FIDELITY FINANCIAL TRUST, N-30D, 1996-07-15

FIDELITY FINANCIAL TRUST
N-30D, 1996-07-15

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(2_FIDELITY_LOGOS)FIDELITY

CONVERTIBLE SECURITIES
FUND
SEMIANNUAL REPORT
MAY 31, 1996
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

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

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

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

FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 28 Notes to the financial statements.

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE

DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first five
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term. You also can help to manage some of the risks of investing
through diversification. A stock fund is already diversified because it
invests in many issues. You can diversify even further by placing some of
your money in several different types of stock funds or in other investment
categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND

Convertible Securities 11.02% 20.93% 112.06% 247.95%

Merrill Lynch Convertible Securities 10.97% 23.10% 101.10% n/a
Index

Lipper Convertible Securities 9.32% 19.71% 87.01% n/a
Funds Average

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on January 5, 1987. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Merrill Lynch Convertible Securities Index - a broad
measure of the performance of convertible securities. To measure how the
fund's performance stacked up against its peers, you can compare it to the
convertible securities funds average, which reflects the performance of 42
convertible securities funds with similar objectives tracked by Lipper
Analytical Services over the past six months. Both benchmarks include
reinvested dividends and capital gains, if any, and exclude the effects of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Convertible Securities 20.93% 16.22% 14.17%

Merrill Lynch Convertible Securities Index 23.10% 15.00% n/a

Lipper Convertible Securities 19.71% 13.19% n/a
Funds Average

AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.

$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960531 19960619 113813 S00000000000001
Convertible Sec. FB Conv. Sec. Index
00308 FB002
1987/01/31 10000.00 10000.00
1987/02/28 10350.19 10414.00
1987/03/31 10437.74 10521.26
1987/04/30 10282.10 10523.37
1987/05/31 10252.92 10554.94
1987/06/30 10429.22 10775.54
1987/07/31 10949.70 11215.18
1987/08/31 11195.21 11439.48
1987/09/30 11119.15 11271.32
1987/10/31 9020.63 9151.19
1987/11/30 9000.74 8857.43
1987/12/31 9253.19 9308.28
1988/01/31 9598.16 9567.05
1988/02/29 9993.85 10007.13
1988/03/31 10126.04 9973.11
1988/04/30 10321.56 10179.55
1988/05/31 10249.53 10078.77
1988/06/30 10675.20 10466.80
1988/07/31 10602.16 10357.95
1988/08/31 10445.63 10174.61
1988/09/30 10582.76 10356.74
1988/10/31 10752.09 10488.27
1988/11/30 10593.35 10317.31
1988/12/31 10723.60 10556.67
1989/01/31 11181.78 11030.67
1989/02/28 11301.78 11028.46
1989/03/31 11630.82 11171.83
1989/04/30 12062.00 11547.21
1989/05/31 12338.39 11781.61
1989/06/30 12437.48 11695.61
1989/07/31 12997.22 12031.27
1989/08/31 13422.63 12295.96
1989/09/30 13433.82 12188.99
1989/10/31 13161.97 11803.81
1989/11/30 13377.19 11996.22
1989/12/31 13542.01 12009.41
1990/01/31 13040.03 11531.44
1990/02/28 13191.79 11683.65
1990/03/31 13450.80 11862.41
1990/04/30 13344.43 11597.88
1990/05/31 13876.31 12160.38
1990/06/30 14031.25 12145.78
1990/07/31 13935.55 12037.69
1990/08/31 13014.49 11344.32
1990/09/30 12372.25 10848.57
1990/10/31 12129.89 10442.83
1990/11/30 12760.02 10953.49
1990/12/31 13150.08 11182.42
1991/01/31 13965.02 11684.51
1991/02/28 14866.39 12382.07
1991/03/31 15261.65 12685.43
1991/04/30 15436.49 12813.55
1991/05/31 15961.04 13192.84
1991/06/30 15657.98 12824.76
1991/07/31 16289.35 13312.10
1991/08/31 16908.09 13808.64
1991/09/30 17190.33 13783.78
1991/10/31 17930.53 13982.27
1991/11/30 17164.81 13645.30
1991/12/31 18244.09 14438.09
1992/01/31 19164.97 14838.02
1992/02/29 19792.23 15222.33
1992/03/31 19458.45 15095.98
1992/04/30 19620.16 15268.08
1992/05/31 19997.47 15545.96
1992/06/30 19878.15 15472.89
1992/07/31 20422.38 15898.39
1992/08/31 20027.81 15798.23
1992/09/30 20504.91 16114.20
1992/10/31 20985.60 16152.87
1992/11/30 21658.57 16619.69
1992/12/31 22261.36 16988.65
1993/01/31 23005.79 17518.69
1993/02/28 22604.94 17587.02
1993/03/31 23729.83 18230.70
1993/04/30 23946.74 18227.05
1993/05/31 24539.62 18546.03
1993/06/30 24511.53 18722.22
1993/07/31 24759.71 18915.05
1993/08/31 25343.67 19433.33
1993/09/30 25638.09 19652.92
1993/10/31 26227.47 20116.73
1993/11/30 25976.98 19812.97
1993/12/31 26221.17 20139.88
1994/01/31 26874.71 20717.90
1994/02/28 26444.33 20388.48
1994/03/31 25286.77 19556.63
1994/04/30 24867.74 19200.70
1994/05/31 24771.04 19242.94
1994/06/30 24752.39 19025.50
1994/07/31 25193.23 19562.02
1994/08/31 26532.08 19947.39
1994/09/30 26366.37 19594.32
1994/10/31 26531.68 19762.83
1994/11/30 25837.39 19045.44
1994/12/31 25760.75 19190.19
1995/01/31 25760.75 19165.24
1995/02/28 26297.44 19791.94
1995/03/31 27074.58 20314.45
1995/04/30 27684.52 20775.59
1995/05/31 27989.49 21388.47
1995/06/30 28689.58 22167.01
1995/07/31 29442.32 22953.94
1995/08/31 29784.47 23194.95
1995/09/30 30349.81 23540.56
1995/10/31 29607.46 22817.86
1995/11/30 30487.92 23611.93
1995/12/31 30753.32 23741.79
1996/01/31 31379.46 24266.48
1996/02/29 32134.92 24919.25
1996/03/31 32545.78 25128.57
1996/04/30 33308.29 25714.07
1996/05/31 33847.62 26287.49
IMATRL PRASUN SHR__CHT 19960531 19960619 113818 R00000000000123

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Convertible Securities Fund on January 31, 1987,
shortly after the fund started. As the chart shows, by May 31, 1996, the
value of the investment would have grown to $33,848 - a 238.48% increase on
the initial investment. For comparison, look at how the First Boston
Convertible Securities Index did over the same period. (The Merrill Lynch
Convertible Securities Index does not extend as far back as the fund's
start date, and therefore is not appropriate for this comparison.) With
dividends reinvested, the same $10,000 investment in the First Boston
Convertible Securities Index would have grown to $26,287 - a 162.87%
increase.

UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks or bonds 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 MANAGERS' OVERVIEW

NOTE TO SHAREHOLDERS: On June 3, 1996, Robert Bertelson (right photo)
became Portfolio Manager of Fidelity Convertible Securities Fund. The
following is an interview with Charles Mangum (left photo), who managed the
fund during the period, with additional comments from Robert Bertelson on
his outlook.
Q. HOW DID THE FUND PERFORM, CHARLES?
C.M. It performed well, compared to its peer group. For the six- and
12-month periods ended May 31, 1996, the fund had total returns of 11.02%
and 20.93%, compared to 9.32% and 19.71% for the convertible securities
funds average, according to Lipper Analytical Services. Additionally, the
Merrill Lynch Convertible Securities Index had total returns of 10.97% and
23.10% over the same periods.
Q. DURING MOST OF 1995, LARGE-CAP STOCKS SIGNIFICANTLY OUTPERFORMED
MID-CAPS, WHILE IN THE PAST SIX MONTHS WE'VE SEEN STRONGER RELATIVE
PERFORMANCE IN THE MID-CAP AND SMALL-CAP AREA. DID THE FUND BENEFIT FROM
THIS CHANGING ENVIRONMENT?
C.M. No question. Much of the convertible securities market is made up of
small- and mid-cap stocks. As a result, the fund had a strong mid-cap
focus, and during the period we benefited from the fact that performance of
mid-caps caught up quite a bit to the overall market. I'd also add that
over the period, the fund had more of an equity exposure because of the
types of convertible securities in the portfolio.
Q. CAN YOU EXPLAIN THAT FURTHER?
C.M. Sure. There are several different types of convertible securities. On
one end of the spectrum, there are securities in which the bond represents
most, or even virtually all, of the overall value of that security. At the
other extreme, low-premium convertibles are ones whose value is tied more
closely to the underlying common stock, and therefore is generally much
more sensitive to stock prices than to bond prices. And, of course, there
are securities in between these extremes. In general, I look for
opportunities all along this spectrum, and because I felt there was better
relative value in the equity-focused area of the market recently, the fund
had more equity exposure over the period.
Q. DESPITE THE WEAK RELATIVE PERFORMANCE OF THE HEALTH CARE SECTOR, IT
REMAINS A SIZABLE FOCUS OF THE FUND. WHY IS THAT?
C.M. While it's true that areas within the sector, especially nursing
stocks, remained somewhat weak, I reasoned that it was primarily due to
lingering uncertainty over regulatory concerns, rather than a fundamental
weakness of health care companies. So I actually added to the fund's health
care exposure overall, buying or maintaining positions in selected
securities that I felt were cheap on a valuation basis. For example, I
added a holding in Tenet, an acute-care hospital company that's been
growing its earnings rapidly, and whose security is convertible into the
common stock of Vencor, a large nursing and specialty hospital company.
Tenet's stock had been cheap on a valuation basis because of concern over
its ability to integrate a large acquisition late in 1995. In addition,
nursing home securities such as NovaCare have continued to be important
positions in the fund.
Q. ONE OF THE BIGGEST SECTOR CHANGES DURING THE PERIOD WAS AN INCREASE IN
TECHNOLOGY EXPOSURE. WHAT WAS BEHIND THAT MOVE?
C.M. Well, technology issues can be so volatile that I tend to move in and
out of them fairly quickly. That doesn't mean that my investment style is
to have a lot of rapid turnover, but the nature of the technology sector is
fast-paced change, and I need to respond to the realities in that part of
the market. Unisys was my biggest technology position during the period,
and I don't consider that as a technology investment so much as a
restructuring story. Unisys has three distinct businesses - one in
hardware, two in service - and I viewed the company as being in a situation
similar to
IBM a few years ago - trying to restructure its way out of a very trying
period. If it's successful, the company could see strong earnings gains
going forward.
Q. LET'S COVER ONE OTHER SIGNIFICANT SECTOR CHANGE: THE INCREASE IN ENERGY
HOLDINGS WITHIN THE PORTFOLIO.
C.M. Right. There's been somewhat of a boom in the energy services industry
recently, helped in part by the rise in oil prices. But more of it is due
to better cost control and improvements in oil and gas exploration. Even
though rig counts are not up much, the revenues per rig are up. Valhi is a
good example of a company that benefited from these trends.
Q. TURNING TO YOU, BOB, WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?
B.B. I am reasonably positive on the economy right now. We've seen
consumers start to spend more, which has given a lift to the retail and
auto industries. I think that kind of momentum might well carry forward for
a while, and I'll be looking to continue what Charles has done in finding
issues with attractive valuations that could benefit from that kind of
environment. Of course, a stronger economy has also contributed to higher
interest rates, which may have the effect of limiting the upside potential
for gains in the financial markets. I would add that, in regard to the
fund's current structure, it also means I'm pretty comfortable with the
degree of equity exposure that Charles mentioned earlier.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: high total return
through a combination of
current income and capital
appreciation by investing
mainly in securities that are
convertible into common
stock
START DATE: January 5, 1987
SIZE: as of May 31, 1996,
more than $1.1 billion
MANAGER: Robert Bertelson,
since June 1996; manager,
Fidelity Select Energy
Portfolio, 1992-1994;
Fidelity Select Industrial
Equipment Portfolio,
1994-1996; joined Fidelity in
1991
(checkmark)
BOB BERTELSON ON HIS
APPROACH TO MANAGING IN THE
CONVERTIBLE SECURITIES MARKET:
"First of all, I think that the
convertible securities market
demands that you be a flexible
investor. You're likely to see
very different kinds of
companies represented in the
convertible marketplace, and
you need to be comfortable
with growth companies,
cyclicals and turnarounds, to
name a few. Depending on
where I think the greatest
opportunities lie in the market,
I will analyze different
companies from, say, a growth
or value perspective.
In general, however, I tend to
look most favorably on
companies that are leaders in
their industries, with a
dominant share of the market.
I also like to see a company
capable of generating free
cash flow, which I think is a
powerful tool for buttressing
its underlying growth rate. I
also look for signs such as
positive unit growth and
managers who own their own
company's stock and
therefore have strong
incentives for improving their
returns on capital and
providing shareholder value. I
can find these kinds of
companies in all types of
industries, and I typically don't
take large sector positions
based on a macroeconomic
outlook. Although I have
experience in international
investing, I don't currently
plan to focus on adding to the
fund's foreign exposure. In my
mind, you have to choose not
only the right company, but
also the right country and the
right currency situation. The
way I see it, those are more
variables that can go wrong,
and I plan to be very selective
in pursuing those
opportunities for the fund."
INVESTMENT CHANGES

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

NovaCare, Inc. 5 1/2%, 1/15/00 2.7 3.0

RJR Nabisco Holdings Corp. 2.4 0.8
depositary
shares representing 1/10 pfd., Series
C

Unisys Corp. 8 1/4%, 8/1/00 2.1 0.8

Cooper Industries, Inc. 7.05%, 1/1/15 2.1 1.2

Chubb Corp. (The) 6%, 5/15/98 1.9 1.6

Trimas Corp. 5%, 8/1/03 1.8 0.0

Coleman Worldwide Corp. 2nd liquid 1.8 1.3
yield option notes 0%, 5/27/13

Hasbro Corp. 6%, 11/15/98 1.8 0.0

Tenet HealthCare Corp. 6%, 12/1/05 1.7 0.0

Sprint Corp. $2.63 1.5 1.5

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

Health 19.3 14.8

Finance 11.5 11.4

Technology 10.5 6.9

Media & Leisure 9.9 9.6

Utilities 9.2 5.6

ASSET ALLOCATION
AS OF MAY 31, 1996 * AS OF NOVEMBER 30, 1995 **

Convertible
securities 81.4%
Stocks 14.4%
Short-term
investments 2.9%
Nonconvertible
bonds 1.3%
FOREIGN
INVESTMENTS 4.5%
Convertible
securities 79.5%
Stocks 14.3%
Short-term
investments 5.0%
Nonconvertible
bonds 1.2%
FOREIGN
INVESTMENTS 6.4%
Row: 1, Col: 1, Value: 1.3
Row: 1, Col: 2, Value: 2.9
Row: 1, Col: 3, Value: 14.4
Row: 1, Col: 4, Value: 41.4
Row: 1, Col: 5, Value: 40.0
Row: 1, Col: 1, Value: 1.2
Row: 1, Col: 2, Value: 5.0
Row: 1, Col: 3, Value: 14.3
Row: 1, Col: 4, Value: 40.5
Row: 1, Col: 5, Value: 39.0
*
**
INVESTMENTS MAY 31, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

CORPORATE BONDS - 56.9%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - 55.6%
BASIC INDUSTRIES - 3.2%
CHEMICALS & PLASTICS - 1.0%
Valhi, Inc. liquid yield option notes
0%, 10/20/07 B1 $ 28,550 $ 12,205
IRON & STEEL - 1.8%
Trimas Corp. 5%, 8/1/03 Ba3 18,871 21,466
METALS & MINING - 0.4%
Inco Ltd. 5 3/4%, 7/1/04 Baa2 3,500 4,445
TOTAL BASIC INDUSTRIES 38,116
CONGLOMERATES - 0.7%
Gencorp, Inc. 8%, 8/1/02 B1 7,950 8,546
CONSTRUCTION & REAL ESTATE - 0.6%
BUILDING MATERIALS - 0.2%
Thermo Terratech, Inc. 4 5/8%, 5/1/03 (f) - 2,020 2,101
REAL ESTATE INVESTMENT TRUSTS - 0.4%
Sizeler Property Investors, Inc. 8%, 7/15/03 - 6,150 5,473
TOTAL CONSTRUCTION & REAL ESTATE 7,574
DURABLES - 1.2%
AUTOS, TIRES, & ACCESSORIES - 1.2%
Titan Wheel International, Inc. 4 3/4%, 12/1/00 B2 6,425 8,931
Toyota Motor Corp. 1.20%, 1/28/98 - JPY 455,000 5,386
TOTAL DURABLES 14,317
ENERGY - 1.5%
ENERGY SERVICES - 0.2%
Nabors Industries, Inc. 5%, 5/1/06 Ba2 2,918 3,100
INDEPENDENT POWER - 0.5%
Thermo Electron Corp. 4 1/8%, 1/1/03 (f) Ba2 4,500 5,592
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - 0.8%
Garnet Resources Corp.
9 1/2%, 12/21/98 (f) - $ 3,000 $ 2,400
Pennzoil 4 3/4%, 10/1/03 Baa3 1,080 1,184
USX-Marathon Group 7%, 6/15/17 BB- 6,000 5,640
9,224
TOTAL ENERGY 17,916
FINANCE - 3.7%
BANKS - 0.9%
Bank of New York Co., Inc. 7 1/2%, 8/15/01 A2 3,960 10,356
INSURANCE - 2.8%
Chubb Corp. (The) 6%, 5/15/98 Aa3 19,450 21,808
Fremont General Corp. liquid yield option notes
0%, 10/12/13 Ba2 20,320 9,652
Mutual Risk Management Ltd. exchangeable
0%, 10/30/15 (f) Baa3 5,000 1,850
33,310
TOTAL FINANCE 43,666
HEALTH - 12.0%
DRUGS & PHARMACEUTICALS - 2.0%
North American Vaccine, Inc. 6 1/2%, 5/1/03 Caa 2,000 2,200
Roche Holdings, Inc. liquid yield option notes
0%, 4/20/10 (f) - 35,000 15,225
Yamanouchi Pharmaceutical Co. Ltd.
euro 1 1/4%, 3/31/14 Aa3 JPY 540,000 5,856
23,281
MEDICAL EQUIPMENT & SUPPLIES - 0.5%
Benson Eyecare Corp. 8%, 5/15/01 CCC+ 5,333 6,400
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - 9.5%
Beverly Enterprises, Inc. 5 1/2%, 8/1/18 B3 $ 9,470 $ 9,754
Healthsource, Inc. 5%, 3/1/03 (f) Ba3 3,000 2,490
Integrated Health Services, Inc. 6%, 1/1/03 B2 5,260 5,207
Meris Labs, Inc. 10%, 11/14/97 (e) - 3,150 1,418
Multicare Companies, Inc. 7%, 3/15/03 (f) B- 5,320 6,810
NovaCare, Inc. 5 1/2%, 1/15/00 B1 36,040 31,984
Sun Healthcare Group, Inc. 6%, 3/1/04 (f) - 8,090 7,443
Tenet Healthcare Corp. 6%, 12/1/05 B1 19,490 20,367
TheraTx, Inc. 8%, 2/1/02 (f) B3 17,660 17,219
US Diagnostic Labs, Inc. 9%, 3/31/03 (f) - 6,000 8,760
111,452
TOTAL HEALTH 141,133
INDUSTRIAL MACHINERY & EQUIPMENT - 4.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 22,170 24,165
POLLUTION CONTROL - 2.1%
Sanifill, Inc. 5%, 3/1/06 B1 8,730 9,625
WMX Technologies, Inc. 2%, 1/24/05 A2 15,260 14,879
24,504
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 48,669
MEDIA & LEISURE - 7.9%
BROADCASTING - 1.0%
Home Shopping Network, Inc.
5 7/8%, 3/1/06 (f) B- 3,495 4,404
Time Warner, Inc. liquid yield option notes
0%, 6/22/13 Ba1 17,000 7,076
11,480
ENTERTAINMENT - 0.9%
All American Communications, Inc.
6 1/2%, 10/1/03 (f) - 6,900 6,762
Kushner-Locke Co. 8%, 12/15/00 (f) - 3,000 3,900
10,662
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 3.6%
Coleman Worldwide Corp. 2nd liquid yield
option notes 0%, 5/27/13 B2 $ 61,460 $ 21,204
Hasbro Corp. 6%, 11/15/98 A3 16,020 20,766
41,970
LODGING & GAMING - 0.8%
WMS Industries, Inc. 5 3/4%, 12/1/02 B1 9,350 8,929
PUBLISHING - 1.4%
Nelson Thomas, Inc. 5 3/4%, 11/30/99 (f) B1 4,510 4,318
News America Holdings, Inc.
liquid yield option notes 0%, 3/11/13 Baa3 21,890 10,343
Scholastic Corp. 5%, 8/15/05 (f) Baa3 2,000 2,080
16,741
RESTAURANTS - 0.2%
Shoney's, Inc. liquid yield option notes
0%, 4/11/04 B2 5,490 2,567
TOTAL MEDIA & LEISURE 92,349
NONDURABLES - 2.0%
BEVERAGES - 0.6%
Grand Metropolitan PLC 6 1/2%, 1/31/00 (f) A2 6,000 6,600
HOUSEHOLD PRODUCTS - 1.4%
Alberto Culver Co. 5 1/2%, 6/30/05 (f) - 13,700 16,817
TOTAL NONDURABLES 23,417
PRECIOUS METALS - 0.5%
Stillwater Mining Co. 7%, 5/1/03 (f) - 4,500 5,310
RETAIL & WHOLESALE - 4.6%
APPAREL STORES - 0.3%
Baby Superstore, Inc. 4 7/8%, 10/1/00 B3 4,000 3,260
DRUG STORES - 1.0%
Rite Aid Corp. liquid yield option notes
0%, 7/24/06 Baa1 23,100 12,128
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 1.3%
Proffitts, Inc. 4 3/4%, 11/1/03 B1 $ 15,628 $ 15,862
RETAIL & WHOLESALE, MISCELLANEOUS - 2.0%
Intertan, Inc. 9%, 8/30/00 - CAD 3,870 3,167
Office Depot, Inc. 0%, 11/1/08 Baa3 7,300 4,745
Waban, Inc. 6 1/2%, 7/1/02 Ba3 13,300 15,162
23,074
TOTAL RETAIL & WHOLESALE 54,324
SERVICES - 0.5%
ADVERTISING - 0.3%
Omnicom Group, Inc. 4 1/2%, 9/1/00 (f) Baa2 2,100 3,344
SERVICES - 0.2%
First Financial Management Corp. 5%, 12/15/99 A2 1,500 2,809
TOTAL SERVICES 6,153
TECHNOLOGY - 8.0%
COMMUNICATIONS EQUIPMENT - 0.3%
General Instrument Corp. 5%, 6/15/00 B1 2,490 3,180
COMPUTER SERVICES & SOFTWARE - 2.8%
Automatic Data Processing, Inc. 0%, 2/20/12 Aa3 21,000 10,657
Softkey International, Inc.
5 1/2%, 11/1/00 (f) - 19,880 17,047
Systems & Computer Technology Corp.
6 1/4%, 9/1/03 B2 4,140 4,927
32,631
COMPUTERS & OFFICE EQUIPMENT - 3.6%
Silicon Graphics, Inc. 0%, 11/2/13 (f) B1 21,630 11,653
Synoptics Communications, Inc.
5 1/4%, 5/15/03 (f) Ba3 7,000 6,580
Unisys Corp. 8 1/4%, 8/1/00 B3 23,435 24,197
42,430
ELECTRONICS - 1.3%
Cyrix Corp. 5 1/2%, 6/1/01 (f) - 4,025 4,025
National Semiconductor Corp.
6 1/2%, 10/1/02 (f) Ba2 2,000 1,785
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Sanmina Corp. 5 1/2%, 8/15/02 (f) B2 $ 5,070 $ 7,174
Xilinx, Inc. 5 1/4%, 11/1/02 (f) B2 3,170 3,019
16,003
TOTAL TECHNOLOGY 94,244
TRANSPORTATION - 0.8%
AIR TRANSPORTATION - 0.0%
Florida West Airlines, Inc.
8%, 3/18/99 (b)(f) - 2,000 100
TRUCKING & FREIGHT - 0.8%
Air Express International Corp. 6%, 1/15/03 B1 7,610 9,455
TOTAL TRANSPORTATION 9,555
UTILITIES - 4.2%
CELLULAR - 2.2%
Cellular Communications, Inc. 0%, 7/27/99 (f) B1 11,900 9,580
United States Cellular Corp.
liquid yield option note 0%, 6/15/15 Ba3 48,240 16,371
25,951
GAS - 0.4%
Consolidated Natural Gas Co.
7 1/4%, 12/15/15 A2 4,300 4,515
TELEPHONE SERVICES - 1.6%
Cam-Net Communications Network, Inc.
11 1/2%, 4/4/98 (e) - 2,275 2,133
US West, Inc. liquid yield option notes
0%, 6/25/11 A3 49,000 16,966
19,099
TOTAL UTILITIES 49,565
TOTAL CONVERTIBLE BONDS 654,854
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - 1.3%
HEALTH - 1.0%
MEDICAL EQUIPMENT & SUPPLIES - 1.0%
Advanced Medical, Inc. 15%, 7/15/99 - $ 12,032 $ 12,033
TECHNOLOGY - 0.3%
COMPUTER SERVICES & SOFTWARE - 0.3%
Sapiens International 10% 12/31/99 - 4,454 3,385
TOTAL NONCONVERTIBLE BONDS 15,418
TOTAL CORPORATE BONDS
(Cost $637,746) 670,272
COMMON STOCKS - 14.4%
SHARES
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.3%
Sekisui Chemical Co. Ltd. 242,000 2,865
PAPER & FOREST PRODUCTS - 0.1%
Pentair, Inc. 43,100 1,153
TOTAL BASIC INDUSTRIES 4,018
CONGLOMERATES - 0.2%
Allied-Signal, Inc. 40,000 2,189
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.8%
Armstrong World Industries, Inc. 10,000 589
Masco Corp. 290,000 9,062
TOTAL CONSTRUCTION & REAL ESTATE 9,651
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Bandag, Inc. 27,100 1,348
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER DURABLES - 0.3%
Swedish Match AB (a) 880,200 $ 2,941
TOTAL DURABLES 4,289
FINANCE - 1.4%
CREDIT & OTHER FINANCE - 0.4%
Acom Co. Ltd. 104,000 4,280
FEDERAL SPONSORED CREDIT - 0.2%
Federal National Mortgage Association 100,000 3,088
INSURANCE - 0.8%
Equitable of Iowa Companies 39,300 1,449
First Colony Corp. 55,800 1,465
Old Republic International Corp. 138,171 3,022
Protective Life Corp. 30,900 1,155
UNUM Corp. 41,700 2,460
9,551
TOTAL FINANCE 16,919
HEALTH - 5.0%
DRUGS & PHARMACEUTICALS - 3.0%
Allergan, Inc. 464,200 17,872
Schering-Plough Corp. 195,800 11,478
Takeda Chemical Industries Ltd. 383,000 6,341
35,691
MEDICAL EQUIPMENT & SUPPLIES - 0.4%
BEC Group, Inc. (a) 364,082 2,190
Biomet, Inc. (a) 100,000 1,400
Datascope Corp. (a) 90,000 1,598
5,188
MEDICAL FACILITIES MANAGEMENT - 1.6%
Columbia/HCA Healthcare Corp. 150,000 8,081
IVF America, Inc. (a) 200,000 750
TheraTx, Inc. (a) 651,700 9,613
18,444
TOTAL HEALTH 59,323
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 1.1%
LEISURE DURABLES & TOYS - 0.4%
Nintendo Co. Ltd. Ord. 64,000 $ 4,711
PUBLISHING - 0.7%
Scholastic Corp. (a) 66,900 4,165
Score Board, Inc. (e) 912,000 4,104
8,269
TOTAL MEDIA & LEISURE 12,980
NONDURABLES - 0.3%
FOODS - 0.3%
Nestle SA (Reg.) 2,700 3,049
RETAIL & WHOLESALE - 2.2%
GENERAL MERCHANDISE STORES - 0.9%
Proffitts, Inc. (a) 148,600 5,461
Wal-Mart Stores, Inc. 200,000 5,175
10,636
GROCERY STORES - 0.3%
Richfood Holdings, Inc. Class A 125,600 4,208
RETAIL & WHOLESALE, MISCELLANEOUS - 1.0%
Home Depot, Inc. (The) 150,000 7,669
Office Depot, Inc. (a) 144,400 3,700
11,369
TOTAL RETAIL & WHOLESALE 26,213
SERVICES - 0.3%
ADVERTISING - 0.3%
Interpublic Group of Companies, Inc. 84,400 3,914
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.3%
Equifax, Inc. 132,300 3,274
ELECTRONICS - 0.3%
Advanced Micro Devices, Inc. 100,000 1,763
ESS Technology, Inc. (a) 100,000 2,225
3,988
TOTAL TECHNOLOGY 7,262
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.0%
Florida West Airlines, Inc. (a) 18,236 $ -
RAILROADS - 0.5%
Burlington Northern Santa Fe Corp. 63,829 5,410
TOTAL TRANSPORTATION 5,410
UTILITIES - 1.2%
ELECTRIC UTILITY - 0.3%
Central Maine Power Co. 254,200 3,400
TELEPHONE SERVICES - 0.9%
AT&T Corp. 152,700 9,525
Cam-Net Communications Network, Inc. (a) 875,935 1,642
11,167
TOTAL UTILITIES 14,567
TOTAL COMMON STOCKS
(Cost $159,703) 169,784
CONVERTIBLE PREFERRED STOCKS - 25.8%
BASIC INDUSTRIES - 1.3%
METALS & MINING - 0.5%
Freeport-McMoRan Copper & Gold, Inc. $1.75 106,000 3,525
Reynolds Metals Co. $3.31 54,900 2,642
6,167
PACKAGING & CONTAINERS - 0.6%
Crown Cork & Seal, Inc. $1.88 141,500 6,456
PAPER & FOREST PRODUCTS - 0.2%
International Paper Capital Trust $2.625 60,000 2,745
TOTAL BASIC INDUSTRIES 15,368
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 1.5%
BUILDING MATERIALS - 0.3%
Bird Corp. $1.85 216,350 $ 3,299
REAL ESTATE INVESTMENT TRUSTS - 1.2%
Felcor Suite Hotels, Inc., Series A, $1.95 250,000 6,250
Oasis Residential, Inc. $2.25 325,200 8,171
14,421
TOTAL CONSTRUCTION & REAL ESTATE 17,720
DURABLES - 1.0%
AUTOS, TIRES, & ACCESSORIES - 1.0%
Chrysler Corp., Series A, $4.625 (f) 29,100 5,369
Masotech, Inc. $1.20 dividend enhanced 415,600 6,494
TOTAL DURABLES 11,863
ENERGY - 4.0%
OIL & GAS - 4.0%
Atlantic Richfield Co. exchangeable $2.22 267,700 6,759
Lomak Petroleum, Inc. exchangeable $2.03 (f) 70,000 2,748
Occidental Petroleum Corp.:
Indexed $3.00 261,400 16,892
$3.875 (f) 163,000 10,025
Santa Fe Energy Resources, Inc. $.732 752,400 8,465
Valero Energy Corp. $3.125 52,400 2,961
TOTAL ENERGY 47,850
FINANCE - 6.4%
BANKS - 0.5%
Banc One Corp., Series C, $3.50 90,000 6,390
CREDIT & OTHER FINANCE - 1.1%
Continental Airlines Finance Trust $4.25 (f) 196,000 12,985
INSURANCE - 3.4%
Alexander & Alexander Services, Inc.,
Series A, $3.625 (f) 175,500 8,424
American General LLC, Series A, $3.00 304,700 15,844
Conseco, Inc. $4.27875 213,300 15,358
39,626
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.4%
Washington Mutual, Inc., Series D 44,200 $ 5,044
SECURITIES INDUSTRY - 1.0%
Salomon, Inc. $2.03 407,600 11,413
TOTAL FINANCE 75,458
HEALTH - 1.3%
DRUGS & PHARMACEUTICALS - 0.2%
Neorx Corp., Series 1, $2.44 126,700 2,502
MEDICAL FACILITIES MANAGEMENT - 1.1%
Corning LP $3.00 225,800 12,871
TOTAL HEALTH 15,373
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
Cooper Industries, Inc. $0.81 exchangeable 350,000 5,600
MEDIA & LEISURE - 0.9%
BROADCASTING - 0.9%
Cablevision Systems Corp. depositary shares representing
1/10 pfd., Series I, $2.125 375,900 9,914
Triathalon Broadcasting Co. depositary shares
representing 1/10 pfd. $0.945 59,000 627
TOTAL MEDIA & LEISURE 10,541
NONDURABLES - 2.4%
TOBACCO - 2.4%
RJR Nabisco Holdings Corp. depositary shares
representing 1/10 pfd., Series C 4,270,800 28,294
SERVICES - 0.3%
LEASING & RENTAL - 0.3%
Gatx Corp. exchangeable $3.875 69,700 3,903
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 1.6%
COMPUTER SERVICES & SOFTWARE - 1.4%
Ceridian Corp. $2.75 106,100 $ 12,414
Sapiens International Corp. NV 10% 13,535 3,932
16,346
COMPUTERS & OFFICE EQUIPMENT - 0.2%
Wang Labs, Inc. $3.25 (f) 42,000 2,184
TOTAL TECHNOLOGY 18,530
TRANSPORTATION - 0.8%
AIR TRANSPORTATION - 0.8%
Trans World Airlines, Inc. $4.00 (a)(f) 90,000 5,197
USAir Group, Inc., Series B, 8 3/4% (a) 71,000 3,932
TOTAL TRANSPORTATION 9,129
UTILITIES - 3.8%
CELLULAR - 0.6%
Mobile Telecommunication Technologies Corp.
$2.25 (f) 259,200 6,286
GAS - 0.4%
MCN Corp. $2.0125 186,000 4,929
TELEPHONE SERVICES - 2.8%
Enhance Financial Services Group, Inc. $7.625 527,000 15,020
Sprint Corp. $2.63 439,100 18,166
33,186
TOTAL UTILITIES 44,401
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $275,611) 304,030
REPURCHASE AGREEMENTS - 2.9%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.32%, dated
5/31/96 due 6/3/96 $ 34,365 $ 34,350
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,107,410) $ 1,178,436
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
JPY - Japanese yen
LEGEND
1. Non-income producing
2. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
3. Principal amount is stated in United States dollars unless otherwise
noted.
4. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
5. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Cam-Net Communications
Network, Inc. 11 1/2%,
4/4/98 4/12/96 $ 1,838
Meris Labs, Inc.
10%, 11/14/97 11/14/94 $ 3,150
Score Board, Inc. 5/28/96 $ 8,764
6. Security exempt from registration under
Rule 144A of the Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At the period end, the value of these securities amounted to
$237,606,000 or 20.0% of net assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 11.8% AAA, AA, A 9.5%
Baa 3.4% BBB 7.2%
Ba 7.6% BB 8.2%
B 21.4% B 17.6%
Caa 0.2% CCC 1.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 10.4%
including long-term debt categorized as other securities.
INCOME TAX INFORMATION
At May 31,1996, the aggregate cost of investment securities for income tax
purposes was $1,107,641,000. Net unrealized appreciation aggregated
$70,795,000, of which $93,438,000 related to appreciated investment
securities and $22,643,000 related to depreciated investment securities.
The fund intends to elect to defer to its fiscal
year ending November 30, 1996 approximately $442,000 of losses recognized
during the period November 1, 1995
to November 30, 1995.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

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

ASSETS

Investment in securities, at value (including repurchase $ 1,178,436
agreements of $34,350) (cost $1,107,410) -
See accompanying schedule

Receivable for fund shares sold 10,744

Dividends receivable 1,272

Interest receivable 7,672

Other receivables 157

TOTAL ASSETS 1,198,281

LIABILITIES

Payable for investments purchased $ 1,529

Payable for fund shares redeemed 2,428

Accrued management fee 365

Other payables and accrued expenses 338

Collateral on securities loaned, at value 2,910

TOTAL LIABILITIES 7,570

NET ASSETS $ 1,190,711

Net Assets consist of:

Paid in capital $ 1,050,272

Undistributed net investment income 8,440

Accumulated undistributed net realized gain (loss) on 60,938
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 71,061
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 65,414 shares outstanding $ 1,190,711

NET ASSET VALUE, offering price and redemption price $18.20
per share ($1,190,711 (divided by) 65,414 shares)

</TABLE>

STATEMENT OF OPERATIONS

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

INVESTMENT INCOME $ 9,346
Dividends

Interest (including income on securities loaned of $23) 19,423

TOTAL INCOME 28,769

EXPENSES

Management fee $ 2,754
Basic fee

Performance adjustment (706)

Transfer agent fees 1,196

Accounting and security lending fees 240

Non-interested trustees' compensation 2

Custodian fees and expenses 37

Registration fees 23

Audit 24

Legal 4

Total expenses before reductions 3,574

Expense reductions (58) 3,516

NET INVESTMENT INCOME 25,253

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

Investment securities (including realized gain (loss) of 57,161
$(858) on sales of investments in affiliated issuers)

Foreign currency transactions (4) 57,157

Change in net unrealized appreciation (depreciation) on 31,790
investment securities

NET GAIN (LOSS) 88,947

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 114,200
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

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

INCREASE (DECREASE) IN NET ASSETS

Operations $ 25,253 $ 44,341
Net investment income

Net realized gain (loss) 57,157 68,607

Change in net unrealized appreciation (depreciation) 31,790 45,718

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 114,200 158,666
FROM OPERATIONS

Distributions to shareholders (26,462) (40,653)
From net investment income

From net realized gain (49,848) -

TOTAL DISTRIBUTIONS (76,310) (40,653)

Share transactions 269,586 432,412
Net proceeds from sales of shares

Reinvestment of distributions 71,290 36,917

Cost of shares redeemed (237,387) (441,400)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 103,489 27,929
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 141,379 145,942

NET ASSETS

Beginning of period 1,049,332 903,390

End of period (including undistributed net investment $ 1,190,711 $ 1,049,332
income of $8,440 and $9,649, respectively)

OTHER INFORMATION
Shares

Sold 15,406 26,247

Issued in reinvestment of distributions 4,251 2,300

Redeemed (13,674) (26,902)

Net increase (decrease) 5,983 1,645

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1996

(UNAUDITED) 1995 1994 E 1993 1992 1991

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

Net asset value, $ 17.66 $ 15.63 $ 17.63 $ 15.77 $ 13.45 $ 10.53
beginning of period

Income from Investment
Operations

Net investment .41 .79 .78 .75 .67 .60
income

Net realized and 1.41 1.94 (.86) 2.24 2.66 2.94
unrealized gain
(loss)

Total from investment 1.82 2.73 (.08) 2.99 3.33 3.54
operations

Less Distributions (.44) (.70) (.91) (.73) (.64) (.62)
From net investment
income

From net realized (.84) - (1.01) (.40) (.37) -
gain

Total distributions (1.28) (.70) (1.92) (1.13) (1.01) (.62)

Net asset value, end $ 18.20 $ 17.66 $ 15.63 $ 17.63 $ 15.77 $ 13.45
of period

TOTAL RETURN B, C 11.02% 18.00% (.54) 19.94% 26.18% 34.52%
%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 1,191 $ 1,049 $ 903 $ 1,056 $ 412 $ 126
period (in millions)

Ratio of expenses to .66% A .70% .86% .92% .96% 1.17%
average net assets

Ratio of expenses to .65% A .70% .85% .92% .96% 1.17%
average net assets , D D
after expense
reductions

Ratio of net investment 4.67% A 4.59% 4.61% 4.62% 4.82% 4.99%
income to average
net assets

Portfolio turnover rate 185% A 203% 318% 312% 258% 152%

Average commission $ .0438
rate F

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
E EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Convertible Securities Fund (the fund) is a fund of Fidelity
Financial Trust (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 financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
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."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses ofthe trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, market discount and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain
(loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $7,655,000 or
0.6% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,016,390,000 and $968,908,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic 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 ranged from .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .20%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .15%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. For the period,
the management fee was equivalent to an annualized rate of .38% of average
net assets after the performance adjustment.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $6,000 for the
period.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.22% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based on the number and duration of lending transactions. The
accounting 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 $71,000 for the period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, the value of the
securities loaned and the value of collateral amounted to $2,794,000 and
$2,910,000, respectively.
6. 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
$45,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses.
6. EXPENSE REDUCTIONS - CONTINUED
During the period, the fund's custodian and transfer agent fees were
reduced by $1,000 and $12,000, respectively, under these arrangements.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Advanced Medical, Inc $ - $ 2,080 $ - $ -
TOTALS $ - $ 2,080 $ - $ -

TO CALL FIDELITY

FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.

(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI

TO WRITE FIDELITY

If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan(registered trademark) Fund
Real Estate Portfolio
Utilities Income Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE

(2_FIDELITY_LOGOS)FIDELITY

EQUITY-INCOME II
FUND
SEMIANNUAL REPORT
MAY 31, 1996
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

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

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

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

FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.

NOTES 31 Notes to the financial statements.

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND

Equity-Income II 12.26% 23.76% 130.98% 209.99%

S&P 500(registered trademark) 11.79% 28.44% 97.37% 140.94%

Equity Income Funds 10.11% 23.40% 86.96% n/a
Average

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on August 21, 1990. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Standard & Poor's 500 Index - a common proxy for the
U.S. stock market. To measure how the fund's performance stacked up against
its peers, you can compare it to the equity income funds average, which
reflects the performance of 149 equity income funds with similar objectives
tracked by Lipper Analytical Services over the past six months. Both
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Equity-Income II 23.76% 18.23% 21.60%

S&P 500 28.44% 14.56% 16.42%

Equity Income Funds Average 23.40% 13.25% n/a

AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and shows you what would have happened if the fund had performed at a
constant rate each year.

$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960531 19960612 121300 S00000000000001
Equity-Income II SP Standard & Poor 500
00319 SP001
1990/08/21 10000.00 10000.00
1990/08/31 10090.00 9833.94
1990/09/30 9790.00 9355.02
1990/10/31 9790.00 9314.80
1990/11/30 10180.00 9916.53
1990/12/31 10451.06 10193.20
1991/01/31 10954.00 10637.63
1991/02/28 11929.70 11398.22
1991/03/31 12424.99 11674.06
1991/04/30 12770.41 11702.07
1991/05/31 13420.62 12207.60
1991/06/30 13105.67 11648.49
1991/07/31 13833.74 12191.31
1991/08/31 14361.43 12480.25
1991/09/30 14456.53 12271.83
1991/10/31 14904.71 12436.27
1991/11/30 14456.53 11935.09
1991/12/31 15320.99 13300.46
1992/01/31 15754.68 13053.08
1992/02/29 16262.56 13222.77
1992/03/31 16199.86 12964.92
1992/04/30 16550.87 13346.09
1992/05/31 16731.70 13411.49
1992/06/30 16626.27 13211.65
1992/07/31 17139.50 13752.01
1992/08/31 16786.65 13470.10
1992/09/30 17001.04 13629.04
1992/10/31 17140.75 13676.74
1992/11/30 17807.03 14143.12
1992/12/31 18240.51 14317.08
1993/01/31 18739.36 14437.34
1993/02/28 19071.82 14633.69
1993/03/31 19793.85 14942.46
1993/04/30 19849.55 14580.86
1993/05/31 20150.30 14971.62
1993/06/30 20341.51 15015.04
1993/07/31 20543.02 14954.98
1993/08/31 21214.73 15521.77
1993/09/30 21136.47 15402.26
1993/10/31 21530.18 15721.08
1993/11/30 21203.96 15571.73
1993/12/31 21685.43 15760.15
1994/01/31 22723.07 16296.00
1994/02/28 22286.55 15854.37
1994/03/31 21374.40 15163.12
1994/04/30 21955.29 15357.21
1994/05/31 22216.10 15609.07
1994/06/30 22047.50 15226.65
1994/07/31 22643.38 15726.08
1994/08/31 23418.02 16370.85
1994/09/30 22879.58 15969.77
1994/10/31 23274.88 16329.08
1994/11/30 22244.70 15734.38
1994/12/31 22370.95 15967.72
1995/01/31 22345.60 16381.76
1995/02/28 23154.03 17020.16
1995/03/31 23916.45 17522.43
1995/04/30 24475.31 18038.46
1995/05/31 25046.86 18759.46
1995/06/30 25390.89 19195.24
1995/07/31 26386.61 19831.75
1995/08/31 26527.03 19881.53
1995/09/30 27125.59 20720.53
1995/10/31 26317.59 20646.56
1995/11/30 27612.95 21552.95
1995/12/31 28274.79 21968.05
1996/01/31 29056.25 22715.85
1996/02/29 29427.41 22926.42
1996/03/31 30226.90 23147.20
1996/04/30 30706.27 23488.39
1996/05/31 30999.21 24094.16
IMATRL PRASUN SHR__CHT 19960531 19960612 121303 R00000000000073

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Equity-Income II Fund on August 21, 1990, when the
fund started. As the chart shows, by May 31, 1996, the value of the
investment would have grown to $30,999 - a 209.99% increase on the initial
investment. For comparison, look at how the S&P 500 did over the same
period. With dividends reinvested, the same $10,000 investment would have
grown to $24,094 - a 140.94% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Brian S. Posner, Portfolio Manager of Fidelity
Equity-Income II Fund
Q. BRIAN, HOW HAS THE FUND PERFORMED?
A. For the six months that ended May 31, 1996, the fund had a total return
of 12.26%. That compared to the six month total returns of 10.11% for the
equity income funds average tracked by Lipper Analytical Services and
11.79% for the Standard & Poor's 500 Index, respectively. Over the past 12
months, the fund posted a total return of 23.76%, while the total return
for the equity income funds average was 23.40% and the S&P 500's return was
28.44%.
Q. YOU MUST BE PLEASED WITH THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS
. . .
A. Yes, because the fund performed well on an absolute, as well as a
relative, basis. Broadly speaking, the strong performance over the past six
months was driven by three factors. First, a number of significant
investments made throughout 1995, particularly among energy service and
retail companies, yielded strong returns. Second, some of the best
performing securities in the fund were among its largest holdings,
including duPont and Schlumberger. Finally, an eclectic mix of stocks
representing numerous industry sectors also helped performance.
Q. BEFORE WE GET INTO SOME OF THE PARTICULARS, HOW WOULD YOU DESCRIBE THE
INVESTING ENVIRONMENT DURING THE PAST SIX MONTHS?
A. Following very strong performance in 1995, the gains posted by the broad
market indices over the last six months were somewhat remarkable. What was
truly extraordinary about the last six months was that the rate of ascent
continued relatively unabated amid an environment of rising interest rates,
heightened concerns about the overall state of the economy and a sharp
increase in stock market volatility. There was some shift in market
leadership toward those industries that benefit from an improving economy.
But the most notable change regarding market leadership was the relatively
strong performance of small- and medium-capitalization companies compared
to the larger-capitalization stocks that dominated in 1995.
Q. DID THE INCREASE IN INTEREST RATES HAVE ANY EFFECT ON THE MARKET?
A. Since the end of November 1995, long-term interest rates rose by almost
a full percentage point to 7.3% at the end of May. The most obvious effect
of higher interest rates was seen in the performance of classic
"interest-rate-sensitive" groups, including utilities and financial
companies, which in general posted poor returns for the period. I believe
that a less obvious, secondary effect was the increase in stock market
volatility also witnessed during the period, as investors were forced to
reassess the lofty valuations being awarded to many stocks. As a result, a
number of industries with high price-to-earnings ratios underperformed
during the period, including some of last year's leaders, such as medical
products and pharmaceutical companies.
Q. LET'S TALK ABOUT THE POSITIVE PERFORMANCE OF THE FUND'S ENERGY SERVICE
HOLDINGS . . .
A. Energy service companies have been strong contributors to the fund for
about the last 18 months. Gains in 1995 could be attributed primarily to
the self-help measures taken by many companies in the industry, such as
reducing overhead expenses and improving balance sheet quality. Beginning
late last year, the industry experienced real improvement in its underlying
fundamentals as demand for its services increased around the world. Those
companies that made the investment to reduce their cost structures and
realign their capacity did particularly well, including Western Atlas and
Baker Hughes.
Q. YOU ALSO MENTIONED THAT THE FUND'S RETAIL STOCKS DID WELL . . .
A. In 1995, retail stocks in general and the shares of apparel retailers
and department stores in particular fell to valuation levels that severely
discounted the likelihood of any near-term stabilization or improvement in
fundamental trends. However, in fact, fundamentals were stabilizing as
evidenced by improved inventory positions, declining operating costs and
slower square footage growth for a great many companies in the industry.
Beginning in early 1996, the combination of attractive valuations, improved
cost and capital structures, and rising sales propelled many stocks in the
group to strong gains in the last six months, including Gap, Inc., Dillard
Department Stores and Federated Department Stores.
Q. WERE THERE ANY NOTABLE AREAS OF WEAKNESS DURING THE PERIOD?
A. The combination of rising interest rates and heightened competitive
concerns negatively impacted utility stocks in general and regional
telephone operating company stocks in particular. While the fund's exposure
to these companies was limited, they did detract from overall performance.
Q. WHAT'S YOUR OUTLOOK?
A. I expect it to be a difficult market going forward. Valuations are
generally high and are being pressured further by the recent rise in
interest rates, as well as the increase in overall market volatility. It is
critical to be realistic about the returns one can expect from equities
given the aforementioned conditions, as well as the very strong gains
posted by the broad market indices over the last 18 months. In this
environment, I am placing much emphasis on attempting to control risk and
volatility by focusing on investments in companies with sound fundamentals
and whose stocks are valued attractively.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

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

British Petroleum PLC ADR 3.0 3.2

American Express Co. 2.6 3.2

AT&T Corp. 2.2 0.8

du Pont (E.I.) de Nemours & Co. 2.1 2.0

Wal-Mart Stores, Inc. 2.1 1.5

Schlumberger Ltd. 1.9 2.0

Philip Morris Companies, Inc. 1.7 1.7

International Business Machines 1.5 1.4
Corp.

Federal National Mortgage 1.4 1.8
Association

Western Atlas, Inc. 1.3 1.1

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

Energy 13.8 13.7

Finance 13.8 15.2

Basic Industries 9.9 10.4

Durables 9.3 5.6

Retail & Wholesale 8.2 7.9

ASSET ALLOCATION
AS OF MAY 31, 1996 * AS OF NOVEMBER 30, 1995 **
Stocks 85.0%
Bonds 1.7%
Convertible
securities 4.5%
Short-term
investments 8.8%
FOREIGN
INVESTMENTS 9.9%
Stocks 80.5%
Bonds 1.7%
Convertible
securities 3.3%
Short-term
investments 14.5%
FOREIGN
INVESTMENTS 12.4%
Row: 1, Col: 1, Value: 8.800000000000001
Row: 1, Col: 2, Value: 4.5
Row: 1, Col: 3, Value: 1.7
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 45.0
Row: 1, Col: 1, Value: 14.5
Row: 1, Col: 2, Value: 3.3
Row: 1, Col: 3, Value: 1.7
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 40.5
*
**
INVESTMENTS MAY 31, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 85.0%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.0%
Flightsafety International, Inc. 879,300 $ 48,471
Lockheed Martin Corp. 1,109,554 93,064
141,535
BASIC INDUSTRIES - 9.2%
CHEMICALS & PLASTICS - 6.2%
Betz Laboratories, Inc. 682,400 31,305
Dow Chemical Co. 91,200 7,627
du Pont (E.I.) de Nemours & Co. 3,860,100 307,843
Ferro Corp. (d) 1,517,700 41,357
Great Lakes Chemical Corp. 2,453,200 158,231
IMC Fertilizer Group, Inc. 1,348,500 49,389
Lawter International, Inc. 24,600 283
Methanex Corp. (a) 650,000 4,773
Nalco Chemical Co. 1,838,700 58,379
Raychem Corp. 530,600 39,662
Rohm & Haas Co. 841,000 56,978
Union Carbide Corp. 3,127,800 134,886
890,713
IRON & STEEL - 0.7%
Armco, Inc. (a) 1,087,700 5,710
Inland Steel Industries, Inc. 758,900 16,411
LTV Corp. 2,367,800 30,485
Nucor Corp. 917,600 50,468
103,074
METALS & MINING - 1.7%
Aluminum Co. of America 2,610,200 160,854
Alcan Aluminium Ltd. 1,725,000 56,464
Inco Ltd. 525,900 17,157
Pechiney SA Class A 100,000 4,262
238,737
PACKAGING & CONTAINERS - 0.4%
Caradon PLC 6,669,800 24,056
Corning, Inc. 650,000 24,862
Tupperware Corp. 269,800 12,343
61,261
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 0.2%
Fort Howard Corp. (a) 1,039,400 $ 21,568
TOTAL BASIC INDUSTRIES 1,315,353
CONGLOMERATES - 1.3%
Allied-Signal, Inc. 1,326,000 72,599
American Standard Companies, Inc. (a) 985,800 29,204
United Technologies Corp. 715,200 78,225
180,028
CONSTRUCTION & REAL ESTATE - 3.0%
BUILDING MATERIALS - 1.1%
Masco Corp. 2,990,800 93,462
Rugby Group 2,928,400 5,429
Sherwin-Williams Co. 824,700 37,008
United Dominion Industries Ltd. 1,233,000 29,279
165,178
CONSTRUCTION - 0.5%
McDermott (J. Ray) SA (d) 2,629,600 65,740
ENGINEERING - 0.3%
Foster Wheeler Corp. 947,500 42,164
REAL ESTATE INVESTMENT TRUSTS - 1.1%
Bay Apartment Communities, Inc. 252,000 6,457
Beacon Properties Corp. 256,900 6,487
Bradley Real Estate Trust (SBI) 479,150 7,067
CBL & Associates Properties, Inc. 250,000 5,344
Cali Realty Corp. 223,300 4,996
CenterPoint Properties Corp. 100,000 2,375
Colonial Properties Trust (SBI) 200,000 4,700
Duke Realty Investors, Inc. 271,600 8,182
Equity Residential Properties Trust (SBI) 441,700 13,693
Excel Realty Trust, Inc. 110,700 2,089
Felcor Suite Hotels, Inc. 300,000 9,263
First Industrial Realty Trust, Inc. 211,800 5,004
Franchise Finance Corp. of America 213,800 4,704
Highwoods Properties, Inc. 32,900 966
LTC Properties, Inc. 263,100 4,210
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Liberty Property Trust (SBI) 299,900 $ 6,110
Macerich Co. 250,000 5,250
Patriot American Hospitality, Inc. 300,000 8,513
Public Storage, Inc. 574,800 12,071
RFS Hotel Investors, Inc. 300,000 5,175
Realty Income Corp. 100,000 2,088
Reckson Associates Realty Corp. 117,300 3,666
Shurgard Storage Centers, Inc. 21,800 534
Sovran Self Storage, Inc. 86,400 2,257
Speiker Properties, Inc. 90,000 2,475
Starwood Lodging Trust combined certificate 412,000 15,656
Urban Shopping Centers, Inc. 150,000 3,563
Weeks Corp. 100,000 2,575
155,470
TOTAL CONSTRUCTION & REAL ESTATE 428,552
DURABLES - 8.9%
AUTOS, TIRES, & ACCESSORIES - 4.9%
Arvin Industries, Inc. 659,300 16,153
Bandag, Inc. 269,100 13,388
Chrysler Corp. 2,030,000 135,249
Cummins Engine Co., Inc. 766,500 32,576
Eaton Corp. 1,503,700 87,027
Echlin, Inc. 33,000 1,128
General Motors Corp. 3,205,618 176,710
Johnson Controls, Inc. 733,800 51,183
Modine Manufacturing Co. 56,500 1,427
PACCAR, Inc. 354,400 17,454
Scania AB:
Class A 223,000 6,319
Class B 1,279,000 36,244
Superior Industries International, Inc. 1,163,900 31,862
Volvo AB Class B 4,607,900 97,934
704,654
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER DURABLES - 0.8%
Minnesota Mining & Manufacturing Co. 1,404,500 $ 95,857
Swedish Match AB (a) 5,881,500 19,650
115,507
CONSUMER ELECTRONICS - 0.8%
Newell Co. 1,263,200 37,896
Whirlpool Corp. 1,326,400 75,439
113,335
TEXTILES & APPAREL - 2.4%
Fruit of the Loom, Inc. Class A (a) 2,899,700 78,292
Intimate Brands, Inc. Class A 893,300 19,318
Nine West Group, Inc. (a) 998,400 48,547
Russell Corp. (d) 3,033,200 83,413
Stride Rite Corp. 1,770,800 15,937
Unifi, Inc. 2,350,300 65,221
Westpoint Stevens, Inc. Class A (a) 1,459,900 33,943
344,671
TOTAL DURABLES 1,278,167
ENERGY - 13.0%
ENERGY SERVICES - 5.3%
Baker Hughes, Inc. 4,254,400 133,482
Dresser Industries, Inc. 3,141,400 91,886
Energy Ventures, Inc. (a) 713,100 23,800
Helmerich & Payne, Inc. 151,900 5,506
McDermott International, Inc. 1,952,700 42,471
Offshore Logistics, Inc. (a) 346,900 5,030
Schlumberger Ltd. 3,229,400 269,251
Western Atlas, Inc. (a)(d) 3,056,869 187,233
758,659
OIL & GAS - 7.7%
Amerada Hess Corp. 1,707,200 97,310
Atlantic Richfield Co. 435,700 52,121
British Petroleum PLC:
Ord. 3,885,885 33,456
ADR 4,034,831 425,170
Burlington Resources, Inc. 1,687,100 64,110
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Canada Occidental Petroleum Ltd. 500,000 $ 8,749
Coastal Corp. (The) 1,444,200 59,212
Newfield Exploration Co. (a) 101,000 3,762
Noble Affiliates, Inc. 437,900 14,834
Occidental Petroleum Corp. 2,578,300 66,714
Royal Dutch Petroleum Co. ADR 888,600 133,290
Total SA:
Class B 1,816,610 131,589
sponsored ADR 547,116 19,696
Union Pacific Resources Group, Inc. 22,900 590
1,110,603
TOTAL ENERGY 1,869,262
FINANCE - 13.0%
BANKS - 2.3%
Banc One Corp. 1,730,080 64,013
Bank of New York Co., Inc. 3,230,164 167,565
Canadian Imperial Bank of Commerce 600,000 19,903
Deutsche Bank AG 1,605,000 75,510
Republic New York Corp. 112,700 7,128
334,119
CREDIT & OTHER FINANCE - 3.2%
American Express Co. 7,986,512 365,383
Beneficial Corp. 1,026,200 59,776
First Chicago NBD Corp. 841,400 36,706
461,865
FEDERAL SPONSORED CREDIT - 1.8%
Federal Home Loan Mortgage Corporation 619,500 51,186
Federal National Mortgage Association 6,534,500 201,753
252,939
INSURANCE - 5.0%
Alexander & Alexander Services, Inc. 1,820,050 36,173
Allmerica Financial Corp. 449,600 11,914
Allstate Corp. 4,397,800 185,807
Angerstein Underwriting Trust PLC (d) 6,500,000 12,302
Berkley (W.R.) Corp. 837,600 36,436
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
General Re Corp. 756,500 $ 110,449
Gryphon Holdings, Inc. (a)(d) 547,900 9,862
Hiscox Select Insurance Fund PLC 750,000 1,513
ITT Hartford Group, Inc. 1,634,400 84,580
Loews Corp. 637,100 50,809
MBIA, Inc. 211,600 16,108
MGIC Investment Corp. 293,700 17,255
Masthead Insurance Underwriting PLC 900,000 1,606
NAC Re Corp. 846,100 27,498
Old Republic International Corp. 1,314,600 28,757
Orion Capital Corp. 430,100 20,322
Reliance Group Holdings, Inc. 848,200 6,574
Syndicate Capital Trust PLC (d) 2,650,000 4,563
Travelers, Inc. (The) 564,486 23,426
Terra Nova Holdings Ltd. (d) 1,200,000 18,300
Unionamerica Holdings PLC sponsored ADR 480,200 7,563
711,817
SECURITIES INDUSTRY - 0.7%
Lehman Brothers Holdings, Inc. 3,906,480 95,709
TOTAL FINANCE 1,856,449
HEALTH - 2.4%
DRUGS & PHARMACEUTICALS - 1.4%
American Home Products Corp. 1,110,400 59,406
Bristol-Myers Squibb Co. 74,100 6,326
Genentech, Inc. special (a) 1,253,700 65,976
Merck & Co., Inc. 370,000 23,911
Pharmacia & Upjohn, Inc. 822,000 33,599
Schering-Plough Corp. 200,000 11,725
200,943
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Bausch & Lomb, Inc. 2,339,900 100,616
MEDICAL FACILITIES MANAGEMENT - 0.3%
Tenet Healthcare Corp. (a) 1,100,000 23,650
United HealthCare Corp. 391,000 21,456
45,106
TOTAL HEALTH 346,665
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HOLDING COMPANIES - 0.1%
U.S. Industries, Inc. (a) 600,000 $ 13,050
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
ELECTRICAL EQUIPMENT - 0.7%
Alcatel Alsthom Cie Generale d'Electricite SA 245,000 22,368
Fuji Electric Co. Ltd. 4,188,000 23,046
Mitsubishi Electric Co. Ord. 945,000 6,468
Scientific-Atlanta, Inc. 2,162,600 40,819
Sensormatic Electronics Corp. 537,700 9,611
102,312
INDUSTRIAL MACHINERY & EQUIPMENT - 0.9%
Cooper Industries, Inc. 1,816,338 77,421
Goulds Pumps, Inc. 286,900 6,814
Keystone International, Inc. 484,900 10,607
Stewart & Stevenson Services, Inc. 1,186,700 29,667
124,509
POLLUTION CONTROL - 1.8%
Browning-Ferris Industries, Inc. 3,943,800 120,286
Safety Kleen Corp. 800,000 13,300
WMX Technologies, Inc. 3,569,000 125,807
259,393
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 486,214
MEDIA & LEISURE - 1.3%
ENTERTAINMENT - 0.1%
Disney (Walt) Co. 125,000 7,594
LODGING & GAMING - 0.2%
ITT Corp. 475,000 29,213
PUBLISHING - 0.4%
Dun & Bradstreet Corp. 296,200 18,920
Knight-Ridder, Inc. 81,500 6,092
New York Times Co. (The) Class A 952,600 31,317
56,329
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.6%
Brinker International, Inc. (a) 2,755,900 $ 46,161
Darden Restaurants, Inc. 3,413,500 40,535
86,696
TOTAL MEDIA & LEISURE 179,832
NONDURABLES - 4.5%
BEVERAGES - 0.6%
Anheuser-Busch Companies, Inc. 1,321,800 94,178
FOODS - 0.4%
Quaker Oats Co. 81,800 2,850
Ralston Purina Co. 954,000 58,433
61,283
HOUSEHOLD PRODUCTS - 0.9%
Premark International, Inc. 989,200 15,951
Rubbermaid, Inc. 2,988,100 83,667
Unilever NV:
Ord. 50,000 6,813
ADR 130,000 17,534
123,965
TOBACCO - 2.6%
Philip Morris Companies, Inc. 2,461,500 244,612
RJR Nabisco Holdings Corp. 2,543,120 84,241
UST, Inc. 1,243,100 41,022
369,875
TOTAL NONDURABLES 649,301
PRECIOUS METALS - 0.9%
Newmont Mining Corp. 1,376,600 82,940
Santa Fe Pacific Gold Corp. 3,055,300 46,593
129,533
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 8.1%
APPAREL STORES - 1.5%
Gap, Inc. 1,150,000 $ 38,669
Limited, Inc. (The) 5,332,095 110,641
Payless Shoesource, Inc. (a) 863,908 24,297
TJX Companies, Inc. 1,177,500 41,507
215,114
DRUG STORES - 0.3%
Rite Aid Corp. 1,425,000 41,859
GENERAL MERCHANDISE STORES - 5.0%
Carson Pirie Scott & Co. (a) 143,400 3,979
Dayton Hudson Corp. 1,200,800 122,482
Dillard Department Stores, Inc. Class A 2,824,000 112,960
Federated Department Stores, Inc. (a) 3,314,700 114,772
May Department Stores Co. (The) 1,193,800 56,556
Wal-Mart Stores, Inc. 11,638,700 301,151
711,900
GROCERY STORES - 0.3%
Supervalu, Inc. 1,324,500 41,059
RETAIL & WHOLESALE, MISCELLANEOUS - 1.0%
Best Buy Co., Inc. (a) 441,700 10,049
Duty Free International, Inc. 837,900 12,569
Fingerhut Companies, Inc. 2,196,100 33,765
Pier 1 Imports, Inc. 722,300 11,376
Sound Advice, Inc. (warrants) (a) 6 -
Toys "R" Us, Inc. (a) 2,903,000 84,187
151,946
TOTAL RETAIL & WHOLESALE 1,161,878
SERVICES - 1.3%
ADVERTISING - 0.3%
WPP Group PLC 3,890,100 11,828
WPP Group PLC (f) 9,300,000 28,277
WPP Group PLC ADR 68,280 2,100
42,205
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - CONTINUED
LEASING & RENTAL - 0.0%
GATX Corp. 14,100 $ 635
PRINTING - 0.1%
New England Business Service, Inc. 463,000 8,508
SERVICES - 0.9%
ADT Ltd. (a) 1,922,000 36,998
Block (H&R), Inc. 1,663,400 58,011
Christies International PLC 5,862,900 20,009
Sotheby's Holdings, Inc. Class A 1,544,700 22,012
137,030
TOTAL SERVICES 188,378
TECHNOLOGY - 5.6%
COMMUNICATIONS EQUIPMENT - 0.4%
DSC Communications Corp. (a) 1,805,000 54,376
COMPUTER SERVICES & SOFTWARE - 0.7%
Automatic Data Processing, Inc. 2,717,200 104,273
COMPUTERS & OFFICE EQUIPMENT - 2.8%
International Business Machines Corp. 2,053,900 219,254
Pitney Bowes, Inc. 1,768,300 87,752
Silicon Graphics, Inc. (a) 2,079,100 57,175
Wang Laboratories, Inc. (a) 1,547,300 33,460
397,641
ELECTRONIC INSTRUMENTS - 0.3%
Tektronix, Inc. 582,500 22,135
Teradyne, Inc. (a) 1,350,000 27,169
49,304
ELECTRONICS - 1.1%
AMP, Inc. 3,029,500 127,618
Avnet, Inc. 185,300 9,543
VLSI Technology, Inc. (a) 947,200 16,221
153,382
PHOTOGRAPHIC EQUIPMENT - 0.3%
Polaroid Corp. 953,600 42,912
TOTAL TECHNOLOGY 801,888
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 2.5%
AIR TRANSPORTATION - 0.1%
AMR Corp. 196,000 $ 18,498
RAILROADS - 1.4%
Burlington Northern Santa Fe Corp. 1,258,706 106,675
CSX Corp. 988,300 48,921
Union Pacific Corp. 614,200 43,071
198,667
SHIPPING - 0.1%
Kirby Corp. (a) 694,900 12,248
TRUCKING & FREIGHT - 0.9%
Caliber System, Inc. 1,156,000 42,917
Consolidated Freightways, Inc. 652,900 15,506
Hunt (J.B.) Transport Services, Inc. 1,525,700 28,988
Roadway Express, Inc. 590,100 9,810
USFreightways Corp. 685,000 14,899
Yellow Corp. 894,300 11,626
123,746
TOTAL TRANSPORTATION 353,159
UTILITIES - 5.5%
ELECTRIC UTILITY - 0.5%
American Electric Power Co., Inc. 392,100 15,733
DQE, Inc. 206,300 5,544
Duke Power Co. 150,000 7,238
Entergy Corp. 1,586,300 41,640
70,155
TELEPHONE SERVICES - 5.0%
AT&T Corp. 5,101,400 318,200
ALLTEL Corp. 1,691,500 53,282
Ameritech Corp. 1,658,000 93,677
Bell Atlantic Corp. 687,000 42,852
Lucent Technologies, Inc. (a) 211,800 8,048
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
NYNEX Corp. 2,189,600 $ 100,995
SBC Communications, Inc. 975,000 48,141
U.S. West, Inc. 1,693,400 55,247
720,442
TOTAL UTILITIES 790,597
TOTAL COMMON STOCKS
(Cost $9,867,804) 12,169,841
PREFERRED STOCKS - 2.6%
CONVERTIBLE PREFERRED STOCKS - 2.6%
BASIC INDUSTRIES - 0.5%
IRON & STEEL - 0.2%
Armco, Inc. Class A $3.625 418,100 20,382
METALS & MINING - 0.3%
Reynolds Metals Co. $3.31 950,600 45,748
TOTAL BASIC INDUSTRIES 66,130
ENERGY - 0.5%
OIL & GAS - 0.5%
Atlantic Richfield Co. exchangeable $2.23 2,121,200 53,560
Occidental Petroleum Corp. $3.875 (f) 305,000 18,757
72,317
FINANCE - 0.6%
INSURANCE - 0.6%
Alexander & Alexander Services, Inc., Series A,
$3.625 (f) 480,000 23,040
Allstate Corp. exchangeable $2.30 1,704,900 67,344
90,384
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
ELECTRICAL EQUIPMENT - 0.3%
Westinghouse Electric Corp. $1.30 (f) 2,506,200 $ 42,292
POLLUTION CONTROL - 0.1%
Browning-Ferris Industries, Inc. 579,300 19,407
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 61,699
MEDIA & LEISURE - 0.5%
ENTERTAINMENT - 0.5%
Time Warner Financing Trust $1.24 1,766,000 67,108
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (f) 32,000 1,664
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
Sprint Corp. $2.63 236,700 9,793
TOTAL CONVERTIBLE PREFERRED STOCKS 369,095
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. (e) 11,768 37
Gulf Canada Resources Ltd., Series 1, adj. rate 410,232 1,304
TOTAL NONCONVERTIBLE PREFERRED STOCKS 1,341
TOTAL PREFERRED STOCKS
(Cost $357,225) 370,436
CORPORATE BONDS - 3.6%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - 1.9%
CONGLOMERATES - 0.1%
Hanson America, Inc. 2.39%, 3/1/01 (f) A3 $ 19,054 $ 16,291
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Centerpoint Properties 8.22%, 1/15/04 Ba2 1,030 1,318
Sizeler Property Investors, Inc. 8%, 7/15/03 - 1,000 890
2,208
HEALTH - 0.4%
DRUGS & PHARMACEUTICALS - 0.4%
Roche Holdings, Inc. liquid yield option
notes 0%, 4/20/10 (f) - 118,000 51,330
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
Cooper Industries, Inc. 7.05%, 1/1/15 A3 34,262 37,346
Exide Corp. 2.90%, 12/15/05 (f) B2 33,000 19,305
56,651
RETAIL & WHOLESALE - 0.1%
GENERAL MERCHANDISE STORES - 0.1%
Federated Department Stores, Inc. 5%, 10/1/03 Ba3 13,000 15,048
SERVICES - 0.3%
SERVICES - 0.3%
ADT Operations, Inc. liquid yield option
notes 0%, 7/6/10 Ba3 87,940 49,686
TECHNOLOGY - 0.6%
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Silicon Graphics, Inc. 0%, 11/2/13 (f) B1 74,240 39,997
Unisys Corp. 8 1/4%, 3/15/06 B3 1,291 1,762
41,759
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.3%
National Semiconductor Corp.
6 1/2%, 10/1/02 (f) Ba2 $ 42,500 $ 37,931
VLSI Technology, Inc. 8 1/4%, 10/1/05 B 9,000 8,258
46,189
TOTAL TECHNOLOGY 87,948
TOTAL CONVERTIBLE BONDS 279,162
NONCONVERTIBLE BONDS - 1.7%
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.1%
IMC Fertilizer Group, Inc. 10 1/8%, 6/15/01 Ba3 7,000 7,446
PAPER & FOREST PRODUCTS - 0.1%
Stone Container Corp.:
11 1/2%, 9/1/99 B2 2,000 2,027
9 7/8%, 2/1/01 B1 20,000 19,250
21,277
TOTAL BASIC INDUSTRIES 28,723
CONGLOMERATES - 0.3%
American Standard, Inc.:
10 7/8%, 5/15/99 Ba3 1,000 1,060
11 3/8%, 5/15/04 Ba3 17,530 19,020
0%, 6/1/05 (c) B1 15,000 12,863
Sequa Corp. 9 3/8%, 12/15/03 B3 12,110 11,595
44,538
DURABLES - 0.4%
TEXTILES & APPAREL - 0.4%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 29,690 29,245
9 3/8%, 12/15/05 B3 29,750 28,783
58,028
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - 0.3%
ENERGY SERVICES - 0.2%
Global Marine, Inc. 12 3/4%, 12/15/99 B1 $ 24,200 $ 26,378
OIL & GAS - 0.1%
Transtexas Gas Corp. 11 1/2%, 6/15/02 B2 12,000 11,760
TOTAL ENERGY 38,138
FINANCE - 0.2%
CLOSED END INVESTMENT COMPANY - 0.1%
Airplanes 10 7/8%, 3/15/19 Ba2 12,610 13,209
INSURANCE - 0.1%
ITT Hartford Group, Inc. 7 1/4%, 12/1/96 A1 1,500 1,502
Reliance Group 9%, 11/15/00 Ba3 16,000 15,840
17,342
SAVINGS & LOANS - 0.0%
Coast Savings Financial, Inc. 10%, 4/1/00 Ba2 2,800 2,856
TOTAL FINANCE 33,407
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT - 0.1%
Tenet Healthcare Corp. 8 5/8%, 12/1/03 Ba1 7,480 7,555
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands International, Inc.
11 1/2%, 6/1/01 B3 3,997 4,197
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.2%
AMR Corp. 7 3/4%, 12/1/97 Baa3 26,000 26,409
TOTAL NONCONVERTIBLE BONDS 240,995
TOTAL CORPORATE BONDS
(Cost $504,728) 520,157
U.S. TREASURY OBLIGATIONS - 2.8%
PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S)
U.S. Treasury Bills, yields at date of purchase
5.05% to 5.07%, 6/13/96 to 6/20/96
(Cost $398,914) $ 400,000 $ 399,138
REPURCHASE AGREEMENTS - 6.0%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.32%, dated
5/31/96 due 6/3/96 $ 865,662 865,278
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $11,993,949) $ 14,324,850
LEGEND
1. Non-income producing
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
4. Affiliated company (see Note 6 of Notes to Financial Statements).
5. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Gulf Canada
Resources Ltd. 10/15/93 $ 29
6. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $278,884,000 or 1.9% of net
assets.
INCOME TAX INFORMATION
At May 31, 1996, the aggregate cost of investment securities for income tax
purposes was $11,994,053,000. Net unrealized appreciation aggregated
$2,330,797,000, of which $2,444,186,000 related to appreciated investment
securities and $113,389,000 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

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

ASSETS

Investment in securities, at value (including repurchase $ 14,324,850
agreements of $865,278) (cost $11,993,949) -
See accompanying schedule

Receivable for investments sold 28,785

Receivable for fund shares sold 30,723

Dividends receivable 35,762

Interest receivable 9,644

Other receivables 135

TOTAL ASSETS 14,429,899

LIABILITIES

Payable for investments purchased $ 45,619

Payable for fund shares redeemed 21,036

Accrued management fee 5,967

Other payables and accrued expenses 4,115

TOTAL LIABILITIES 76,737

NET ASSETS $ 14,353,162

Net Assets consist of:

Paid in capital $ 11,443,333

Undistributed net investment income 88,724

Accumulated undistributed net realized gain (loss) on 490,240
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 2,330,865
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 616,508 shares outstanding $ 14,353,162

NET ASSET VALUE, offering price and redemption price $23.28
per share ($14,353,162 (divided by) 616,508 shares)

</TABLE>

STATEMENT OF OPERATIONS

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

INVESTMENT INCOME $ 139,108
Dividends (including $1,070 received from affiliated issuers)

Interest 55,368

TOTAL INCOME 194,476

EXPENSES

Management fee $ 32,736

Transfer agent fees 13,225

Accounting fees and expenses 408

Non-interested trustees' compensation 22

Custodian fees and expenses 245

Registration fees 927

Audit 51

Legal 40

Miscellaneous 76

Total expenses before reductions 47,730

Expense reductions (577) 47,153

NET INVESTMENT INCOME 147,323

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

Investment securities 494,506

Foreign currency transactions (47) 494,459

Change in net unrealized appreciation (depreciation) on:

Investment securities 830,466

Assets and liabilities in foreign currencies 10 830,476

NET GAIN (LOSS) 1,324,935

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,472,258
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

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

INCREASE (DECREASE) IN NET ASSETS

Operations $ 147,323 $ 227,830
Net investment income

Net realized gain (loss) 494,459 349,107

Change in net unrealized appreciation (depreciation) 830,476 1,499,475

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,472,258 2,076,412
FROM OPERATIONS

Distributions to shareholders (95,473) (189,161)
From net investment income

From net realized gain (347,349) (351,737)

TOTAL DISTRIBUTIONS (442,822) (540,898)

Share transactions 2,936,139 4,531,327
Net proceeds from sales of shares

Reinvestment of distributions 427,987 521,445

Cost of shares redeemed (1,593,100) (2,640,770)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,771,026 2,412,002
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 2,800,462 3,947,516

NET ASSETS

Beginning of period 11,552,700 7,605,184

End of period (including undistributed net investment $ 14,353,162 $ 11,552,700
income of $88,724 and $36,874, respectively)

OTHER INFORMATION
Shares

Sold 131,622 232,585

Issued in reinvestment of distributions 20,050 28,726

Redeemed (71,866) (134,237)

Net increase (decrease) 79,806 127,074

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1996

(UNAUDITED) 1995 1994 D 1993 1992 1991

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

Net asset value, $ 21.53 $ 18.57 $ 18.85 $ 16.57 $ 13.87 $ 10.18
beginning of period

Income from
Investment
Operations

Net investment .25 .42 .37 .44 .40 .45 G
income

Net realized 2.31 3.80 .53 2.62 2.75 3.76
and unrealized
gain (loss)

Total from 2.56 4.22 .90 3.06 3.15 4.21
investment
operations

Less Distributions (.17) (.40) (.47) (.41) (.32) (.44)
From net investment
income

From net realized (.64) (.86) (.71) (.37) (.13) (.08)
gain

Total distributions (.81) (1.26) (1.18) (.78) (.45) (.52)

Net asset value, end $ 23.28 $ 21.53 $ 18.57 $ 18.85 $ 16.57 $ 13.87
of period

TOTAL RETURN B, C 12.26% 24.13% 4.91% 19.08% 23.18% 42.01%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 14,353 $ 11,553 $ 7,605 $ 4,815 $ 1,942 $ 292
period (in millions)

Ratio of expenses to .74% A .76% .83% .89% 1.01% 1.52%
average net assets

Ratio of expenses .73% A .75% .81% .88% 1.01% 1.52%
to average net , E E E E
assets after
expense reductions

Ratio of net 2.29% A 2.37% 2.36% 2.69% 3.09% 3.83%
investment income
to average net
assets

Portfolio turnover rate 47% A 45% 75% 55% 89% 206%

Average commission $ .0393
rate F

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
G NET INVESTMENT INCOME PER SHARE REFLECTS $.12 PER SHARE RELATING TO A
NONRECURRING INITIATIVE TO INVEST IN DIVIDEND INCOME PRODUCING SECURITIES
WHICH WAS IN EFFECT FOR A PORTION OF 1991.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Equity-Income II Fund (the fund) is a fund of Fidelity Financial
Trust (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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
accrued as earned. Investment income is recorded net of foreign taxes
withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, market discount, non-taxable dividends, and losses
deferred due to wash sales. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
Company (FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more repurchase
agreements that mature in 60 days or less from the date of purchase, and
are collateralized by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $37,000 or 0.0%
of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $4,313,402,000 and $2,695,062,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives 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 ranged from .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
lower management fee. The annual individual fund fee rate is .20%. For the
period, the management fee was equivalent to an annualized rate of .51% of
average net assets
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $11,000 for the
period.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type
of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. For the period, the transfer
agent fees were equivalent to an annualized rate of .21% of average net
assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $1,744,000 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
$498,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $2,000 and $77,000,
respectively, under these arrangements.
6. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Angerstein Underwriting Trust PLC $ - $ - $ - $ 12,302
Ferro Corp. 2,688 - 396 41,357
Gryphon Holdings, Inc. - - - 9,862
Hornbeck Offshore Services, Inc. - - - -
McDermott (J. Ray) SA 10,812 - - 65,740
Russell Corp. 17,006 - 674 83,413
Syndicate Capital Trust PLC - - - 4,563
Terra Nova Holdings Ltd. - - - 18,300
Western Atlas, Inc. 18,809 - - 187,233
TOTALS $ 49,315 $ - $ 1,070 $ 422,770
TO CALL FIDELITY

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Brian S. Posner, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan(registered trademark) Fund
Real Estate Portfolio
Utilities Income Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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FIDELITY

(REGISTERED TRADEMARK)
RETIREMENT GROWTH
FUND
SEMIANNUAL REPORT
MAY 31, 1996
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

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

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

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

FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 25 Notes to the financial statements.

There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Retirement Growth 9.66% 22.05% 116.71% 256.61%

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

Capital Appreciation Funds 15.10% 34.18% 107.75% 219.30%
Average

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one, five, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Standard & Poor's 500 Index -
a common proxy for the U.S. stock market. To measure how the fund's
performance stacked up against its peers, you can compare it to the capital
appreciation funds average, which reflects the performance of 194 capital
appreciation funds with similar objectives tracked by Lipper Analytical
Services over the past six months. Both benchmarks include reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Retirement Growth 22.05% 16.73% 13.56%

S&P 500 28.44% 14.56% 13.94%

Capital Appreciation Funds Average 34.18% 15.19% 11.43%

AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960531 19960612 102244 S00000000000001
Retirement Growth SP Standard & Poor 500
00073 SP001
1986/05/31 10000.00 10000.00
1986/06/30 9813.77 10169.00
1986/07/31 9040.63 9600.55
1986/08/31 9700.90 10312.91
1986/09/30 9006.77 9460.04
1986/10/31 9446.95 10005.88
1986/11/30 9554.18 10249.02
1986/12/31 9204.29 9987.67
1987/01/31 10496.14 11333.01
1987/02/28 11198.24 11780.67
1987/03/31 11602.49 12121.13
1987/04/30 11609.58 12013.25
1987/05/31 11836.52 12117.76
1987/06/30 12233.67 12729.71
1987/07/31 13176.91 13375.11
1987/08/31 13574.06 13874.00
1987/09/30 13467.68 13570.16
1987/10/31 9836.58 10647.15
1987/11/30 9177.03 9769.82
1987/12/31 10062.27 10513.31
1988/01/31 10238.63 10955.92
1988/02/29 11111.19 11466.46
1988/03/31 11101.91 11112.15
1988/04/30 11306.13 11235.49
1988/05/31 11250.43 11333.24
1988/06/30 11835.23 11853.44
1988/07/31 11695.99 11808.39
1988/08/31 11371.10 11406.91
1988/09/30 11714.56 11892.84
1988/10/31 11798.10 12223.46
1988/11/30 11649.58 12048.67
1988/12/31 11624.46 12259.52
1989/01/31 12521.56 13156.92
1989/02/28 12266.59 12829.31
1989/03/31 12587.66 13128.23
1989/04/30 13182.57 13809.59
1989/05/31 13437.54 14368.88
1989/06/30 13248.68 14286.97
1989/07/31 14495.17 15577.09
1989/08/31 14665.14 15882.40
1989/09/30 14882.33 15817.28
1989/10/31 14362.96 15450.32
1989/11/30 14750.13 15765.51
1989/12/31 15159.56 16143.88
1990/01/31 14412.69 15060.62
1990/02/28 14563.35 15254.91
1990/03/31 14683.87 15659.16
1990/04/30 14262.03 15267.68
1990/05/31 15597.84 16756.28
1990/06/30 15949.37 16642.34
1990/07/31 15889.11 16589.08
1990/08/31 14262.03 15089.43
1990/09/30 12745.44 14354.57
1990/10/31 12333.65 14292.85
1990/11/30 13187.36 15216.17
1990/12/31 13620.07 15640.70
1991/01/31 14247.91 16322.63
1991/02/28 15422.57 17489.70
1991/03/31 15827.63 17912.95
1991/04/30 15928.90 17955.94
1991/05/31 16455.47 18731.64
1991/06/30 15402.32 17873.73
1991/07/31 16404.84 18706.65
1991/08/31 17103.56 19149.99
1991/09/30 17316.22 18830.19
1991/10/31 17933.93 19082.51
1991/11/30 17427.61 18313.49
1991/12/31 19828.77 20408.55
1992/01/31 19872.28 20028.95
1992/02/29 20155.08 20289.33
1992/03/31 19535.09 19893.69
1992/04/30 19752.63 20478.56
1992/05/31 20122.45 20578.91
1992/06/30 19382.81 20272.28
1992/07/31 20046.31 21101.42
1992/08/31 19502.46 20668.84
1992/09/30 19730.88 20912.73
1992/10/31 20350.86 20985.93
1992/11/30 21503.83 21701.55
1992/12/31 21929.87 21968.47
1993/01/31 22476.78 22153.01
1993/02/28 21769.80 22454.29
1993/03/31 22383.41 22928.08
1993/04/30 22210.00 22373.22
1993/05/31 23383.86 22972.82
1993/06/30 23690.66 23039.44
1993/07/31 23850.74 22947.28
1993/08/31 25184.67 23816.98
1993/09/30 25278.04 23633.59
1993/10/31 26025.05 24122.81
1993/11/30 25691.56 23893.64
1993/12/31 26782.83 24182.76
1994/01/31 27539.62 25004.97
1994/02/28 27257.09 24327.33
1994/03/31 26007.99 23266.66
1994/04/30 26245.91 23564.48
1994/05/31 26424.36 23950.93
1994/06/30 25844.42 23364.14
1994/07/31 26498.71 24130.48
1994/08/31 27777.54 25119.83
1994/09/30 27465.27 24504.39
1994/10/31 27584.23 25055.74
1994/11/30 26781.24 24143.21
1994/12/31 26799.19 24501.26
1995/01/31 26916.28 25136.57
1995/02/28 27533.32 26116.15
1995/03/31 28117.00 26886.83
1995/04/30 28850.78 27678.65
1995/05/31 29217.67 28784.97
1995/06/30 29818.03 29453.64
1995/07/31 31268.91 30430.32
1995/08/31 31502.38 30506.70
1995/09/30 32186.13 31794.09
1995/10/31 31485.71 31680.58
1995/11/30 32519.67 33071.36
1995/12/31 33306.05 33708.31
1996/01/31 33801.63 34855.74
1996/02/29 34151.43 35178.86
1996/03/31 34261.89 35517.63
1996/04/30 35348.11 36041.16
1996/05/31 35661.09 36970.66
IMATRL PRASUN SHR__CHT 19960531 19960612 102249 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Retirement Growth Fund on May 31, 1986. As the chart shows, by
May 31, 1996, the value of the investment would have grown to $35,661 - a
256.61% increase on the initial investment. For comparison, look at how the
S&P 500 did over the same period. With dividends reinvested, the same
$10,000 investment would have grown to $36,971 - a 269.71% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGERS' OVERVIEW

NOTE TO SHAREHOLDERS: On June 3, 1996, J. Fergus Shiel (right photo)
succeeded Michael Gordon (left photo) as manager of Fidelity Retirement
Growth Fund. The following is an interview with Michael Gordon, with
additional comments from Fergus Shiel on his outlook for the fund.
Q. MICHAEL, HOW DID THE FUND PERFORM?
M.G. Frankly, not as well as I would have liked. For the six months ended
May 31, 1996, the fund had a total return of 9.66%. That compares to total
returns for the same period of 15.10% for the capital appreciation funds
average, according to Lipper Analytical Services, and 11.79% for the
Standard & Poor's 500 Index. For the 12 months ended May 31, 1996, the fund
returned 22.05%, while the Lipper average and S&P 500 had total returns of
34.18% and 28.44%, respectively.
Q. WHY DID THE FUND TRAIL ITS PEER GROUP OVER THE PERIOD?
M.G. The main reason was that the fund was underweighted in some of the
areas of the market that did particularly well during the past six months,
such as the over-the-counter market and the technology sector. I'm
disappointed that the fund didn't fare better, because an environment with
good market breadth - where a high percentage of stocks are participating
in a rally - should have been more favorable for this type of fund.
Given that the peer group outperformed the index, it's probably fair to say
that other capital appreciation funds took better advantage of those
segments of the market during the period.
Q. DIDN'T THE FUND HAVE A FAIRLY LARGE EXPOSURE TO TECHNOLOGY STOCKS DURING
THE PERIOD?
M.G. Well, technology-related stocks comprised around 7% of the portfolio
at both the beginning and the end of the period. However, the fund wasn't
invested in many of the data communications and network-related stocks that
fueled the technology rally. For example, the fund missed the run-up in
stocks such as U.S. Robotics, while its investments in computer and
software stocks did not contribute substantially to returns. I felt that
valuations in some areas of technology were high and fundamentals were
deteriorating. Still, as an investment professional, I realize that the
market always has the last word, and the market has clearly said that I
should have been more invested in that area.
Q. ONE SIGNIFICANT CHANGE IN THE FUND'S SECTOR WEIGHTINGS AT THE END OF THE
PERIOD WAS CONSIDERABLY MORE EXPOSURE TO ENERGY STOCKS. DID THE FUND
BENEFIT FROM THE RECENT RUN-UP IN OIL PRICES?
M.G. It sure did. As it happens, though, I was not forecasting oil prices
of $30 a barrel when I increased the fund's investments in energy stocks.
Many of the positions were in energy service companies, where I had seen
some promising company restructurings occur. During the period, I felt
several stocks were poised for significant earnings growth. Schlumberger,
Halliburton, Baker Hughes and Dresser Industries are all good examples of
this trend. Similarly, Occidental Petroleum had recently restructured its
balance sheet and operations, greatly reducing interest costs, overhead and
operating expenses. It also has very strong core chemical and oil
operations.
Q. YOU ALSO INCREASED THE FUND'S INVESTMENTS IN THE RETAIL SECTOR. DID THE
ECONOMY'S RECENT STRENGTH TRANSLATE INTO GAINS FOR THAT AREA?
M.G. Sure, to a certain extent. An improving economy and employment picture
are a good combination for retail and wholesale stocks. But I think the
real story in those stocks is finding the companies that are taking steps
to cut costs and improve margins, rather than waiting for the economy to
lift them up. For example, over the period I added a sizable position in
Dayton Hudson to the portfolio. It's undergone a dramatic restructuring
that's resulted in significantly reduced expenses. In fact, Target, Dayton
Hudson's biggest and most profitable division, could be an impressive
growth company in and of itself. Taken together with the larger
cost-cutting effort, I felt the stock could generate strong earnings per
share gains going forward. The bottom line is, while I did think the sector
in general offered some good opportunities for the fund, much of the move
into retail stocks was driven by company-specific considerations.
Q. YOU REDUCED THE FUND'S POSITIONS IN THE UTILITIES AND FINANCE SECTORS.
WHAT WAS BEHIND YOUR THINKING THERE?
M.G. With regard to utilities, I sold some of the telephone stocks,
including foreign ones, that Harris Leviton, the previous manager, had
invested in before I began managing the fund. Basically, I took profits in
a few of the stocks that I felt had become expensively priced. I also felt
that the improving economy made economically sensitive stocks look more
attractive than the financial sector in general. Coupled with what I
believed were high valuations in financial stocks based on their price
history, current price-to-book ratios and my own outlook for future
earnings growth, I somewhat underweighted the fund in that sector during
the period.
Q. TURNING NOW TO YOU, FERGUS, WHAT IS YOUR OUTLOOK FOR THE FUND OVER THE
NEXT SEVERAL MONTHS?
F.S. I can't be certain of what factors may affect the fund until I have a
firmer idea of any realignments I might make to the portfolio. To my
thinking, stocks go up for a great number of reasons, including cheap
current valuations, a changing focus on how a company reinvests its
capital, earnings accelerations and changes in the industry or in company
management. The key for me is being open to any of these kinds of stories,
rather than holding to one specific investment discipline, such as growth
or value investing. The stocks you see in the next report may have been
bought for a variety of reasons, but they'll be there for just one: because
I believe they'll go up.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

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

ITT Corp. 3.5 0.0

Dayton Hudson Corp. 3.3 0.0

Manpower, Inc. 2.9 0.0

Occidental Petroleum Corp. 2.6 0.0

Harley Davidson, Inc. 2.1 0.0

Aluminum Co. of America 1.9 1.3

Louisiana Land & Exploration Co. 1.7 0.0

Ceridian Corp. 1.6 0.0

Pall Corp. 1.6 0.0

SunGard Data Systems, Inc. 1.5 1.8

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

Energy 16.5 4.0

Media & Leisure 12.5 8.7

Basic Industries 11.7 11.6

Retail & Wholesale 7.3 6.0

Technology 6.7 7.3

ASSET ALLOCATION
AS OF MAY 31, 1996 * AS OF NOVEMBER 30, 1995 **
Row: 1, Col: 1, Value: 14.2
Row: 1, Col: 2, Value: 5.4
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 4, Value: 40.4
Row: 1, Col: 1, Value: 13.6
Row: 1, Col: 2, Value: 2.5
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 4, Value: 44.1
Stocks 80.4%
Bonds 5.4%
Short-term
investments 14.2%
FOREIGN
INVESTMENTS 12.9%
Stocks 84.1%
Bonds 2.3%
Short-term
investments 13.6%
FOREIGN
INVESTMENTS 28.0%
*
**
INVESTMENTS MAY 31, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 80.4%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.1%
Flightsafety International, Inc. 18,600 $ 1,025
Precision Castparts Corp. 72,500 3,100
4,125
BASIC INDUSTRIES - 11.7%
CHEMICALS & PLASTICS - 4.2%
Carlisle Plastics, Inc. Class A (b) 1,169,100 7,891
DSM NV 250,000 25,711
Dow Chemical Co. 364,200 30,456
du Pont (E.I.) de Nemours & Co. 178,800 14,259
Georgia Gulf Corp. 766,500 26,253
IMC Fertilizer Group, Inc. 101,000 3,699
Lyondell Petrochemical Co. 885,100 22,902
PPG Industries, Inc. 7,200 373
Raychem Corp. 60,400 4,515
Rexene Corp. (b) 949,400 11,156
Sekisui Chemical Co. Ltd. 587,000 6,949
Union Carbide Corp. 600,000 25,875
180,039
IRON & STEEL - 0.9%
AK Steel Holding Corp. 772,700 33,419
Inland Steel Industries, Inc. 76,200 1,648
LTV Corp. 257,000 3,309
Nucor Corp. 25,000 1,375
39,751
METALS & MINING - 5.5%
Alumax, Inc. (a) 705,850 23,469
Aluminum Co. of America 1,311,800 80,840
Falconbridge Ltd. 121,000 2,727
Falconbridge Ltd. 1st Installment Receipt (d) 4,618,500 41,675
Freeport-McMoRan Copper & Gold, Inc. Class B 75,500 2,510
Inco Ltd. 484,725 15,813
Phelps Dodge Corp. 155,300 10,638
QNI Ltd. (b) 24,414,657 59,464
RTZ Corp. PLC Ord. 133,000 2,074
Reynolds Metals Co. 13,400 724
239,934
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 1.1%
Boise Cascade Corp. 41,500 $ 1,743
Champion International Corp. 362,900 16,013
International Paper Co. 737,200 29,396
47,152
TOTAL BASIC INDUSTRIES 506,876
CONGLOMERATES - 1.4%
Crane Co. 365,500 15,397
Teledyne, Inc. 14,600 551
Tyco International Ltd. 1,144,756 45,218
61,166
CONSTRUCTION & REAL ESTATE - 1.0%
BUILDING MATERIALS - 0.0%
Lafarge Corp. 660 14
CONSTRUCTION - 0.1%
Centex Corp. 13,100 395
Daiwa House Industry Co. Ltd. (warrants) (a) 6,000 1,538
Sekisui House Ltd. 55,000 646
Sundance Homes, Inc. (a) 207,000 362
2,941
ENGINEERING - 0.9%
Fluor Corp. 347,900 22,700
Foster Wheeler Corp. 377,900 16,817
39,517
REAL ESTATE INVESTMENT TRUSTS - 0.0%
First Industrial Realty Trust, Inc. 15,000 354
TOTAL CONSTRUCTION & REAL ESTATE 42,826
DURABLES - 2.4%
AUTOS, TIRES, & ACCESSORIES - 1.0%
Chrysler Corp. 106,084 7,068
Ford Motor Co. 677,500 24,729
General Motors Corp. 5,100 281
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
Lear Corp. (a) 11,500 $ 444
Scania AB Class B 207,400 5,877
Tofas Turk Otomobil Fabrikasi AS ADR (c) 3,484,950 871
Volvo AB Class B 185,000 3,932
43,202
CONSUMER DURABLES - 0.0%
Swedish Match AB (a) 185,000 618
CONSUMER ELECTRONICS - 0.1%
Black & Decker Corp. 69,000 2,838
HOME FURNISHINGS - 0.3%
Furniture Brands International, Inc. (a) 1,075,600 11,697
TEXTILES & APPAREL - 1.0%
Converse, Inc. (a) 2,000 9
Designer Holdings Ltd. (a) 107,000 3,290
Gucci Group NV (NY Reg.) (a) 9,900 663
Interface, Inc. Class A 106,600 1,532
Liz Claiborne, Inc. 775,100 28,776
NIKE, Inc. Class B 2,400 241
Pillowtex Corp. 498,900 6,673
Quaker Fabric Corp. (a) 51,800 486
VF Corp. 67,200 4,091
Warnaco Group, Inc. Class A 600 17
45,778
TOTAL DURABLES 104,133
ENERGY - 16.5%
ENERGY SERVICES - 4.3%
BJ Services Co. (a) 573,700 19,362
Baker Hughes, Inc. 1,514,700 47,524
Dresser Industries, Inc. 1,987,100 58,123
Halliburton Co. 357,300 19,875
Helmerich & Payne, Inc. 700 25
Nabors Industries, Inc. (a) 24,700 380
Schlumberger Ltd. 447,300 37,294
Tidewater, Inc. 89,900 3,708
186,291
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - 12.2%
Amerada Hess Corp. 232,900 $ 13,275
Amoco Corp. 50,400 3,654
Anadarko Petroleum Corp. 756,900 40,683
Atlantic Richfield Co. 9,200 1,101
Belco Oil & Gas Corp. (a) 23,800 652
British Petroleum PLC:
ADR 567,045 59,752
Ord. 1,081,111 9,308
Diamond Shamrock R&M, Inc. 347,600 11,427
Enron Oil & Gas Co. 705,300 17,809
Flores & Rucks, Inc. (a) 5,100 152
Louisiana Land & Exploration Co. 1,378,000 74,240
NGC Corp. 170,290 2,639
Noble Affiliates, Inc. 299,200 10,135
Northstar Energy Corp. (a) 115,700 1,133
Occidental Petroleum Corp. 4,334,400 112,153
Oryx Energy Co. (a) 1,111,300 18,059
Phillips Petroleum Co. 1,463,200 60,723
Pogo Producing Co. 1,700 61
Renaissance Energy Ltd. (a) 150,000 3,973
Royal Dutch Petroleum Co. ADR (NY Reg.) 216,200 32,430
USX-Marathon Group 1,299,900 28,435
Union Pacific Resources Group, Inc. 501,200 12,906
Unocal Corp. 504,791 16,406
531,106
TOTAL ENERGY 717,397
FINANCE - 2.7%
BANKS - 1.2%
Canadian Imperial Bank of Commerce 939,400 31,161
Yasuda Trust & Banking 3,322,000 20,094
51,255
CREDIT & OTHER FINANCE - 0.0%
First USA, Inc. 5,800 336
INSURANCE - 1.5%
Allstate Corp. 198,400 8,382
Everest Reinsurance Holdings, Inc. 48,000 1,122
MGIC Investment Corp. 246,700 14,494
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Paul Revere Corp. 707,100 $ 19,357
Provident Companies, Inc. 619,800 22,235
65,590
TOTAL FINANCE 117,181
HEALTH - 4.4%
DRUGS & PHARMACEUTICALS - 2.1%
Avigen, Inc. 45,600 490
Biogen, Inc. (a) 963,500 58,292
Genentech, Inc. special (a) 553,500 29,128
Pfizer, Inc. 10,000 707
88,617
MEDICAL EQUIPMENT & SUPPLIES - 2.3%
Arterial Vascular Engineering, Inc. (a) 700 29
Bausch & Lomb, Inc. 5,900 254
Cygnus, Inc. (a) 109,500 2,033
Pall Corp. 2,591,000 69,309
Terumo Corp. 600,000 7,214
U.S. Surgical Corp. 398,800 13,659
Ventritex, Inc. (a) 398,900 7,978
100,476
TOTAL HEALTH 189,093
INDUSTRIAL MACHINERY & EQUIPMENT - 3.3%
ELECTRICAL EQUIPMENT - 0.3%
Omron Corp. 662,000 13,408
Reunert Ltd. 20,000 92
13,500
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Case Corp. 319,200 16,000
Caterpillar, Inc. 533,700 35,024
Cooper Industries, Inc. 83,500 3,559
Deere & Co. 330,300 13,749
Greenfield Industries, Inc. 169,000 6,380
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
Parker-Hannifin Corp. 77,300 $ 3,150
Stanley Works 81,800 4,959
UCAR International, Inc. (a) 77,000 3,292
86,113
POLLUTION CONTROL - 1.0%
USA Waste Services, Inc. (a) 18,600 549
WMX Technologies, Inc. 1,253,000 44,168
44,717
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 144,330
MEDIA & LEISURE - 12.5%
BROADCASTING - 0.3%
PanAmSat Corp. (a) 6,400 181
Time Warner, Inc. 331,600 13,388
13,569
ENTERTAINMENT - 0.2%
Anchor Gaming (a) 74,400 4,762
Cinergi Pictures Entertainment, Inc. (a)(b) 800,000 1,525
6,287
LEISURE DURABLES & TOYS - 3.5%
Harley Davidson, Inc. 1,907,700 91,331
Nintendo Co. Ltd. Ord. 843,500 62,097
153,428
LODGING & GAMING - 6.1%
Aztar Corp. (a) 483,100 5,556
Bally Entertainment Corp. 763,600 18,326
Circus Circus Enterprises, Inc. (a) 121,200 5,045
Hilton Hotels Corp. 105,500 11,368
ITT Corp. 2,472,300 152,046
Millennium & Copthorne Hotels PLC (a)(c) 2,026,300 10,750
Millennium & Copthorne Hotels PLC sponsored ADR (a)(c) 127,000 2,683
Mirage Resorts, Inc. (a) 84,200 4,789
Rio Hotel & Casino, Inc. (a) 817,600 14,717
Sun International Hotels Ltd. Ord. (a) 552,496 27,901
Trump Hotels & Casino Resorts, Inc. (a) 400,000 12,600
265,781
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 2.2%
Hollinger International, Inc. Class A 447,000 $ 5,532
Knight-Ridder, Inc. 454,500 33,974
New York Times Co. (The) Class A 1,148,200 37,747
Times Mirror Co. Class A 447,800 19,535
96,788
RESTAURANTS - 0.2%
Bugaboo Creek Steak House, Inc. (a)(b) 411,300 3,393
CKE Restaurants, Inc. 226,800 5,245
8,638
TOTAL MEDIA & LEISURE 544,491
NONDURABLES - 1.0%
FOODS - 0.0%
EID Parry GDR (c) 305,000 763
HOUSEHOLD PRODUCTS - 0.0%
Safeskin Corp. (a) 6,700 240
TOBACCO - 1.0%
Philip Morris Companies, Inc. 401,800 39,929
TOTAL NONDURABLES 40,932
PRECIOUS METALS - 2.2%
Kinross Gold Corp. (a) 250,000 2,256
Newmont Gold Co. 34,800 2,166
Newmont Mining Corp. 806,600 48,598
Placer Dome, Inc. 265,000 7,812
Western Mining Holdings Ltd. 4,703,600 35,645
96,477
RETAIL & WHOLESALE - 7.3%
APPAREL STORES - 0.0%
Loehmanns, Inc. (a) 4,000 103
Saks Holdings, Inc. 5,500 179
Talbots, Inc. 2,100 68
350
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 6.8%
Aoyama Trading Co. Ord. 955,000 $ 25,614
Dayton Hudson Corp. 1,416,100 144,442
Dillard Department Stores, Inc. Class A 732,200 29,288
Federated Department Stores, Inc. (a) 1,593,087 55,161
May Department Stores Co. (The) 242,600 11,493
Mercantile Stores Co., Inc. 10,100 651
Nordstrom, Inc. 242,600 12,373
Woolworth Corp. (a) 807,200 16,547
295,569
GROCERY STORES - 0.2%
Food Lion, Inc. Class A 59,700 459
Pepkor Ltd. (a) 917,900 4,220
Safeway, Inc. (a) 83,600 2,822
7,501
RETAIL & WHOLESALE, MISCELLANEOUS - 0.3%
Home Depot, Inc. (The) 9,300 476
Land's End, Inc. (a) 78,000 1,706
Spiegel, Inc. Class A 94,500 1,010
Tiffany & Co., Inc. 35,800 2,716
Toys "R" Us, Inc. (a) 224,400 6,508
12,416
TOTAL RETAIL & WHOLESALE 315,836
SERVICES - 3.6%
PRINTING - 0.5%
Deluxe Corp. 56,400 2,045
Harland (John H.) Co. 703,200 19,074
21,119
SERVICES - 3.1%
Catalina Marketing Corp. (a) 103,100 7,990
Manpower, Inc. 3,309,200 127,404
135,394
TOTAL SERVICES 156,513
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 6.7%
COMMUNICATIONS EQUIPMENT - 0.0%
Octel Communications Corp. (a) 6,000 $ 147
COMPUTER SERVICES & SOFTWARE - 4.9%
Ceridian Corp. (a) 1,328,300 70,234
Checkfree Corp. (a) 23,200 519
Compuware Corp. (a) 436,400 17,129
Continuum Co., Inc. (a) 655,500 40,313
ECI Telecom Ltd. 67,300 1,783
Electronics for Imaging, Inc. (a) 14,200 1,136
Gametek, Inc. (a) 110,400 345
Microsoft Corp. (a) 20,500 2,434
Sierra On-Line, Inc. (a) 324,700 14,612
SunGard Data Systems, Inc. (a) 1,746,900 65,945
Sykes Enterprises, Inc. (a) 2,000 96
214,546
COMPUTERS & OFFICE EQUIPMENT - 0.9%
Adaptec, Inc. (a) 31,700 1,898
Digital Equipment Corp. (a) 355,500 18,531
International Business Machines Corp. 5,600 598
Itron, Inc. (a) 3,000 102
Quantum Corp. (a) 5,000 119
Seagate Technology (a) 7,800 458
VeriFone, Inc. (a) 382,400 19,263
40,969
ELECTRONIC INSTRUMENTS - 0.5%
Perkin-Elmer Corp. 389,400 20,638
ELECTRONICS - 0.4%
Analog Devices, Inc. (a) 25,800 713
Atmel Corp. (a) 257,400 9,138
Cirrus Logic, Inc. (a) 4,100 87
ESS Technology, Inc. (a) 21,900 487
Intel Corp. 68,100 5,142
15,567
TOTAL TECHNOLOGY 291,867
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 0.9%
RAILROADS - 0.8%
CSX Corp. 323,300 $ 16,003
Wisconsin Central Transportation Corp. (a) 572,100 20,214
36,217
TRUCKING & FREIGHT - 0.1%
Air Express International Corp. 64,900 1,866
TOTAL TRANSPORTATION 38,083
UTILITIES - 2.7%
ELECTRIC UTILITY - 0.0%
Mosenergo AO sponsored ADR (a)(c) 96,300 2,143
GAS - 0.3%
Sonat, Inc. 327,300 13,869
TELEPHONE SERVICES - 2.4%
AT&T Corp. 929,100 57,952
Bell Atlantic Corp. 172,200 10,741
BellSouth Corp. 12,700 516
NYNEX Corp. 186,100 8,584
Telebras sponsored ADR 390,100 25,113
102,906
TOTAL UTILITIES 118,918
TOTAL COMMON STOCKS
(Cost $3,180,310) 3,490,244
U.S. TREASURY OBLIGATIONS - 5.4%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (D) AMOUNT (C) (000S) (000S)
6 1/4%, 8/15/23
(Cost $238,069) Aaa $ 262,000 233,754
REPURCHASE AGREEMENTS - 14.2%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.32%, dated
5/31/96 due 6/3/96 $ 618,585 $ 618,311
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $4,036,690) $ 4,342,309
LEGEND
1. Non-income producing
2. Affiliated company (see Note 7 of Notes to Financial Statements).
3. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $17,210,000 or 0.4% of net
assets.
4. Purchased on an installment basis. Market value reflects only those
payments made through May 31, 1996. The remaining installments aggregating
CAD 87,752,000 are due July 31, 1996 and January 31, 1997.
OTHER INFORMATION
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 87.1%
Japan 3.2
Canada 2.5
Australia 2.2
United Kingdom 1.9
Netherlands 1.4
Others (individually less than 1%) 1.7
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31, 1996, the aggregate cost of investment securities for income tax
purposes was $4,036,697,000. Net unrealized appreciation aggregated
$305,612,000, of which $367,269,000 related to appreciated investment
securities and $61,657,000 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

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

ASSETS

Investment in securities, at value (including repurchase $ 4,342,309
agreements of $618,311) (cost $4,036,690) -
See accompanying schedule

Receivable for investments sold 627

Receivable for fund shares sold 4,598

Dividends receivable 8,956

Interest receivable 4,769

Other receivables 1,223

TOTAL ASSETS 4,362,482

LIABILITIES

Payable to custodian bank $ 556

Payable for investments purchased 540

Payable for fund shares redeemed 5,626

Accrued management fee 1,748

Other payables and accrued expenses 1,672

TOTAL LIABILITIES 10,142

NET ASSETS $ 4,352,340

Net Assets consist of:

Paid in capital $ 3,506,503

Undistributed net investment income 32,696

Accumulated undistributed net realized gain (loss) on 507,573
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 305,568
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 224,746 shares outstanding $ 4,352,340

NET ASSET VALUE, offering price and redemption price per $19.37
share ($4,352,340 (divided by) 224,746 shares)

</TABLE>

STATEMENT OF OPERATIONS

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

INVESTMENT INCOME $ 31,263
Dividends (including $992 received from affiliated
issuers)

Interest (including income on securities loaned of $7) 18,507

TOTAL INCOME 49,770

EXPENSES

Management fee $ 12,659
Basic fee

Performance adjustment (857)

Transfer agent fees 4,195

Accounting and security lending fees 404

Non-interested trustees' compensation 7

Custodian fees and expenses 256

Registration fees 170

Audit 36

Legal 19

Miscellaneous 26

Total expenses before reductions 16,915

Expense reductions (437) 16,478

NET INVESTMENT INCOME 33,292

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

Investment securities (including realized gain of 506,598
$32,555
on sales of investments in affiliated issuers)

Foreign currency transactions (130) 506,468

Change in net unrealized appreciation (depreciation) on:

Investment securities (157,923)

Assets and liabilities in foreign currencies (40) (157,963)

NET GAIN (LOSS) 348,505

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 381,797
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

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

INCREASE (DECREASE) IN NET ASSETS

Operations $ 33,292 $ 68,660
Net investment income

Net realized gain (loss) 506,468 314,324

Change in net unrealized appreciation (depreciation) (157,963) 317,181

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 381,797 700,165
FROM OPERATIONS

Distributions to shareholders (71,355) (34,963)
From net investment income

From net realized gain (309,832) (310,283)

TOTAL DISTRIBUTIONS (381,187) (345,246)

Share transactions 408,857 789,784
Net proceeds from sales of shares

Reinvestment of distributions 380,571 344,637

Cost of shares redeemed (407,507) (682,351)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 381,921 452,070
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 382,531 806,989

NET ASSETS

Beginning of period 3,969,809 3,162,820

End of period (including undistributed net investment $ 4,352,340 $ 3,969,809
income of $32,696 and $67,851, respectively)

OTHER INFORMATION
Shares

Sold 21,910 45,146

Issued in reinvestment of distributions 21,160 21,376

Redeemed (21,862) (38,605)

Net increase (decrease) 21,208 27,917

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED MAY 31,
1996

(UNAUDITED) 1995 1994 F 1993 1992 1991

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

Net asset value, beginning $ 19.50 $ 18.01 $ 19.26 $ 19.77 $ 17.21 $ 13.13
of period

Income from Investment
Operations

Net investment income .16 .34 .19 .09 .14 .27

Net realized and 1.57 3.09 .58 3.09 3.66 3.92
unrealized gain (loss)

Total from investment 1.73 3.43 .77 3.18 3.80 4.19
operations

Less Distributions (.35) (.20) (.14) (.16) (.20) (.11)
From net investment G
income

From net realized gain (1.51) (1.74) (1.88) (3.53) (1.04) -
G

Total distributions (1.86) (1.94) (2.02) (3.69) (1.24) (.11)

Net asset value, end $ 19.37 $ 19.50 $ 18.01 $ 19.26 $ 19.77 $ 17.21
of period

TOTAL RETURN B, C 9.66% 21.43% 4.24% 19.47% 23.39% 32.15%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 4,352 $ 3,970 $ 3,163 $ 2,688 $ 2,166 $ 1,577
(in millions)

Ratio of expenses to .81% A .99% 1.07% 1.05% 1.02% .83%
average net assets

Ratio of expenses to .79% A, .99% 1.07% 1.05% 1.02% .83%
average net assets after D
expense reductions

Ratio of net investment 1.60% A 1.92% 1.13% .80% 1.01% 1.56%
income to average
net assets

Portfolio turnover rate 221% A 108% 72% 101% 138% 119%

Average commission $ .0254
rate E

</TABLE>

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
E FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
F EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Retirement Growth Fund (the fund) is a fund of Fidelity Financial
Trust (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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income 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, market discount and losses
deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the 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
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
agreements that mature in 60 days or less from the date of purchase, and
are collateralized by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,979,283,000 and $4,035,823,000, respectively, of which U.S.
government and government agency obligations aggregated $238,069,000 and
$0, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic 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 ranged from .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .20%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. For the period,
the management fee was equivalent to an annualized rate of .57% of average
net assets after the performance adjustment.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $5,000 for the
period.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
that vary according to account size and type of account. FSC pays for
typesetting, printing and mailing of all shareholder reports, except proxy
statements. For the period, the transfer agent fees were equivalent to an
annualized rate of .20% of average net assets.
ACCOUNTING AND SECURITY LENDING
FEES. FSC maintains the fund's accounting records and administers the
security lending program. The security lending fee is based on the number
and duration of lending transactions. The accounting 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 $1,081,000 for the period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This
collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. At period end, there
were no loans outstanding.
6. 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
$343,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $2,000 and $92,000,
respectively, under these arrangements.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
AFC Cable Systems, Inc. $ - $ 8,244 $ - $ -
American Banker Insurance Group - 32,971 310 -
Bradlees, Inc. - 2,477 - -
Bugaboo Creek Steak House, Inc. - 900 - 3,393
CFC International - 617 - -
Cable Design Technology Corp. - 4,506 - -
Carlisle Plastics, Inc. Class A 1,713 - - 7,891
Cinergi Pictures Entertainment, Inc. - 4,510 - 1,525
Cole National Corp. Class A - 12,150 - -
Cygnus, Inc. - 7,348 - -
Freds, Inc. Class A - 16,016 46 -
Gametek, Inc. - 1,404 - -
Image Industries, Inc. - 4,800 - -
Innovative International Holdings Ltd. - 886 165 -
Just Toys, Inc. 14 2,865 - -
K-Swiss, Inc. Class A - 2,474 6 -
Kentucky Electric Steel, Inc. - 1,560 - -
Lechters, Inc. 482 18,576 - -
Libbey, Inc. - 8,132 82 -
Maxwell Shoe, Inc. Class A - 8,582 - -
OroAmerica, Inc. - 293 - -
People's Choice TV Corp. - 15,543 - -
Pillowtex Corp. - 7,452 49 -
QNI Ltd. 9,192 - 311 59,464
Quantum Restaurant Group, Inc. - 5,119 - -
Rexene Corp. - - 23 11,156
Rhodes, Inc. - 6,610 - -
Sierra On-line, Inc. 6,929 26,327 - -
SunGard Data Systems, Inc. - 12,899 - -
Whole Foods Market, Inc. - 17,578 - -
Wireless One, Inc. 433 2,348 - -
TOTALS $ 18,763 $ 233,187 $ 992 $ 83,429

TO CALL FIDELITY

INVESTMENT ADVISER
Fidelity Management &
Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export Fund
Fidelity Fifty
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Stock Fund
Stock Selector
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118

for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE