FIDELITY ADVISOR
EQUITY INCOME
FUND - CLASS A, CLASS T, CLASS B AND CLASS C
ANNUAL REPORT
NOVEMBER 30, 1998
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
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 25 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 34 Notes to the financial statements.
REPORT OF INDEPENDENT 43 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 44
PROXY VOTING RESULTS 46
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
The month of November proved to be a strong one for the stock and bond
markets. The Dow Jones Industrial Average reached a record high.
Merger activity, which had lulled during the summer correction, has
increased significantly. Small-cap stocks posted their third
consecutive month of positive returns, as did emerging markets. While
bond returns generally were not at the levels of their equity
counterparts, they were mostly positive nonetheless.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR EQUITY INCOME FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). The initial offering of Class A shares took place on September
3, 1996. Class A shares bear a 0.25% 12b-1 fee that is reflected in
returns after September 3, 1996. Returns between September 10, 1992
(the date Class T shares were first offered) and September 3, 1996 are
those of Class T and reflect Class T shares' 0.50% 12b-1 fee (0.65%
prior to January 1, 1996). Returns prior to September 10, 1992 are
those of the Institutional Class, the original class of the fund,
which does not bear a 12b-1 fee. Had Class A shares' 12b-1 fee been
reflected, returns prior to September 10, 1992 would have been lower.
If Fidelity had not reimbursed certain class expenses, the past five
year and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL A 13.82% 132.52% 307.65%
FIDELITY ADV EQUITY INCOME - CL A 7.27% 119.15% 284.21%
(INCL. 5.75% SALES CHARGE)
S&P 500 (registered trademark) 23.66% 181.25% 457.74%
Equity Income Funds Average 10.66% 114.51% 285.26%
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, market
capitalization-weighted 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
219 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL A 13.82% 18.38% 15.09%
FIDELITY ADV EQUITY INCOME - CL A 7.27% 16.99% 14.41%
(INCL. 5.75% SALES CHARGE)
S&P 500 23.66% 22.98% 18.75%
Equity Income Funds Average 10.66% 16.40% 14.34%
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show
you what would have happened if Class A had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL A S&P 500
00246 SP001
1988/11/30 9425.00 10000.00
1988/12/31 9493.39 10175.00
1989/01/31 10101.72 10919.81
1989/02/28 10015.60 10647.91
1989/03/31 10214.70 10896.00
1989/04/30 10588.84 11461.51
1989/05/31 10842.20 11925.70
1989/06/30 10886.06 11857.72
1989/07/31 11573.60 12928.47
1989/08/31 11724.14 13181.87
1989/09/30 11572.91 13127.82
1989/10/31 10938.41 12823.26
1989/11/30 11082.10 13084.85
1989/12/31 11243.48 13398.89
1990/01/31 10532.51 12499.82
1990/02/28 10551.31 12661.07
1990/03/31 10551.31 12996.59
1990/04/30 10142.94 12671.68
1990/05/31 10810.86 13907.16
1990/06/30 10762.94 13812.60
1990/07/31 10589.50 13768.40
1990/08/31 9785.36 12523.73
1990/09/30 9045.37 11913.83
1990/10/31 8839.80 11862.60
1990/11/30 9430.43 12628.92
1990/12/31 9638.04 12981.27
1991/01/31 10128.45 13547.25
1991/02/28 10852.63 14515.88
1991/03/31 11025.83 14867.16
1991/04/30 11025.57 14902.84
1991/05/31 11629.38 15546.65
1991/06/30 11095.62 14834.61
1991/07/31 11702.84 15525.90
1991/08/31 11950.70 15893.87
1991/09/30 11888.79 15628.44
1991/10/31 12086.87 15837.86
1991/11/30 11596.72 15199.60
1991/12/31 12511.12 16938.43
1992/01/31 12637.07 16623.37
1992/02/29 13027.50 16839.48
1992/03/31 12815.85 16511.11
1992/04/30 13272.62 16996.54
1992/05/31 13389.79 17079.82
1992/06/30 13240.71 16825.33
1992/07/31 13584.62 17513.49
1992/08/31 13262.11 17154.46
1992/09/30 13348.79 17356.88
1992/10/31 13522.21 17417.63
1992/11/30 13999.55 18011.57
1992/12/31 14348.18 18233.11
1993/01/31 14795.65 18386.27
1993/02/28 15178.73 18636.33
1993/03/31 15671.71 19029.55
1993/04/30 15594.89 18569.04
1993/05/31 15837.07 19066.69
1993/06/30 15991.84 19121.98
1993/07/31 16213.27 19045.49
1993/08/31 16779.08 19767.32
1993/09/30 16667.89 19615.11
1993/10/31 16868.04 20021.14
1993/11/30 16523.34 19830.94
1993/12/31 16934.75 20070.89
1994/01/31 17713.11 20753.30
1994/02/28 17246.09 20190.89
1994/03/31 16507.59 19310.57
1994/04/30 17077.59 19557.74
1994/05/31 17189.36 19878.49
1994/06/30 17076.03 19391.47
1994/07/31 17659.82 20027.51
1994/08/31 18569.20 20848.63
1994/09/30 18253.94 20337.84
1994/10/31 18614.52 20795.44
1994/11/30 17983.52 20038.07
1994/12/31 18028.59 20335.24
1995/01/31 18305.06 20862.53
1995/02/28 18950.18 21675.54
1995/03/31 19562.18 22315.19
1995/04/30 20083.68 22972.37
1995/05/31 20639.95 23890.58
1995/06/30 20930.22 24445.56
1995/07/31 21686.46 25256.17
1995/08/31 21942.41 25319.56
1995/09/30 22616.92 26388.05
1995/10/31 22360.17 26293.84
1995/11/30 23282.12 27448.14
1995/12/31 23896.37 27976.80
1996/01/31 24604.73 28929.13
1996/02/29 24688.74 29197.30
1996/03/31 24869.24 29478.47
1996/04/30 25037.93 29912.98
1996/05/31 25230.72 30684.44
1996/06/30 25086.34 30801.34
1996/07/31 24143.79 29440.54
1996/08/31 24602.98 30061.44
1996/09/30 25473.31 31753.30
1996/10/31 25983.26 32629.06
1996/11/30 27658.82 35095.49
1996/12/31 27353.34 34400.24
1997/01/31 28268.04 36549.57
1997/02/28 28493.58 36836.12
1997/03/31 27360.77 35322.52
1997/04/30 28518.10 37431.28
1997/05/31 30153.45 39710.10
1997/06/30 31637.04 41489.11
1997/07/31 33934.71 44790.40
1997/08/31 32571.26 42281.24
1997/09/30 34275.73 44596.98
1997/10/31 32795.93 43107.44
1997/11/30 33757.17 45102.89
1997/12/31 34424.69 45877.30
1998/01/31 34343.00 46384.71
1998/02/28 36782.51 49729.97
1998/03/31 38450.86 52276.64
1998/04/30 38627.43 52802.54
1998/05/31 38287.88 51894.87
1998/06/30 38737.75 54002.84
1998/07/31 38152.26 53427.71
1998/08/31 32433.50 45703.13
1998/09/30 34012.32 48630.87
1998/10/31 36796.63 52586.51
1998/11/30 38420.82 55773.78
IMATRL PRASUN SHR__CHT 19981130 19981223 142353 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, 1988, and the current 5.75% sales charge was paid. As the chart
shows, by November 30, 1998, the value of the investment would have
grown to $38,421 - a 284.21% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $55,774 - a 457.74%
increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FIDELITY ADVISOR EQUITY INCOME FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). The initial offering of Class T shares took place on September
10, 1992. Class T shares bear a 0.50% 12b-1 fee (0.65% prior to
January 1, 1996) that is reflected in returns after September 10,
1992. Returns prior to that date are those of the Institutional Class,
the original class of the fund which does not bear a 12b-1 fee. Had
Class T shares' 12b-1 fee been reflected, returns prior to September
10, 1992 would have been lower. If Fidelity had not reimbursed certain
class expenses, the past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL T 13.63% 132.45% 307.52%
FIDELITY ADV EQUITY INCOME - CL T 9.65% 124.32% 293.26%
(INCL. 3.50% SALES CHARGE)
S&P 500 23.66% 181.25% 457.74%
Equity Income Funds Average 10.66% 114.51% 285.26%
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, market
capitalization-weighted 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
219 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL T 13.63% 18.38% 15.08%
FIDELITY ADV EQUITY INCOME - CL T 9.65% 17.54% 14.67%
(INCL. 3.50% SALES CHARGE)
S&P 500 23.66% 22.98% 18.75%
Equity Income Funds Average 10.66% 16.40% 14.34%
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show
you what would have happened if Class T had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL T S&P 500
00280 SP001
1988/11/30 9650.00 10000.00
1988/12/31 9720.02 10175.00
1989/01/31 10342.88 10919.81
1989/02/28 10254.70 10647.91
1989/03/31 10458.55 10896.00
1989/04/30 10841.62 11461.51
1989/05/31 11101.03 11925.70
1989/06/30 11145.94 11857.72
1989/07/31 11849.89 12928.47
1989/08/31 12004.02 13181.87
1989/09/30 11849.19 13127.82
1989/10/31 11199.54 12823.26
1989/11/30 11346.66 13084.85
1989/12/31 11511.89 13398.89
1990/01/31 10783.95 12499.82
1990/02/28 10803.20 12661.07
1990/03/31 10803.20 12996.59
1990/04/30 10385.08 12671.68
1990/05/31 11068.95 13907.16
1990/06/30 11019.88 13812.60
1990/07/31 10842.30 13768.40
1990/08/31 10018.96 12523.73
1990/09/30 9261.31 11913.83
1990/10/31 9050.82 11862.60
1990/11/30 9655.56 12628.92
1990/12/31 9868.13 12981.27
1991/01/31 10370.24 13547.25
1991/02/28 11111.71 14515.88
1991/03/31 11289.05 14867.16
1991/04/30 11288.78 14902.84
1991/05/31 11907.01 15546.65
1991/06/30 11360.50 14834.61
1991/07/31 11982.22 15525.90
1991/08/31 12236.00 15893.87
1991/09/30 12172.60 15628.44
1991/10/31 12375.42 15837.86
1991/11/30 11873.57 15199.60
1991/12/31 12809.79 16938.43
1992/01/31 12938.75 16623.37
1992/02/29 13338.50 16839.48
1992/03/31 13121.79 16511.11
1992/04/30 13589.48 16996.54
1992/05/31 13709.44 17079.82
1992/06/30 13556.80 16825.33
1992/07/31 13908.92 17513.49
1992/08/31 13578.72 17154.46
1992/09/30 13667.46 17356.88
1992/10/31 13845.02 17417.63
1992/11/30 14333.75 18011.57
1992/12/31 14690.71 18233.11
1993/01/31 15148.86 18386.27
1993/02/28 15541.09 18636.33
1993/03/31 16045.84 19029.55
1993/04/30 15967.18 18569.04
1993/05/31 16215.14 19066.69
1993/06/30 16373.60 19121.98
1993/07/31 16600.32 19045.49
1993/08/31 17179.64 19767.32
1993/09/30 17065.80 19615.11
1993/10/31 17270.72 20021.14
1993/11/30 16917.79 19830.94
1993/12/31 17339.03 20070.89
1994/01/31 18135.97 20753.30
1994/02/28 17657.80 20190.89
1994/03/31 16901.67 19310.57
1994/04/30 17485.28 19557.74
1994/05/31 17599.71 19878.49
1994/06/30 17483.68 19391.47
1994/07/31 18081.41 20027.51
1994/08/31 19012.50 20848.63
1994/09/30 18689.72 20337.84
1994/10/31 19058.89 20795.44
1994/11/30 18412.83 20038.07
1994/12/31 18458.98 20335.24
1995/01/31 18742.05 20862.53
1995/02/28 19402.57 21675.54
1995/03/31 20029.18 22315.19
1995/04/30 20563.14 22972.37
1995/05/31 21132.69 23890.58
1995/06/30 21429.88 24445.56
1995/07/31 22204.17 25256.17
1995/08/31 22466.24 25319.56
1995/09/30 23156.85 26388.05
1995/10/31 22893.97 26293.84
1995/11/30 23837.93 27448.14
1995/12/31 24466.84 27976.80
1996/01/31 25192.11 28929.13
1996/02/29 25278.13 29197.30
1996/03/31 25462.94 29478.47
1996/04/30 25635.65 29912.98
1996/05/31 25833.04 30684.44
1996/06/30 25685.21 30801.34
1996/07/31 24720.16 29440.54
1996/08/31 25190.32 30061.44
1996/09/30 26093.71 31753.30
1996/10/31 26627.50 32629.06
1996/11/30 28340.60 35095.49
1996/12/31 28040.78 34400.24
1997/01/31 28974.62 36549.57
1997/02/28 29204.88 36836.12
1997/03/31 28037.33 35322.52
1997/04/30 29230.13 37431.28
1997/05/31 30923.14 39710.10
1997/06/30 32448.78 41489.11
1997/07/31 34789.52 44790.40
1997/08/31 33400.51 42281.24
1997/09/30 35149.83 44596.98
1997/10/31 33628.86 43107.44
1997/11/30 34608.47 45102.89
1997/12/31 35301.82 45877.30
1998/01/31 35218.73 46384.71
1998/02/28 37702.81 49729.97
1998/03/31 39415.20 52276.64
1998/04/30 39581.10 52802.54
1998/05/31 39235.47 51894.87
1998/06/30 39692.93 54002.84
1998/07/31 39083.54 53427.71
1998/08/31 33211.32 45703.13
1998/09/30 34817.41 48630.87
1998/10/31 37674.94 52586.51
1998/11/30 39325.64 55773.78
IMATRL PRASUN SHR__CHT 19981130 19981223 143832 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, 1988, and the current 3.50% sales charge was paid. As the chart
shows, by November 30, 1998, the value of the investment would have
grown to $39,326 - a 293.26% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $55,774 - a 457.74%
increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FIDELITY ADVISOR EQUITY INCOME FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). Initial offering of Class B shares took place on June 30,
1994. Class B shares bear a 1.00% 12b-1 fee that is reflected in
returns after June 30, 1994. Returns between September 10, 1992 (the
date Class T shares were first offered) and June 30, 1994 are those of
Class T, and reflect Class T shares' prior 0.65% 12b-1 fee. Returns
prior to September 10, 1992 are those of the Institutional Class, the
original class of the fund, which does not bear a 12b-1 fee. Had Class
B shares' 12b-1 fee been reflected, returns prior to June 30, 1994
would have been lower. Class B shares' contingent deferred sales
charge included in the past one year, past five years, and past 10
years total return figures are 5%, 2% and 0%, respectively. If
Fidelity had not reimbursed certain class expenses, the past five year
and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL B 13.06% 127.80% 299.37%
FIDELITY ADV EQUITY INCOME - CL B 8.06% 125.80% 299.37%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500 23.66% 181.25% 457.74%
Equity Income Funds Average 10.66% 114.51% 285.26%
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, market
capitalization-weighted 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
219 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL B 13.06% 17.90% 14.85%
FIDELITY ADV EQUITY INCOME - CL B 8.06% 17.69% 14.85%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500 23.66% 22.98% 18.75%
Equity Income Funds Average 10.66% 16.40% 14.34%
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and
shows you what would have happened if Class B had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL B S&P 500
00180 SP001
1988/11/30 10000.00 10000.00
1988/12/31 10072.56 10175.00
1989/01/31 10718.01 10919.81
1989/02/28 10626.63 10647.91
1989/03/31 10837.88 10896.00
1989/04/30 11234.84 11461.51
1989/05/31 11503.66 11925.70
1989/06/30 11550.20 11857.72
1989/07/31 12279.68 12928.47
1989/08/31 12439.40 13181.87
1989/09/30 12278.95 13127.82
1989/10/31 11605.75 12823.26
1989/11/30 11758.20 13084.85
1989/12/31 11929.42 13398.89
1990/01/31 11175.07 12499.82
1990/02/28 11195.03 12661.07
1990/03/31 11195.03 12996.59
1990/04/30 10761.74 12671.68
1990/05/31 11470.41 13907.16
1990/06/30 11419.57 13812.60
1990/07/31 11235.55 13768.40
1990/08/31 10382.34 12523.73
1990/09/30 9597.21 11913.83
1990/10/31 9379.09 11862.60
1990/11/30 10005.76 12628.92
1990/12/31 10226.04 12981.27
1991/01/31 10746.37 13547.25
1991/02/28 11514.73 14515.88
1991/03/31 11698.49 14867.16
1991/04/30 11698.22 14902.84
1991/05/31 12338.87 15546.65
1991/06/30 11772.54 14834.61
1991/07/31 12416.81 15525.90
1991/08/31 12679.79 15893.87
1991/09/30 12614.10 15628.44
1991/10/31 12824.27 15837.86
1991/11/30 12304.22 15199.60
1991/12/31 13274.40 16938.43
1992/01/31 13408.03 16623.37
1992/02/29 13822.28 16839.48
1992/03/31 13597.71 16511.11
1992/04/30 14082.36 16996.54
1992/05/31 14206.67 17079.82
1992/06/30 14048.50 16825.33
1992/07/31 14413.39 17513.49
1992/08/31 14071.21 17154.46
1992/09/30 14163.17 17356.88
1992/10/31 14347.17 17417.63
1992/11/30 14853.63 18011.57
1992/12/31 15223.53 18233.11
1993/01/31 15698.30 18386.27
1993/02/28 16104.76 18636.33
1993/03/31 16627.81 19029.55
1993/04/30 16546.30 18569.04
1993/05/31 16803.25 19066.69
1993/06/30 16967.47 19121.98
1993/07/31 17202.40 19045.49
1993/08/31 17802.74 19767.32
1993/09/30 17684.76 19615.11
1993/10/31 17897.12 20021.14
1993/11/30 17531.39 19830.94
1993/12/31 17967.91 20070.89
1994/01/31 18793.75 20753.30
1994/02/28 18298.24 20190.89
1994/03/31 17514.69 19310.57
1994/04/30 18119.46 19557.74
1994/05/31 18238.04 19878.49
1994/06/30 18117.80 19391.47
1994/07/31 18737.21 20027.51
1994/08/31 19713.98 20848.63
1994/09/30 19379.38 20337.84
1994/10/31 19738.26 20795.44
1994/11/30 19068.36 20038.07
1994/12/31 19116.47 20335.24
1995/01/31 19385.37 20862.53
1995/02/28 20057.62 21675.54
1995/03/31 20719.11 22315.19
1995/04/30 21259.82 22972.37
1995/05/31 21837.40 23890.58
1995/06/30 22132.79 24445.56
1995/07/31 22934.25 25256.17
1995/08/31 23193.19 25319.56
1995/09/30 23895.81 26388.05
1995/10/31 23611.63 26293.84
1995/11/30 24587.73 27448.14
1995/12/31 25225.40 27976.80
1996/01/31 25949.26 28929.13
1996/02/29 26038.13 29197.30
1996/03/31 26216.20 29478.47
1996/04/30 26381.72 29912.98
1996/05/31 26572.71 30684.44
1996/06/30 26407.31 30801.34
1996/07/31 25399.49 29440.54
1996/08/31 25884.26 30061.44
1996/09/30 26790.18 31753.30
1996/10/31 27327.26 32629.06
1996/11/30 29066.38 35095.49
1996/12/31 28757.61 34400.24
1997/01/31 29705.23 36549.57
1997/02/28 29915.81 36836.12
1997/03/31 28716.34 35322.52
1997/04/30 29915.60 37431.28
1997/05/31 31655.19 39710.10
1997/06/30 33183.42 41489.11
1997/07/31 35573.47 44790.40
1997/08/31 34134.16 42281.24
1997/09/30 35916.86 44596.98
1997/10/31 34331.13 43107.44
1997/11/30 35322.21 45102.89
1997/12/31 36019.08 45877.30
1998/01/31 35905.69 46384.71
1998/02/28 38421.92 49729.97
1998/03/31 40146.96 52276.64
1998/04/30 40316.72 52802.54
1998/05/31 39934.77 51894.87
1998/06/30 40387.94 54002.84
1998/07/31 39750.91 53427.71
1998/08/31 33762.79 45703.13
1998/09/30 35376.49 48630.87
1998/10/31 38265.53 52586.51
1998/11/30 39936.63 55773.78
IMATRL PRASUN SHR__CHT 19981130 19981223 142542 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, 1988. As the chart shows, by November 30, 1998, the value of the
investment, would have been $39,937 - a 299.37% increase on the
initial investment. For comparison, look at how the Standard & Poor's
500 Index did over the same period. With dividends, and capital gains,
if any, reinvested, the same $10,000 investment would have grown to
$55,774 - a 457.74% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FIDELITY ADVISOR EQUITY INCOME FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). The initial offering of Class C shares took place on November
3, 1997. Class C shares bear a 1.00% 12b-1 fee that is reflected in
returns after November 3, 1997. Returns between June 30, 1994 (the
date Class B shares were first offered) and November 3, 1997 are those
of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns
between September 10, 1992 (the date Class T shares were first
offered) and June 30, 1994 are those of Class T shares, and reflect
Class T shares' prior 0.65% 12b-1 fee. Returns prior to September 10,
1992 are those of the Institutional Class, the original class of the
fund which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee
been reflected, returns prior to June 30, 1994 would have been lower.
Class C shares' contingent deferred sales charge included in the past
one year, past five years and past 10 years total return figures are
1%, 0% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses, the past five year and past 10 year total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL C 12.90% 127.55% 298.92%
FIDELITY ADV EQUITY INCOME - CL C 11.90% 127.55% 298.92%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500 23.66% 181.25% 457.74%
Equity Income Funds Average 10.66% 114.51% 285.26%
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, market
capitalization-weighted 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
219 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - CL C 12.90% 17.87% 14.84%
FIDELITY ADV EQUITY INCOME - CL C 11.90% 17.87% 14.84%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
S&P 500 23.66% 22.98% 18.75%
Equity Income Funds Average 10.66% 16.40% 14.34%
AVERAGE ANNUAL TOTAL RETURNS take Class C's cumulative return and
shows you what would have happened if Class C had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL C S&P 500
00480 SP001
1988/11/30 10000.00 10000.00
1988/12/31 10072.56 10175.00
1989/01/31 10718.01 10919.81
1989/02/28 10626.63 10647.91
1989/03/31 10837.88 10896.00
1989/04/30 11234.84 11461.51
1989/05/31 11503.66 11925.70
1989/06/30 11550.20 11857.72
1989/07/31 12279.68 12928.47
1989/08/31 12439.40 13181.87
1989/09/30 12278.95 13127.82
1989/10/31 11605.75 12823.26
1989/11/30 11758.20 13084.85
1989/12/31 11929.42 13398.89
1990/01/31 11175.07 12499.82
1990/02/28 11195.03 12661.07
1990/03/31 11195.03 12996.59
1990/04/30 10761.74 12671.68
1990/05/31 11470.41 13907.16
1990/06/30 11419.57 13812.60
1990/07/31 11235.55 13768.40
1990/08/31 10382.34 12523.73
1990/09/30 9597.21 11913.83
1990/10/31 9379.09 11862.60
1990/11/30 10005.76 12628.92
1990/12/31 10226.04 12981.27
1991/01/31 10746.37 13547.25
1991/02/28 11514.73 14515.88
1991/03/31 11698.49 14867.16
1991/04/30 11698.22 14902.84
1991/05/31 12338.87 15546.65
1991/06/30 11772.54 14834.61
1991/07/31 12416.81 15525.90
1991/08/31 12679.79 15893.87
1991/09/30 12614.10 15628.44
1991/10/31 12824.27 15837.86
1991/11/30 12304.22 15199.60
1991/12/31 13274.40 16938.43
1992/01/31 13408.03 16623.37
1992/02/29 13822.28 16839.48
1992/03/31 13597.71 16511.11
1992/04/30 14082.36 16996.54
1992/05/31 14206.67 17079.82
1992/06/30 14048.50 16825.33
1992/07/31 14413.39 17513.49
1992/08/31 14071.21 17154.46
1992/09/30 14163.17 17356.88
1992/10/31 14347.17 17417.63
1992/11/30 14853.63 18011.57
1992/12/31 15223.53 18233.11
1993/01/31 15698.30 18386.27
1993/02/28 16104.76 18636.33
1993/03/31 16627.81 19029.55
1993/04/30 16546.30 18569.04
1993/05/31 16803.25 19066.69
1993/06/30 16967.47 19121.98
1993/07/31 17202.40 19045.49
1993/08/31 17802.74 19767.32
1993/09/30 17684.76 19615.11
1993/10/31 17897.12 20021.14
1993/11/30 17531.39 19830.94
1993/12/31 17967.91 20070.89
1994/01/31 18793.75 20753.30
1994/02/28 18298.24 20190.89
1994/03/31 17514.69 19310.57
1994/04/30 18119.46 19557.74
1994/05/31 18238.04 19878.49
1994/06/30 18117.80 19391.47
1994/07/31 18737.21 20027.51
1994/08/31 19713.98 20848.63
1994/09/30 19379.38 20337.84
1994/10/31 19738.26 20795.44
1994/11/30 19068.36 20038.07
1994/12/31 19116.47 20335.24
1995/01/31 19385.37 20862.53
1995/02/28 20057.62 21675.54
1995/03/31 20719.11 22315.19
1995/04/30 21259.82 22972.37
1995/05/31 21837.40 23890.58
1995/06/30 22132.79 24445.56
1995/07/31 22934.25 25256.17
1995/08/31 23193.19 25319.56
1995/09/30 23895.81 26388.05
1995/10/31 23611.63 26293.84
1995/11/30 24587.73 27448.14
1995/12/31 25225.40 27976.80
1996/01/31 25949.26 28929.13
1996/02/29 26038.13 29197.30
1996/03/31 26216.20 29478.47
1996/04/30 26381.72 29912.98
1996/05/31 26572.71 30684.44
1996/06/30 26407.31 30801.34
1996/07/31 25399.49 29440.54
1996/08/31 25884.26 30061.44
1996/09/30 26790.18 31753.30
1996/10/31 27327.26 32629.06
1996/11/30 29066.38 35095.49
1996/12/31 28757.61 34400.24
1997/01/31 29705.23 36549.57
1997/02/28 29915.81 36836.12
1997/03/31 28716.34 35322.52
1997/04/30 29915.60 37431.28
1997/05/31 31655.19 39710.10
1997/06/30 33183.42 41489.11
1997/07/31 35573.47 44790.40
1997/08/31 34134.16 42281.24
1997/09/30 35916.86 44596.98
1997/10/31 34331.13 43107.44
1997/11/30 35334.48 45102.89
1997/12/31 36029.52 45877.30
1998/01/31 35916.46 46384.71
1998/02/28 38425.53 49729.97
1998/03/31 40146.15 52276.64
1998/04/30 40301.42 52802.54
1998/05/31 39920.29 51894.87
1998/06/30 40358.61 54002.84
1998/07/31 39722.71 53427.71
1998/08/31 33731.09 45703.13
1998/09/30 35342.05 48630.87
1998/10/31 38224.80 52586.51
1998/11/30 39892.28 55773.78
IMATRL PRASUN SHR__CHT 19981130 19981223 142716 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, 1988. As the chart shows, by November 30, 1998, the value of the
investment, would have been $39,892 - a 298.92% increase on the
initial investment. For comparison, look at how the Standard & Poor's
500 Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would have grown to
$55,774 - a 457.74% 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
When the final bell of the U.S. stock
market sounded on Monday,
November 23, 1998, the Dow
Jones Industrial Average stood at a
record high of 9374.27, serving
notice that the bleak economic
outlook from just a few short
months earlier would not keep
positive investor sentiment down.
For the 12-month period ended
November 30, 1998, the Dow -
an index of 30 blue-chip stocks -
returned 18.56%. What caused the
turnaround from the doldrums of
equity performance during the
summer and early fall? A variety of
factors: The economic problems in
Russia, Brazil and other emerging
markets began to dissipate; Asian
markets began to rebound; and,
perhaps most importantly, three
interest-rate cuts late in the period
by the Federal Reserve Board
helped stem the tide of a slowing
U.S. economy. All these factors
culminated in the Dow reaching its
record high late in November, a
peak that outpaced the previous
record set in July by nearly 40 points.
Small-cap stock performance was
still a far cry behind their large-cap
brethren. For the period, the Russell
2000 Index - a popular measure
of small-cap stock performance -
returned -6.62%, significantly
trailing the large-cap weighted
Standard & Poor's 500 Index's
return of 23.66%. Despite the late
rally in the equity market, this kind
of volatility has characterized the
entire year, and when it will level
off is impossible to predict.
An interview with Bob Chow, Portfolio Manager of Fidelity Advisor
Equity Income Fund
Q. HOW DID THE FUND PERFORM, BOB?
A. For the 12 months that ended November 30, 1998, the fund's Class A,
T, B and C shares returned 13.82%, 13.63% 13.06% and 12.90%,
respectively. During the same period, the Standard & Poor's 500 Index
returned 23.66%, while the equity income funds average returned
10.66%, according to Lipper Analytical Services.
Q. WHAT CAUSED THE FUND TO TRAIL THE INDEX YET BEAT THE LIPPER
AVERAGE?
A. The overall story was the same as we've seen the past few periods
regarding the performance of the S&P 500 index. The market continues
to favor the big growth stocks in the technology and pharmaceutical
sectors. Given the fund's objective to achieve a high dividend yield
and my conservative investment style, growth stocks are not the
primary focus for the fund. In my search for undervalued stocks, I
found the best deals in the financial, energy and utilities
industries. While these sectors underperformed the S&P 500 index, they
were top sectors for the fund and represented about 38% of the fund's
investments at the end of the period. With regard to the equity income
fund average, it is always difficult to know where my competitors are
investing. However, many equity income funds tend to have a higher
fixed-income exposure than Fidelity Advisor Equity Income Fund, which
hurt their performance.
Q. THE FUND'S SECTOR WEIGHTINGS REMAINED RELATIVELY STABLE OVER THE
PAST SIX MONTHS. WHY DID YOU MAINTAIN THESE ALLOCATIONS?
A. The fund's sector weightings will not change very much over time
unless there is a serious valuation shift, where one sector becomes
much cheaper than others. While this has started to happen in certain
sectors during the recent stock rally, I am comfortable with the
fund's current allocation. In addition, the turnover - or the amount
of trading in the fund - tends to be on the moderate side, which also
minimizes fluctuations in the sector weightings.
Q. WHAT STOCKS PERFORMED WELL FOR THE FUND?
A. Fleet Financial performed very well at the end of the period. It
was an example of a financial stock that was hammered along with the
rest of its sector when concerns were heightened regarding exposure to
emerging markets and troubled hedge funds. However, the stock rallied
significantly toward the end of the period as investors realized
Fleet's fundamental business outlook was solid. U.S. WEST also was a
good contributor during the period. Of all the regional Bell operating
companies, U.S. WEST was the least loved, primarily because the
western and mid-western region it serves is not seen as a high growth
area. The company's stock price, however, was well below comparable
telecommunications companies and the stock rallied as a result.
Q. WHICH STOCKS HURT PERFORMANCE?
A. PMI Group was the worst detractor from performance. The company is
a mortgage insurance provider that looked undervalued relative to its
competitors, and the stock ended up as one of the fund's top holdings.
Unfortunately, Freddie Mac, a large mortgage underwriter, announced
that it was looking to move into the mortgage insurance area. After
this news, PMI Group's stock took a nose dive. The fund's position in
Citigroup also hurt performance. This company was an example of
another financial stock that suffered after negative news regarding
its exposure to emerging markets and a troubled hedge fund. However, I
still had confidence in the company's ability to penetrate new markets
and grow revenues, and the stock was still a top holding at period's
end.
Q. WHAT'S YOUR OUTLOOK, BOB?
A. Looking at the big picture, my outlook is positive. With interest
rates declining worldwide and central banks working in unison to
reduce the impact of the Asian crisis, global stock markets have more
reason to react positively. In the U.S., we have a demographic
phenomenon where baby boomers are saving record amounts of money for
retirement, providing a solid backdrop for growth in stocks. I don't
see this trend reversing until the baby boomers start to retire and
begin to take money out of the market. On a short-term basis, I'm
somewhat concerned with the amount of speculative buying and rampant
optimism we've seen in the market. Normally, this spells trouble for
stocks on a short-term basis.
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 REDUCING THE
TOTAL NUMBER OF HOLDINGS IN
THE FUND:
"When I became portfolio manager
in 1996, there were well over 200
holdings in the fund. Since then,
I've always felt the ideal number
should be closer to125. From my
perspective, this is a more
manageable number of companies
to follow and it allows me to keep a
closer eye on each holding. The
problem is, in order to get down to
that number you have to increase
the average size of each stock in
the portfolio. With stock prices
high during much of this time
period, I had to pick my
opportunities carefully, taking
advantage of strength in the
market to sell certain holdings
and weakness to increase
investments.
"Good examples of this strategy are
recent purchases of Pepsi,
Kimberly-Clark and Bowater. Six
months ago, none of these stocks
was in the portfolio and now they
represent approximately 5% of the
fund's investments. As prices
dropped down to reasonable levels
for these stocks, I was able to
acquire top-quality companies that
met the fund's value criteria. As a
result, over time I've been able to
position the fund with strong
companies at reasonable prices.
Another factor that helped reduce
the total holdings was the high
number of mergers and
acquisitions among the fund's
positions."
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,
1998, more than $4.1 billion
MANAGER: Robert Chow, since
1996; joined Fidelity in 1989
(checkmark)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF NOVEMBER 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Fleet Financial Group, Inc. 3.3 2.3
General Electric Co. 2.6 1.3
International Business Machines Corp. 2.5 1.8
Philip Morris Companies, Inc. 2.3 1.7
Citigroup, Inc. 2.1 3.1
PMI Group, Inc. 2.0 2.8
AT&T Corp. 2.0 1.0
British Petroleum Co. PLC ADR 1.9 1.8
U.S. WEST, Inc. 1.8 1.7
Bristol-Myers Squibb Co. 1.8 1.1
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE MARKET SECTORS AS OF NOVEMBER 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
FINANCE 18.5 19.4
ENERGY 10.1 8.5
UTILITIES 9.0 6.1
TECHNOLOGY 8.5 8.8
BASIC INDUSTRIES 7.7 6.2
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1998 * AS OF MAY 31, 1998 **
ROW: 1, COL: 1, VALUE: 5.9
ROW: 1, COL: 2, VALUE: 94.09999999999999
STOCKS 95.7%
SHORT-TERM
INVESTMENTS 4.3%
FOREIGN
INVESTMENTS 8.0%
STOCKS 94.1%
SHORT-TERM
INVESTMENTS 5.9%
FOREIGN
INVESTMENTS 6.0%
ROW: 1, COL: 1, VALUE: 4.3
ROW: 1, COL: 2, VALUE: 95.7
*
**
INVESTMENTS NOVEMBER 30, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 94.1%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 2.6%
AEROSPACE & DEFENSE - 1.6%
AlliedSignal, Inc. 280,000 $ 12,320
GenCorp, Inc. 800,000 19,700
Lockheed Martin Corp. 160,000 16,600
United Technologies Corp. 180,000 19,294
67,914
DEFENSE ELECTRONICS - 1.0%
Litton Industries, Inc. (a) 540,000 33,041
Raytheon Co. Class B 130,000 7,199
40,240
TOTAL AEROSPACE & DEFENSE 108,154
BASIC INDUSTRIES - 7.7%
CHEMICALS & PLASTICS - 1.6%
BASF AG 400,000 15,124
Cytec Industries, Inc. (a) 400,000 9,025
du Pont (E.I.) de Nemours & Co. 220,000 12,925
Ferro Corp. 650,000 18,159
Monsanto Co. 40,000 1,813
W.R. Grace & Co. 400,000 6,600
63,646
IRON & STEEL - 0.4%
Nucor Corp. 370,000 15,540
METALS & MINING - 1.1%
Aluminum Co. of America 600,000 44,475
PAPER & FOREST PRODUCTS - 4.6%
Bowater, Inc. 1,700,000 67,150
Chesapeake Corp. 750,000 26,016
Georgia-Pacific Corp. 320,000 18,160
Kimberly-Clark Corp. 1,200,000 63,150
Pentair, Inc. 400,000 15,075
189,551
TOTAL BASIC INDUSTRIES 313,212
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 2.3%
BUILDING MATERIALS - 1.6%
American Standard Companies, Inc. (a) 280,000 $ 9,590
CalMat Co. 220,000 6,765
Masco Corp. 400,000 11,550
Sherwin-Williams Co. 200,000 5,675
USG Corp. 580,000 28,674
York International Corp. 140,000 5,880
68,134
CONSTRUCTION - 0.4%
Centex Corp. 220,000 7,851
Lennar Corp. 350,000 7,788
15,639
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Duke Realty Investments, Inc. 223,672 5,075
Public Storage, Inc. 240,000 6,375
11,450
TOTAL CONSTRUCTION & REAL ESTATE 95,223
DURABLES - 6.0%
AUTOS, TIRES, & ACCESSORIES - 3.4%
DaimlerChrysler AG 140,000 12,836
Ford Motor Co. 750,000 41,438
ITT Industries, Inc. 450,000 16,200
Snap-On, Inc. 191,600 6,514
TRW, Inc. 1,100,000 60,569
137,557
CONSUMER DURABLES - 0.4%
Minnesota Mining & Manufacturing Co. 230,000 18,472
CONSUMER ELECTRONICS - 0.8%
Black & Decker Corp. 150,000 8,128
Electrolux AB 800,000 12,178
Maytag Corp. 240,000 12,990
33,296
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
HOME FURNISHINGS - 0.8%
Leggett & Platt, Inc. 1,038,100 $ 23,552
Miller (Herman), Inc. 500,000 10,625
34,177
TEXTILES & APPAREL - 0.6%
Dexter Corp. 600,000 19,238
NIKE, Inc. Class B 120,000 4,800
24,038
TOTAL DURABLES 247,540
ENERGY - 10.1%
ENERGY SERVICES - 0.7%
Halliburton Co. 200,000 5,875
Helmerich & Payne, Inc. 240,000 4,140
Schlumberger Ltd. 440,000 19,663
29,678
OIL & GAS - 9.4%
Amerada Hess Corp. 500,000 27,750
Apache Corp. 650,000 14,950
British Petroleum Co. PLC ADR 847,253 78,053
Burlington Resources, Inc. 300,000 10,688
Chevron Corp. 630,000 52,684
Elf Aquitaine 350,000 43,575
Exxon Corp. 400,000 30,025
Texaco, Inc. 920,000 52,958
Tosco Corp. 400,000 10,450
Total SA sponsored ADR 500,000 30,563
USX-Marathon Group 1,100,000 31,213
382,909
TOTAL ENERGY 412,587
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 18.5%
BANKS - 3.2%
Bank of New York Co., Inc. 2,040,000 $ 69,870
Comerica, Inc. 500,000 32,250
Wells Fargo & Co. 800,000 28,800
130,920
CREDIT & OTHER FINANCE - 7.1%
American Express Co. 500,000 50,031
Citigroup, Inc. 1,700,000 85,319
Fleet Financial Group, Inc. 3,200,000 133,383
Household International, Inc. 514,300 20,122
288,855
FEDERAL SPONSORED CREDIT - 2.3%
Fannie Mae 760,000 55,290
Freddie Mac 650,000 39,325
94,615
INSURANCE - 5.1%
Allstate Corp. 620,000 25,265
American International Group, Inc. 200,000 18,800
Chubb Corp. (The) 200,000 14,013
General Re Corp. 50,000 11,675
Hartford Financial Services Group, Inc. 600,000 33,113
Loews Corp. 90,000 9,000
PMI Group, Inc. 1,490,000 81,484
PXRE Corp. 660,000 14,644
207,994
SECURITIES INDUSTRY - 0.8%
Lehman Brothers Holdings, Inc. 700,000 34,956
TOTAL FINANCE 757,340
HEALTH - 6.2%
DRUGS & PHARMACEUTICALS - 4.4%
American Home Products Corp. 850,000 45,263
Bristol-Myers Squibb Co. 600,000 73,538
Merck & Co., Inc. 400,000 61,950
180,751
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 1.8%
Allegiance Corp. 380,000 $ 15,319
Johnson & Johnson 700,000 56,875
72,194
TOTAL HEALTH 252,945
HOLDING COMPANIES - 0.3%
PartnerRe Ltd. 250,000 11,063
INDUSTRIAL MACHINERY & EQUIPMENT - 6.3%
ELECTRICAL EQUIPMENT - 3.0%
Emerson Electric Co. 230,000 14,950
General Electric Co. 1,200,000 108,600
123,550
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Applied Industrial Technologies, Inc. 328,900 4,605
Caterpillar, Inc. 420,000 20,764
Ingersoll-Rand Co. 200,000 9,362
Tyco International Ltd. 460,000 30,274
UNOVA, Inc. 1,000,000 16,938
81,943
POLLUTION CONTROL - 1.3%
Browning-Ferris Industries, Inc. 850,000 25,075
Waste Management, Inc. 600,000 25,725
50,800
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 256,293
MEDIA & LEISURE - 0.1%
PUBLISHING - 0.1%
Knight-Ridder, Inc. 120,000 6,173
NONDURABLES - 7.4%
BEVERAGES - 2.8%
Anheuser-Busch Companies, Inc. 580,000 35,163
PepsiCo, Inc. 1,600,000 61,900
Whitman Corp. 700,000 15,838
112,901
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - 0.8%
Heinz (H.J.) Co. 290,000 $ 16,911
Lance, Inc. 700,000 13,781
30,692
HOUSEHOLD PRODUCTS - 1.5%
Church & Dwight Co., Inc. 780,000 26,959
Procter & Gamble Co. 150,000 13,144
Unilever NV (NY shares) 300,000 23,194
63,297
TOBACCO - 2.3%
Philip Morris Companies, Inc. 1,700,000 95,094
TOTAL NONDURABLES 301,984
RETAIL & WHOLESALE - 5.8%
APPAREL STORES - 0.2%
TJX Companies, Inc. 360,000 9,225
DRUG STORES - 0.9%
CVS Corp. 200,000 9,875
Rite Aid Corp. 570,000 26,434
36,309
GENERAL MERCHANDISE STORES - 3.8%
Consolidated Stores Corp. (a) 800,000 17,200
Federated Department Stores, Inc. (a) 1,600,000 66,700
Jo-Ann Stores, Inc. (a) 470,000 7,491
May Department Stores Co. (The) 680,000 41,013
Wal-Mart Stores, Inc. 300,000 22,594
154,998
GROCERY STORES - 0.4%
Safeway, Inc. (a) 320,000 16,900
RETAIL & WHOLESALE, MISCELLANEOUS - 0.5%
Home Depot, Inc. 440,000 21,890
TOTAL RETAIL & WHOLESALE 239,322
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 1.9%
PRINTING - 1.0%
Donnelley (R.R.) & Sons Co. 450,000 $ 19,097
Reynolds & Reynolds Co. Class A 1,100,000 23,238
42,335
SERVICES - 0.9%
ACNielsen Corp. (a) 1,000,000 27,563
Dun & Bradstreet Corp. 320,000 9,660
37,223
TOTAL SERVICES 79,558
TECHNOLOGY - 8.5%
COMPUTER SERVICES & SOFTWARE - 1.2%
CompUSA, Inc. (a) 600,000 8,888
Electronic Data Systems Corp. 460,000 17,940
Wang Laboratories, Inc. (a) 880,000 22,440
49,268
COMPUTERS & OFFICE EQUIPMENT - 5.6%
Apple Computer, Inc. (a) 240,000 7,665
Compaq Computer Corp. 440,000 14,300
International Business Machines Corp. 630,000 103,950
Pitney Bowes, Inc. 1,200,000 67,200
Unisys Corp. (a) 1,300,000 37,050
230,165
ELECTRONICS - 1.3%
AMP, Inc. 366,345 17,722
Texas Instruments, Inc. 460,000 35,133
52,855
PHOTOGRAPHIC EQUIPMENT - 0.4%
Eastman Kodak Co. 200,000 14,513
TOTAL TECHNOLOGY 346,801
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.2%
AMR Corp. (a) 120,000 7,913
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
RAILROADS - 0.7%
Burlington Northern Santa Fe Corp. 720,000 $ 24,480
Wisconsin Central Transportation Corp. (a) 120,000 2,175
26,655
TRUCKING & FREIGHT - 0.5%
Arnold Industries, Inc. 620,000 8,835
Consolidated Freightways Corp. (a) 950,500 11,941
20,776
TOTAL TRANSPORTATION 55,344
UTILITIES - 9.0%
ELECTRIC UTILITY - 0.6%
American Electric Power Co., Inc. 220,000 10,203
Entergy Corp. 480,000 14,070
24,273
TELEPHONE SERVICES - 8.4%
AT&T Corp. 1,300,000 81,006
Bell Atlantic Corp. 1,300,000 72,313
BellSouth Corp. 550,000 47,988
MCI WorldCom, Inc. (a) 800,000 47,200
Sprint Corp.: 240,000 17,460
(FON Group)
(PCS Group) 120,000 1,920
U.S. WEST, Inc. 1,200,000 74,700
342,587
TOTAL UTILITIES 366,860
TOTAL COMMON STOCKS 3,850,399
(Cost $2,877,254)
CONVERTIBLE PREFERRED STOCKS - 0.0%
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor (J.N.) Holdings Ltd. 9.5% (a) 50,000 $ -
(Cost $235)
CASH EQUIVALENTS - 5.9%
Taxable Central Cash Fund (b) 240,547,241 240,547
(Cost $240,547)
TOTAL INVESTMENT IN SECURITIES - 100% $ 4,090,946
(Cost $3,118,036)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.81%. 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, 1998, the aggregate cost of investment securities for
income tax purposes was $3,119,706,000. Net unrealized appreciation
aggregated $971,240,000 of which $1,059,096,000 related to appreciated
investment securities and $87,856,000 related to depreciated
investment securities.
The fund hereby designates approximately $195,013,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $3,118,036) - $ 4,090,946
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 16,398
RECEIVABLE FOR FUND SHARES SOLD 3,797
DIVIDENDS RECEIVABLE 6,875
INTEREST RECEIVABLE 899
OTHER RECEIVABLES 70
TOTAL ASSETS 4,118,985
LIABILITIES
PAYABLE FOR FUND SHARES REDEEMED $ 6,000
ACCRUED MANAGEMENT FEE 1,690
DISTRIBUTION FEES PAYABLE 1,848
OTHER PAYABLES AND ACCRUED EXPENSES 874
TOTAL LIABILITIES 10,412
NET ASSETS $ 4,108,573
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 2,910,192
UNDISTRIBUTED NET INVESTMENT INCOME 4,229
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 221,226
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 972,926
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS $ 4,108,573
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1998
CALCULATION OF MAXIMUM OFFERING PRICE $28.15
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($65,436 (DIVIDED BY) 2,324.4 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/94.25 OF $28.15) $29.87
CLASS T: $28.35
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,635,406 (DIVIDED BY) 92,944 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $28.35) $29.38
CLASS B: $28.20
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($877,573 (DIVIDED BY) 31,123 SHARES) A
CLASS C: $28.23
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($37,014 (DIVIDED BY) 1,311 SHARES) A
INSTITUTIONAL CLASS: $28.59
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($493,144 (DIVIDED BY) 17,250 SHARES)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED NOVEMBER 30, 1998
INVESTMENT INCOME $ 64,563
DIVIDENDS
INTEREST 8,924
TOTAL INCOME 73,487
EXPENSES
MANAGEMENT FEE $ 19,202
TRANSFER AGENT FEES 6,820
DISTRIBUTION FEES 20,749
ACCOUNTING FEES AND EXPENSES 811
NON-INTERESTED TRUSTEES' COMPENSATION 14
CUSTODIAN FEES AND EXPENSES 84
REGISTRATION FEES 330
AUDIT 74
LEGAL 14
REPORTS TO SHAREHOLDERS 143
MISCELLANEOUS 10
TOTAL EXPENSES BEFORE REDUCTIONS 48,251
EXPENSE REDUCTIONS (580) 47,671
NET INVESTMENT INCOME 25,816
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 223,179
FOREIGN CURRENCY TRANSACTIONS (43) 223,136
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 212,032
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 15 212,047
NET GAIN (LOSS) 435,183
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 460,999
FROM OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 25,816 $ 30,780
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 223,136 243,508
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 212,047 326,758
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 460,999 601,046
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (25,412) (31,851)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN (218,223) (64,869)
TOTAL DISTRIBUTIONS (243,635) (96,720)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 528,457 337,812
TOTAL INCREASE (DECREASE) IN NET ASSETS 745,821 842,138
NET ASSETS
BEGINNING OF PERIOD 3,362,752 2,520,614
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 4,108,573 $ 3,362,752
INCOME OF $4,229 AND $3,579, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED NOVEMBER 30,
1998 1997 1996 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.69 $ 22.78 $ 20.38
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME E .24 .23 .06
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.19 4.61 2.44
TOTAL FROM INVESTMENT OPERATIONS 3.43 4.84 2.50
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.25) (.34) (.10)
FROM NET REALIZED GAIN (1.72) (.59) -
TOTAL DISTRIBUTIONS (1.97) (.93) (.10)
NET ASSET VALUE, END OF PERIOD $ 28.15 $ 26.69 $ 22.78
TOTAL RETURN B, C 13.82% 22.05% 12.31%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 65,436 $ 25,659 $ 3,306
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.03% 1.26% G 1.46% A, D, G
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.02% H 1.25% H 1.44% A, H
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .89% .93% 1.27% A
PORTFOLIO TURNOVER 59% 55% 78%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 26.85 $ 22.83 $ 19.95 $ 15.96 $ 14.86
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .19 C .26 C .30 C .31 .28 C
NET REALIZED AND UNREALIZED 3.22 4.62 3.35 4.26 1.03
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS 3.41 4.88 3.65 4.57 1.31
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.19) (.27) (.31) (.30) (.21)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (1.91) (.86) (.77) (.58) (.21)
NET ASSET VALUE, END OF PERIOD $ 28.35 $ 26.85 $ 22.83 $ 19.95 $ 15.96
TOTAL RETURN A, B 13.63% 22.12% 18.89% 29.46% 8.84%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 2,635,406 $ 2,190,070 $ 1,672,994 $ 880,054 $ 179,501
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.21% 1.23% 1.27% 1.48% 1.67%
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET 1.20% D 1.21% D 1.26% D 1.47% D 1.64% D
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO .72% 1.05% 1.45% 1.78% 1.69%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER 59% 55% 78% 80% 140%
</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).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 26.73 $ 22.73 $ 19.90 $ 15.94 $ 15.21
OF PERIOD
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .05 D .13 D .19 D .26 .08 D
NET REALIZED AND UNREALIZED 3.21 4.61 3.33 4.23 .72
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS 3.26 4.74 3.52 4.49 .80
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.07) (.15) (.23) (.25) (.07)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (1.79) (.74) (.69) (.53) (.07)
NET ASSET VALUE, END OF PERIOD $ 28.20 $ 26.73 $ 22.73 $ 19.90 $ 15.94
TOTAL RETURN B, C 13.06% 21.52% 18.22% 28.95% 5.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 877,573 $ 682,308 $ 500,447 $ 270,101 $ 35,373
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.74% 1.74% F 1.81% 1.85% 2.24% A
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET 1.72% G 1.73% G 1.79% G 1.84% G 2.18% A, G
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO .19% .53% .92% 1.41% 1.15% A
AVERAGE NET ASSETS
PORTFOLIO TURNOVER 59% 55% 78% 80% 140%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED
NOVEMBER 30,
1998 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.84 $ 26.65
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .02 .02
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.21 .17
TOTAL FROM INVESTMENT OPERATIONS 3.23 .19
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.12) -
FROM NET REALIZED GAIN (1.72) -
TOTAL DISTRIBUTIONS (1.84) -
NET ASSET VALUE, END OF PERIOD $ 28.23 $ 26.84
TOTAL RETURN B, C 12.90% .71%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 37,014 $ 684
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.84% 1.85% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.82% G 1.81% A, G
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .07% 1.24% A
PORTFOLIO TURNOVER 59% 55%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
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).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 27.07 $ 23.00 $ 20.09 $ 16.07 $ 14.93
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .34 B .39 B .42 B .45 .41 B
NET REALIZED AND UNREALIZED 3.24 4.68 3.37 4.28 1.05
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS 3.58 5.07 3.79 4.73 1.46
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.34) (.41) (.42) (.43) (.32)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (2.06) (1.00) (.88) (.71) (.32)
NET ASSET VALUE, END OF PERIOD $ 28.59 $ 27.07 $ 23.00 $ 20.09 $ 16.07
TOTAL RETURN A 14.23% 22.87% 19.54% 30.43% 9.82%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 493,144 $ 464,031 $ 343,867 $ 297,453 $ 197,533
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE .68% .69% .71% .74% .73%
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET .67% C .67% C .70% C .73% C .71% C
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO 1.25% 1.60% 2.02% 2.52% 2.62%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER 59% 55% 78% 80% 140%
</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).
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Equity Income Fund (the fund) is a fund of Fidelity
Advisor Series III (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
settlement date on purchases and sales of securities. The effects of
changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date
, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income is accrued as earned. Investment
income is recorded net of foreign taxes withheld where recovery of
such taxes is uncertain.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
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, foreign currency transactions,
passive foreign investment companies (PFIC), 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the fund are recorded
as interest income in the accompanying financial statements.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,395,680,000 and $2,153,562,000, 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. As of November 18, 1998 shareholders approved an amended
management fee contract with FMR. Effective December 1, 1998 FMR will
receive a monthly fee that is calculated on the basis of a group fee
rate plus a fixed individual fund fee rate applied to the average net
assets of the fund. The group fee rate is the weighted average of a
series of rates and is based on the monthly average net assets of all
the mutual funds advised by FMR. The rates will range from .2500%
to.5200%. The annual individual fund fee rate will be .20%.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .25%
CLASS T .50%
CLASS B 1.00%*
CLASS C 1.00%*
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
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 retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ $
119,000 -
CLASS T 12,462,000 185,000
CLASS B 7,988,000 5,996,000
CLASS C 180,000 179,000
$ 20,749,000 $ 6,360,000
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $
18,000
CLASS T 394,000
CLASS B 271,000
CLASS C 19,000
INSTITUTIONAL CLASS 28,000
SALES LOAD. FDC receives a front-end sales charge of up to 5.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging from 5% to 1% for Class B and 1% for Class C, of the
lesser of the cost of shares at the initial date of purchase or the
net asset value of the redeemed shares, excluding any reinvested
dividends and capital gains. In addition, purchases of Class A and
Class T shares that were subject to a finder's fee bear a contingent
deferred sales charge on assets that do not remain in the fund for at
least one year. The Class A and Class T contingent deferred sales
charge is based on 0.25% of the lesser of the cost of shares at the
initial date of purchase or the net asset value of the redeemed
shares, excluding any reinvested dividends and capital gains. A
portion of the sales charges paid to FDC are paid to securities
dealers, banks and other financial institutions.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED
FDC BY FDC
CLASS A $ $
672,000 278,000
CLASS T 1,700,000 545,000
CLASS B 1,178,000 1,178,000 *
CLASS C 10,000 10,000 *
$ 3,560,000 $ 2,011,000
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent (collectively referred to
as the transfer agent) for the fund's Class A, Class T, Class B, Class
C and Institutional Class. FIIOC receives account fees and asset-based
fees that vary according to the account size and type of account of
the shareholders of the respective classes of the fund. FIIOC pays for
typesetting, printing and mailing of all shareholder reports, except
proxy statements. For the period, the following amounts were paid to
FIIOC :
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ .23
111,000
CLASS T 4,388,000 .18
CLASS B 1,589,000 .20
CLASS C 40,000 .22
INSTITUTIONAL CLASS 692,000 .14
$ 6,820,000
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC) maintains the
fund's accounting records. The fee is based on the level of average
net assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $657,000 for the
period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $579,000 under this arrangement.
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $1,000 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED NOVEMBER 30,
1998 1997
FROM NET INVESTMENT INCOME
CLASS A $ $
412,000 131,000
CLASS T 17,008,000 20,835,000
CLASS B 1,994,000 3,503,000
CLASS C 38,000 -
INSTITUTIONAL CLASS 5,960,000 7,382,000
TOTAL $ 25,412,000 $ 31,851,000
FROM NET REALIZED GAIN
CLASS A $ $
1,745,000 98,000
CLASS T 142,228,000 43,072,000
CLASS B 44,523,000 13,038,000
CLASS C 120,000 -
INSTITUTIONAL CLASS 29,607,000 8,661,000
TOTAL $ 218,223,000 $ 64,869,000
TOTAL $ 243,635,000 $ 96,720,000
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1998 1997A 1998 1997A
CLASS A 1,676 919 $ $
SHARES SOLD 45,746 22,745
REINVESTMENT OF DISTRIBUTIONS 81 9 2,044 208
SHARES REDEEMED (394) (112) (10,576) (2,828)
NET INCREASE (DECREASE) 1,363 816 $ 37,214 $ 20,125
CLASS T 29,496 28,655 $ $
SHARES SOLD 803,775 693,828
REINVESTMENT OF DISTRIBUTIONS 5,979 2,675 151,631 60,512
SHARES REDEEMED (24,087) (23,070) (653,931) (558,854)
NET INCREASE (DECREASE) 11,388 8,260 $ 301,475 $ 195,486
CLASS B 7,788 5,544 $ $
SHARES SOLD 212,094 135,409
REINVESTMENT OF DISTRIBUTIONS 1,630 700 41,041 15,570
SHARES REDEEMED (3,817) (2,738) (102,483) (66,167)
NET INCREASE (DECREASE) 5,601 3,506 $ 150,652 $ 84,812
CLASS C 1,373 25 $ $
SHARES SOLD 37,538 678
REINVESTMENT OF DISTRIBUTIONS 6 - 145 -
SHARES REDEEMED (93) - (2,412) -
NET INCREASE (DECREASE) 1,286 25 $ 35,271 $ 678
INSTITUTIONAL CLASS 4,647 11,368 $ $
SHARES SOLD 128,397 260,181
REINVESTMENT OF DISTRIBUTIONS 1,179 515 30,191 11,887
SHARES REDEEMED (5,719) (9,691) (154,743) (235,357)
NET INCREASE (DECREASE) 107 2,192 $ 3,845 $ 36,711
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $
11,000
CLASS T 181,000
CLASS B 78,000
CLASS C 16,000
INSTITUTIONAL CLASS 44,000
$ 330,000
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series III and the Shareholders of
Fidelity Advisor Equity Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Equity Income Fund (a fund of Fidelity Advisor Series
III) at November 30, 1998, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Equity Income Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at November 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 12, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity 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:
CLASS A
PAY DATE 12/22/97 1/5/98 12/21/98 1/11/99
RECORD DATE 12/19/97 1/2/98 12/18/98 1/8/99
DIVIDENDS $0.06 - $0.06 -
SHORT-TERM
CAPITAL GAINS $0.44 $0.02 - $.03
LONG-TERM
CAPITAL GAINS $1.10 $0.16 $1.10 $.16
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 42.65% - - -
20% rate 57.35% 100% 100% 100%
CLASS T
PAY DATE 12/22/97 1/5/98 12/21/98 1/11/99
RECORD DATE 12/19/97 1/2/98 12/18/98 1/8/99
DIVIDENDS $0.05 - $0.05 -
SHORT-TERM
CAPITAL GAINS $0.44 $0.02 - $.03
LONG-TERM
CAPITAL GAINS $1.10 $0.16 $1.10 $.16
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 42.65% - - -
20% rate 57.35% 100% 100% 100%
CLASS B
PAY DATE 12/22/97 1/5/98 12/21/98 1/11/99
RECORD DATE 12/19/97 1/2/98 12/18/98 1/8/99
DIVIDENDS $0.02 - $0.01 -
SHORT-TERM
CAPITAL GAINS $0.44 $0.02 - $.03
LONG-TERM
CAPITAL GAINS $1.10 $0.16 $1.10 $.16
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 42.65% - - -
20% rate 57.35% 100% 100% 100%
CLASS C
PAY DATE 12/22/97 1/5/98 12/21/98 1/11/99
RECORD DATE 12/19/97 1/2/98 12/18/98 1/8/99
DIVIDENDS $0.05 - $0.01 -
SHORT-TERM
CAPITAL GAINS $0.44 $0.02 - $.03
LONG-TERM
CAPITAL GAINS $1.10 $0.16 $1.10 $.16
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 42.65% - - -
20% rate 57.35% 100% 100% 100%
A total of 1.27% 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 49.67%, 67.72%, 80.81% and 22.16% of dividends distributed
by Class A, Class T, Class B and Class C, respectively, during the
fiscal year qualifies for the dividends-received deduction for
corporate shareholders.
The fund will notify shareholders in January 1999 of these percentages
for use in preparing 1998 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on November 18,
1998. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To approve an amended management contract for the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,637,972,757.80 84.056
AGAINST 67,740,780.72 3.476
ABSTAIN 242,951,802.17 12.468
TOTAL 1,948,665,340.69 100.000
PROPOSAL 2
To approve a new sub-advisory agreement with FMR Far East for the
fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,624,449,378.01 83.362
AGAINST 69,491,766.35 3.566
ABSTAIN 254,724,196.33 13.072
TOTAL 1,948,665,340.69 100.000
PROPOSAL 3
To approve a new sub-advisory agreement with FMR U.K. for the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,642,160,810.16 84.271
AGAINST 55,201,925.57 2.833
ABSTAIN 251,302,604.96 12.896
TOTAL 1,948,665,340.69 100.000
PROPOSAL 4
To amend the Class T distribution and service plan of the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 932,547,262.31 78.755
AGAINST 97,434,254.70 8.229
ABSTAIN 154,128,028.19 13.016
TOTAL 1,184,109,545.20 100.000
PROPOSAL 5
To amend the Class B distribution and service plan of the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 285,976,785.71 73.299
AGAINST 17,505,771.99 4.487
ABSTAIN 86,668,806.29 22.214
TOTAL 390,151,363.99 100.00
PROPOSAL 6
To approve an agreement and plan providing for the reorganization of
the fund from a separate series of one Massachusetts Business Trust to
another.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,638,349,105.61 84.075
AGAINST 57,305,481.73 2.941
ABSTAIN 253,010,753.35 12.984
TOTAL 1,948,665,340.69 100.000
PROPOSAL 7
To adopt a new fundamental investment policy for the fund permitting
the fund to invest all of its assets in another open-end investment
company managed by FMR or an affiliate with substantially the same
investment objective and policies.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,601,596,057.33 82.189
AGAINST 93,978,071.55 4.823
ABSTAIN 253,091,211.81 12.988
TOTAL 1,948,665,340.69 100.000
PROPOSAL 8
To amend the fund's fundamental investment limitation concerning
diversification.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,598,459,179.90 82.028
AGAINST 95,985,925.94 4.926
ABSTAIN 254,220,234.85 13.046
TOTAL 1,948,665,340.69 100.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Richard A. Spillane, Jr., Vice President
C. Robert Chow, 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 *
* INDEPENDENT TRUSTEES
EPI-ANN-0199 69322
1.539449.101
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
(FIDELITY_LOGO_GRAPHIC) (REGISTERED TRADEMARK)
FIDELITY ADVISOR
EQUITY INCOME
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
NOVEMBER 30, 1998
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
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 19 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 28 Notes to the financial statements.
REPORT OF INDEPENDENT 37 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 38
PROXY VOTING RESULTS 39
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
The month of November proved to be a strong one for the stock and bond
markets. The Dow Jones Industrial Average reached a record high.
Merger activity, which had lulled during the summer correction, has
increased significantly. Small-cap stocks posted their third
consecutive month of positive returns, as did emerging markets. While
bond returns generally were not at the levels of their equity
counterparts, they were mostly positive nonetheless.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR EQUITY INCOME FUND - INSTITUTIONAL CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). If Fidelity had not reimbursed certain class expenses, the
past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - INST CL 14.23% 140.32% 325.10%
S&P 500(registered trademark) 23.66% 181.25% 457.74%
Equity Income Funds Average 10.66% 114.51% 285.26%
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, market capitalization-weighted 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 219 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV EQUITY INCOME - INST CL 14.23% 19.17% 15.57%
S&P 500 23.66% 22.98% 18.75%
Equity Income Funds Average 10.66% 16.40% 14.34%
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative
return and show you what would have happened if Institutional Class
had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Equity Income -CL I S&P 500
00080 SP001
1988/11/30 10000.00 10000.00
1988/12/31 10072.56 10175.00
1989/01/31 10718.01 10919.81
1989/02/28 10626.63 10647.91
1989/03/31 10837.88 10896.00
1989/04/30 11234.84 11461.51
1989/05/31 11503.66 11925.70
1989/06/30 11550.20 11857.72
1989/07/31 12279.68 12928.47
1989/08/31 12439.40 13181.87
1989/09/30 12278.95 13127.82
1989/10/31 11605.75 12823.26
1989/11/30 11758.20 13084.85
1989/12/31 11929.42 13398.89
1990/01/31 11175.07 12499.82
1990/02/28 11195.03 12661.07
1990/03/31 11195.03 12996.59
1990/04/30 10761.74 12671.68
1990/05/31 11470.41 13907.16
1990/06/30 11419.57 13812.60
1990/07/31 11235.55 13768.40
1990/08/31 10382.34 12523.73
1990/09/30 9597.21 11913.83
1990/10/31 9379.09 11862.60
1990/11/30 10005.76 12628.92
1990/12/31 10226.04 12981.27
1991/01/31 10746.37 13547.25
1991/02/28 11514.73 14515.88
1991/03/31 11698.49 14867.16
1991/04/30 11698.22 14902.84
1991/05/31 12338.87 15546.65
1991/06/30 11772.54 14834.61
1991/07/31 12416.81 15525.90
1991/08/31 12679.79 15893.87
1991/09/30 12614.10 15628.44
1991/10/31 12824.27 15837.86
1991/11/30 12304.22 15199.60
1991/12/31 13274.40 16938.43
1992/01/31 13408.03 16623.37
1992/02/29 13822.28 16839.48
1992/03/31 13597.71 16511.11
1992/04/30 14082.36 16996.54
1992/05/31 14206.67 17079.82
1992/06/30 14048.50 16825.33
1992/07/31 14413.39 17513.49
1992/08/31 14071.21 17154.46
1992/09/30 14186.10 17356.88
1992/10/31 14358.65 17417.63
1992/11/30 14876.66 18011.57
1992/12/31 15258.24 18233.11
1993/01/31 15721.78 18386.27
1993/02/28 16128.73 18636.33
1993/03/31 16664.18 19029.55
1993/04/30 16605.89 18569.04
1993/05/31 16875.27 19066.69
1993/06/30 17051.83 19121.98
1993/07/31 17287.61 19045.49
1993/08/31 17913.81 19767.32
1993/09/30 17807.18 19615.11
1993/10/31 18020.44 20021.14
1993/11/30 17688.70 19830.94
1993/12/31 18127.07 20070.89
1994/01/31 18980.11 20753.30
1994/02/28 18506.20 20190.89
1994/03/31 17717.51 19310.57
1994/04/30 18337.92 19557.74
1994/05/31 18481.09 19878.49
1994/06/30 18371.10 19391.47
1994/07/31 19007.90 20027.51
1994/08/31 20017.17 20848.63
1994/09/30 19691.23 20337.84
1994/10/31 20078.05 20795.44
1994/11/30 19425.30 20038.07
1994/12/31 19486.04 20335.24
1995/01/31 19795.73 20862.53
1995/02/28 20501.84 21675.54
1995/03/31 21185.29 22315.19
1995/04/30 21759.55 22972.37
1995/05/31 22383.75 23890.58
1995/06/30 22696.61 24445.56
1995/07/31 23537.69 25256.17
1995/08/31 23826.42 25319.56
1995/09/30 24579.22 26388.05
1995/10/31 24314.39 26293.84
1995/11/30 25335.89 27448.14
1995/12/31 26012.71 27976.80
1996/01/31 26792.12 28929.13
1996/02/29 26909.00 29197.30
1996/03/31 27117.42 29478.47
1996/04/30 27313.17 29912.98
1996/05/31 27535.02 30684.44
1996/06/30 27391.81 30801.34
1996/07/31 26369.53 29440.54
1996/08/31 26893.77 30061.44
1996/09/30 27863.94 31753.30
1996/10/31 28443.34 32629.06
1996/11/30 30286.89 35095.49
1996/12/31 29981.94 34400.24
1997/01/31 31014.39 36549.57
1997/02/28 31258.92 36836.12
1997/03/31 30043.85 35322.52
1997/04/30 31326.37 37431.28
1997/05/31 33154.65 39710.10
1997/06/30 34804.66 41489.11
1997/07/31 37324.95 44790.40
1997/08/31 35859.34 42281.24
1997/09/30 37763.66 44596.98
1997/10/31 36127.74 43107.44
1997/11/30 37213.77 45102.89
1997/12/31 37968.82 45877.30
1998/01/31 37894.85 46384.71
1998/02/28 40591.10 49729.97
1998/03/31 42449.49 52276.64
1998/04/30 42656.35 52802.54
1998/05/31 42286.96 51894.87
1998/06/30 42806.49 54002.84
1998/07/31 42169.14 53427.71
1998/08/31 35854.88 45703.13
1998/09/30 37602.97 48630.87
1998/10/31 40695.66 52586.51
1998/11/30 42509.64 55773.78
IMATRL PRASUN SHR__CHT 19981130 19981223 143536 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, 1988. As the chart shows, by November 30, 1998, the
value of the investment would have grown to $42,510 - a 325.10%
increase on the initial investment. For comparison, look at how the
Standard & Poor's 500 Index did over the same period. With dividends
and capital gains, if any, reinvested, the same $10,000 investment
would have grown to $55,774 - a 457.74% 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
When the final bell of the U.S. stock
market sounded on Monday,
November 23, 1998, the Dow
Jones Industrial Average stood at a
record high of 9374.27, serving
notice that the bleak economic
outlook from just a few short
months earlier would not keep
positive investor sentiment down.
For the 12-month period ended
November 30, 1998, the Dow -
an index of 30 blue-chip stocks -
returned 18.56%. What caused the
turnaround from the doldrums of
equity performance during the
summer and early fall? A variety of
factors: The economic problems in
Russia, Brazil and other emerging
markets began to dissipate; Asian
markets began to rebound; and,
perhaps most importantly, three
interest-rate cuts late in the period
by the Federal Reserve Board
helped stem the tide of a slowing
U.S. economy. All these factors
culminated in the Dow reaching its
record high late in November, a
peak that outpaced the previous
record set in July by nearly 40 points.
Small-cap stock performance was
still a far cry behind their large-cap
brethren. For the period, the Russell
2000 Index - a popular measure
of small-cap stock performance -
returned -6.62%, significantly
trailing the large-cap weighted
Standard & Poor's 500 Index's
return of 23.66%. Despite the late
rally in the equity market, this kind
of volatility has characterized the
entire year, and when it will level
off is impossible to predict.
An interview with Bob Chow, Portfolio Manager of Fidelity Advisor
Equity Income Fund
Q. HOW DID THE FUND PERFORM, BOB?
A. For the 12 months that ended November 30, 1998, the fund's
Institutional Class shares returned 14.23%. During the same period,
the Standard & Poor's 500 Index returned 23.66%, while the equity
income funds average returned 10.66%, according to Lipper Analytical
Services.
Q. WHAT CAUSED THE FUND TO TRAIL THE INDEX YET BEAT THE LIPPER
AVERAGE?
A. The overall story was the same as we've seen the past few periods
regarding the performance of the S&P 500 index. The market continues
to favor the big growth stocks in the technology and pharmaceutical
sectors. Given the fund's objective to achieve a high dividend yield
and my conservative investment style, growth stocks are not the
primary focus for the fund. In my search for undervalued stocks, I
found the best deals in the financial, energy and utilities
industries. While these sectors underperformed the S&P 500 index, they
were top sectors for the fund and represented about 38% of the fund's
investments at the end of the period. With regard to the equity income
fund average, it is always difficult to know where my competitors are
investing. However, many equity income funds tend to have a higher
fixed-income exposure than Fidelity Advisor Equity Income Fund, which
hurt their performance.
Q. THE FUND'S SECTOR WEIGHTINGS REMAINED RELATIVELY STABLE OVER THE
PAST SIX MONTHS. WHY DID YOU MAINTAIN THESE ALLOCATIONS?
A. The fund's sector weightings will not change very much over time
unless there is a serious valuation shift, where one sector becomes
much cheaper than others. While this has started to happen in certain
sectors during the recent stock rally, I am comfortable with the
fund's current allocation. In addition, the turnover - or the amount
of trading in the fund - tends to be on the moderate side, which also
minimizes fluctuations in the sector weightings.
Q. WHAT STOCKS PERFORMED WELL FOR THE FUND?
A. Fleet Financial performed very well at the end of the period. It
was an example of a financial stock that was hammered along with the
rest of its sector when concerns were heightened regarding exposure to
emerging markets and troubled hedge funds. However, the stock rallied
significantly toward the end of the period as investors realized
Fleet's fundamental business outlook was solid. U.S. WEST also was a
good contributor during the period. Of all the regional Bell operating
companies, U.S. WEST was the least loved, primarily because the
western and mid-western region it serves is not seen as a high growth
area. The company's stock price, however, was well below comparable
telecommunications companies and the stock rallied as a result.
Q. WHICH STOCKS HURT PERFORMANCE?
A. PMI Group was the worst detractor from performance. The company is
a mortgage insurance provider that looked undervalued relative to its
competitors, and the stock ended up as one of the fund's top holdings.
Unfortunately, Freddie Mac, a large mortgage underwriter, announced
that it was looking to move into the mortgage insurance area. After
this news, PMI Group's stock took a nose dive. The fund's position in
Citigroup also hurt performance. This company was an example of
another financial stock that suffered after negative news regarding
its exposure to emerging markets and a troubled hedge fund. However, I
still had confidence in the company's ability to penetrate new markets
and grow revenues, and the stock was still a top holding at period's
end.
Q. WHAT'S YOUR OUTLOOK, BOB?
A. Looking at the big picture, my outlook is positive. With interest
rates declining worldwide and central banks working in unison to
reduce the impact of the Asian crisis, global stock markets have more
reason to react positively. In the U.S., we have a demographic
phenomenon where baby boomers are saving record amounts of money for
retirement, providing a solid backdrop for growth in stocks. I don't
see this trend reversing until the baby boomers start to retire and
begin to take money out of the market. On a short-term basis, I'm
somewhat concerned with the amount of speculative buying and rampant
optimism we've seen in the market. Normally, this spells trouble for
stocks on a short-term basis.
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 REDUCING THE
TOTAL NUMBER OF HOLDINGS IN
THE FUND:
"When I became portfolio manager
in 1996, there were well over 200
holdings in the fund. Since then,
I've always felt the ideal number
should be closer to125. From my
perspective, this is a more
manageable number of companies
to follow and it allows me to keep a
closer eye on each holding. The
problem is, in order to get down to
that number you have to increase
the average size of each stock in
the portfolio. With stock prices
high during much of this time
period, I had to pick my
opportunities carefully, taking
advantage of strength in the
market to sell certain holdings
and weakness to increase
investments.
"Good examples of this strategy are
recent purchases of Pepsi,
Kimberly-Clark and Bowater. Six
months ago, none of these stocks
was in the portfolio and now they
represent approximately 5% of the
fund's investments. As prices
dropped down to reasonable levels
for these stocks, I was able to
acquire top-quality companies that
met the fund's value criteria. As a
result, over time I've been able to
position the fund with strong
companies at reasonable prices.
Another factor that helped reduce
the total holdings was the high
number of mergers and
acquisitions among the fund's
positions."
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,
1998, more than $4.1 billion
MANAGER: Robert Chow, since
1996; joined Fidelity in 1989
(checkmark)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF NOVEMBER 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Fleet Financial Group, Inc. 3.3 2.3
General Electric Co. 2.6 1.3
International Business Machines Corp. 2.5 1.8
Philip Morris Companies, Inc. 2.3 1.7
Citigroup, Inc. 2.1 3.1
PMI Group, Inc. 2.0 2.8
AT&T Corp. 2.0 1.0
British Petroleum Co. PLC ADR 1.9 1.8
U.S. WEST, Inc. 1.8 1.7
Bristol-Myers Squibb Co. 1.8 1.1
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE MARKET SECTORS AS OF NOVEMBER 30, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
FINANCE 18.5 19.4
ENERGY 10.1 8.5
UTILITIES 9.0 6.1
TECHNOLOGY 8.5 8.8
BASIC INDUSTRIES 7.7 6.2
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1998 * AS OF MAY 31, 1998 **
ROW: 1, COL: 1, VALUE: 5.9
ROW: 1, COL: 2, VALUE: 94.09999999999999
STOCKS 95.7%
SHORT-TERM
INVESTMENTS 4.3%
FOREIGN
INVESTMENTS 8.0%
STOCKS 94.1%
SHORT-TERM
INVESTMENTS 5.9%
FOREIGN
INVESTMENTS 6.0%
ROW: 1, COL: 1, VALUE: 4.3
ROW: 1, COL: 2, VALUE: 95.7
*
**
INVESTMENTS NOVEMBER 30, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 94.1%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 2.6%
AEROSPACE & DEFENSE - 1.6%
AlliedSignal, Inc. 280,000 $ 12,320
GenCorp, Inc. 800,000 19,700
Lockheed Martin Corp. 160,000 16,600
United Technologies Corp. 180,000 19,294
67,914
DEFENSE ELECTRONICS - 1.0%
Litton Industries, Inc. (a) 540,000 33,041
Raytheon Co. Class B 130,000 7,199
40,240
TOTAL AEROSPACE & DEFENSE 108,154
BASIC INDUSTRIES - 7.7%
CHEMICALS & PLASTICS - 1.6%
BASF AG 400,000 15,124
Cytec Industries, Inc. (a) 400,000 9,025
du Pont (E.I.) de Nemours & Co. 220,000 12,925
Ferro Corp. 650,000 18,159
Monsanto Co. 40,000 1,813
W.R. Grace & Co. 400,000 6,600
63,646
IRON & STEEL - 0.4%
Nucor Corp. 370,000 15,540
METALS & MINING - 1.1%
Aluminum Co. of America 600,000 44,475
PAPER & FOREST PRODUCTS - 4.6%
Bowater, Inc. 1,700,000 67,150
Chesapeake Corp. 750,000 26,016
Georgia-Pacific Corp. 320,000 18,160
Kimberly-Clark Corp. 1,200,000 63,150
Pentair, Inc. 400,000 15,075
189,551
TOTAL BASIC INDUSTRIES 313,212
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 2.3%
BUILDING MATERIALS - 1.6%
American Standard Companies, Inc. (a) 280,000 $ 9,590
CalMat Co. 220,000 6,765
Masco Corp. 400,000 11,550
Sherwin-Williams Co. 200,000 5,675
USG Corp. 580,000 28,674
York International Corp. 140,000 5,880
68,134
CONSTRUCTION - 0.4%
Centex Corp. 220,000 7,851
Lennar Corp. 350,000 7,788
15,639
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Duke Realty Investments, Inc. 223,672 5,075
Public Storage, Inc. 240,000 6,375
11,450
TOTAL CONSTRUCTION & REAL ESTATE 95,223
DURABLES - 6.0%
AUTOS, TIRES, & ACCESSORIES - 3.4%
DaimlerChrysler AG 140,000 12,836
Ford Motor Co. 750,000 41,438
ITT Industries, Inc. 450,000 16,200
Snap-On, Inc. 191,600 6,514
TRW, Inc. 1,100,000 60,569
137,557
CONSUMER DURABLES - 0.4%
Minnesota Mining & Manufacturing Co. 230,000 18,472
CONSUMER ELECTRONICS - 0.8%
Black & Decker Corp. 150,000 8,128
Electrolux AB 800,000 12,178
Maytag Corp. 240,000 12,990
33,296
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
HOME FURNISHINGS - 0.8%
Leggett & Platt, Inc. 1,038,100 $ 23,552
Miller (Herman), Inc. 500,000 10,625
34,177
TEXTILES & APPAREL - 0.6%
Dexter Corp. 600,000 19,238
NIKE, Inc. Class B 120,000 4,800
24,038
TOTAL DURABLES 247,540
ENERGY - 10.1%
ENERGY SERVICES - 0.7%
Halliburton Co. 200,000 5,875
Helmerich & Payne, Inc. 240,000 4,140
Schlumberger Ltd. 440,000 19,663
29,678
OIL & GAS - 9.4%
Amerada Hess Corp. 500,000 27,750
Apache Corp. 650,000 14,950
British Petroleum Co. PLC ADR 847,253 78,053
Burlington Resources, Inc. 300,000 10,688
Chevron Corp. 630,000 52,684
Elf Aquitaine 350,000 43,575
Exxon Corp. 400,000 30,025
Texaco, Inc. 920,000 52,958
Tosco Corp. 400,000 10,450
Total SA sponsored ADR 500,000 30,563
USX-Marathon Group 1,100,000 31,213
382,909
TOTAL ENERGY 412,587
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 18.5%
BANKS - 3.2%
Bank of New York Co., Inc. 2,040,000 $ 69,870
Comerica, Inc. 500,000 32,250
Wells Fargo & Co. 800,000 28,800
130,920
CREDIT & OTHER FINANCE - 7.1%
American Express Co. 500,000 50,031
Citigroup, Inc. 1,700,000 85,319
Fleet Financial Group, Inc. 3,200,000 133,383
Household International, Inc. 514,300 20,122
288,855
FEDERAL SPONSORED CREDIT - 2.3%
Fannie Mae 760,000 55,290
Freddie Mac 650,000 39,325
94,615
INSURANCE - 5.1%
Allstate Corp. 620,000 25,265
American International Group, Inc. 200,000 18,800
Chubb Corp. (The) 200,000 14,013
General Re Corp. 50,000 11,675
Hartford Financial Services Group, Inc. 600,000 33,113
Loews Corp. 90,000 9,000
PMI Group, Inc. 1,490,000 81,484
PXRE Corp. 660,000 14,644
207,994
SECURITIES INDUSTRY - 0.8%
Lehman Brothers Holdings, Inc. 700,000 34,956
TOTAL FINANCE 757,340
HEALTH - 6.2%
DRUGS & PHARMACEUTICALS - 4.4%
American Home Products Corp. 850,000 45,263
Bristol-Myers Squibb Co. 600,000 73,538
Merck & Co., Inc. 400,000 61,950
180,751
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 1.8%
Allegiance Corp. 380,000 $ 15,319
Johnson & Johnson 700,000 56,875
72,194
TOTAL HEALTH 252,945
HOLDING COMPANIES - 0.3%
PartnerRe Ltd. 250,000 11,063
INDUSTRIAL MACHINERY & EQUIPMENT - 6.3%
ELECTRICAL EQUIPMENT - 3.0%
Emerson Electric Co. 230,000 14,950
General Electric Co. 1,200,000 108,600
123,550
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Applied Industrial Technologies, Inc. 328,900 4,605
Caterpillar, Inc. 420,000 20,764
Ingersoll-Rand Co. 200,000 9,362
Tyco International Ltd. 460,000 30,274
UNOVA, Inc. 1,000,000 16,938
81,943
POLLUTION CONTROL - 1.3%
Browning-Ferris Industries, Inc. 850,000 25,075
Waste Management, Inc. 600,000 25,725
50,800
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 256,293
MEDIA & LEISURE - 0.1%
PUBLISHING - 0.1%
Knight-Ridder, Inc. 120,000 6,173
NONDURABLES - 7.4%
BEVERAGES - 2.8%
Anheuser-Busch Companies, Inc. 580,000 35,163
PepsiCo, Inc. 1,600,000 61,900
Whitman Corp. 700,000 15,838
112,901
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - 0.8%
Heinz (H.J.) Co. 290,000 $ 16,911
Lance, Inc. 700,000 13,781
30,692
HOUSEHOLD PRODUCTS - 1.5%
Church & Dwight Co., Inc. 780,000 26,959
Procter & Gamble Co. 150,000 13,144
Unilever NV (NY shares) 300,000 23,194
63,297
TOBACCO - 2.3%
Philip Morris Companies, Inc. 1,700,000 95,094
TOTAL NONDURABLES 301,984
RETAIL & WHOLESALE - 5.8%
APPAREL STORES - 0.2%
TJX Companies, Inc. 360,000 9,225
DRUG STORES - 0.9%
CVS Corp. 200,000 9,875
Rite Aid Corp. 570,000 26,434
36,309
GENERAL MERCHANDISE STORES - 3.8%
Consolidated Stores Corp. (a) 800,000 17,200
Federated Department Stores, Inc. (a) 1,600,000 66,700
Jo-Ann Stores, Inc. (a) 470,000 7,491
May Department Stores Co. (The) 680,000 41,013
Wal-Mart Stores, Inc. 300,000 22,594
154,998
GROCERY STORES - 0.4%
Safeway, Inc. (a) 320,000 16,900
RETAIL & WHOLESALE, MISCELLANEOUS - 0.5%
Home Depot, Inc. 440,000 21,890
TOTAL RETAIL & WHOLESALE 239,322
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 1.9%
PRINTING - 1.0%
Donnelley (R.R.) & Sons Co. 450,000 $ 19,097
Reynolds & Reynolds Co. Class A 1,100,000 23,238
42,335
SERVICES - 0.9%
ACNielsen Corp. (a) 1,000,000 27,563
Dun & Bradstreet Corp. 320,000 9,660
37,223
TOTAL SERVICES 79,558
TECHNOLOGY - 8.5%
COMPUTER SERVICES & SOFTWARE - 1.2%
CompUSA, Inc. (a) 600,000 8,888
Electronic Data Systems Corp. 460,000 17,940
Wang Laboratories, Inc. (a) 880,000 22,440
49,268
COMPUTERS & OFFICE EQUIPMENT - 5.6%
Apple Computer, Inc. (a) 240,000 7,665
Compaq Computer Corp. 440,000 14,300
International Business Machines Corp. 630,000 103,950
Pitney Bowes, Inc. 1,200,000 67,200
Unisys Corp. (a) 1,300,000 37,050
230,165
ELECTRONICS - 1.3%
AMP, Inc. 366,345 17,722
Texas Instruments, Inc. 460,000 35,133
52,855
PHOTOGRAPHIC EQUIPMENT - 0.4%
Eastman Kodak Co. 200,000 14,513
TOTAL TECHNOLOGY 346,801
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.2%
AMR Corp. (a) 120,000 7,913
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
RAILROADS - 0.7%
Burlington Northern Santa Fe Corp. 720,000 $ 24,480
Wisconsin Central Transportation Corp. (a) 120,000 2,175
26,655
TRUCKING & FREIGHT - 0.5%
Arnold Industries, Inc. 620,000 8,835
Consolidated Freightways Corp. (a) 950,500 11,941
20,776
TOTAL TRANSPORTATION 55,344
UTILITIES - 9.0%
ELECTRIC UTILITY - 0.6%
American Electric Power Co., Inc. 220,000 10,203
Entergy Corp. 480,000 14,070
24,273
TELEPHONE SERVICES - 8.4%
AT&T Corp. 1,300,000 81,006
Bell Atlantic Corp. 1,300,000 72,313
BellSouth Corp. 550,000 47,988
MCI WorldCom, Inc. (a) 800,000 47,200
Sprint Corp.: 240,000 17,460
(FON Group)
(PCS Group) 120,000 1,920
U.S. WEST, Inc. 1,200,000 74,700
342,587
TOTAL UTILITIES 366,860
TOTAL COMMON STOCKS 3,850,399
(Cost $2,877,254)
CONVERTIBLE PREFERRED STOCKS - 0.0%
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 0.0%
PUBLISHING - 0.0%
Taylor (J.N.) Holdings Ltd. 9.5% (a) 50,000 $ -
(Cost $235)
CASH EQUIVALENTS - 5.9%
Taxable Central Cash Fund (b) 240,547,241 240,547
(Cost $240,547)
TOTAL INVESTMENT IN SECURITIES - 100% $ 4,090,946
(Cost $3,118,036)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.81%. 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, 1998, the aggregate cost of investment securities for
income tax purposes was $3,119,706,000. Net unrealized appreciation
aggregated $971,240,000 of which $1,059,096,000 related to appreciated
investment securities and $87,856,000 related to depreciated
investment securities.
The fund hereby designates approximately $195,013,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $3,118,036) - $ 4,090,946
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 16,398
RECEIVABLE FOR FUND SHARES SOLD 3,797
DIVIDENDS RECEIVABLE 6,875
INTEREST RECEIVABLE 899
OTHER RECEIVABLES 70
TOTAL ASSETS 4,118,985
LIABILITIES
PAYABLE FOR FUND SHARES REDEEMED $ 6,000
ACCRUED MANAGEMENT FEE 1,690
DISTRIBUTION FEES PAYABLE 1,848
OTHER PAYABLES AND ACCRUED EXPENSES 874
TOTAL LIABILITIES 10,412
NET ASSETS $ 4,108,573
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 2,910,192
UNDISTRIBUTED NET INVESTMENT INCOME 4,229
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 221,226
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 972,926
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS $ 4,108,573
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) NOVEMBER 30, 1998
CALCULATION OF MAXIMUM OFFERING PRICE $28.15
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($65,436 (DIVIDED BY) 2,324.4 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/94.25 OF $28.15) $29.87
CLASS T: $28.35
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,635,406 (DIVIDED BY) 92,944 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $28.35) $29.38
CLASS B: $28.20
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($877,573 (DIVIDED BY) 31,123 SHARES) A
CLASS C: $28.23
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($37,014 (DIVIDED BY) 1,311 SHARES) A
INSTITUTIONAL CLASS: $28.59
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($493,144 (DIVIDED BY) 17,250 SHARES)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED NOVEMBER 30, 1998
INVESTMENT INCOME $ 64,563
DIVIDENDS
INTEREST 8,924
TOTAL INCOME 73,487
EXPENSES
MANAGEMENT FEE $ 19,202
TRANSFER AGENT FEES 6,820
DISTRIBUTION FEES 20,749
ACCOUNTING FEES AND EXPENSES 811
NON-INTERESTED TRUSTEES' COMPENSATION 14
CUSTODIAN FEES AND EXPENSES 84
REGISTRATION FEES 330
AUDIT 74
LEGAL 14
REPORTS TO SHAREHOLDERS 143
MISCELLANEOUS 10
TOTAL EXPENSES BEFORE REDUCTIONS 48,251
EXPENSE REDUCTIONS (580) 47,671
NET INVESTMENT INCOME 25,816
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 223,179
FOREIGN CURRENCY TRANSACTIONS (43) 223,136
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 212,032
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 15 212,047
NET GAIN (LOSS) 435,183
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 460,999
FROM OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 25,816 $ 30,780
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 223,136 243,508
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 212,047 326,758
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 460,999 601,046
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (25,412) (31,851)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN (218,223) (64,869)
TOTAL DISTRIBUTIONS (243,635) (96,720)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 528,457 337,812
TOTAL INCREASE (DECREASE) IN NET ASSETS 745,821 842,138
NET ASSETS
BEGINNING OF PERIOD 3,362,752 2,520,614
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 4,108,573 $ 3,362,752
INCOME OF $4,229 AND $3,579, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED NOVEMBER 30,
1998 1997 1996 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.69 $ 22.78 $ 20.38
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME E .24 .23 .06
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.19 4.61 2.44
TOTAL FROM INVESTMENT OPERATIONS 3.43 4.84 2.50
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.25) (.34) (.10)
FROM NET REALIZED GAIN (1.72) (.59) -
TOTAL DISTRIBUTIONS (1.97) (.93) (.10)
NET ASSET VALUE, END OF PERIOD $ 28.15 $ 26.69 $ 22.78
TOTAL RETURN B, C 13.82% 22.05% 12.31%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 65,436 $ 25,659 $ 3,306
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.03% 1.26% G 1.46% A, D, G
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.02% H 1.25% H 1.44% A, H
EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .89% .93% 1.27% A
PORTFOLIO TURNOVER 59% 55% 78%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 26.85 $ 22.83 $ 19.95 $ 15.96 $ 14.86
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .19 C .26 C .30 C .31 .28 C
NET REALIZED AND UNREALIZED 3.22 4.62 3.35 4.26 1.03
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS 3.41 4.88 3.65 4.57 1.31
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.19) (.27) (.31) (.30) (.21)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (1.91) (.86) (.77) (.58) (.21)
NET ASSET VALUE, END OF PERIOD $ 28.35 $ 26.85 $ 22.83 $ 19.95 $ 15.96
TOTAL RETURN A, B 13.63% 22.12% 18.89% 29.46% 8.84%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 2,635,406 $ 2,190,070 $ 1,672,994 $ 880,054 $ 179,501
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.21% 1.23% 1.27% 1.48% 1.67%
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET 1.20% D 1.21% D 1.26% D 1.47% D 1.64% D
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO .72% 1.05% 1.45% 1.78% 1.69%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER 59% 55% 78% 80% 140%
</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).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 26.73 $ 22.73 $ 19.90 $ 15.94 $ 15.21
OF PERIOD
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .05 D .13 D .19 D .26 .08 D
NET REALIZED AND UNREALIZED 3.21 4.61 3.33 4.23 .72
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS 3.26 4.74 3.52 4.49 .80
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.07) (.15) (.23) (.25) (.07)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (1.79) (.74) (.69) (.53) (.07)
NET ASSET VALUE, END OF PERIOD $ 28.20 $ 26.73 $ 22.73 $ 19.90 $ 15.94
TOTAL RETURN B, C 13.06% 21.52% 18.22% 28.95% 5.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 877,573 $ 682,308 $ 500,447 $ 270,101 $ 35,373
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.74% 1.74% F 1.81% 1.85% 2.24% A
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET 1.72% G 1.73% G 1.79% G 1.84% G 2.18% A, G
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO .19% .53% .92% 1.41% 1.15% A
AVERAGE NET ASSETS
PORTFOLIO TURNOVER 59% 55% 78% 80% 140%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED
NOVEMBER 30,
1998 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.84 $ 26.65
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .02 .02
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.21 .17
TOTAL FROM INVESTMENT OPERATIONS 3.23 .19
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.12) -
FROM NET REALIZED GAIN (1.72) -
TOTAL DISTRIBUTIONS (1.84) -
NET ASSET VALUE, END OF PERIOD $ 28.23 $ 26.84
TOTAL RETURN B, C 12.90% .71%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 37,014 $ 684
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.84% 1.85% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.82% G 1.81% A, G
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS .07% 1.24% A
PORTFOLIO TURNOVER 59% 55%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
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).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 27.07 $ 23.00 $ 20.09 $ 16.07 $ 14.93
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .34 B .39 B .42 B .45 .41 B
NET REALIZED AND UNREALIZED 3.24 4.68 3.37 4.28 1.05
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS 3.58 5.07 3.79 4.73 1.46
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.34) (.41) (.42) (.43) (.32)
FROM NET REALIZED GAIN (1.72) (.59) (.46) (.28) -
TOTAL DISTRIBUTIONS (2.06) (1.00) (.88) (.71) (.32)
NET ASSET VALUE, END OF PERIOD $ 28.59 $ 27.07 $ 23.00 $ 20.09 $ 16.07
TOTAL RETURN A 14.23% 22.87% 19.54% 30.43% 9.82%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 493,144 $ 464,031 $ 343,867 $ 297,453 $ 197,533
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE .68% .69% .71% .74% .73%
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET .67% C .67% C .70% C .73% C .71% C
ASSETS AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME TO 1.25% 1.60% 2.02% 2.52% 2.62%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER 59% 55% 78% 80% 140%
</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).
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Equity Income Fund (the fund) is a fund of Fidelity
Advisor Series III (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
settlement date on purchases and sales of securities. The effects of
changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date
, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income is accrued as earned. Investment
income is recorded net of foreign taxes withheld where recovery of
such taxes is uncertain.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
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, foreign currency transactions,
passive foreign investment companies (PFIC), 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the fund are recorded
as interest income in the accompanying financial statements.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,395,680,000 and $2,153,562,000, 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. As of November 18, 1998 shareholders approved an amended
management fee contract with FMR. Effective December 1, 1998 FMR will
receive a monthly fee that is calculated on the basis of a group fee
rate plus a fixed individual fund fee rate applied to the average net
assets of the fund. The group fee rate is the weighted average of a
series of rates and is based on the monthly average net assets of all
the mutual funds advised by FMR. The rates will range from .2500%
to.5200%. The annual individual fund fee rate will be .20%.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.
For the period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .25%
CLASS T .50%
CLASS B 1.00%*
CLASS C 1.00%*
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
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 retained by FDC:
PAID TO RETAINED
FDC BY FDC
CLASS A $ $
119,000 -
CLASS T 12,462,000 185,000
CLASS B 7,988,000 5,996,000
CLASS C 180,000 179,000
$ 20,749,000 $ 6,360,000
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period, the following amounts were paid to third parties under the
Plans:
CLASS A $
18,000
CLASS T 394,000
CLASS B 271,000
CLASS C 19,000
INSTITUTIONAL CLASS 28,000
SALES LOAD. FDC receives a front-end sales charge of up to 5.75% for
selling Class A shares, and 3.50% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within six years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging from 5% to 1% for Class B and 1% for Class C, of the
lesser of the cost of shares at the initial date of purchase or the
net asset value of the redeemed shares, excluding any reinvested
dividends and capital gains. In addition, purchases of Class A and
Class T shares that were subject to a finder's fee bear a contingent
deferred sales charge on assets that do not remain in the fund for at
least one year. The Class A and Class T contingent deferred sales
charge is based on 0.25% of the lesser of the cost of shares at the
initial date of purchase or the net asset value of the redeemed
shares, excluding any reinvested dividends and capital gains. A
portion of the sales charges paid to FDC are paid to securities
dealers, banks and other financial institutions.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED
FDC BY FDC
CLASS A $ $
672,000 278,000
CLASS T 1,700,000 545,000
CLASS B 1,178,000 1,178,000 *
CLASS C 10,000 10,000 *
$ 3,560,000 $ 2,011,000
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent (collectively referred to
as the transfer agent) for the fund's Class A, Class T, Class B, Class
C and Institutional Class. FIIOC receives account fees and asset-based
fees that vary according to the account size and type of account of
the shareholders of the respective classes of the fund. FIIOC pays for
typesetting, printing and mailing of all shareholder reports, except
proxy statements. For the period, the following amounts were paid to
FIIOC :
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ .23
111,000
CLASS T 4,388,000 .18
CLASS B 1,589,000 .20
CLASS C 40,000 .22
INSTITUTIONAL CLASS 692,000 .14
$ 6,820,000
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC) maintains the
fund's accounting records. The fee is based on the level of average
net assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $657,000 for the
period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $579,000 under this arrangement.
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $1,000 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED NOVEMBER 30,
1998 1997
FROM NET INVESTMENT INCOME
CLASS A $ $
412,000 131,000
CLASS T 17,008,000 20,835,000
CLASS B 1,994,000 3,503,000
CLASS C 38,000 -
INSTITUTIONAL CLASS 5,960,000 7,382,000
TOTAL $ 25,412,000 $ 31,851,000
FROM NET REALIZED GAIN
CLASS A $ $
1,745,000 98,000
CLASS T 142,228,000 43,072,000
CLASS B 44,523,000 13,038,000
CLASS C 120,000 -
INSTITUTIONAL CLASS 29,607,000 8,661,000
TOTAL $ 218,223,000 $ 64,869,000
TOTAL $ 243,635,000 $ 96,720,000
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1998 1997A 1998 1997A
CLASS A 1,676 919 $ $
SHARES SOLD 45,746 22,745
REINVESTMENT OF DISTRIBUTIONS 81 9 2,044 208
SHARES REDEEMED (394) (112) (10,576) (2,828)
NET INCREASE (DECREASE) 1,363 816 $ 37,214 $ 20,125
CLASS T 29,496 28,655 $ $
SHARES SOLD 803,775 693,828
REINVESTMENT OF DISTRIBUTIONS 5,979 2,675 151,631 60,512
SHARES REDEEMED (24,087) (23,070) (653,931) (558,854)
NET INCREASE (DECREASE) 11,388 8,260 $ 301,475 $ 195,486
CLASS B 7,788 5,544 $ $
SHARES SOLD 212,094 135,409
REINVESTMENT OF DISTRIBUTIONS 1,630 700 41,041 15,570
SHARES REDEEMED (3,817) (2,738) (102,483) (66,167)
NET INCREASE (DECREASE) 5,601 3,506 $ 150,652 $ 84,812
CLASS C 1,373 25 $ $
SHARES SOLD 37,538 678
REINVESTMENT OF DISTRIBUTIONS 6 - 145 -
SHARES REDEEMED (93) - (2,412) -
NET INCREASE (DECREASE) 1,286 25 $ 35,271 $ 678
INSTITUTIONAL CLASS 4,647 11,368 $ $
SHARES SOLD 128,397 260,181
REINVESTMENT OF DISTRIBUTIONS 1,179 515 30,191 11,887
SHARES REDEEMED (5,719) (9,691) (154,743) (235,357)
NET INCREASE (DECREASE) 107 2,192 $ 3,845 $ 36,711
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $
11,000
CLASS T 181,000
CLASS B 78,000
CLASS C 16,000
INSTITUTIONAL CLASS 44,000
$ 330,000
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series III and the Shareholders of
Fidelity Advisor Equity Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Equity Income Fund (a fund of Fidelity Advisor Series
III) at November 30, 1998, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Equity Income Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at November 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 12, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity 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:
INSTITUTIONAL CLASS
PAY DATE 12/22/97 1/5/98 12/21/98 1/11/99
RECORD DATE 12/19/97 1/2/98 12/18/98 1/8/99
DIVIDENDS $0.09 - $0.08 -
SHORT-TERM
CAPITAL GAINS $0.44 $0.02 - $.03
LONG-TERM
CAPITAL GAINS $1.10 $0.16 $1.10 $.16
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 42.65% - - -
20% rate 57.35% 100% 100% 100%
A total of 1.27% 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 59.21% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund will notify shareholders in January 1999 of these percentages
for use in preparing 1998 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on November 18,
1998. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To approve an amended management contract for the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,637,972,757.80 84.056
AGAINST 67,740,780.72 3.476
ABSTAIN 242,951,802.17 12.468
TOTAL 1,948,665,340.69 100.000
PROPOSAL 2
To approve a new sub-advisory agreement with FMR Far East for the
fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,624,449,378.01 83.362
AGAINST 69,491,766.35 3.566
ABSTAIN 254,724,196.33 13.072
TOTAL 1,948,665,340.69 100.000
PROPOSAL 3
To approve a new sub-advisory agreement with FMR U.K. for the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,642,160,810.16 84.271
AGAINST 55,201,925.57 2.833
ABSTAIN 251,302,604.96 12.896
TOTAL 1,948,665,340.69 100.000
PROPOSAL 4
To approve an agreement and plan providing for the reorganization of
the fund from a separate series of one Massachusetts Business Trust to
another.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,638,349,105.61 84.075
AGAINST 57,305,481.73 2.941
ABSTAIN 253,010,753.35 12.984
TOTAL 1,948,665,340.69 100.000
PROPOSAL 5
To adopt a new fundamental investment policy for the fund permitting
the fund to invest all of its assets in another open-end investment
company managed by FMR or an affiliate with substantially the same
investment objective and policies.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,601,596,057.33 82.189
AGAINST 93,978,071.55 4.823
ABSTAIN 253,091,211.81 12.988
TOTAL 1,948,665,340.69 100.000
PROPOSAL 6
To amend the fund's fundamental investment limitation concerning
diversification.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 1,598,459,179.90 82.028
AGAINST 95,985,925.94 4.926
ABSTAIN 254,220,234.85 13.046
TOTAL 1,948,665,340.69 100.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Richard A. Spillane, Jr., Vice President
C. Robert Chow, 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 *
* INDEPENDENT TRUSTEES
EPII-ANN-0199 69326
1.539450.101
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
(FIDELITY_LOGO_GRAPHIC) (REGISTERED TRADEMARK)
