375
RPM, Inc. 750,000 12,750
USG Corp. 580,000 30,812
85,905
CONSTRUCTION - 0.6%
Centex Corp. 220,000 7,865
Lennar Corp. 350,000 9,275
Okumura Gumi 2,000,000 6,266
23,406
ENGINEERING - 0.2%
Fluor Corp. 200,000 9,538
REAL ESTATE - 0.2%
LNR Property Corp. 350,000 9,056
REAL ESTATE INVESTMENT TRUSTS - 0.9%
Duke Realty Investors, Inc. 223,672 5,060
Felcor Suite Hotels, Inc. 100,000 3,444
Ocwen Asset Investment Corp. 500,000 8,500
Public Storage, Inc. 240,000 7,200
RFS Hotel Investors, Inc. 93,800 1,864
Starwood Hotels & Resorts Trust 200,000 9,438
35,506
TOTAL CONSTRUCTION & REAL ESTATE 163,411
DURABLES - 7.3%
AUTOS, TIRES, & ACCESSORIES - 5.0%
Chrysler Corp. 573,700 31,912
Eaton Corp. 140,000 12,574
Ford Motor Co. 800,000 41,500
ITT Industries, Inc. 1,200,000 44,250
Modine Manufacturing Co. 80,000 2,720
Pep Boys-Manny, Moe & Jack 300,000 6,675
TRW, Inc. 1,200,000 64,275
203,906
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER DURABLES - 0.5%
Minnesota Mining & Manufacturing Co. 230,000 $ 21,303
CONSUMER ELECTRONICS - 1.1%
Electrolux AB 240,000 23,834
Maytag Co. 420,000 21,184
45,018
HOME FURNISHINGS - 0.6%
Leggett & Platt, Inc. 440,000 22,110
TEXTILES & APPAREL - 0.1%
NIKE, Inc. Class B 100,000 4,600
TOTAL DURABLES 296,937
ENERGY - 8.5%
ENERGY SERVICES - 0.7%
Baker Hughes, Inc. 240,000 8,640
Schlumberger Ltd. 130,000 10,147
Western Atlas, Inc. (a) 120,000 10,388
29,175
OIL & GAS - 7.8%
Amerada Hess Corp. 420,000 22,705
British Petroleum PLC ADR 840,000 74,445
Burlington Resources, Inc. 300,000 12,638
Chevron Corp. 420,000 33,548
Kerr-McGee Corp. 100,000 6,325
Nationale Elf Aquitaine 260,000 36,070
Occidental Petroleum Corp. 1,500,000 41,438
Royal Dutch Petroleum Co. 400,000 22,425
Texaco, Inc. 360,000 20,790
Tosco Corp. 400,000 12,700
Total SA sponsored ADR 560,000 34,895
317,979
TOTAL ENERGY 347,154
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 19.4%
BANKS - 6.0%
Bank of New York Co., Inc. 557,800 $ 34,096
Citicorp 860,000 128,246
Chase Manhattan Corp. 200,000 27,188
Comerica, Inc. 225,000 14,794
NationsBank Corp. 380,000 28,785
Wells Fargo & Co. 30,000 10,845
243,954
CREDIT & OTHER FINANCE - 4.2%
American Express Co. 540,000 55,418
Fleet Financial Group, Inc. 1,150,000 94,300
Household International, Inc. 90,000 12,178
Transamerica Corp. 80,000 9,200
171,096
FEDERAL SPONSORED CREDIT - 2.0%
Fannie Mae 780,000 46,703
Freddie Mac 750,000 34,125
80,828
INSURANCE - 6.7%
Aetna, Inc. 100,000 7,817
Allstate Corp. 460,000 43,298
CIGNA Corp. 240,000 16,440
General Re Corp. 50,000 10,994
Hartford Financial Services Group, Inc. 300,000 33,019
Loews Corp. 170,000 15,428
PMI Group, Inc. 1,500,000 112,781
PXRE Corp. 660,000 20,790
Provident Companies, Inc. 370,000 13,644
274,211
SECURITIES INDUSTRY - 0.5%
Lehman Brothers Holdings, Inc. 250,000 17,734
TOTAL FINANCE 787,823
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 5.8%
DRUGS & PHARMACEUTICALS - 3.8%
American Home Products Corp. 1,560,000 $ 75,367
Bristol-Myers Squibb Co. 400,000 43,000
Merck & Co., Inc. 300,000 35,119
153,486
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Allegiance Corp. 190,000 9,500
MEDICAL FACILITIES MANAGEMENT - 1.8%
Columbia/HCA Healthcare Corp. 350,000 11,441
Humana, Inc. 500,000 15,531
Tenet Healthcare Corp. (a) 400,000 14,000
United HealthCare Corp. 490,000 31,360
72,332
TOTAL HEALTH 235,318
HOLDING COMPANIES - 0.4%
PartnerRe Ltd. 300,000 14,625
INDUSTRIAL MACHINERY & EQUIPMENT - 6.3%
ELECTRICAL EQUIPMENT - 2.2%
Alcatel Alsthom Compagnie Generale d'Electricite
SA sponsored ADR 560,000 24,220
Emerson Electric Co. 230,000 13,972
General Electric Co. 640,000 53,360
L-3 Communications Holdings, Inc. 1,700 48
91,600
INDUSTRIAL MACHINERY & EQUIPMENT - 2.6%
Caterpillar, Inc. 320,000 17,580
Deere & Co. 110,000 5,706
Harnischfeger Industries, Inc. 420,000 13,230
Ingersoll-Rand Co. 220,000 9,914
Toro Co. 80,000 2,795
Tyco International Ltd. 580,000 32,118
UNOVA, Inc. 1,033,100 22,857
104,200
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 1.5%
Browning-Ferris Industries, Inc. 900,000 $ 32,006
USA Waste Services, Inc. (a) 500,000 23,594
Waste Management, Inc. 180,000 5,850
61,450
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 257,250
MEDIA & LEISURE - 1.6%
BROADCASTING - 0.2%
Gaylord Entertainment Co. 300,000 10,106
PUBLISHING - 1.4%
ACNielsen Corp. (a) 1,100,000 28,393
Dun & Bradstreet Corp. 350,000 11,813
Knight-Ridder, Inc. 120,000 6,848
Times Mirror Co. Class A 150,000 9,600
56,654
TOTAL MEDIA & LEISURE 66,760
NONDURABLES - 7.5%
BEVERAGES - 1.0%
Anheuser-Busch Companies, Inc. 580,000 26,644
Whitman Corp. 700,000 15,181
41,825
FOODS - 1.0%
General Mills, Inc. 500,000 34,125
Quaker Oats Co. 130,000 7,499
41,624
HOUSEHOLD PRODUCTS - 3.7%
Church & Dwight Co., Inc. 596,700 18,087
Clorox Co. 260,000 21,710
Premark International, Inc. 471,400 15,114
Rubbermaid, Inc. 800,000 26,100
Unilever NV ADR 900,000 71,044
152,055
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
TOBACCO - 1.8%
Philip Morris Companies, Inc. 1,900,000 $ 71,013
TOTAL NONDURABLES 306,517
PRECIOUS METALS - 0.2%
Newmont Mining Corp. 280,000 6,983
RETAIL & WHOLESALE - 7.0%
APPAREL STORES - 0.2%
TJX Companies, Inc. 180,000 8,415
DRUG STORES - 0.8%
CVS Corp. 100,000 7,019
Rite Aid Corp. 670,000 23,994
31,013
GENERAL MERCHANDISE STORES - 4.3%
Federated Department Stores, Inc. (a) 1,400,000 72,538
May Department Stores Co. (The) 200,000 12,863
Nordstrom, Inc. 180,000 12,971
Sears, Roebuck & Co. 350,000 21,634
Wal-Mart Stores, Inc. 1,050,000 57,947
177,953
GROCERY STORES - 0.6%
Albertson's, Inc. 130,000 6,021
Richfood Holdings, Inc. Class A 250,000 6,109
Safeway, Inc. (a) 320,000 11,660
23,790
RETAIL & WHOLESALE, MISCELLANEOUS - 1.1%
Boise Cascade Office Products Corp. (a) 250,000 4,281
Fabri-Centers of America, Inc. Class B (non-vtg) (a) 320,000 8,260
Home Depot, Inc. 240,000 18,855
Officemax, Inc. (a) 800,000 13,150
44,546
TOTAL RETAIL & WHOLESALE 285,717
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 1.0%
LEASING & RENTAL - 0.2%
Danka Business Systems PLC sponsored ADR 400,000 $ 6,750
PRINTING - 0.8%
Donnelley (R.R.) & Sons Co. 450,000 20,250
Reynolds & Reynolds Co. Class A 700,000 14,656
34,906
TOTAL SERVICES 41,656
TECHNOLOGY - 8.8%
COMPUTER SERVICES & SOFTWARE - 0.4%
Electronic Data Systems Corp. 460,000 16,732
COMPUTERS & OFFICE EQUIPMENT - 5.5%
Apple Computer, Inc. (a) 700,000 18,638
Compaq Computer Corp. 300,000 8,194
International Business Machines Corp. 630,000 73,946
Pitney Bowes, Inc. 1,200,000 56,400
Unisys Corp. (a) 1,880,000 46,060
Wang Laboratories, Inc. (a) 880,000 21,120
224,358
ELECTRONIC INSTRUMENTS - 0.4%
KLA-Tencor Corp. (a) 70,000 2,362
Varian Associates, Inc. 250,000 12,016
14,378
ELECTRONICS - 1.9%
AMP, Inc. 820,000 31,160
Motorola, Inc. 400,000 21,175
Texas Instruments, Inc. 350,000 17,981
Thomas & Betts Corp. 160,000 8,550
78,866
PHOTOGRAPHIC EQUIPMENT - 0.6%
Eastman Kodak Co. 320,000 22,840
TOTAL TECHNOLOGY 357,174
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 2.2%
AIR TRANSPORTATION - 0.5%
AMR Corp. (a) 80,000 $ 12,315
Delta Air Lines, Inc. 80,000 9,200
21,515
RAILROADS - 1.0%
Burlington Northern Santa Fe Corp. 240,000 23,880
CSX Corp. 280,000 13,335
Union Pacific Corp. 100,000 4,838
42,053
TRUCKING & FREIGHT - 0.7%
Arnold Industries, Inc. 620,000 9,687
Consolidated Freightways Corp. (a) 1,010,000 14,898
Pittston Co. (Burlington Group) 160,000 2,810
27,395
TOTAL TRANSPORTATION 90,963
UTILITIES - 6.1%
ELECTRIC UTILITY - 0.2%
American Electric Power Co., Inc. 220,000 9,983
TELEPHONE SERVICES - 5.9%
AT&T Corp. 700,000 42,612
Bell Atlantic Corp. 560,000 51,310
BellSouth Corp. 660,000 42,570
MCI Communications Corp. 260,000 13,902
Sprint Corp. 240,000 17,220
U S WEST Communications Group 1,400,000 71,050
238,664
TOTAL UTILITIES 248,647
TOTAL COMMON STOCKS
(Cost $2,884,783) 3,899,019
CONVERTIBLE PREFERRED STOCKS - 0.0%
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a)
(Cost $235) 50,000 $ -
CASH EQUIVALENTS - 4.3%
Taxable Central Cash Fund
(Cost$173,871) (b) 173,871,474 173,871
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,058,889) $ 4,072,890
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield of the Taxable Central Cash
Fund was 5.56%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
INCOME TAX INFORMATION
At May 31, 1998, the aggregate cost of investment securities for
income tax purposes was $3,060,476,000. Net unrealized appreciation
aggregated $1,012,414,000, of which $1,061,960,000 related to
appreciated investment securities and $49,546,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MAY 31, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $3,058,889) - $ 4,072,890
SEE ACCOMPANYING SCHEDULE
CASH 36
RECEIVABLE FOR INVESTMENTS SOLD 1,069
RECEIVABLE FOR FUND SHARES SOLD 7,485
DIVIDENDS RECEIVABLE 7,211
INTEREST RECEIVABLE 731
OTHER RECEIVABLES 114
PREPAID EXPENSES 6
TOTAL ASSETS 4,089,542
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 23,636
PAYABLE FOR FUND SHARES REDEEMED 10,394
ACCRUED MANAGEMENT FEE 1,699
DISTRIBUTION FEES PAYABLE 1,839
OTHER PAYABLES AND ACCRUED EXPENSES 805
TOTAL LIABILITIES 38,373
NET ASSETS $ 4,051,169
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 2,844,916
UNDISTRIBUTED NET INVESTMENT INCOME 4,694
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 187,564
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 1,013,995
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS $ 4,051,169
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) MAY 31, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $28.19
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($51,052 (DIVIDED BY) 1,811 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/94.25 OF $28.19) $29.91
CLASS T: $28.38
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,634,646 (DIVIDED BY) 92,847 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $28.38) $29.41
CLASS B: $28.23
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($843,548 (DIVIDED BY) 29,881 SHARES) A
CLASS C: $28.28
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($18,320 (DIVIDED BY) 647.9 SHARES) A
INSTITUTIONAL CLASS: $28.62
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($503,603 (DIVIDED BY) 17,594 SHARES)
</TABLE>
A REDEMPTION PRICE PER-SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 32,616
DIVIDENDS
INTEREST 4,500
TOTAL INCOME 37,116
EXPENSES
MANAGEMENT FEE $ 9,362
TRANSFER AGENT FEES 3,276
DISTRIBUTION FEES 10,048
ACCOUNTING FEES AND EXPENSES 406
NON-INTERESTED TRUSTEES' COMPENSATION 9
CUSTODIAN FEES AND EXPENSES 29
REGISTRATION FEES 256
AUDIT 35
LEGAL 8
MISCELLANEOUS 29
TOTAL EXPENSES BEFORE REDUCTIONS 23,458
EXPENSE REDUCTIONS (315) 23,143
NET INVESTMENT INCOME 13,973
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 189,291
FOREIGN CURRENCY TRANSACTIONS (61) 189,230
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 253,122
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES (6) 253,116
NET GAIN (LOSS) 442,346
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 456,319
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 13,973 $ 30,780
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 189,230 243,508
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 253,116 326,758
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 456,319 601,046
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (12,858) (31,851)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN (218,223) (64,869)
TOTAL DISTRIBUTIONS (231,081) (96,720)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 463,179 337,812
TOTAL INCREASE (DECREASE) IN NET ASSETS 688,417 842,138
NET ASSETS
BEGINNING OF PERIOD 3,362,752 2,520,614
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 4,051,169 $ 3,362,752
INCOME OF $4,694 AND $3,579, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED YEARS ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 1996 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.69 $ 22.78 $ 20.38
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME E .13 .23 .06
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.21 4.61 2.44
TOTAL FROM INVESTMENT OPERATIONS 3.34 4.84 2.50
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.12) (.34) (.10)
FROM NET REALIZED GAIN (1.72) (.59) -
TOTAL DISTRIBUTIONS (1.84) (.93) (.10)
NET ASSET VALUE, END OF PERIOD $ 28.19 $ 26.69 $ 22.78
TOTAL RETURN B, C 13.42% 22.05% 12.31%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 51,052 $ 25,659 $ 3,306
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.08% A 1.26% G 1.46% A, D, G
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.06% A, H 1.25% H 1.44% A, H
AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE .97% A .93% 1.27% A
NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78%
AVERAGE COMMISSION RATE I $ .0454 $ .0430 $ .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 LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
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 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.
<ERROR: WIDE TABLE>
ERROR: THE FOLLOWING TABLE: "ASSETS" IS TOO WIDE!
TABLE WIDTH IS 233 CHARACTERS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 26.85 $ 22.83 $ 19.95 $ 15.96 $ 14.86 $ 12.86
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT .11 D .26 D .30 D .31 .28 D .33
INCOME
NET REALIZED AND 3.24 4.62 3.35 4.26 1.03 1.97
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVESTMENT 3.35 4.88 3.65 4.57 1.31 2.30
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.10) (.27) (.31) (.30) (.21) (.30)
INCOME
FROM NET (1.72) (.59) (.46) (.28) - -
REALIZED GAIN
TOTAL DISTRIBUTIONS (1.82) (.86) (.77) (.58) (.21) (.30)
NET ASSET VALUE, $ 28.38 $ 26.85 $ 22.83 $ 19.95 $ 15.96 $ 14.86
END OF PERIOD
TOTAL RETURN B, C 13.37% 22.12% 18.89% 29.46% 8.84% 18.03%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 2,634,646 $ 2,190,070 $ 1,672,994 $ 880,054 $ 179,501 $ 42,326
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO 1.23% A 1.23% 1.27% 1.48% 1.67% 1.77%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO 1.22% A, E 1.21% E 1.26% E 1.47% E 1.64% E 1.77%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT .80% A 1.05% 1.45% 1.78% 1.69% 2.02%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78% 80% 140% 120%
AVERAGE COMMISSION $ .0454 $ .0430 $ .0424
RATE F
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 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).
F 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 26.73 $ 22.73 $ 19.90 $ 15.94 $ 15.21
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .04 D .13 D .19 D .26 .08 D
NET REALIZED AND UNREALIZED 3.22 4.61 3.33 4.23 .72
GAIN (LOSS)
TOTAL FROM INVESTMENT 3.26 4.74 3.52 4.49 .80
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.04) (.15) (.23) (.25) (.07)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (1.76) (.74) (.69) (.53) (.07)
NET ASSET VALUE, END OF PERIOD $ 28.23 $ 26.73 $ 22.73 $ 19.90 $ 15.94
TOTAL RETURN B, C 13.06% 21.52% 18.22% 28.95% 5.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 843,548 $ 682,308 $ 500,447 $ 270,101 $ 35,373
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.77% A 1.74% F 1.81% 1.85% 2.24% A
NET ASSETS
RATIO OF EXPENSES TO AVERAGE 1.75% A, G 1.73% G 1.79% G 1.84% G 2.18% A, G
NET ASSETS AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT INCOME .27% A .53% .92% 1.41% 1.15% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78% 80% 140%
AVERAGE COMMISSION RATE H $ .0454 $ .0430 $ .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 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 AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.84 $ 26.65
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .03 .02
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.22 .17
TOTAL FROM INVESTMENT OPERATIONS 3.25 .19
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.09) -
FROM NET REALIZED GAIN (1.72) -
TOTAL DISTRIBUTIONS (1.81) -
NET ASSET VALUE, END OF PERIOD $ 28.28 $ 26.84
TOTAL RETURN B, C 12.98% .71%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 18,320 $ 684
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.85% A, F 1.85% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.83% A, G 1.81% A, G
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .24% A 1.24% A
PORTFOLIO TURNOVER 54% A 55%
AVERAGE COMMISSION RATE H $ .0454 $ .0430
</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 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 NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 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.
<ERROR: WIDE TABLE>
ERROR: THE FOLLOWING TABLE: "ASSETS" IS TOO WIDE!
TABLE WIDTH IS 231 CHARACTERS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 27.07 $ 23.00 $ 20.09 $ 16.07 $ 14.93 $ 12.88
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT .18 D .39 D .42 D .45 .41 D .39
INCOME
NET REALIZED AND 3.26 4.68 3.37 4.28 1.05 2.02
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVESTMENT 3.44 5.07 3.79 4.73 1.46 2.41
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.17) (.41) (.42) (.43) (.32) (.36)
INCOME
FROM NET (1.72) (.59) (.46) (.28) - -
REALIZED GAIN
TOTAL DISTRIBUTIONS (1.89) (1.00) (.88) (.71) (.32) (.36)
NET ASSET VALUE, $ 28.62 $ 27.07 $ 23.00 $ 20.09 $ 16.07 $ 14.93
END OF PERIOD
TOTAL RETURN B, C 13.63% 22.87% 19.54% 30.43% 9.82% 18.90%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF $ 503,603 $ 464,031 $ 343,867 $ 297,453 $ 197,533 $ 191,138
PERIOD (000 OMITTED)
RATIO OF EXPENSES TO .69% A .69% .71% .74% .73% .80%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .68% A, E .67% E .70% E .73% E .71% E .79% E
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT 1.33% A 1.60% 2.02% 2.52% 2.62% 3.00%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER 54% A 55% 78% 80% 140% 120%
AVERAGE COMMISSION $ .0454 $ .0430 $ .0424
RATE F
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 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 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).
F 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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 1998 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Equity Income Fund (the fund) is a fund of Fidelity
Advisor Series III (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, 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
matters that affect that class. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, 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, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require 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 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Under the Plan, deferred amounts are treated as though
equivalent dollar amounts have been invested in shares of a
cross-section of Fidelity funds, including shares of the fund.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class C and shares of Class C for distribution under federal and state
securities law. These expenses are amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
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, futures and options transactions,
market discount, non-taxable dividends and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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-denominated
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.
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 FMR, may transfer uninvested cash
balances into one or more joint trading accounts. These balances are
invested in one or more repurchase agreements 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 Fidelity Investments Money Management, Inc.,
(formerly FMR Texas, Inc.) an affiliate of 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. Income distributions from the Cash Fund are declared daily
and paid monthly from net interest income. Income distributions earned
by the fund are recorded as interest income in the accompanying
financial statements.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,237,519,000 and $953,983,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .25%
CLASS T .50%
CLASS B 1.00% *
CLASS C 1.00% *
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 47,000 $ -
CLASS T 6,121,000 98,000
CLASS B 3,838,000 2,878,000
CLASS C 42,000 42,000
$ 10,048,000 $ 3,018,000
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $ 12,000
CLASS T 173,000
CLASS B 179,000
CLASS C 12,000
$ 376,000
SALES LOAD. FDC receives a front-end sales charge of up to 5.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
from 5% to 1% for Class B and 1% for Class C, 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. In addition, purchases of Class A and Class T shares that were
subject to a finder's fee bear a contingent deferred sales charge on
assets that do not remain in the fund for at least one year. The Class
A and Class T contingent deferred sales charge is based on 0.25% 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. A portion of the sales charges paid to
FDC are paid to securities dealers, banks, and other financial
institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED BY
FDC FDC
CLASS A $ 383,000 $ 152,000
CLASS T 869,000 233,000
CLASS B 513,000 513,000*
CLASS C 1,000 1,000*
$ 1,766,000 $ 899,000
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent (collectively referred to
as the transfer agent) for the fund's Class A, Class T, Class B, Class
C and Institutional Class. FIIOC receives account fees and asset-based
fees that vary according to the account size and type of account of
the shareholders of the respective classes of the fund. FIIOC pays for
typesetting, printing and mailing of all shareholder reports, except
proxy statements. For the period, the following amounts were paid to
FIIOC:
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 43,000 .23% *
CLASS T 2,137,000 .18% *
CLASS B 745,000 .20% *
CLASS C 9,000 .23% *
INSTITUTIONAL CLASS 342,000 .14% *
$ 3,276,000
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. Fidelity Service Company, Inc., 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 $304,000 for the
period.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each of the following classes:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS C 1.85% $ 13,000
FMR has also 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 $301,000 under this arrangement.
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $1,000 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1998 1997
FROM NET INVESTMENT INCOME
CLASS A $ 146,000 $ 131,000
CLASS T 8,652,000 20,835,000
CLASS B 1,085,000 3,503,000
CLASS C 16,000 -
INSTITUTIONAL CLASS 2,959,000 7,382,000
TOTAL $ 12,858,000 $ 31,851,000
FROM NET REALIZED GAIN
CLASS A $ 1,745,000 $ 98,000
CLASS T 142,228,000 43,072,000
CLASS B 44,523,000 13,038,000
CLASS C 120,000 -
INSTITUTIONAL CLASS 29,607,000 8,661,000
TOTAL $ 218,223,000 $ 64,869,000
TOTAL $ 231,081,000 $ 96,720,000
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
AMOUNT IN THOUSANDS SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1998 1997 A 1998 1997 A
CLASS A 904 919 $ 24,672 $ 22,745
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 71 9 1,792 208
SHARES REDEEMED (125) (112) (3,450) (2,828)
NET INCREASE (DECREASE) 850 816 $ 23,014 $ 20,125
CLASS T 16,033 28,655 $ 437,093 $ 693,828
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 5,685 2,675 143,735 60,512
SHARES REDEEMED (10,427) (23,070) (284,667) (558,854)
NET INCREASE (DECREASE) 11,291 8,260 $ 296,161 $ 195,486
CLASS B 4,282 5,544 $ 116,756 $ 135,409
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,601 700 40,251 15,570
SHARES REDEEMED (1,524) (2,738) (41,493) (66,167)
NET INCREASE (DECREASE) 4,359 3,506 $ 115,514 $ 84,812
CLASS C 627 25 $ 17,223 $ 678
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 5 - 126 -
SHARES REDEEMED (9) - (253) -
NET INCREASE (DECREASE) 623 25 $ 17,096 $ 678
INSTITUTIONAL CLASS 2,483 11,368 $ 68,952 $ 260,181
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,095 515 27,908 11,887
SHARES REDEEMED (3,127) (9,691) (85,466) (235,357)
NET INCREASE (DECREASE) 451 2,192 $ 11,394 $ 36,711
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 10,000
CLASS T 134,000
CLASS B 61,000
CLASS C 15,000
INSTITUTIONAL CLASS 36,000
$ 256,000
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
Robert C. Pozen, Senior Vice President
Richard A. Spillane, Jr., Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
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 International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
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 Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
