FIDELITY ADVISOR SERIES III, N-30D, 1998-01-20

FIDELITY ADVISOR SERIES III
N-30D, 1998-01-20

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(2_FIDELITY_LOGOS)FIDELITY ADVISOR

(REGISTERED TRADEMARK)
EQUITY INCOME
FUND - CLASS A, CLASS T, CLASS B AND CLASS C
ANNUAL REPORT
NOVEMBER 30, 1997
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.

REPORT OF INDEPENDENT 44 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 45

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE

(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October and into
November, the Standard & Poor's 500 Index has risen more than 31%
year-to-date, almost three times its historical annual average.
Meanwhile, bond markets - primarily influenced by a relatively steady
flow of positive news on the inflation front - continued to post solid
returns through the first 11 months of 1997.
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
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.
Effective August 1, 1997, the maximum 5.25% sales charge on Class A
shares was increased to 5.75%. If Fidelity had not reimbursed certain
class expenses, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - CLASS A 22.05% 141.13% 354.83%

ADVISOR EQUITY INCOME FUND - CLASS A 15.03% 127.27% 328.68%
(INCL. MAX. 5.75% SALES CHARGE)

S&P 500(REGISTERED TRADEMARK) 28.51% 150.41% 456.23%

EQUITY INCOME FUNDS AVERAGE 23.99% 119.16% 303.74%

CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average
represents a peer group of 178 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 NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - CLASS A 22.05% 19.25% 16.35%

ADVISOR EQUITY INCOME FUND - CLASS A 15.03% 17.84% 15.67%
(INCL. MAX. 5.75% SALES CHARGE)

S&P 500 28.51% 20.15% 18.69%

EQUITY INCOME FUNDS AVERAGE 23.99% 16.84% 14.72%

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
IMAHDR PRASUN SHR__CHT 19971130 19971210 115928 S00000000000001
FA Equity Income -CL A S&P 500
00246 SP001
1987/11/30 9425.00 10000.00
1987/12/31 9783.20 10761.00
1988/01/31 10452.32 11214.04
1988/02/29 10962.18 11736.61
1988/03/31 10818.75 11373.95
1988/04/30 10973.31 11500.20
1988/05/31 11108.01 11600.25
1988/06/30 11743.65 12132.71
1988/07/31 11722.68 12086.60
1988/08/31 11490.76 11675.66
1988/09/30 11830.28 12173.04
1988/10/31 12043.63 12511.45
1988/11/30 11968.62 12332.54
1988/12/31 12055.47 12548.36
1989/01/31 12827.98 13466.90
1989/02/28 12718.62 13131.57
1989/03/31 12971.45 13437.54
1989/04/30 13446.56 14134.94
1989/05/31 13768.30 14707.41
1989/06/30 13823.99 14623.58
1989/07/31 14697.09 15944.09
1989/08/31 14888.25 16256.59
1989/09/30 14696.22 16189.94
1989/10/31 13890.48 15814.33
1989/11/30 14072.95 16136.94
1989/12/31 14277.87 16524.23
1990/01/31 13375.02 15415.45
1990/02/28 13398.91 15614.31
1990/03/31 13398.91 16028.09
1990/04/30 12880.32 15627.39
1990/05/31 13728.51 17151.06
1990/06/30 13667.65 17034.43
1990/07/31 13447.40 16979.92
1990/08/31 12426.24 15444.94
1990/09/30 11486.54 14692.77
1990/10/31 11225.48 14629.59
1990/11/30 11975.52 15574.66
1990/12/31 12239.16 16009.20
1991/01/31 12861.92 16707.20
1991/02/28 13781.54 17901.76
1991/03/31 14001.49 18334.98
1991/04/30 14001.16 18378.99
1991/05/31 14767.93 19172.96
1991/06/30 14090.11 18294.84
1991/07/31 14861.21 19147.38
1991/08/31 15175.97 19601.17
1991/09/30 15097.34 19273.83
1991/10/31 15348.88 19532.10
1991/11/30 14726.45 18744.96
1991/12/31 15887.63 20889.38
1992/01/31 16047.57 20500.84
1992/02/29 16543.37 20767.35
1992/03/31 16274.59 20362.38
1992/04/30 16854.65 20961.04
1992/05/31 17003.43 21063.75
1992/06/30 16814.12 20749.90
1992/07/31 17250.85 21598.57
1992/08/31 16841.30 21155.80
1992/09/30 16951.36 21405.44
1992/10/31 17171.59 21480.36
1992/11/30 17777.75 22212.84
1992/12/31 18220.47 22486.05
1993/01/31 18788.71 22674.94
1993/02/28 19275.18 22983.32
1993/03/31 19901.20 23468.26
1993/04/30 19803.65 22900.33
1993/05/31 20111.18 23514.06
1993/06/30 20307.72 23582.25
1993/07/31 20588.91 23487.92
1993/08/31 21307.43 24378.11
1993/09/30 21166.23 24190.40
1993/10/31 21420.39 24691.14
1993/11/30 20982.66 24456.58
1993/12/31 21505.11 24752.50
1994/01/31 22493.53 25594.09
1994/02/28 21900.48 24900.49
1994/03/31 20962.67 23814.83
1994/04/30 21686.50 24119.66
1994/05/31 21828.43 24515.22
1994/06/30 21684.52 23914.60
1994/07/31 22425.87 24699.00
1994/08/31 23580.66 25711.65
1994/09/30 23180.33 25081.72
1994/10/31 23638.21 25646.06
1994/11/30 22836.92 24712.03
1994/12/31 22894.15 25078.51
1995/01/31 23245.25 25728.79
1995/02/28 24064.46 26731.44
1995/03/31 24841.63 27520.29
1995/04/30 25503.88 28330.76
1995/05/31 26210.28 29463.14
1995/06/30 26578.88 30147.57
1995/07/31 27539.21 31147.26
1995/08/31 27864.24 31225.44
1995/09/30 28720.79 32543.16
1995/10/31 28394.75 32426.98
1995/11/30 29565.52 33850.52
1995/12/31 30345.54 34502.48
1996/01/31 31245.06 35676.95
1996/02/29 31351.75 36007.67
1996/03/31 31580.97 36354.43
1996/04/30 31795.18 36890.29
1996/05/31 32040.00 37841.69
1996/06/30 31856.65 37985.87
1996/07/31 30659.73 36307.65
1996/08/31 31242.84 37073.38
1996/09/30 32348.06 39159.87
1996/10/31 32995.64 40239.90
1996/11/30 35123.40 43281.64
1996/12/31 34735.47 42424.23
1997/01/31 35897.03 45074.89
1997/02/28 36183.44 45428.28
1997/03/31 34744.91 43561.63
1997/04/30 36214.58 46162.26
1997/05/31 38291.28 48972.62
1997/06/30 40175.27 51166.59
1997/07/31 43093.03 55237.92
1997/08/31 41361.61 52143.49
1997/09/30 43526.09 54999.39
1997/10/31 41646.92 53162.41
1997/11/28 42867.57 55623.30
IMATRL PRASUN SHR__CHT 19971130 19971210 115932 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class A on November
30, 1987, and the current maximum 5.75% sales charge was paid. As the
chart shows, by November 30, 1997, the value of the investment would
have grown to $42,868 - a 328.68% increase on the initial investment.
For comparison, look at how the S&P 500 did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $55,623 - a 456.23% 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)
ADVISOR EQUITY INCOME FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE

ADVISOR EQUITY INCOME FUND - CLASS T 22.12% 141.45% 355.43%

ADVISOR EQUITY INCOME FUND - CLASS T 17.84% 133.00% 339.49%
(INCL. MAX. 3.50% SALES CHARGE)

S&P 500(REGISTERED TRADEMARK) 28.51% 150.41% 456.23%

EQUITY INCOME FUNDS AVERAGE 23.99% 119.16% 303.74%

CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you 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 one year average
represents a peer group of 178 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 NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - CLASS T 22.12% 19.28% 16.37%

ADVISOR EQUITY INCOME FUND - CLASS T 17.84% 18.43% 15.96%
(INCL. MAX. 3.50% SALES CHARGE)

S&P 500 28.51% 20.15% 18.69%

EQUITY INCOME FUNDS AVERAGE 23.99% 16.84% 14.72%

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
IMAHDR PRASUN SHR__CHT 19971130 19971210 120015 S00000000000001
FA Equity Income -CL T S&P 500
00280 SP001
1987/11/30 9650.00 10000.00
1987/12/31 10016.76 10761.00
1988/01/31 10701.84 11214.04
1988/02/29 11223.88 11736.61
1988/03/31 11077.03 11373.95
1988/04/30 11235.27 11500.20
1988/05/31 11373.19 11600.25
1988/06/30 12024.00 12132.71
1988/07/31 12002.53 12086.60
1988/08/31 11765.07 11675.66
1988/09/30 12112.70 12173.04
1988/10/31 12331.14 12511.45
1988/11/30 12254.35 12332.54
1988/12/31 12343.27 12548.36
1989/01/31 13134.22 13466.90
1989/02/28 13022.25 13131.57
1989/03/31 13281.12 13437.54
1989/04/30 13767.56 14134.94
1989/05/31 14096.98 14707.41
1989/06/30 14154.01 14623.58
1989/07/31 15047.95 15944.09
1989/08/31 15243.68 16256.59
1989/09/30 15047.06 16189.94
1989/10/31 14222.08 15814.33
1989/11/30 14408.91 16136.94
1989/12/31 14618.72 16524.23
1990/01/31 13694.32 15415.45
1990/02/28 13718.78 15614.31
1990/03/31 13718.78 16028.09
1990/04/30 13187.81 15627.39
1990/05/31 14056.24 17151.06
1990/06/30 13993.94 17034.43
1990/07/31 13768.43 16979.92
1990/08/31 12722.89 15444.94
1990/09/30 11760.76 14692.77
1990/10/31 11493.47 14629.59
1990/11/30 12261.40 15574.66
1990/12/31 12531.34 16009.20
1991/01/31 13168.97 16707.20
1991/02/28 14110.55 17901.76
1991/03/31 14335.74 18334.98
1991/04/30 14335.40 18378.99
1991/05/31 15120.48 19172.96
1991/06/30 14426.48 18294.84
1991/07/31 15215.99 19147.38
1991/08/31 15538.26 19601.17
1991/09/30 15457.75 19273.83
1991/10/31 15715.30 19532.10
1991/11/30 15078.01 18744.96
1991/12/31 16266.91 20889.38
1992/01/31 16430.67 20500.84
1992/02/29 16938.31 20767.35
1992/03/31 16663.11 20362.38
1992/04/30 17257.01 20961.04
1992/05/31 17409.35 21063.75
1992/06/30 17215.51 20749.90
1992/07/31 17662.67 21598.57
1992/08/31 17243.35 21155.80
1992/09/30 17356.04 21405.44
1992/10/31 17581.52 21480.36
1992/11/30 18202.16 22212.84
1992/12/31 18655.44 22486.05
1993/01/31 19237.24 22674.94
1993/02/28 19735.33 22983.32
1993/03/31 20376.30 23468.26
1993/04/30 20276.41 22900.33
1993/05/31 20591.29 23514.06
1993/06/30 20792.52 23582.25
1993/07/31 21080.42 23487.92
1993/08/31 21816.10 24378.11
1993/09/30 21671.52 24190.40
1993/10/31 21931.75 24691.14
1993/11/30 21483.58 24456.58
1993/12/31 22018.50 24752.50
1994/01/31 23030.51 25594.09
1994/02/28 22423.30 24900.49
1994/03/31 21463.11 23814.83
1994/04/30 22204.22 24119.66
1994/05/31 22349.53 24515.22
1994/06/30 22202.18 23914.60
1994/07/31 22961.23 24699.00
1994/08/31 24143.60 25711.65
1994/09/30 23733.71 25081.72
1994/10/31 24202.52 25646.06
1994/11/30 23382.10 24712.03
1994/12/31 23440.70 25078.51
1995/01/31 23800.17 25728.79
1995/02/28 24638.94 26731.44
1995/03/31 25434.67 27520.29
1995/04/30 26112.73 28330.76
1995/05/31 26835.99 29463.14
1995/06/30 27213.39 30147.57
1995/07/31 28196.65 31147.26
1995/08/31 28529.44 31225.44
1995/09/30 29406.43 32543.16
1995/10/31 29072.61 32426.98
1995/11/30 30271.32 33850.52
1995/12/31 31069.97 34502.48
1996/01/31 31990.97 35676.95
1996/02/29 32100.20 36007.67
1996/03/31 32334.89 36354.43
1996/04/30 32554.22 36890.29
1996/05/31 32804.88 37841.69
1996/06/30 32617.16 37985.87
1996/07/31 31391.66 36307.65
1996/08/31 31988.69 37073.38
1996/09/30 33135.90 39159.87
1996/10/31 33813.75 40239.90
1996/11/30 35989.18 43281.64
1996/12/31 35608.44 42424.23
1997/01/31 36794.31 45074.89
1997/02/28 37086.71 45428.28
1997/03/31 35604.05 43561.63
1997/04/30 37118.77 46162.26
1997/05/31 39268.70 48972.62
1997/06/30 41206.08 51166.59
1997/07/31 44178.54 55237.92
1997/08/31 42414.66 52143.49
1997/09/30 44636.09 54999.39
1997/10/31 42704.64 53162.41
1997/11/28 43948.63 55623.30
IMATRL PRASUN SHR__CHT 19971130 19971210 120019 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class T on November
30, 1987, and the current maximum 3.50% sales charge was paid. As the
chart shows, by November 30, 1997, the value of the investment would
have grown to $43,949 - a 339.49% increase on the initial investment.
For comparison, look at how the S&P 500 did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $55,623 - a 456.23% 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)
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/shareholder service fee that
is reflected in returns after June 30, 1994. Returns between September
10, 1992 (the date Class T shares were first offered) and June 30,
1994 are those of Class T, and reflect Class T 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. Effective
January 2, 1997, Class B shares' contingent deferred sales charge is
based on a declining scale that ranges from 5% to 1% on Class B shares
redeemed within six years of purchase. This scale is revised from the
previous scale of 4% to 1% on shares redeemed within five years of
purchase. Class B shares' contingent deferred sales charge included in
the past one year, past five years, and past 10 years total return
figures are 5%, 2% and 0%, respectively. If Fidelity had not
reimbursed certain class expenses, the total return would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - CLASS B 21.52% 137.80% 348.55%

ADVISOR EQUITY INCOME FUND - CLASS B 16.52% 135.80% 348.55%
(INCL. CONTINGENT DEFERRED SALES CHARGE)

S&P 500(REGISTERED TRADEMARK) 28.51% 150.41% 456.23%

EQUITY INCOME FUNDS AVERAGE 23.99% 119.16% 303.74%

CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case one year, five years or 10
years. For example, if you 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 one year average
represents a peer group of 178 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 NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - CLASS B 21.52% 18.92% 16.19%

ADVISOR EQUITY INCOME FUND - CLASS B 16.52% 18.72% 16.19%
(INCL. CONTINGENT DEFERRED SALES CHARGE)

S&P 500 28.51% 20.15% 18.69%

EQUITY INCOME FUNDS AVERAGE 23.99% 16.84% 14.72%

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
IMAHDR PRASUN SHR__CHT 19971130 19971210 115939 S00000000000001
FA Equity Income -CL B S&P 500
00180 SP001
1987/11/30 10000.00 10000.00
1987/12/31 10380.06 10761.00
1988/01/31 11089.99 11214.04
1988/02/29 11630.96 11736.61
1988/03/31 11478.78 11373.95
1988/04/30 11642.77 11500.20
1988/05/31 11785.69 11600.25
1988/06/30 12460.11 12132.71
1988/07/31 12437.86 12086.60
1988/08/31 12191.78 11675.66
1988/09/30 12552.02 12173.04
1988/10/31 12778.39 12511.45
1988/11/30 12698.81 12332.54
1988/12/31 12790.95 12548.36
1989/01/31 13610.59 13466.90
1989/02/28 13494.56 13131.57
1989/03/31 13762.81 13437.54
1989/04/30 14266.90 14134.94
1989/05/31 14608.27 14707.41
1989/06/30 14667.37 14623.58
1989/07/31 15593.73 15944.09
1989/08/31 15796.55 16256.59
1989/09/30 15592.81 16189.94
1989/10/31 14737.91 15814.33
1989/11/30 14931.51 16136.94
1989/12/31 15148.94 16524.23
1990/01/31 14191.01 15415.45
1990/02/28 14216.35 15614.31
1990/03/31 14216.35 16028.09
1990/04/30 13666.12 15627.39
1990/05/31 14566.05 17151.06
1990/06/30 14501.49 17034.43
1990/07/31 14267.80 16979.92
1990/08/31 13184.34 15444.94
1990/09/30 12187.31 14692.77
1990/10/31 11910.33 14629.59
1990/11/30 12706.12 15574.66
1990/12/31 12985.85 16009.20
1991/01/31 13646.60 16707.20
1991/02/28 14622.33 17901.76
1991/03/31 14855.69 18334.98
1991/04/30 14855.34 18378.99
1991/05/31 15668.89 19172.96
1991/06/30 14949.72 18294.84
1991/07/31 15767.87 19147.38
1991/08/31 16101.82 19601.17
1991/09/30 16018.40 19273.83
1991/10/31 16285.29 19532.10
1991/11/30 15624.89 18744.96
1991/12/31 16856.90 20889.38
1992/01/31 17026.60 20500.84
1992/02/29 17552.65 20767.35
1992/03/31 17267.47 20362.38
1992/04/30 17882.91 20961.04
1992/05/31 18040.78 21063.75
1992/06/30 17839.91 20749.90
1992/07/31 18303.29 21598.57
1992/08/31 17868.75 21155.80
1992/09/30 17985.53 21405.44
1992/10/31 18219.19 21480.36
1992/11/30 18862.34 22212.84
1992/12/31 19332.07 22486.05
1993/01/31 19934.97 22674.94
1993/02/28 20451.12 22983.32
1993/03/31 21115.33 23468.26
1993/04/30 21011.83 22900.33
1993/05/31 21338.12 23514.06
1993/06/30 21546.66 23582.25
1993/07/31 21845.00 23487.92
1993/08/31 22607.35 24378.11
1993/09/30 22457.54 24190.40
1993/10/31 22727.21 24691.14
1993/11/30 22262.77 24456.58
1993/12/31 22817.10 24752.50
1994/01/31 23865.81 25594.09
1994/02/28 23236.58 24900.49
1994/03/31 22241.56 23814.83
1994/04/30 23009.55 24119.66
1994/05/31 23160.14 24515.22
1994/06/30 23007.45 23914.60
1994/07/31 23794.02 24699.00
1994/08/31 25034.40 25711.65
1994/09/30 24609.50 25081.72
1994/10/31 25065.23 25646.06
1994/11/30 24214.53 24712.03
1994/12/31 24275.63 25078.51
1995/01/31 24617.10 25728.79
1995/02/28 25470.78 26731.44
1995/03/31 26310.79 27520.29
1995/04/30 26997.43 28330.76
1995/05/31 27730.89 29463.14
1995/06/30 28106.00 30147.57
1995/07/31 29123.76 31147.26
1995/08/31 29452.58 31225.44
1995/09/30 30344.82 32543.16
1995/10/31 29983.95 32426.98
1995/11/30 31223.47 33850.52
1995/12/31 32033.24 34502.48
1996/01/31 32952.46 35676.95
1996/02/29 33065.31 36007.67
1996/03/31 33291.44 36354.43
1996/04/30 33501.63 36890.29
1996/05/31 33744.16 37841.69
1996/06/30 33534.13 37985.87
1996/07/31 32254.32 36307.65
1996/08/31 32869.92 37073.38
1996/09/30 34020.32 39159.87
1996/10/31 34702.35 40239.90
1996/11/30 36910.83 43281.64
1996/12/31 36518.73 42424.23
1997/01/31 37722.09 45074.89
1997/02/28 37989.51 45428.28
1997/03/31 36466.32 43561.63
1997/04/30 37989.24 46162.26
1997/05/31 40198.31 48972.62
1997/06/30 42138.98 51166.59
1997/07/31 45174.06 55237.92
1997/08/31 43346.30 52143.49
1997/09/30 45610.12 54999.39
1997/10/31 43596.43 53162.41
1997/11/28 44854.99 55623.30
IMATRL PRASUN SHR__CHT 19971130 19971210 115942 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class B on November
30, 1987. As the chart shows, by November 30, 1997, the value of the
investment, would have been $44,855 - a 348.55% increase on the
initial investment. For comparison, look at how the S&P 500 did over
the same period. With dividends, and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $55,623- a
456.23% 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)
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 shareholder service fee
that is reflected in returns after November 3, 1997. Returns between
June 30, 1994 and November 3, 1997 are those of Class B shares and
reflect Class B's 1.00% 12b- 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 20, 1994 would have been lower. Class C's
contingent deferred sales charge included in the past one year total
return figure is 1.00%. If Fidelity had not reimbursed certain class
expenses, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - CLASS C 22.02% 138.78% 350.40%

ADVISOR EQUITY INCOME FUND - CLASS C 21.02% 138.78% 350.40%
(INCL. CONTINGENT DEFERRED SALES CHARGE)

S&P 500(REGISTERED TRADEMARK) 28.51% 150.41% 456.23%

EQUITY INCOME FUNDS AVERAGE 23.99% 119.16% 303.74%

CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case 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 one year average
represents a peer group of 178 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 NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - CLASS C 22.02% 19.01% 16.24%

ADVISOR EQUITY INCOME FUND - CLASS C 21.02% 19.01% 16.24%
(INCL. CONTINGENT DEFERRED SALES CHARGE)

S&P 500 28.51% 20.15% 18.69%

EQUITY INCOME FUNDS AVERAGE 23.99% 16.84% 14.72%

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
IMAHDR PRASUN SHR__CHT 19971130 19971210 115958 S00000000000001
FA Equity Income -CL C S&P 500
00480 SP001
1987/11/30 10000.00 10000.00
1987/12/31 10380.06 10761.00
1988/01/31 11089.99 11214.04
1988/02/29 11630.96 11736.61
1988/03/31 11478.78 11373.95
1988/04/30 11642.77 11500.20
1988/05/31 11785.69 11600.25
1988/06/30 12460.11 12132.71
1988/07/31 12437.86 12086.60
1988/08/31 12191.78 11675.66
1988/09/30 12552.02 12173.04
1988/10/31 12778.39 12511.45
1988/11/30 12698.81 12332.54
1988/12/31 12790.95 12548.36
1989/01/31 13610.59 13466.90
1989/02/28 13494.56 13131.57
1989/03/31 13762.81 13437.54
1989/04/30 14266.90 14134.94
1989/05/31 14608.27 14707.41
1989/06/30 14667.37 14623.58
1989/07/31 15593.73 15944.09
1989/08/31 15796.55 16256.59
1989/09/30 15592.81 16189.94
1989/10/31 14737.91 15814.33
1989/11/30 14931.51 16136.94
1989/12/31 15148.94 16524.23
1990/01/31 14191.01 15415.45
1990/02/28 14216.35 15614.31
1990/03/31 14216.35 16028.09
1990/04/30 13666.12 15627.39
1990/05/31 14566.05 17151.06
1990/06/30 14501.49 17034.43
1990/07/31 14267.80 16979.92
1990/08/31 13184.34 15444.94
1990/09/30 12187.31 14692.77
1990/10/31 11910.33 14629.59
1990/11/30 12706.12 15574.66
1990/12/31 12985.85 16009.20
1991/01/31 13646.60 16707.20
1991/02/28 14622.33 17901.76
1991/03/31 14855.69 18334.98
1991/04/30 14855.34 18378.99
1991/05/31 15668.89 19172.96
1991/06/30 14949.72 18294.84
1991/07/31 15767.87 19147.38
1991/08/31 16101.82 19601.17
1991/09/30 16018.40 19273.83
1991/10/31 16285.29 19532.10
1991/11/30 15624.89 18744.96
1991/12/31 16856.90 20889.38
1992/01/31 17026.60 20500.84
1992/02/29 17552.65 20767.35
1992/03/31 17267.47 20362.38
1992/04/30 17882.91 20961.04
1992/05/31 18040.78 21063.75
1992/06/30 17839.91 20749.90
1992/07/31 18303.29 21598.57
1992/08/31 17868.75 21155.80
1992/09/30 17985.53 21405.44
1992/10/31 18219.19 21480.36
1992/11/30 18862.34 22212.84
1992/12/31 19332.07 22486.05
1993/01/31 19934.97 22674.94
1993/02/28 20451.12 22983.32
1993/03/31 21115.33 23468.26
1993/04/30 21011.83 22900.33
1993/05/31 21338.12 23514.06
1993/06/30 21546.66 23582.25
1993/07/31 21845.00 23487.92
1993/08/31 22607.35 24378.11
1993/09/30 22457.54 24190.40
1993/10/31 22727.21 24691.14
1993/11/30 22262.77 24456.58
1993/12/31 22817.10 24752.50
1994/01/31 23865.81 25594.09
1994/02/28 23236.58 24900.49
1994/03/31 22241.56 23814.83
1994/04/30 23009.55 24119.66
1994/05/31 23160.14 24515.22
1994/06/30 23007.45 23914.60
1994/07/31 23794.02 24699.00
1994/08/31 25034.40 25711.65
1994/09/30 24609.50 25081.72
1994/10/31 25065.23 25646.06
1994/11/30 24214.53 24712.03
1994/12/31 24275.63 25078.51
1995/01/31 24617.10 25728.79
1995/02/28 25470.78 26731.44
1995/03/31 26310.79 27520.29
1995/04/30 26997.43 28330.76
1995/05/31 27730.89 29463.14
1995/06/30 28106.00 30147.57
1995/07/31 29123.76 31147.26
1995/08/31 29452.58 31225.44
1995/09/30 30344.82 32543.16
1995/10/31 29983.95 32426.98
1995/11/30 31223.47 33850.52
1995/12/31 32033.24 34502.48
1996/01/31 32952.46 35676.95
1996/02/29 33065.31 36007.67
1996/03/31 33291.44 36354.43
1996/04/30 33501.63 36890.29
1996/05/31 33744.16 37841.69
1996/06/30 33534.13 37985.87
1996/07/31 32254.32 36307.65
1996/08/31 32869.92 37073.38
1996/09/30 34020.32 39159.87
1996/10/31 34702.35 40239.90
1996/11/30 36910.83 43281.64
1996/12/31 36518.73 42424.23
1997/01/31 37722.09 45074.89
1997/02/28 37989.51 45428.28
1997/03/31 36466.32 43561.63
1997/04/30 37989.24 46162.26
1997/05/31 40198.31 48972.62
1997/06/30 42138.98 51166.59
1997/07/31 45174.06 55237.92
1997/08/31 43346.30 52143.49
1997/09/30 45610.12 54999.39
1997/10/31 43596.43 53162.41
1997/11/28 45039.58 55623.30
IMATRL PRASUN SHR__CHT 19971130 19971210 120001 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Class C on November
30, 1987. As the chart shows, by November 30, 1997, the value of the
investment, would have been $45,040 - a 350.40% increase on the
initial investment. For comparison, look at how the S&P 500 did over
the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 investment would have grown to $55,623 - a 456.23%
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
The 12 months that ended
November 30, 1997, was a period
that truly tested the U.S. stock
market's resolve. But despite
frequent shifts in sentiment, an
interest-rate hike and global
volatility concerns, U.S. stocks still
managed to perform well. The
Standard & Poor's 500 Index - a
broad gauge of the U.S. stock
market - returned 28.51% during
the period, well above the
market's long-term annual
average of around 11%. In the first
half of the period, large-cap stocks
were responsible for much of the
market's gain, as investors were
drawn to stocks with recognizable
names and consistent
earnings-growth track records.
Consequently, stock prices soared
and enthusiasm was high. The
Federal Reserve Board - in an
attempt to halt inflation before it
appeared - raised a key
short-term interest rate by 0.25%
in March. The market paused
briefly, but then kept rolling as the
Dow Jones Industrial Average
reached the 8,000-point mark for
the first time ever in August. With
several multinational companies
announcing earnings shortfalls in
mid-August, small-cap stocks
came into favor among investors.
During August and September,
the Russell 2000 Index - which
measures small-cap stock
performance - was up 9.78%
while the S&P was down 0.43%.
Volatility in Asian markets in late
October sent skittish investors
running for cover. The Dow slid
554 points in one day, then
snapped back the next, reclaiming
330-plus points. Sensing
continued fallout from this
volatility, investors again became
quality-conscious and large-caps
regained their perch through
November.
An interview with Robert Chow, Portfolio Manager of Fidelity Advisor
Equity Income Fund
Q. HOW DID THE FUND DO, BOB?
A. For the 12 months that ended November 30, 1997, the fund's Class A,
T, B and C shares returned 22.05%, 22.12%, 21.52% and 22.02%,
respectively. Over the same period, the Standard and Poor's 500 Index
gained 28.51%. The equity income funds average was up 23.99%,
according to Lipper Analytical Services.
Q. WHY DID THE FUND UNDERPERFORM THE AVERAGE AND THE INDEX?
A. The market paid a premium for certainty over the period, especially
following the Asian crisis in October. That is, investors gravitated
toward stocks of companies that generally post steady earnings growth
in a variety of economic climates. As a result, investors who bought
the blue chip stocks in the S&P 500 that fit this profile were
rewarded, even though many of those stocks had very high valuations.
I'm a value investor, and I won't buy a stock unless it meets my value
criteria. I should note that relative to its peer group, the fund was
ahead for most of the period. The November 30 cutoff point for the
period happened to catch the fund trailing the equity income funds
average by a small amount.
Q. THE FUND'S SECTOR ALLOCATIONS SEEM QUITE STABLE WHEN COMPARED TO
THOSE REPORTED SIX MONTHS AGO. CAN YOU COMMENT ON THAT?
A. Sure. My goal is to achieve an annual turnover rate of about 33%,
which means that, on average, the fund holds a stock for three years.
In practice, the fund's turnover rate has been somewhat higher than
33%, as I have attempted to balance low turnover with profitability
considerations. For example, the turnover rate increased after the
stock market's sharp drop at the end of October because many stocks in
a variety of sectors that were not interesting to me before the drop
suddenly became attractive from a value standpoint. Many new
opportunities were created literally overnight, and I took the
opportunity to upgrade the risk/reward profile of the fund.
Q. ONE OF THE RISKS OF VALUE INVESTING IS BEING TOO EARLY WITH A
PURCHASE. HOW DO YOU HANDLE THAT ISSUE?
A. In addition to value considerations, I look closely at the basic
business prospects of a company. I want to determine if there's a good
reason for a stock's low valuation. I look at relative valuation as
well as absolute valuation. With relative valuation, I look at how a
stock is valued compared to similar stocks in its sector. For example,
if the stock of one bank has a lower relative valuation than that of
most other bank stocks, that stock might be attractive from a value
standpoint even though its absolute valuation might not be
particularly low. I'm not necessarily trying to buy stocks at their
absolute bottom.
Q. WHAT STOCKS DID WELL FOR THE FUND?
A. Wal-Mart has been one of the top five holdings since I began
managing the fund in April of 1996. From 1993 to 1995 the stock didn't
do much, as the company absorbed the costs of opening its superstores,
which offer groceries in addition to all of the items people usually
associate with Wal-Mart. The worst of the adjustment process seems to
be behind the company, and the stock rose in response to higher sales
and profits. Another good performer for the fund was IBM. In addition
to displaying a renewed emphasis on cutting costs and raising cash
flow, the company bought back almost 20% of its shares over the past
three years, thereby raising earnings for each share still
outstanding.
Q. WHAT STOCKS PERFORMED POORLY FOR THE FUND?
A. Mercury Finance, which the fund no longer owns, was a major
disappointment. The stock went from $15 to $2 in a single day when it
was discovered that the company's financial statements had been
falsified. Another holding that hurt the fund's performance was
Newmont Mining, a precious-metals mining company whose stock declined
as the price of gold went from about $370 an ounce to just under $300
an ounce during the period.
Q. WHAT'S YOUR OUTLOOK, BOB?
A. My outlook for the fund is very positive. Over the long term, and
in most market environments, history has shown that a value approach
has brought investors very competitive returns. I do not have a
favorite sector where I am looking for opportunities right now. My
plan is to continue to analyze stocks on an individual basis using my
valuation models, without trying to predict where the overall market
will go.
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 THE
IMPORTANCE OF LOOKING AT
RISK-ADJUSTED RETURNS:
"One thing to keep in mind with a
relatively low-volatility stock fund
like this one is that its returns on a
risk-adjusted basis are often much
more comparable to those of the
Standard & Poor's 500 Index than
the absolute returns would suggest.
Over the past year, I managed the
fund with a beta of .78, which means
that the fund had only 78% of the
volatility of the index. That means
significantly less risk for the fund's
shareholders. If the fund returns 78%
of the index's returns with only 78%
of its volatility in a given time period,
those are equivalent returns
according to the most meaningful
way of measuring them.
"To fairly evaluate the performance
of any fund against that of any other
fund or index, therefore, investors
need to have not only the absolute
performance numbers but also the
beta numbers. Beta tells you how
much risk, relative to some
benchmark, a fund exposed its
shareholders to in the process of
achieving its absolute returns. In a
few years, I think our industry will be
emphasizing risk-adjusted returns to
a much greater extent, and absolute
returns will cease to be as important
as they are now."
FUND FACTS
GOAL: seeks to maintain a yield
that exceeds the composite
dividend yield of the S&P 500,
also considers the potential for
achieving capital appreciation
START DATE: April 25, 1983
SIZE: as of November 30,
1997, more than $3.3 billion
MANAGER: Robert Chow, since
1996; joined Fidelity in 1989
(checkmark)
INVESTMENT CHANGES

TOP TEN STOCKS AS OF NOVEMBER 30, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO

WAL-MART STORES, INC. 3.6 3.2

PHILIP MORRIS COMPANIES, INC. 2.7 2.2

BRITISH PETROLEUM PLC ADR 2.5 3.5

INTERNATIONAL BUSINESS MACHINES CORP. 2.3 2.2

CITICORP 2.1 0.9

FLEET FINANCIAL GROUP, INC. 1.9 0.8

U. S. WEST COMMUNICATIONS GROUP 1.8 0.7

PITNEY BOWES, INC. 1.6 1.2

ALLSTATE CORP. 1.5 1.5

AMERICAN HOME PRODUCTS CORP. 1.5 0.3

TOP FIVE MARKET SECTORS AS OF NOVEMBER 30, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO

FINANCE 18.4 18.0

BASIC INDUSTRIES 8.8 6.9

ENERGY 8.6 8.0

RETAIL & WHOLESALE 8.6 6.8

NONDURABLES 7.3 6.7
</TABLE>

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1997 * AS OF MAY 31, 1997 **
ROW: 1, COL: 1, VALUE: 5.9
ROW: 1, COL: 2, VALUE: 2.0
ROW: 1, COL: 3, VALUE: 0.0
ROW: 1, COL: 4, VALUE: 50.0
ROW: 1, COL: 5, VALUE: 42.0
STOCKS AND
EQUITY FUTURES 91.5%
BONDS 1.7%
CONVERTIBLE
SECURITIES 0.9%
SHORT-TERM
INVESTMENTS 5.9%
FOREIGN
INVESTMENTS 5.4%
STOCKS 93.0%
BONDS 0.0%
CONVERTIBLE
SECURITIES 1.1%
SHORT-TERM
INVESTMENTS 5.9%
FOREIGN
INVESTMENTS 6.3%
ROW: 1, COL: 1, VALUE: 5.9
ROW: 1, COL: 2, VALUE: 1.5
ROW: 1, COL: 3, VALUE: 2.5
ROW: 1, COL: 4, VALUE: 50.0
ROW: 1, COL: 5, VALUE: 40.0
*
**
INVESTMENTS NOVEMBER 30, 1997

SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES

COMMON STOCKS - 93.0%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 3.9%
AEROSPACE & DEFENSE - 2.7%
AlliedSignal, Inc. 280,000 $ 10,395
Boeing Co. 340,000 18,062
Lockheed Martin Corp. 400,000 39,025
Rockwell International Corp. 150,000 7,312
United Technologies Corp. 240,000 17,985
92,779
DEFENSE ELECTRONICS - 0.7%
Litton Industries, Inc. (a) 340,000 17,128
Raytheon Co. 133,600 7,473
24,601
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 140,000 12,127
Newport News Shipbuilding, Inc. 150,000 3,638
15,765
TOTAL AEROSPACE & DEFENSE 133,145
BASIC INDUSTRIES - 8.8%
CHEMICALS & PLASTICS - 4.4%
Cabot Corp. 500,000 13,094
Dow Chemical Co. 50,000 4,937
du Pont (E.I.) de Nemours & Co. 320,000 19,380
Ferro Corp. 520,000 19,922
Goodrich (B.F.) Co. 360,000 16,020
Monsanto Co. 180,000 7,864
Olin Corp. 380,000 18,810
Union Carbide Corp. 700,000 30,888
Valspar Corp. 100,000 3,038
Witco Corp. 330,000 14,231
148,184
IRON & STEEL - 0.3%
Nucor Corp. 200,000 10,000
METALS & MINING - 1.1%
Alumax, Inc. (a) 720,000 22,635
Aluminum Co. of America 220,000 14,795
37,430
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 3.0%
Champion International Corp. 350,000 $ 18,747
Chesapeake Corp. 160,000 5,480
Georgia-Pacific Corp. 320,000 27,320
Kimberly-Clark Corp. 20,000 1,041
Mead Corp. 100,000 6,456
Pentair, Inc. 680,000 25,670
Union Camp Corp. 120,000 7,208
Unisource Worldwide, Inc. 530,000 8,314
100,236
TOTAL BASIC INDUSTRIES 295,850
CONSTRUCTION & REAL ESTATE - 4.1%
BUILDING MATERIALS - 2.6%
CalMat Co. 340,000 8,904
Masco Corp. 540,000 25,448
RPM, Inc. 1,000,000 20,000
Sherwin-Williams Co. 107,100 3,059
USG Corp. (a) 660,000 30,938
88,349
CONSTRUCTION - 0.4%
Centex Corp. 110,000 6,971
Lennar Corp. 350,000 7,306
14,277
ENGINEERING - 0.2%
Fluor Corp. 160,000 5,750
REAL ESTATE - 0.2%
LNR Property Corp. 350,000 8,138
REAL ESTATE INVESTMENT TRUSTS - 0.7%
Duke Realty Investors, Inc. 223,672 5,144
Felcor Suite Hotels, Inc. 100,000 3,631
Public Storage, Inc. 240,000 6,630
RFS Hotel Investors, Inc. 350,000 6,650
22,055
TOTAL CONSTRUCTION & REAL ESTATE 138,569
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 5.9%
AUTOS, TIRES, & ACCESSORIES - 3.5%
Chrysler Corp. 1,100,000 $ 37,744
Cummins Engine Co., Inc. 140,000 9,012
Eaton Corp. 140,000 13,221
General Motors Corp. 470,000 28,670
ITT Industries, Inc. (a) 565,900 17,967
Meritor Automotive, Inc. 50,000 1,119
Modine Manufacturing Co. 260,000 8,824
Snap-On Tools Corp. 60,000 2,636
119,193
CONSUMER DURABLES - 0.7%
Minnesota Mining & Manufacturing Co. 230,000 22,411
CONSUMER ELECTRONICS - 0.9%
Maytag Co. 740,000 23,911
Whirlpool Corp. 150,000 8,222
32,133
HOME FURNISHINGS - 0.6%
Heilig-Meyers Co. 200,000 2,587
Leggett & Platt, Inc. 420,000 18,060
20,647
TEXTILES & APPAREL - 0.2%
NIKE, Inc. Class B 110,000 5,356
TOTAL DURABLES 199,740
ENERGY - 8.6%
ENERGY SERVICES - 1.5%
Baker Hughes, Inc. 450,000 18,844
Schlumberger Ltd. 210,000 17,286
Western Atlas, Inc. (a) 210,000 14,608
50,738
OIL & GAS - 7.1%
Amerada Hess Corp. 320,000 17,920
Atlantic Richfield Co. 60,000 4,890
British Petroleum PLC ADR 1,000,000 83,000
Burlington Resources, Inc. 300,000 13,350
Chevron Corp. 330,000 26,462
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Kerr-McGee Corp. 220,000 $ 14,589
Occidental Petroleum Corp. 520,000 15,437
Royal Dutch Petroleum Co. 400,000 21,075
Texaco, Inc. 360,000 20,340
Total SA sponsored ADR 419,400 22,045
239,108
TOTAL ENERGY 289,846
FINANCE - 17.3%
BANKS - 4.7%
Bank of New York Co., Inc. 470,000 25,262
Citicorp 600,000 71,963
Comerica, Inc. 150,000 12,778
NationsBank Corp. 800,000 48,050
158,053
CREDIT & OTHER FINANCE - 3.5%
American Express Co. 540,000 42,592
Fleet Financial Group, Inc. 970,000 64,081
Household International, Inc. 90,000 11,340
118,013
FEDERAL SPONSORED CREDIT - 2.3%
Federal Home Loan Mortgage Corporation 750,000 30,938
Federal National Mortgage Association 780,000 41,194
SLM Holding Corp. 50,000 6,456
78,588
INSURANCE - 6.4%
Aetna, Inc. 100,000 7,538
Allstate Corp. 600,000 51,525
Berkley (W.R.) Corp. 240,000 9,990
CIGNA Corp. 220,000 36,795
General Re Corp. 120,000 23,820
Hartford Financial Services Group, Inc. 340,000 28,475
Loews Corp. 170,000 18,041
PXRE Corp. 660,000 19,511
Provident Companies, Inc. 370,000 12,141
SAFECO Corp. 150,000 7,331
215,167
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.4%
Lehman Brothers Holdings, Inc. 260,000 $ 13,146
TOTAL FINANCE 582,967
HEALTH - 4.5%
DRUGS & PHARMACEUTICALS - 3.3%
American Home Products Corp. 720,000 50,310
Bristol-Myers Squibb Co. 400,000 37,450
Merck & Co., Inc. 270,000 25,532
113,292
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Allegiance Corp. 190,000 6,021
MEDICAL FACILITIES MANAGEMENT - 1.0%
Columbia/HCA Healthcare Corp. 500,000 14,750
Tenet Healthcare Corp. (a) 570,000 18,062
32,812
TOTAL HEALTH 152,125
HOLDING COMPANIES - 0.8%
Norfolk Southern Corp. 130,000 4,136
PartnerRe Ltd. 500,000 21,625
25,761
INDUSTRIAL MACHINERY & EQUIPMENT - 4.2%
ELECTRICAL EQUIPMENT - 1.4%
Alcatel Alsthom Compagnie Generale d'Electricite SA
sponsored ADR 300,000 7,425
Emerson Electric Co. 230,000 12,650
General Electric Co. 380,000 28,025
48,100
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
Caterpillar, Inc. 320,000 15,340
Deere & Co. 110,000 6,029
Ingersoll-Rand Co. 270,000 11,036
Tyco International Ltd. 620,000 24,335
UNOVA, Inc. 900,000 15,188
71,928
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.7%
Browning-Ferris Industries, Inc. 530,000 $ 18,914
Waste Management, Inc. 177,200 4,364
23,278
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 143,306
MEDIA & LEISURE - 2.7%
BROADCASTING - 0.3%
Gaylord Entertainment Co. 300,000 9,169
ENTERTAINMENT - 0.1%
MGM Grand, Inc. (a) 109,700 4,292
LODGING & GAMING - 0.5%
Circus Circus Enterprises, Inc. (a) 90,000 1,856
ITT Corp. 190,000 14,416
16,272
PUBLISHING - 1.8%
ACNielsen Corp. (a) 1,324,200 29,712
Dun & Bradstreet Corp. 540,000 15,120
Knight-Ridder, Inc. 120,000 6,015
Times Mirror Co. Class A 150,000 8,906
59,753
RESTAURANTS - 0.0%
Tricon Global Restaurants, Inc. (a) 15,000 507
Uno Restaurant Corp. (a) 200,000 1,250
1,757
TOTAL MEDIA & LEISURE 91,243
NONDURABLES - 7.3%
BEVERAGES - 0.7%
Anheuser-Busch Companies, Inc. 400,000 17,275
PepsiCo, Inc. 140,000 5,163
22,438
FOODS - 0.2%
Quaker Oats Co. 130,000 6,890
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 3.0%
Church & Dwight Co., Inc. 330,000 $ 9,694
Clorox Co. 550,000 42,694
First Brands Corp. 120,000 3,082
Rubbermaid, Inc. 220,000 5,335
Unilever NV ADR 700,000 40,644
101,449
TOBACCO - 3.4%
Philip Morris Companies, Inc. 2,100,000 91,350
RJR Nabisco Holdings Corp. 520,000 18,947
Schweitzer-Mauduit International, Inc. 140,000 4,970
115,267
TOTAL NONDURABLES 246,044
PRECIOUS METALS - 0.3%
Newmont Mining Corp. 320,000 9,620
RETAIL & WHOLESALE - 8.6%
APPAREL STORES - 0.2%
TJX Companies, Inc. 200,000 6,900
DRUG STORES - 1.0%
CVS Corp. 100,000 6,638
Rite Aid Corp. 420,000 27,615
34,253
GENERAL MERCHANDISE STORES - 5.1%
Dillards, Inc. Class A 100,000 3,656
Federated Department Stores, Inc. (a) 600,000 27,338
May Department Stores Co. (The) 200,000 10,750
Nordstrom, Inc. 180,000 10,620
Wal-Mart Stores, Inc. 3,000,000 119,812
172,176
GROCERY STORES - 0.7%
Albertson's, Inc. 140,000 6,213
Richfood Holdings, Inc. Class A 250,000 6,828
Safeway, Inc. (a) 160,000 9,720
22,761
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 1.6%
Boise Cascade Office Products Corp. (a) 400,000 $ 7,250
Fabri-Centers of America, Inc. Class B (non-vtg.) (a) 320,000 6,440
Home Depot, Inc. 450,000 25,172
Officemax, Inc. (a) 800,000 11,250
Toys "R" Us, Inc. (a) 100,000 3,412
53,524
TOTAL RETAIL & WHOLESALE 289,614
SERVICES - 0.3%
PRINTING - 0.3%
Reynolds & Reynolds Co. Class A 500,000 9,563
TECHNOLOGY - 7.2%
COMPUTER SERVICES & SOFTWARE - 0.5%
Electronic Data Systems Corp. 460,000 17,480
COMPUTERS & OFFICE EQUIPMENT - 5.0%
International Business Machines Corp. 710,000 77,789
Komag, Inc. (a) 200,000 4,013
Pitney Bowes, Inc. 640,000 53,800
Seagate Technology (a) 250,000 5,672
Unisys Corp. (a) 1,000,000 14,312
Wang Laboratories, Inc. (a) 550,000 12,169
167,755
ELECTRONIC INSTRUMENTS - 0.1%
KLA-Tencor Corp. (a) 100,000 3,875
ELECTRONICS - 1.4%
AMP, Inc. 890,000 38,659
Thomas & Betts Corp. 160,000 7,260
45,919
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 50,000 3,031
Imation Corp. (a) 180,000 3,139
6,170
TOTAL TECHNOLOGY 241,199
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 2.7%
AIR TRANSPORTATION - 0.5%
AMR Corp. (a) 80,000 $ 9,695
Delta Air Lines, Inc. 80,000 8,915
18,610
RAILROADS - 1.0%
Burlington Northern Santa Fe Corp. 200,000 18,300
CSX Corp. 280,000 14,647
32,947
TRUCKING & FREIGHT - 1.2%
Arnold Industries, Inc. 620,000 11,082
Consolidated Freightways Corp. 1,030,000 16,094
Pittston Co. (Burlington Group) 260,000 7,166
USFreightways Corp. 170,000 5,228
39,570
TOTAL TRANSPORTATION 91,127
UTILITIES - 5.8%
ELECTRIC UTILITY - 0.3%
American Electric Power Co., Inc. 220,000 10,904
TELEPHONE SERVICES - 5.5%
AT&T Corp. 200,000 11,175
Bell Atlantic Corp. 560,000 49,980
BellSouth Corp. 680,000 37,230
MCI Communications Corp. 260,000 11,424
SBC Communications, Inc. 30,000 2,184
Sprint Corp. 240,000 14,055
U. S. WEST Communications Group 1,330,000 60,099
186,147
TOTAL UTILITIES 197,051
TOTAL COMMON STOCKS
(Cost $2,384,846) 3,136,770
CONVERTIBLE PREFERRED STOCKS - 1.1%
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 1.1%
INSURANCE - 1.1%
Allstate Corp. $2.30 ACES 660,000 $ 36,300
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 50,000 -
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $27,345) 36,300
CASH EQUIVALENTS - 5.9%
Taxable Central Cash Fund (b)
(Cost $199,107) 199,106,982 199,107
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,611,298) $ 3,372,177
SECURITY TYPE ABBREVIATIONS
ACES - Automatic Common Exchange
Securities.
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund
was 5.69%. 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 November 30, 1997, the aggregate cost of investment securities for
income tax purposes was $2,613,586,000. Net unrealized appreciation
aggregated $758,591,000, of which $812,263,000 related to appreciated
investment securities and $53,672,000 related to depreciated
investment securities.
The fund hereby designates approximately $17,867,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1997

ASSETS

INVESTMENT IN SECURITIES, AT VALUE (COST $2,611,298) - $ 3,372,177
SEE ACCOMPANYING SCHEDULE

RECEIVABLE FOR INVESTMENTS SOLD 14,820

RECEIVABLE FOR FUND SHARES SOLD 4,087

DIVIDENDS RECEIVABLE 5,737

INTEREST RECEIVABLE 850

OTHER RECEIVABLES 40

PREPAID EXPENSES 14

TOTAL ASSETS 3,397,725

LIABILITIES

PAYABLE FOR INVESTMENTS PURCHASED $ 27,530

PAYABLE FOR FUND SHARES REDEEMED 3,935

ACCRUED MANAGEMENT FEE 1,339

DISTRIBUTION FEES PAYABLE 1,464

OTHER PAYABLES AND ACCRUED EXPENSES 705

TOTAL LIABILITIES 34,973

NET ASSETS $ 3,362,752

NET ASSETS CONSIST OF:

PAID IN CAPITAL $ 2,363,921

UNDISTRIBUTED NET INVESTMENT INCOME 3,579

ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 234,373
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS

NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 760,879

NET ASSETS $ 3,362,752

</TABLE>

STATEMENT OF ASSETS AND LIABILITIES - CONTINUED

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1997

CALCULATION OF MAXIMUM OFFERING PRICE $26.69
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($25,659 (DIVIDED BY) 961.4 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/94.25 OF $26.69) $28.32

CLASS T: $26.85
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,190,070 (DIVIDED BY) 81,556 SHARES)

MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $26.85) $27.82

CLASS B: $26.73
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($682,308 (DIVIDED BY) 25,522 SHARES) A

CLASS C: $26.84
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($684 (DIVIDED BY) 25.48 SHARES) A

INSTITUTIONAL CLASS: $27.07
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($464,031 (DIVIDED BY) 17,143 SHARES)

</TABLE>

A REDEMPTION PRICE PER-SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C>
AMOUNTS IN THOUSANDS YEAR ENDED NOVEMBER 30, 1997

INVESTMENT INCOME $ 52,216
DIVIDENDS

INTEREST 15,362

TOTAL INCOME 67,578

EXPENSES

MANAGEMENT FEE $ 14,928

TRANSFER AGENT FEES 5,444

DISTRIBUTION FEES 15,529

ACCOUNTING FEES AND EXPENSES 808

NON-INTERESTED TRUSTEES' COMPENSATION 16

CUSTODIAN FEES AND EXPENSES 49

REGISTRATION FEES 254

AUDIT 80

LEGAL 28

MISCELLANEOUS 95

TOTAL EXPENSES BEFORE REDUCTIONS 37,231

EXPENSE REDUCTIONS (433) 36,798

NET INVESTMENT INCOME 30,780

REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:

INVESTMENT SECURITIES 223,510

FOREIGN CURRENCY TRANSACTIONS (3)

FUTURES CONTRACTS 20,001 243,508

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:

INVESTMENT SECURITIES 326,757

ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 1 326,758

NET GAIN (LOSS) 570,266

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 601,046
FROM OPERATIONS

STATEMENT OF CHANGES IN NET ASSETS
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996

INCREASE (DECREASE) IN NET ASSETS

OPERATIONS $ 30,780 $ 29,299
NET INVESTMENT INCOME

NET REALIZED GAIN (LOSS) 243,508 69,742

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 326,758 261,601

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 601,046 360,642
FROM OPERATIONS

DISTRIBUTIONS TO SHAREHOLDERS (31,851) (28,968)
FROM NET INVESTMENT INCOME

FROM NET REALIZED GAIN (64,869) (35,076)

TOTAL DISTRIBUTIONS (96,720) (64,044)

SHARE TRANSACTIONS - NET INCREASE (DECREASE) 337,812 776,408

TOTAL INCREASE (DECREASE) IN NET ASSETS 842,138 1,073,006

NET ASSETS

BEGINNING OF PERIOD 2,520,614 1,447,608

END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 3,362,752 $ 2,520,614
INCOME OF $3,579 AND $4,640, RESPECTIVELY)

</TABLE>

FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED NOVEMBER 30,

1997 1996 F

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

NET ASSET VALUE, BEGINNING OF PERIOD $ 22.78 $ 20.38

INCOME FROM INVESTMENT OPERATIONS

NET INVESTMENT INCOME E .23 .06

NET REALIZED AND UNREALIZED GAIN (LOSS) 4.61 2.44

TOTAL FROM INVESTMENT OPERATIONS 4.84 2.50

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.34) (.10)

FROM NET REALIZED GAIN (.59) -

TOTAL DISTRIBUTIONS (.93) (.10)

NET ASSET VALUE, END OF PERIOD $ 26.69 $ 22.78

TOTAL RETURN B, C 22.05% 12.31%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 25,659 $ 3,306

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.26% G 1.46% A, D,
G

RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.25% H 1.44% A, H

RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .93% 1.27% A

PORTFOLIO TURNOVER 55% 78%

AVERAGE COMMISSION RATE I $ .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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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.
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED NOVEMBER 30,

1997 1996 1995 1994 1993

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

NET ASSET VALUE, $ 22.83 $ 19.95 $ 15.96 $ 14.86 $ 12.86
BEGINNING OF PERIOD

INCOME FROM INVESTMENT
OPERATIONS

NET INVESTMENT INCOME .26 C .30 C .31 .28 C .33

NET REALIZED AND UNREALIZED 4.62 3.35 4.26 1.03 1.97
GAIN (LOSS)

TOTAL FROM INVESTMENT 4.88 3.65 4.57 1.31 2.30
OPERATIONS

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.27) (.31) (.30) (.21) (.30)

FROM NET REALIZED GAIN (.59) (.46) (.28) - -

TOTAL DISTRIBUTIONS (.86) (.77) (.58) (.21) (.30)

NET ASSET VALUE, END OF PERIOD $ 26.85 $ 22.83 $ 19.95 $ 15.96 $ 14.86

TOTAL RETURN A, B 22.12% 18.89% 29.46% 8.84% 18.03%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 2,190,070 $ 1,672,994 $ 880,054 $ 179,501 $ 42,326
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE 1.23% 1.27% 1.48% 1.67% 1.77%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE 1.21% D 1.26% D 1.47% D 1.64% D 1.77%
NET ASSETS AFTER EXPENSE
REDUCTIONS

RATIO OF NET INVESTMENT INCOME 1.05% 1.45% 1.78% 1.69% 2.02%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER 55% 78% 80% 140% 120%

AVERAGE COMMISSION RATE E $ .0430 $ .0424

</TABLE>

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

1997 1996 1995 1994 E

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

NET ASSET VALUE, BEGINNING OF PERIOD $ 22.73 $ 19.90 $ 15.94 $ 15.21

INCOME FROM INVESTMENT OPERATIONS

NET INVESTMENT INCOME .13 D .19 D .26 .08 D

NET REALIZED AND UNREALIZED GAIN (LOSS) 4.61 3.33 4.23 .72

TOTAL FROM INVESTMENT OPERATIONS 4.74 3.52 4.49 .80

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.15) (.23) (.25) (.07)

FROM NET REALIZED GAIN (.59) (.46) (.28) -

TOTAL DISTRIBUTIONS (.74) (.69) (.53) (.07)

NET ASSET VALUE, END OF PERIOD $ 26.73 $ 22.73 $ 19.90 $ 15.94

TOTAL RETURN B, C 21.52% 18.22% 28.95% 5.25%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 682,308 $ 500,447 $ 270,101 $ 35,373

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.74% F 1.81% 1.85% 2.24% A

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.73% G 1.79% G 1.84% G 2.18% A,
AFTER EXPENSE REDUCTIONS G

RATIO OF NET INVESTMENT INCOME TO AVERAGE .53% .92% 1.41% 1.15% A
NET ASSETS

PORTFOLIO TURNOVER 55% 78% 80% 140%

AVERAGE COMMISSION RATE H $ .0430 $ .0424

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 (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 FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
FINANCIAL HIGHLIGHTS - CLASS C
YEAR ENDED
NOVEMBER 30,

1997 H

SELECTED PER-SHARE DATA

NET ASSET VALUE, BEGINNING OF PERIOD $ 26.65

INCOME FROM INVESTMENT OPERATIONS

NET INVESTMENT INCOME C .02

NET REALIZED AND UNREALIZED GAIN (LOSS) .17

TOTAL FROM INVESTMENT OPERATIONS .19

NET ASSET VALUE, END OF PERIOD $ 26.84

TOTAL RETURN B, D .71%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD (000 OMITTED) $ 684

RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.85% A, E

RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.81% A, F

RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.24% A

PORTFOLIO TURNOVER 55%

AVERAGE COMMISSION RATE G $ .0430

A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE
FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY
VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF
TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND
COMMISSION RATE STRUCTURES MAY DIFFER.
H FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF C SHARES) TO
NOVEMBER 30, 1997.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED NOVEMBER 30,

1997 1996 1995 1994 1993

</TABLE>

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

NET ASSET VALUE, $ 23.00 $ 20.09 $ 16.07 $ 14.93 $ 12.88
BEGINNING OF PERIOD

INCOME FROM
INVESTMENT OPERATIONS

NET INVESTMENT INCOME .39 B .42 B .45 .41 B .39

NET REALIZED AND UNREALIZED 4.68 3.37 4.28 1.05 2.02
GAIN (LOSS)

TOTAL FROM INVESTMENT OPERATIONS 5.07 3.79 4.73 1.46 2.41

LESS DISTRIBUTIONS

FROM NET INVESTMENT INCOME (.41) (.42) (.43) (.32) (.36)

FROM NET REALIZED GAIN (.59) (.46) (.28) - -

TOTAL DISTRIBUTIONS (1.00) (.88) (.71) (.32) (.36)

NET ASSET VALUE, END OF PERIOD $ 27.07 $ 23.00 $ 20.09 $ 16.07 $ 14.93

TOTAL RETURN A 22.87% 19.54% 30.43% 9.82% 18.90%

RATIOS AND SUPPLEMENTAL DATA

NET ASSETS, END OF PERIOD $ 464,031 $ 343,867 $ 297,453 $ 197,533 $ 191,138
(000 OMITTED)

RATIO OF EXPENSES TO AVERAGE .69% .71% .74% .73% .80%
NET ASSETS

RATIO OF EXPENSES TO AVERAGE NET .67% .70% .73% .71% .79%
ASSETS AFTER EXPENSE REDUCTIONS C C C C C

RATIO OF NET INVESTMENT INCOME 1.60% 2.02% 2.52% 2.62% 3.00%
TO AVERAGE NET ASSETS

PORTFOLIO TURNOVER 55% 78% 80% 140% 120%

AVERAGE COMMISSION RATE D $ .0430 $ .0424

</TABLE>

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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).
D 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1997

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 its
distribution plan. The fund commenced sale of Class C shares on
November 3, 1997. 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, registration, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities (including restricted
securities) for which exchange quotations are not readily available
(and in certain cases debt securities which trade on an exchange) are
valued primarily using dealer-supplied valuations or at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Income
receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Purchases and sales of securities are translated into U.S. dollars at
the contractual currency exchange rates established at the time of
each trade.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, and the
difference between the amount of net investment income accrued and the
U.S. dollar amount actually received. The effects of changes in
foreign currency
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
exchange rates on investments in securities are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, 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.
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 borne by Class C and 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.
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. The cost of the foreign currency contracts is
included in the cost basis of the associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of 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 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
received by the fund are recorded as interest income in the
accompanying financial statements.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock and bond markets and to fluctuations in interest
rates and currency values. Buying futures tends to increase the fund's
exposure to the underlying instrument, while selling futures tends to
decrease the fund's exposure to the underlying instrument or hedge
other fund investments. Losses may arise from changes in the value of
the underlying instruments or if the counterparties do not perform
under the contracts' terms. Gains (losses) are realized upon the
expiration or closing of the futures contracts. Futures contracts are
valued at the settlement price established each day by the board of
trade or exchange on which they are traded.
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,853,868,000 and $1,519,043,000, respectively, of which
U.S. government and government agency obligations aggregated
$3,171,000 and $48,219,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $503,243,000 and $523,245,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a fee
that is computed daily at an annual rate of .50% of the fund's average
net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to 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. This fee is 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion
of which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION

CLASS A $ 32,000 $ 32,000

CLASS T 9,636,000 9,636,000

CLASS B 5,861,000 1,465,000

CLASS C 256 256

$ 15,529,256 $ 11,133,256

Under the Plans, FMR or FDC 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.
SALES LOAD. FDC receives a front-end sales charge of up to 5.75% for
selling Class A shares (5.25% prior to August 1, 1997), and 3.50% for
selling Class T shares of the fund, respectively. FDC receives the
proceeds of contingent deferred sales charges levied on Class B share
redemptions occurring within six years of purchase (five years prior
to January 2, 1997) and Class C share redemptions occurring within one
year of purchase. Contingent deferred sales charges are based on
declining rates ranging from 5% to 1% (4% to 1% prior to January 2,
1997) 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.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION

CLASS A $ 461,000 $ 337,000

CLASS T 1,835,000 1,302,000

CLASS B 1,017,000 0*

$ 3,313,000 $ 1,639,000

* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH
WHICH THE SALES ARE MADE.
TRANSFER AGENT FEES. Each class of the fund has entered into a
separate transfer, dividend disbursing, and shareholder servicing
agent (collectively referred to as the Transfer Agents) contract with
respect to its shares. The Transfer Agents receive account fees and
asset-based fees that vary according to the account size and type of
account of
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
the shareholders of the respective classes of the fund. FIIOC pays for
typesetting, printing and mailing of all shareholder reports. For the
period, the following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS

CLASS A FIIOC* $ 31,000 .24

CLASS T** FIIOC* 3,566,000 .18

CLASS B FIIOC* 1,194,000 .20

CLASS C FIIOC* 50 .22***

INSTITUTIONAL CLASS FIIOC* 653,000 .14

$ 5,444,050

* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC)
AN AFFILIATE OF FMR.
** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS
THE TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET,
HOWEVER, HAD DELEGATED CERTAIN TRANSFER, DIVIDEND DISBURSING, AND
SHAREHOLDER SERVICES TO FIIOC FOR WHICH FIIOC RECEIVED ITS ALLOCABLE
SHARE OF ALL SUCH FEES.
*** ANNUALIZED
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 $473,000 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 A 1.10% $ 2,000

CLASS B 1.85% 33,000

CLASS C 1.85% 6,000

$ 41,000

Effective November 1, 1997, Class A, Class T, Class B, and the
Institutional Class expense limitations were changed from 1.50% to
1.10%, 1.75% to 1.35%, 2.25% to 1.85%, and from 1.25% to 0.85% of each
Class' average net assets, respectively.
5. EXPENSE REDUCTIONS - CONTINUED
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 $358,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses.
During the period, each applicable class' expenses were reduced as
follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST CREDITS

CLASS T $ 5,000

INSTITUTIONAL CLASS 29,000

$ 34,000

6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED NOVEMBER 30,

1997 1996 A

CLASS A

FROM NET INVESTMENT INCOME $ 131,000 $ 4,000

FROM NET REALIZED GAIN 98,000 -

TOTAL $ 229,000 $ 4,000

CLASS T

FROM NET INVESTMENT INCOME $ 20,835,000 $ 18,521,000

FROM NET REALIZED GAIN 43,072,000 21,465,000

TOTAL $ 63,907,000 $ 39,986,000

CLASS B

FROM NET INVESTMENT INCOME $ 3,503,000 $ 4,108,000

FROM NET REALIZED GAIN 13,038,000 6,588,000

TOTAL $ 16,541,000 $ 10,696,000

INSTITUTIONAL CLASS

FROM NET INVESTMENT INCOME $ 7,382,000 $ 6,335,000

FROM NET REALIZED GAIN 8,661,000 7,023,000

TOTAL $ 16,043,000 $ 13,358,000

$ 96,720,000 $ 64,044,000

A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS

AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,

1997 B 1996 A 1997 B 1996 A

CLASS A 919 150 $ 22,745 $ 3,202
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 9 - 208 3

SHARES REDEEMED (112) (5) (2,828) (105)

NET INCREASE (DECREASE) 816 145 $ 20,125 $ 3,100

CLASS T 28,655 44,565 $ 693,829 $ 918,821
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 2,675 1,866 60,512 37,447

SHARES REDEEMED (23,070) (17,253) (558,854) (358,513)

NET INCREASE (DECREASE) 8,260 29,178 $ 195,486 $ 597,755

CLASS B 5,544 11,769 $ 135,409 $ 243,202
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 700 478 15,570 9,527

SHARES REDEEMED (2,738) (3,806) (66,167) (79,827)

NET INCREASE (DECREASE) 3,506 8,441 $ 84,812 $ 172,902

CLASS C 25 - $ 678 $ -
SHARES SOLD

NET INCREASE (DECREASE) 25 - $ 678 $ -

INSTITUTIONAL CLASS 11,368 7,490 $ 260,181 $ 155,473
SHARES SOLD

REINVESTMENT OF DISTRIBUTIONS 515 432 11,887 8,672

SHARES REDEEMED (9,691) (7,780) (235,357) (161,494)

NET INCREASE (DECREASE) 2,192 142 $ 36,711 $ 2,651

</TABLE>

A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
B 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 $ 33,000

CLASS T 134,000

CLASS B 46,000

CLASS C 6,000

INSTITUTIONAL CLASS 35,000

$ 254,000

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Fidelity Advisor Series III and the Shareholders of
Fidelity Advisor Equity Income Fund:
We have audited the accompanying statements of assets and liabilities
of Fidelity Advisor Series III: Fidelity Advisor Equity Income Fund,
including the schedule of portfolio investments, as of November 30,
1997, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights of Class
A, Class T, Class B, Class C and Institutional Class for each of the
periods indicated therein. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Advisor Series III: Fidelity Advisor
Equity Income Fund as of November 30, 1997, the results of it's
operations for the year then ended, the changes in their net assets
for each of the two years in the period then ended, and the financial
highlights of Class A, Class T, Class B, Class C and Institutional
Class for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 13, 1998
DISTRIBUTIONS

The Board of Trustees of Advisor Equity Income Fund voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment
income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Class A 12/22/97 12/19/97 $.06 $1.54
1/5/98 1/2/98 - $.18
Class T 12/22/97 12/19/97 $.05 $1.54
1/5/98 1/2/98 - $.18
Class B 12/22/97 12/19/97 $.02 $1.54
1/5/98 1/2/98 - $.18
Class C 12/22/97 12/19/97 $.05 $1.54
1/5/98 1/2/98 - $.18
A total of 8.31% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
A total of 80.10%, 59.78%, and 70.26% of the dividends distributed by
Class A, Class T, and Class B, respectively, during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund will notify shareholders in January 1998 of these percentages
for use in preparing 1997 income tax returns.

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
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
Fidelity Advisor Short-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 - INSTITUTIONAL CLASS
ANNUAL REPORT
NOVEMBER 30, 1997
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.

REPORT OF INDEPENDENT 38 THE AUDITORS' OPINION.
ACCOUNTANTS

DISTRIBUTIONS 39

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - INSTITUTIONAL CLASS 22.87% 150.15% 372.57%

S&P 500(REGISTERED TRADEMARK) 28.51% 150.41% 456.23%

EQUITY INCOME FUNDS AVERAGE 23.99% 119.16% 303.74%

</TABLE>

CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, 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 one year average represents a peer
group of 178 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 NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

ADVISOR EQUITY INCOME FUND - INSTITUTIONAL CLASS 22.87% 20.13% 16.80%

S&P 500 28.51% 20.15% 18.69%

EQUITY INCOME FUNDS AVERAGE 23.99% 16.84% 14.72%

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
IMAHDR PRASUN SHR__CHT 19971130 19971210 115959 S00000000000001
FA Equity Income -CL I S&P 500
00080 SP001
1987/11/30 10000.00 10000.00
1987/12/31 10380.06 10761.00
1988/01/31 11089.99 11214.04
1988/02/29 11630.96 11736.61
1988/03/31 11478.78 11373.95
1988/04/30 11642.77 11500.20
1988/05/31 11785.69 11600.25
1988/06/30 12460.11 12132.71
1988/07/31 12437.86 12086.60
1988/08/31 12191.78 11675.66
1988/09/30 12552.02 12173.04
1988/10/31 12778.39 12511.45
1988/11/30 12698.81 12332.54
1988/12/31 12790.95 12548.36
1989/01/31 13610.59 13466.90
1989/02/28 13494.56 13131.57
1989/03/31 13762.81 13437.54
1989/04/30 14266.90 14134.94
1989/05/31 14608.27 14707.41
1989/06/30 14667.37 14623.58
1989/07/31 15593.73 15944.09
1989/08/31 15796.55 16256.59
1989/09/30 15592.81 16189.94
1989/10/31 14737.91 15814.33
1989/11/30 14931.51 16136.94
1989/12/31 15148.94 16524.23
1990/01/31 14191.01 15415.45
1990/02/28 14216.35 15614.31
1990/03/31 14216.35 16028.09
1990/04/30 13666.12 15627.39
1990/05/31 14566.05 17151.06
1990/06/30 14501.49 17034.43
1990/07/31 14267.80 16979.92
1990/08/31 13184.34 15444.94
1990/09/30 12187.31 14692.77
1990/10/31 11910.33 14629.59
1990/11/30 12706.12 15574.66
1990/12/31 12985.85 16009.20
1991/01/31 13646.60 16707.20
1991/02/28 14622.33 17901.76
1991/03/31 14855.69 18334.98
1991/04/30 14855.34 18378.99
1991/05/31 15668.89 19172.96
1991/06/30 14949.72 18294.84
1991/07/31 15767.87 19147.38
1991/08/31 16101.82 19601.17
1991/09/30 16018.40 19273.83
1991/10/31 16285.29 19532.10
1991/11/30 15624.89 18744.96
1991/12/31 16856.90 20889.38
1992/01/31 17026.60 20500.84
1992/02/29 17552.65 20767.35
1992/03/31 17267.47 20362.38
1992/04/30 17882.91 20961.04
1992/05/31 18040.78 21063.75
1992/06/30 17839.91 20749.90
1992/07/31 18303.29 21598.57
1992/08/31 17868.75 21155.80
1992/09/30 18014.65 21405.44
1992/10/31 18233.77 21480.36
1992/11/30 18891.58 22212.84
1992/12/31 19376.14 22486.05
1993/01/31 19964.79 22674.94
1993/02/28 20481.56 22983.32
1993/03/31 21161.51 23468.26
1993/04/30 21087.50 22900.33
1993/05/31 21429.57 23514.06
1993/06/30 21653.78 23582.25
1993/07/31 21953.20 23487.92
1993/08/31 22748.40 24378.11
1993/09/30 22612.99 24190.40
1993/10/31 22883.81 24691.14
1993/11/30 22462.54 24456.58
1993/12/31 23019.21 24752.50
1994/01/31 24102.47 25594.09
1994/02/28 23500.66 24900.49
1994/03/31 22499.12 23814.83
1994/04/30 23286.96 24119.66
1994/05/31 23468.77 24515.22
1994/06/30 23329.10 23914.60
1994/07/31 24137.77 24699.00
1994/08/31 25419.42 25711.65
1994/09/30 25005.52 25081.72
1994/10/31 25496.72 25646.06
1994/11/30 24667.81 24712.03
1994/12/31 24744.94 25078.51
1995/01/31 25138.22 25728.79
1995/02/28 26034.89 26731.44
1995/03/31 26902.78 27520.29
1995/04/30 27632.03 28330.76
1995/05/31 28424.68 29463.14
1995/06/30 28821.98 30147.57
1995/07/31 29890.05 31147.26
1995/08/31 30256.71 31225.44
1995/09/30 31212.67 32543.16
1995/10/31 30876.37 32426.98
1995/11/30 32173.56 33850.52
1995/12/31 33033.03 34502.48
1996/01/31 34022.79 35676.95
1996/02/29 34171.22 36007.67
1996/03/31 34435.89 36354.43
1996/04/30 34684.46 36890.29
1996/05/31 34966.18 37841.69
1996/06/30 34784.32 37985.87
1996/07/31 33486.15 36307.65
1996/08/31 34151.88 37073.38
1996/09/30 35383.87 39159.87
1996/10/31 36119.64 40239.90
1996/11/30 38460.73 43281.64
1996/12/31 38073.48 42424.23
1997/01/31 39384.57 45074.89
1997/02/28 39695.09 45428.28
1997/03/31 38152.10 43561.63
1997/04/30 39780.75 46162.26
1997/05/31 42102.45 48972.62
1997/06/30 44197.76 51166.59
1997/07/31 47398.22 55237.92
1997/08/31 45537.08 52143.49
1997/09/30 47955.34 54999.39
1997/10/31 45877.91 53162.41
1997/11/28 47257.04 55623.30
IMATRL PRASUN SHR__CHT 19971130 19971210 120004 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Equity Income Fund - Institutional Class
on November 30, 1987. As the chart shows, by November 30, 1997, the
value of the investment would have grown to $47,257 - a 372.57%
increase on the initial investment. For comparison, look at how the
S&P 500 did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 investment would have grown to
$55,623 - a 456.23% 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
The 12 months that ended
November 30, 1997, was a period
that truly tested the U.S. stock
market's resolve. But despite
frequent shifts in sentiment, an
interest-rate hike and global
volatility concerns, U.S. stocks still
managed to perform well. The
Standard & Poor's 500 Index - a
broad gauge of the U.S. stock
market - returned 28.51% during
the period, well above the
market's long-term annual
average of around 11%. In the first
half of the period, large-cap stocks
were responsible for much of the
market's gain, as investors were
drawn to stocks with recognizable
names and consistent
earnings-growth track records.
Consequently, stock prices soared
and enthusiasm was high. The
Federal Reserve Board - in an
attempt to halt inflation before it
appeared - raised a key
short-term interest rate by 0.25%
in March. The market paused
briefly, but then kept rolling as the
Dow Jones Industrial Average
reached the 8,000-point mark for
the first time ever in August. With
several multinational companies
announcing earnings shortfalls in
mid-August, small-cap stocks
came into favor among investors.
During August and September,
the Russell 2000 Index - which
measures small-cap stock
performance - was up 9.78%
while the S&P was down 0.43%.
Volatility in Asian markets in late
October sent skittish investors
running for cover. The Dow slid
554 points in one day, then
snapped back the next, reclaiming
330-plus points. Sensing
continued fallout from this
volatility, investors again became
quality-conscious and large-caps
regained their perch through
November.
An interview with Robert Chow, Portfolio Manager of Fidelity Advisor
Equity Income Fund
Q. HOW DID THE FUND DO, BOB?
A. For the 12 months that ended November 30, 1997, the fund's
Institutional Class shares returned 22.87%. Over the same period, the
Standard and Poor's 500 Index gained 28.51%. The equity income funds
average was up 23.99%, according to Lipper Analytical Services.
Q. WHY DID THE FUND UNDERPERFORM THE AVERAGE AND THE INDEX?
A. The market paid a premium for certainty over the period, especially
following the Asian crisis in October. That is, investors gravitated
toward stocks of companies that generally post steady earnings growth
in a variety of economic climates. As a result, investors who bought
the blue chip stocks in the S&P 500 that fit this profile were
rewarded, even though many of those stocks had very high valuations.
I'm a value investor, and I won't buy a stock unless it meets my value
criteria. I should note that relative to its peer group, the fund was
ahead for most of the period. The November 30 cutoff point for the
period happened to catch the fund trailing the equity income funds
average by a small amount.
Q. THE FUND'S SECTOR ALLOCATIONS SEEM QUITE STABLE WHEN COMPARED TO
THOSE REPORTED SIX MONTHS AGO. CAN YOU COMMENT ON THAT?
A. Sure. My goal is to achieve an annual turnover rate of about 33%,
which means that, on average, the fund holds a stock for three years.
In practice, the fund's turnover rate has been somewhat higher than
33%, as I have attempted to balance low turnover with profitability
considerations. For example, the turnover rate increased after the
stock market's sharp drop at the end of October because many stocks in
a variety of sectors that were not interesting to me before the drop
suddenly became attractive from a value standpoint. Many new
opportunities were created literally overnight, and I took the
opportunity to upgrade the risk/reward profile of the fund.
Q. ONE OF THE RISKS OF VALUE INVESTING IS BEING TOO EARLY WITH A
PURCHASE. HOW DO YOU HANDLE THAT ISSUE?
A. In addition to value considerations, I look closely at the basic
business prospects of a company. I want to determine if there's a good
reason for a stock's low valuation. I look at relative valuation as
well as absolute valuation. With relative valuation, I look at how a
stock is valued compared to similar stocks in its sector. For example,
if the stock of one bank has a lower relative valuation than that of
most other bank stocks, that stock might be attractive from a value
standpoint even though its absolute valuation might not be
particularly low. I'm not necessarily trying to buy stocks at their
absolute bottom.
Q. WHAT STOCKS DID WELL FOR THE FUND?
A. Wal-Mart has been one of the top five holdings since I began
managing the fund in April of 1996. From 1993 to 1995 the stock didn't
do much, as the company absorbed the costs of opening its superstores,
which offer groceries in addition to all of the items people usually
associate with Wal-Mart. The worst of the adjustment process seems to
be behind the company, and the stock rose in response to higher sales
and profits. Another good performer for the fund was IBM. In addition
to displaying a renewed emphasis on cutting costs and raising cash
flow, the company bought back almost 20% of its shares over the past
three years, thereby raising earnings for each share still
outstanding.
Q. WHAT STOCKS PERFORMED POORLY FOR THE FUND?
A. Mercury Finance, which the fund no longer owns, was a major
disappointment. The stock went from $15 to $2 in a single day when it
was discovered that the company's financial statements had been
falsified. Another holding that hurt the fund's performance was
Newmont Mining, a precious-metals mining company whose stock declined
as the price of gold went from about $370 an ounce to just under $300
an ounce during the period.
Q. WHAT'S YOUR OUTLOOK, BOB?
A. My outlook for the fund is very positive. Over the long term, and
in most market environments, history has shown that a value approach
has brought investors very competitive returns. I do not have a
favorite sector where I am looking for opportunities right now. My
plan is to continue to analyze stocks on an individual basis using my
valuation models, without trying to predict where the overall market
will go.
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.