FIDELITY DESTINY PORTFOLIOS
CROSS REFERENCE SHEET
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2a The Funds' Expenses
b,c *
3a The Funds' Financial Histories
b *
c The Funds' Performance
4a(i) Destiny Funds and the Fidelity Organization;
a(ii) The Funds' Investment Objective;
Investment Policies, Risks and Limitations
b,c Investment Policies, Risks and Limitations
5a,b(i) Destiny Funds and the Fidelity Organization
b(ii,iii), c,d,e Management and Service Fees; Destiny
Funds and the Fidelity Organization, The
Funds' Financial Histories
f Investment Policies, Risks and Limitations;
6a(i) Destiny Funds and the Fidelity Organization
a(ii,iii), b,c,d *
e Cover Page; Shareholder Services
f Shareholder Services
g A Few Words About Distributions and Taxes
7a Destiny Funds and the Fidelity Organization
b(i,ii) How to Buy Shares
b(iii) The Funds' Expenses
b(iv,v) *
c Shareholder Services
d How to Buy Shares
e,f *
8a How to Redeem Shares
b,c,d *
9 *
Form N-1A Item Number
Part B Statement of Additional Information
10,11 Cover Page
12 Description of the Fund
13a,b,c Investment Policies and Limitations
d *
14a,b Trustees and Officers
c *
15a,b *
c Trustees and Officers
16a(i) FMR
a(ii) Trustees and Officers
a(iii),b Management Contracts
c *
d Contracts with Companies Affiliated with
FMR
e,f,g *
h Description of the Fund
i Contracts with Companies Affiliated with
FMR
17a,b,c,d Portfolio Transactions
e *
18a Description of the Fund
b *
19a *
b Valuation of Fund Securities; Additional
Purchase and Redemption Information
c *
20 Distributions and Taxes
21a Contracts with Companies Affiliated with
FMR
b,c *
22 Performance
23 Financial Statements for the Funds' fiscal
year ended September 30, 1994 are
incorporated by reference into the Statement
of Additional Information.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 58 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No.
Fidelity Destiny Portfolios
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address Of Principal Executive Offices)
Registrant's Telephone Number (617) 570-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, MA 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b)
(X) On November 29, 1994 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) On ( ) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) On ( ) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed post-effective
amendment.
Registrant intends to file a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and the notice required by such Rule on or
about November 30, 1994.
FIDELITY DESTINY
PORTFOLIOS:
DESTINY I AND
DESTINY II
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS
PROSPECTUS
November 29, 1994
Fidelity Destiny Portfolios: Destiny I and Destiny II (the Fund or the
Funds) is an open-end management investment company made up of two separate
diversified portfolios. Each Fund seeks to achieve capital growth. Income
generally will not be considered when securities are purchased by the
Funds, although many securities may indeed be income-producing.
Please read this Prospectus before investing. It is designed to provide
you with information and to help you decide if either of the Fund's goals
match your own. YOU SHOULD RETAIN THIS DOCUMENT FOR FUTURE REFERENCE.
Shares of each Fund may be purchased only through Fidelity Systematic
Investment Plans: Destiny Plans I and Destiny Plans II (the Plans or a
Plan), a unit investment trust. Details of the Plans, including the
Creation and Sales Charges, as well as Custodian Fees, are discussed in the
Prospectus for the Plans. The charges for the first year of a Plan may
amount to as much as 50% of the amounts paid under a Plan. Prospective
investors should read this Prospectus in conjunction with the Plans'
Prospectus.
A Statement of Additional Information (SAI) dated November 29, 1994 for
the Funds has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference. This SAI is available
free upon request from Fidelity Distributors Corporation
(Distributors).
FIDELITY DISTRIBUTORS CORPORATION
FIDELITY INVESTMENTS INSTITUTIONAL SERVICES COMPANY, INC., BROKER/DEALER
SERVICES DIVISION
NATIONWIDE (TOLL FREE) 1-800-752-2347
IN ALASKA OR OVERSEAS (CALL COLLECT) 617-439-0547
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD
OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE PAGE
The Funds' Expenses F-2 The Funds' Financial Histories F-3
The Funds' Investment Objective F- 5
The Funds' Investment Policies, Risks
and Limitations F- 5
Portfolio Transactions F- 7
A Few Words About Distributions and Taxes F- 7
Destiny Funds and the Fidelity Organization F- 8
Management and Service Fees F- 9
The Funds' Performance F- 10
How to Buy Shares
Shareholder Services
How to Redeem Shares
Appendix
Financial Statements F-1 7
THE FUNDS' EXPENSES
The expense summary format below was developed for use by all mutual funds
to help you make your investment decisions. Of course, you should consider
this expense information along with other important information, including
the Funds' investment objectives and their past performance and the fees
and expenses associated with investment through the Plans.
A. SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases See Note A
Sales Load on Reinvested Distributions See Note A
Deferred Sales Load Imposed on Redemptions None
Redemption Fees None
Exchange Fees None
B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
DESTINY I DESTINY II
Management Fees . 65 % . 73 %
Other Expenses . 05 % .07 %
Total Operating Expenses .70 % . 80 %
C. EXAMPLE
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each period:
1 YR 3 YRS 5 YRS 10 YRS
Destiny I $ 7 $ 22 $ 39 $ 87
Destiny II $ 8 $ 26 $ 44 $ 99
EXPLANATION OF TABLE
A. SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or
sell shares of a Fund. Neither Fund will offer its shares publicly except
through the Plans, which impose separate Creation and Sales Charges.
Applicable Creation and Sales Charges vary according to the monthly
investment size and duration of each Plan. Please refer to the Destiny
Plans' Prospectus for details. If you exchange shares of the Funds, other
charges may apply. (See "Exchange Privilege" on page for information.)
B. ANNUAL FUND OPERATING EXPENSES are based on the Funds' historical
expenses. Management fees are paid by each Fund to Fidelity Management &
Research Company (FMR) for managing its investments and business affairs
and will vary based on performance. A portion of the brokerage commissions
that the Funds paid were used to reduce F und expenses. Each Fund
incurs other expenses for maintaining shareholder records, furnishing
shareholder statements and reports, and for other services. Management fees
and other expenses are reflected in each Fund's share price and are not
charged directly to individual shareholder accounts. For accounts
maintained within the Plans, separate Custodian fees and an annual service
fee are charged directly to Planholders. Please refer to the section
"Management and Service Fees," beginning on page and the Destiny Plans'
Prospectus for further information.
C. The hypothetical EXAMPLE illustrates the expenses associated with a
$1,000 investment over periods of 1, 3, 5 and 10 years, based on the
expenses in the table above and an assumed annual return of 5%. THE RETURN
OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED INDICATIONS OF ACTUAL OR
EXPECTED FUND PERFORMANCE OR EXPENSES, BOTH OF WHICH WILL VARY. Please
refer to page F-10 for the Funds' past performance. As stated above,
Creation and Sales Charges vary for each Plan. Generally, however, these
charges are structured to decrease as a percentage of the monthly
investment as the Plan progresses. Consequently, the major portion of the
total Creation and Sales Charges incurred during the life of a Plan are
assessed within its first year. For a detailed explanation of applicable
rate structure, please refer to the Destiny Plans' Prospectus.
THE FUNDS' FINANCIAL HISTORIES
FINANCIAL HIGHLIGHTS
The tables that follow are included in the Fund's Annual Report and have
been audited by Coopers & Lybrand L.L.P. , independent accountants.
Their report on the financial statements and financial highlights is
included in the Annual Report. The financial statements and financial
highlights are incorporated by reference into the Funds' SAI.
The tables that follow are included in the Fund's Annual Report and have
been audited by Coopers & Lybrand L.L.P. , independent accountants.
Their report on the financial statements and financial highlights is
included in the Annual Report. The financial statements and financial
highlights are a part of this Prospectus.
A LOOK AT DESTINY I'S HISTORY
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Three
Ended Months Years Ended June 30,
Septemb Ended
er 30, Septemb
er 30,
1994 1993 1993 1992 1991 1990 1989 1988 1987 1986 1985
SELECTED PER-SHARE DATA
Net asset value,
$ 16.86 $ 17.22 $ 16.54 $ 15.23 $ 14.24 $ 14.03 $ 12.44 $ 15.93 $ 16.04 $ 12.81 $ 12.12
beginning of period
Income from Investment
Operations
Net investment income
.30 .04 .26 .31 .33 .46C .30 .24 .28 .33 .44
Net realized and unrealized
1.69 .75 3.16 2.55 1.25 1.18 1.81 (.35) 2.47 4.50 2.30
gain (loss) on investments
Total from investment
1.99 .79 3.42 2.86 1.58 1.64 2.11 (.11) 2.75 4.83 2.74
operations
Less Distributions
From net investment income
(.11) (.14) (.30) (.49) (.10) (.38) (.26) (.39) (.32) (.46) (.34)
From net realized gain
(1.04) (1.01) (2.44) (1.06) (.49) (1.05) (.26) (2.99) (2.54) (1.14) (1.71)
Total distributions
(1.15) (1.15) (2.74) (1.55) (.59) (1.43) (.52) (3.38) (2.86) (1.60) (2.05)
Net asset value, end of
$ 17.70 $ 16.86 $ 17.22 $ 16.54 $ 15.23 $ 14.24 $ 14.03 $ 12.44 $ 15.93 $ 16.04 $ 12.81
period
TOTAL RETURNB
12.30% 4.77% 23.90% 20.18% 11.93% 12.17% 17.90% (1.45)% 22.43% 43.09% 27.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
$ 3,273 $ 2,973 $ 2,869 $ 2,373 $ 2,023 $ 1,832 $ 1,662 $ 1,440 $ 1,461 $ 1,165 $ 764
period (in millions)
Ratio of expenses to
.70% .65%A .66% .61% .50% .53% .60% .60% .60% .60% .60%
average net assets
Ratio of net investment
1.69% 1.11%A 1.83% 2.00% 2.45% 3.37% 2.35% 2.10% 2.20% 2.70% 4.20%
income to average net C
assets
Portfolio turnover rate
77% 82%A 75% 75% 84% 75% 72% 80% 91% 108% 86%
</TABLE>
A Annualized
B Total returns for periods of less than one year are not
annualized.
C Investment income per share reflects special dividends of $.06 and
$.03 per share, respectively.
A LOOK AT DESTINY II'S HISTORY
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Three December 30,
Ended Months 1985
Septemb Ended (Commencement
er 30, Septemb of Operations)
er 30, Years Ended June 30, to June 30,
1994 1993 1993 1992 1991 1990 1989 1988 1987 1986
SELECTED PER-SHARE DATA
Net asset value,
$ 26.68 $ 26.46 $ 24.68 $ 23.50 $ 21.11 $ 20.64 $ 18.25 $ 20.98 $ 16.53 $ 10.00
beginning of period
Income from Investment
Operations
Net investment income
.42 .04 .26 .33 .29 .56C .24 .13 .02 .03
Net realized and
2.86 1.23 4.85 4.08 2.61 2.27 2.72 (.19) 4.73 6.50
unrealized gain (loss)
on investments
Total from investment
3.28 1.27 5.11 4.41 2.90 2.83 2.96 (.06) 4.75 6.53
operations
Less Distributions
From net investment
(.12) (.14) (.36) (.34) (.35) (.36) (.18) (.09) -- --
income
From net realized gain
(1.29) (.91) (2.97) (2.89) (.16) (2.00) (.39) (2.58) (.30) --
Total distributions
(1.41) (1.05) (3.33) (3.23) (.51) (2.36) (.57) (2.67) (.30) --
Net asset value, end of
$ 28.55 $ 26.68 $ 26.46 $ 24.68 $ 23.50 $ 21.11 $ 20.64 $ 18.25 $ 20.98 $ 16.53
period
TOTAL RETURNB
12.67% 4.93% 23.28% 20.61% 14.35% 14.42% 16.76% (.23)% 29.37% 65.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
$ 1,437 $ 1,143 $ 1,061 $ 479 $ 326 $ 221 $ 143 $ 78 $ 37 $ 5
period (in millions)
Ratio of expenses to
.80% .84% .84% .88% .84% .87% .97% 1.12% 1.50% 1.50%A,D
average net assets
A
Ratio of net investment
1.56% .69% 1.41% 1.60% 1.70% 3.07% 1.53% 1.07% .39% 1.07%A
income to average net
A C
assets
Portfolio turnover rate
72% 80% 81% 113% 129% 112% 128% 148% 183% 228%A
A
</TABLE>
A Annualized
B Total returns for periods of less than one year are not
annualized.
C Investment income per share reflects special dividends of $.14 and
$.06 per share, respectively.
D Expenses have been limited to a percentage of average net assets in
accordance with various state expense limitation regulations. Expenses
borne by the investment adviser amounted to $.14 per share for the period
ended June 30, 1986.
THE FUNDS' INVESTMENT OBJECTIVE
Each Fund seeks to achieve capital growth. Income generally will not be
considered when securities are purchased by the Funds, although many of
such securities may indeed be income-producing. Each Fund may not always
achieve its objective, but each will always follow the investment style
described below .
THE FUNDS' INVESTMENT POLICIES, RISKS AND LIMITATIONS
Each Fund's assets will tend to be invested fully in common stocks or
securities convertible into common stocks. Each Fund also has the ability
to purchase preferred stocks or bonds that may produce capital growth.
The Funds may purchase all types of securities, such as:
(medium solid bullet) common and preferred stocks;
(medium solid bullet) bonds, debentures, notes and other debt securities;
or
(medium solid bullet) warrants and rights to purchase securities.
FMR normally invests each Fund's assets according to its investment
strategy. Each Fund also reserves the right to invest without limitation in
preferred stock and investment-grade debt instruments for temporary,
defensive purposes.
Each Fund may invest in lower-quality, high-yielding securities (sometimes
referred to as "junk bonds"), although each Fund intends to limit its
investments in these securities to 10% of its assets. Each Fund may
purchase restricted securities, illiquid investments, enter into repurchase
agreements, and may invest in indexed securities. Each Fund may also invest
in loans and other direct debt instruments, foreign securities, options and
futures contracts, real estate-related investments, and swap agreements.
See the "Appendix" beginning on page F-1 4 for more information.
MATCHING THE FUNDS TO YOUR INVESTMENT NEEDS
Shares of each Fund may be acquired only through the purchase of an
interest in Fidelity Systematic Investment Plans: Destiny Plans I or
Destiny Plans II. The Funds are designed for you if you are seeking
accumulation of capital through regular, systematic investing over a period
of 10 years or more. Investments in the Funds are based on the concept of
"dollar-cost averaging." This involves consistently buying uniform dollar
amounts of a security regardless of the price, at regular intervals. When
prices are low, more shares are bought than when prices are high. Because
the value of the securities in each Fund fluctuates with market conditions,
if you liquidate your Plan investment when the market value of your shares
is less than their original cost, including the initial Plan's Creation and
Sales Charges, you will incur a loss. Investments in a systematic
investment plan do not eliminate market risk. While FMR will seek to
realize capital growth over the lifetime of a Plan, the policies FMR
follows may not be appropriate if you are unable to complete your Plan. You
should also consider your ability to continue to invest during periods of
varying economic and market conditions.
Receipt by each Fund of investments on a systematic basis tends to provide
a more consistent level of Fund assets than might be the case for those
funds whose shares are sold directly and may allow each Fund to plan for
the gradual accumulation of various individual security positions. One
example of how each Fund could employ this concept is through the program
of dollar-cost averaging as described above. Such a program could be
hampered by increased net redemptions or the failure of Plan investors to
purchase shares.
FMR is also the investment adviser to certain other investment companies
not sold through systematic investment plans, which also have objectives of
capital growth. The investment policies employed by each of these funds
vary, as do the sales charges assessed to fund share purchases and the
investment results each has attained.
LIMITING INVESTMENT RISKS
Each Fund has adopted the following investment limitations designed to
reduce investment risk. The policies and limitations discussed
below , in the section "The Funds' Investment Policies, Risks and
Limitations" on page F- 5 , and in the "Appendix" beginning on page
F-1 4 , are considered at the time of purchase. With the exception of
each Fund's borrowing policy, the sale of portfolio securities is not
required in the event of a subsequent change in circumstances.
DIVERSIFICATION: Limitations (a) and (b) are fundamental. These limitations
do not apply to U.S. government securities.
(medium solid bullet) Each Fund may not (except that up to 25% of the
Fund's total assets may be invested without regard to these limitations)
purchase a security if, as a result, (a) more than 5% of its total assets
would be invested in the securities of any issuer or (b) it would hold more
than 10% of the outstanding voting securities of any issuer.
(medium solid bullet) As a fundamental policy, each Fund may not purchase
the securities of any issuer if, as a result, more than 25% of the Fund's
total assets would be invested in the securities of companies having their
principal business activities in the same industry.
BORROWING:
The following limitation is fundamental:
(medium solid bullet) Each Fund may borrow money for temporary or
emergency purposes, in an amount not exceeding 33% of the value of its
total assets .
The following limitations are non-fundamental:
(medium solid bullet) Each Fund may borrow money from a bank or from a
fund advised by FMR or an affiliate and may engage in reverse repurchase
agreements; and
(medium solid bullet) E ach Fund may not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
LENDING: Percentage limitations are fundamental.
(medium solid bullet) Each Fund (a) may lend portfolio securities to a
broker-dealer or institution when the loan is fully collateralized; and (b)
may lend money to a mutual fund advised by FMR or an affiliate. Each Fund
will limit loans in the aggregate to 33% of its total assets.
(medium solid bullet) Each Fund may acquire loans, loan participations and
other forms of direct debt instruments.
Each Fund has received permission from the SEC to lend money to and borrow
money from other mutual funds advised by FMR or its affiliates, subject to
certain restrictions (see the "Appendix" on page F-1 4 ). If a Fund
borrows money, its share price may be subject to greater fluctuation until
the borrowing is paid off. To this extent, purchasing securities when
borrowings are outstanding involves an element of leverage.
As a non-fundamental policy, each Fund may not purchase a security, if, as
a result, more than 10% of its net assets would be invested in illiquid
investments.
Each Fund's investment objective is fundamental and may only be changed by
the affirmative vote of the outstanding shares of that Fund. Each Fund's
policies and limitations, except as noted, are non-fundamental and may be
changed without shareholder approval.
PORTFOLIO TRANSACTIONS
FMR chooses broker-dealers by judging professional ability and quality of
service. FMR uses various brokerage firms to carry out its portfolio
transactions. Since FMR places a large number of transactions, including
those of Fidelity's other funds, each Fund pays commissions lower than
those generally paid by individual investors. Also, each Fund incurs lower
costs than those generally incurred by individuals when purchasing debt
securities.
Each Fund has authorized FMR to allocate transactions to some
broker-dealers who help distribute each Fund's shares or shares of
Fidelity's other funds, and on an agency basis to Fidelity Brokerage
Services, Inc. (FBSI) and Fidelity Brokerage Services, Ltd. (FBSL),
affiliates of FMR. FMR will make such allocations if commissions are
comparable to those charged by non-affiliated, qualified broker-dealers for
similar services.
FMR also may allocate brokerage transactions to the Funds' custodian,
acting as broker-dealer, or to other broker-dealers, so long as transaction
quality and commission rates are comparable to those of other
broker-dealers, where the broker-dealers will allocate a portion of the
commissions paid toward payment of the Funds' expenses. These expenses
currently include transfer agent and custodian fees.
Higher commissions may be paid to those firms that provide research
services, to the extent permitted by law. FMR also is authorized to
allocate brokerage transactions to FBSI in order to secure from FBSI
research services produced by third-party, independent entities. FMR may
use this research information in managing the Funds' assets, as well as
assets of other clients.
The frequency of portfolio transactions - the Funds' turnover rates - will
vary from year to year depending on market conditions. For the fiscal year
ended September 30, 1994, the annualized turnover rates for Destiny I and
Destiny II were 77% and 72%, respectively. Because higher turnover rates
increase transaction costs and may increase taxable capital gains, FMR
carefully weighs the anticipated benefits of short-term investing against
these consequences.
A FEW WORDS ABOUT DISTRIBUTIONS AND TAXES
Each Fund distributes substantially all of its net investment income and
capital gains to shareholders each year, normally in December.
FEDERAL TAXES. Distributions from each Fund's income and short-term
capital gains are taxed as dividends, and long-term capital gain
distributions are taxed as long-term capital gains. Each Fund's
distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares, except that distributions declared
in December and paid in January are taxable as if paid on December 31st.
Each Fund will send you a tax statement by January 31, showing the tax
status of the distributions you received in the past year, and will file a
copy with the Internal Revenue Service (IRS).
CAPITAL GAINS. You may realize a capital gain or loss when you sell
(redeem) or exchange shares. For most types of accounts, each Fund will
report the proceeds of your redemptions to you and the IRS annually.
However, because the tax treatment also depends on your purchase price and
your personal tax position, you should also keep your regular account
statements to use in determining your tax basis.
"BUYING A DIVIDEND." On the record date for a distribution, each Fund's
share value is reduced by the amount of the distribution. If you buy shares
just before the record date (buying a dividend), you will pay the full
price for the shares, and then receive a portion of the price back as a
taxable distribution.
OTHER TAX INFORMATION. In addition to federal taxes, you may be subject to
state or local taxes on your investment . Investors should consult their
tax advisers for details and up-to-date information on the tax laws in
their state to determine whether the Fund is suitable to their particular
tax situation .
When you sign your Plan Application, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the Funds
to withhold 31% of your taxable distributions and redemptions.
Each Fund is treated as a separate entity for federal income tax purposes.
DESTINY FUNDS AND THE FIDELITY ORGANIZATION
Fidelity Destiny Portfolios (the trust) is an open-end management
investment company made up of two separate diversified funds. Originally
organized as a Massachusetts corporation on January 7, 1969, the Trust was
reorganized as a Massachusetts business trust on June 20, 1984. The Board
of Trustees supervises each Fund's activities and reviews contractual
arrangements with companies that provide each Fund with services. Each Fund
offers its own shares exclusively. As a trust, it is not required to hold
annual shareholder meetings. However, special meetings may be called for a
specific Fund or the Trust as a whole for purposes such as electing or
removing Trustees, changing fundamental policies or approving a management
contract. As a shareholder, the number of votes you are entitled to is
based upon the dollar value of your investment. If a matter affects just
one Fund, a separate vote of the shareholders of that Fund is taken.
Fidelity Investments is one of the largest investment management
organizations in the U.S. and has its principal business address at 82
Devonshire Street, Boston, MA 02109. It includes a number of different
companies that provide a variety of financial services and products. Each
Fund employs various Fidelity companies to perform certain activities
required to operate each Fund.
FMR, the Funds' investment adviser, is the original Fidelity
company, founded in 1946. It provides a number of mutual funds and other
clients with investment research and fund management services. It maintains
a large staff of experienced investment personnel and a full complement of
related support facilities. As of September 30, 1994, FMR advised funds
having approximately 20 million shareholder accounts with a total
value of more than $250 billion. Fidelity Distributors Corporation, 82
Devonshire Street, Boston, MA 02109 , an affiliate of FMR,
distributes shares for the Fidelity funds. FMR Corp. is the parent company
for the Fidelity companies. FMR Corp. is the ultimate parent company of
FMR, Fidelity Management & Research (U.K.) Inc. (FMR U.K.) and Fidelity
Management & Research (Far East) Inc. (FMR Far East). Through ownership of
voting common stock, members of the Edward C. Johnson 3d family form a
controlling group with respect to FMR Corp. Changes may occur in the
Johnson family group, through death or disability, which would result in
changes in each individual family members' holding of stock. Such changes
could result in one or more family members becoming holders of over 25% of
the stock. The Funds have received an opinion of counsel that changes in
the composition of the Johnson family group under these circumstances would
not result in the termination of the Funds' management or distribution
contracts and, accordingly, would not require a shareholder vote to
continue operation under those contracts.
George A. Vanderheiden is manager and Vice President of Destiny I and
Destiny II, which he has managed since 1980 and 1985, respectively. Mr.
Vanderheiden also manages the Fidelity Advisor Growth Opportunities Fund.
Mr. Vanderheiden is a managing director of FMR Corp., and leader of the
Growth Group. He joined Fidelity in 1971.
MANAGEMENT AND SERVICE FEES
For managing its investment and business affairs, each Fund pays FMR a
monthly fee based on a basic fee rate, which is the sum of two components:
1. A GROUP FEE RATE based on the monthly average net assets of all the
mutual funds advised by FMR. The rate cannot rise above .52%, and
drops (to as low as a marginal rate of .31%*) as total assets in all
these funds rise. The effective group fee rate for September 1994 was
. 3193 %.
* On October 20, 1993, each Fund's shareholders approved new management
contracts with the group
fee rate schedule providing for a marginal rate as low as .30% when average
group net assets exceed
$174 billion. Effective November 1, 1993, FMR voluntarily agreed to adopt a
revised group fee rate
schedule providing for a marginal rate as low as .285% when average group
net assets exceed $336
billion. Effective August 1, 1994, FMR voluntarily agreed to adopt a
revised group fee rate schedule
providing for a marginal rate as low as .270% when average group assets
exceed $390 billion. These
revised schedules will be presented to shareholders for approval at the
next shareholder s meeting.
2. An INDIVIDUAL FUND FEE RATE, which varies for each Fund.
One-twelfth of the annual basic fee rate is applied to each Fund's net
assets averaged over the most recent month, giving a dollar amount, which
is the basic fee for that month.
The following are the individual Fund fee rates, total management fees and
total operating expenses for the Funds' most recent fiscal year end,
expressed as a percentage of average net assets:
INDIVIDUAL FUND TOTAL TOTAL OPERATING
FEE RATES MANAGEMENT FEE EXPENSES
Destiny I .17% .65 % . 70 %
Destiny II .30% .73 % . 80 %
_______________
In addition to the basic fee, each Fund's management fee varies based on
performance. The performance adjustment rate is added to or subtracted from
the management fee and is calculated monthly. It is based on a comparison
of each Fund's performance to that of the Standard & Poor's Composite Index
of 500 Stocks (S&P 500 (registered trademark) ), a widely recognized,
unmanaged index of common stock prices, over the most recent 36-month
period. The difference is converted into a dollar amount that is added to
or subtracted from the management fee. This adjustment rewards FMR when
a Fund outperforms the S&P 500 and reduces FMR's fee when the Fund
underperforms the S&P 500. The maximum annualized performance adjustment
rate is +/ - .24% of average net assets up to and including
$100,000,000 and + / - .20% of average net assets in excess of
$100,000,000.
Effective November 1, 1993, FMR entered into sub-advisory agreements on
behalf of the Funds with FMR U.K. and FMR Far East. FMR U.K. focuses
primarily on issuers based in Europe, and FMR Far East focuses primarily on
issuers based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR, not the Funds, pays FMR U.K. and FMR Far East fees equal
to 110% and 105%, respectively, of each sub-advisor's costs incurred in
connection with its sub-advisory agreement. Sub-advis e rs provide
research and investment advice and research services with respect to
issuers based outside the United States and FMR may grant sub-advisors
investment management authority to buy and sell securities if FMR believes
it would be beneficial to a Fund.
Fidelity Service Co. (Service), 82 Devonshire Street, Boston, MA
02109 , an affiliate of FMR, acts as each Fund's transfer and
dividend-paying agent and maintains the Funds' shareholder records. With
respect to those accounts not associated with the Plans, each Fund pays
fees based on the type, size, and number of accounts, and the number of
transactions made by shareholders. For the fiscal year ended September 30,
1994, Destiny I and Destiny II's transfer agent fees amounted to
$ 125,929 and $ 63,171 , respectively. The Funds also pay
Service to calculate their net asset value (NAV) per share, to maintain
their general accounting records, and to administer their securities
lending programs. The fees for pricing and bookkeeping services are based
on each Fund's average net assets, but must fall within a range of $45,000
to $750,000 per year. The fees for securities lending are based on the
number and duration of individual securities loans. For the fiscal year
ended September 30, 1994, fees for pricing and bookkeeping and securities
lending services (including related out-of-pocket expenses) for Destiny I
and Destiny II amounted to $ 761,590 and $ 551,751 ,
respectively.
THE FUNDS' PERFORMANCE
Each Fund's performance may be quoted in advertising in various ways. All
performance information is historical and is not intended to indicate
future performance. Share price, yield and total return fluctuate in
response to market conditions and other factors, and the value of each
Fund's shares when redeemed may be worth more or less than their original
cost.
Each Fund's performance may be quoted in advertising in terms of
cumulative or average annual total return. A CUMULATIVE TOTAL RETURN
reflects each Fund's performance over a stated period of time. An AVERAGE
ANNUAL TOTAL RETURN reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if each Fund's
performance had been constant over the entire period. Because average
annual total returns tend to smooth out variations in each Fund's
performance, shareholders should recognize that those returns are
not the same as actual year-by-year results. All total returns quoted below
do not include the effect of paying the separate Creation and Sales Charges
and Custodian Fees associated with the purchase of shares of the Funds
through the Plans. Total returns would be lower if Creation and Sales
Charges and Custodian Fees were taken into account. As previously
discussed, shares of the Funds may be acquired only through Fidelity
Systematic Investment Plans. Investors should consult the Plans' Prospectus
for complete information regarding Creation and Sales Charges and Custodian
Fees.
HISTORICAL FUND RESULTS. The following charts show each Fund's
total returns for the period ended September 30, 1994:
DESTINY I
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND* ONE YEAR FIVE YEARS TEN YEARS
LIFE OF FUND*
12.30 % 14.77 % 17.93 % 18.15 % 12.30 %
99.10 % 420.47 % 5599.24 %
DESTINY II
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND** ONE YEAR FIVE YEARS TEN YEARS
LIFE OF FUND**
12.67 % 15.89 % N/A 22.05 % 12.67 %
109.08 % N/A 472.97 %
* Life of Fund - July 10, 1970 (Commencement of Operations) - September 30,
1994.
** Life of Fund - December 30, 1985 (Commencement of Operations) -
September 30, 1994.
To illustrate the components of overall performance, each Fund may
separate its cumulative and average annual total returns into income
results and capital gain or loss. Other illustrations of performance may
show moving averages over specified periods.
HISTORICAL FUND RESULTS. The following charts show Destiny Plans
I and Destiny Plans II average annual total returns calculated for the one,
five, ten years and Life of Plan ended September 30, 1994 for a $50/month,
15 year Plan. Life of Plan figures are for the periods October 1, 1979 to
September 30, 1994 for Destiny Plans I and Commencement of Operations
(December 30, 1985) through September 30, 1994 for Destiny Plans II. The
following Plan-related average annual total returns include change in share
price, reinvestment of dividends and capital gains, and the effects of the
separate Creation and Sales Charges and Custodian Fees assessed through the
Plans. Consult the Plans' Prospectus for more complete information on
applicable charges and fees.
DESTINY PLANS I
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE OF
$50/MONTH, ONE YEAR FIVE YEARS TEN YEARS PLAN
15 YEAR PLAN
-46.32% 10.63% 16.39% 17.44%
</TABLE>
DESTINY PLANS II
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE OF
$50/MONTH, ONE YEAR FIVE YEARS TEN YEARS PLAN
15 YEAR PLAN
-46.14% 11.71% N/A 20.14%
</TABLE>
HOW TO BUY SHARES
Each Fund has an agreement with Distributors under which each Fund issues
shares at NAV to State Street Bank and Trust Company as Custodian for the
Plans. EACH FUND WILL NOT OFFER ITS SHARES PUBLICLY EXCEPT THROUGH THE
PLANS. Generally, State Street Bank and Trust Company will hold
directly all shares of each Fund unless a Planholder owns Fund shares
directly after completing or terminating a Plan. The terms of the offering
of the Plans are contained in the Plans' Prospectus.
SHARE VALUE
Each Fund's NAV is computed by adding the value of all securities plus
cash and other assets, deducting liabilities and then dividing the result
by the number of shares of that Fund that are outstanding. Service
calculates each Fund's NAV at the close of the Fund's business day which
coincides with the close of business of the New York Stock Exchange (NYSE),
normally 4:00 p.m., Eastern time. Each Fund is open for business each day
the NYSE is open. Purchase orders are processed at the NAV next determined
after an order is received. Securities and other assets held by each
Fund are valued primarily on the basis of market quotations. Foreign
securities are valued based on quotations from the primary market in which
they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. If quotations are not readily
available or if the values have been materially affected by events
occurring after a foreign market's closing, assets are valued by a
method which the Trust's Board of Trustees believes accurately reflects
fair value.
SHAREHOLDER SERVICES
THE FOLLOWING SHAREHOLDER SERVICES ARE APPLICABLE ONLY TO THOSE
SHAREHOLDERS WHO HAVE COMPLETED OR TERMINATED A PLAN AND HOLD SHARES OF
A FU ND DIRECTLY. Planholders should consult the section titled "Rights
and Privileges of Planholders" on page 1 1 of their Plan's Prospectus
for a discussion of distribution options and other pertinent data.
CHOOSING A DISTRIBUTION OPTION
You can choose from three distribution options:
1. The SHARE OPTION reinvests your income dividends and capital gain
distributions in additional shares. You are assigned this option
automatically unless you specify otherwise in writing.
2. The INCOME-EARNED OPTION reinvests your capital gain distributions and
pays your income dividends in cash.
3. With the CASH OPTION you receive both income dividends and capital gain
distributions in cash.
Income dividends and capital gain distributions will be reinvested at the
NAV as of the record date for the distribution. On the day a Fund goes
ex-dividend, the amount of the distribution is deducted from its share
price. Reinvestment of distributions will be made at that day's NAV. Cash
distribution checks will be mailed within seven days.
EXCHANGE PRIVILEGE
The exchange privilege is a convenient way to buy shares in Fidelity's
other funds in order to respond to changes in your goals or in market
conditions and is available only to those who have completed or terminated
a Plan and received shares of the Fund directly. In addition, those who
have completed or terminated a Plan and received shares directly may
exchange at NAV into any of the Fidelity funds, including the
Fidelity Advisor Funds. However, to protect the Funds' performance and
shareholders, Fidelity discourages frequent trading in response to
short-term market fluctuations. The Fidelity family of funds includes,
among others, common stock funds, tax-exempt and corporate bond funds and
money market funds. Before you make an exchange from either Fund please
note the following:
1. You may exchange shares of the Funds for shares of Fidelity's other
funds that are registered in your state as long as the funds will not be
adversely affected by your exchange. You will not have to pay any sales
charge on the shares of another Fidelity fund you acquire by exchange from
the Funds.
2. Fidelity's Investor Centers can provide information and a prospectus for
any of Fidelity's other funds registered in your state excluding the
Fidelity Advisor Funds. For information on those funds, ask your investment
professional. Read the prospectus of the fund into which you want to
exchange for relevant information.
3. You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.
4. RESTRICTIONS: Although the exchange privilege is an important benefit,
fund performance and shareholders can be hurt by excessive trading. To
protect the interests of shareholders, the Funds reserve the right to
temporarily or permanently terminate the exchange privilege for any person
who makes more than four exchanges out of each Fund during the calendar
year. For purposes of the four exchange limit, accounts under common
ownership or control, including accounts having the same taxpayer
identification number, will be aggregated. There are currently no
administrative or redemption fees applicable to exchanges out of the
Destiny Funds. However, other funds may restrict or limit exchanges, and
may impose administrative fees of up to $7.50 and redemption fees of up to
1.5% on exchanges. Read the prospectus of each fund into which you want to
exchange for details.
5. TAXES: Each exchange actually represents the sale of shares of one fund
and the purchase of shares in another, which may produce a gain or loss for
tax purposes.
The Funds reserve the right at any time without prior notice to refuse
exchange purchases by any person or group if, in FMR's judgment, a Fund
would be unable to invest effectively in accordance with its investment
objective and policies or might otherwise be adversely affected. In
particular, a pattern of exchanges that coincide with a "market timing"
strategy may be disruptive to the Funds. Although each Fund will attempt to
give you prior notice whenever it is reasonably able to do so, it may
impose these restrictions at any time. The Funds may terminate or modify
the exchange privilege in the future.
You can make exchanges either in writing or by telephone by calling
1-800-544-7777. You may initiate many transactions by telephone.
Fidelity may only be liable for losses resulting from
unauthorized transactions if it does not follow reasonable
procedures designed to verify the identity of the caller. Fidelity will
request personalized security codes or other information, and may also
record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions. Written requests for exchange should be sent to Fidelity
Investments, P.O. Box 660602, Dallas, TX 75266-0602.
STATEMENTS AND REPORTS
For accounts not associated with the Plans, Service will send a statement
of account after every transaction that affects the share balance or the
account registration (the Funds currently do not issue share certificates).
A statement with tax information will be mailed to you by January 31 of
each year, and will also be filed with the IRS. To reduce annual expenses
only one copy of most reports (such as the Funds' Annual Report) may be
mailed to your household. Please call Fidelity if you need additional
copies.
Service pays for shareholder services but not for special services, such
as producing and mailing historical account documents. You may be required
to pay a fee for special services.
HOW TO REDEEM SHARES
THE FOLLOWING DISCUSSION RELATES ONLY TO THOSE INVESTORS WHO HOLD SHARES
OF THE FUNDS DIRECTLY. PLANHOLDERS SHOULD CONSULT THEIR PLANS' PROSPECTUS
FOR THE REQUIREMENTS FOR REDEMPTION OF SHARES FROM A PLAN.
You may sell (redeem) all or a portion of your shares on any business day.
Your shares will be redeemed at the NAV next calculated after Service has
received and accepted your written redemption request. Each Fund may hold
payment until it is reasonably satisfied that investments which were made
by check have been collected (which may take up to seven (7) days).
Once your shares are redeemed, each Fund normally will send you the
proceeds on the next business day. However, if making immediate payment
could affect the Fund adversely, it may take up to seven (7) days to pay
you. Also, when the NYSE is closed (or when trading is restricted) for any
reason other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, each
Fund may suspend redemption or postpone payment dates. If you are unable to
execute your transaction by telephone (for example, during periods of
unusual market activity) consider placing your order by mail or contact
your investment professional.
If you have certificates for your shares, you must submit them to Service
in order to redeem your shares, and you should call Service for specific
instructions. The Funds currently do not issue share certificates.
TO REDEEM BY MAIL - Send a "letter of instruction" to Fidelity
Investments, P.O. Box 660602, Dallas, TX 75266-0602. The letter
should specify the name of the Fund, the number of shares to be sold, your
name, your account number, and the additional requirements listed below
that apply to your particular account.
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Sole Proprietorship, Letter of instruction
signed by all person(s) required to
Custodial (Uniform Gifts/Transfers to Minors Act), sign for the
account exactly as it is registered, accompa-
General Partners nied by signature guarantee(s).
Corporations, Associations Letter of instruction and a corporate
resolution, signed by person(s) required to sign for the account by
signature guarantee(s).
Trusts A letter of instruction signed by the Trustee(s) with a signature
guarantee. (If the Trustee's name is not registered on your account, also
provide a copy of the trust document, certified within the last 60 days.)
If you do not fall into any of the above registration categories (e.g.,
Executors, Administrators, Conservators or Guardians) please call Service
for further instructions.
A signature guarantee is a widely accepted way to protect you and Service
by guaranteeing the signature on your request; it may not be provided by a
notary public. Signature guarantees will be accepted from banks, brokers,
dealers, municipal securities dealers, municipal securities brokers,
government securities dealers, government securities brokers, credit unions
(if authorized under state law), national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Planholders who have redeemed shares under "Cancellation and Refund
Rights" (discussed in the Plans' Prospectus, page 1 4 ), may not
reinstate at NAV the proceeds from such a cancellation or refund until all
refunded Creation and Sales Charges included in the cancellation have first
been deducted in full from the amount being replaced. To redeem shares from
a Plan, see page 1 5 of the Plans' Prospectus.
APPENDIX
The following paragraphs provide a brief description of securities in
which each Fund may invest and transactions they may make. The Funds are
not limited by this discussion, however, and may purchase other types of
securities and enter into other types of transactions if they are
consistent with the Funds' investment objectives and policies.
FOREIGN INVESTMENTS. Investment in foreign securities involve
additional risks. Foreign securities and securities denominated in or
indexed to foreign currencies may be affected by the strength of foreign
currencies relative to the U.S. dollar, or by political or economic
developments in foreign countries. Foreign companies may not be subject to
accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations.
Foreign markets may be less liquid or more volatile than U.S. markets, and
may offer less protection to investors. In addition to the political and
economic factors that can affect foreign securities, a governmental issuer
may be unwilling to repay principal and interest when due, and may require
that the conditions for payment be renegotiated. These factors could make
foreign investments, especially those in developing countries, more
volatile. FMR considers these factors when making foreign investments.
A Fund may enter into currency forward contracts (agreements to
exchange one currency for another at a future date) to manage currency
risks and to facilitate transactions in foreign securities. Although
currency forward contracts can be used to protect a Fund from adverse
exchange rate changes, they involve a risk of loss if FMR fails to predict
foreign currency values correctly.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of each Fund's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for a Fund to sell them promptly at an acceptable price.
INDEXED SECURITIES. Each Fund may invest in indexed securities whose value
is linked to currencies, interest rates, commodities, indices, or other
financial indicators. Most indexed securities are short to intermediate
term fixed-income securities whose values at maturity or interest rates
rise or fall according to the change in one or more specified underlying
instruments. Indexed securities may be positively or negatively indexed
(i.e., their value may increase or decrease if the underlying instrument
appreciates), and may have return characteristics similar to direct
investments in the underlying instrument or to one or more options on the
underlying instrument. Indexed securities may be more volatile than the
underlying instrument itself.
INTERFUND BORROWING PROGRAM. The Funds have received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. Interfund loans and borrowings normally will extend
overnight, but can have a maximum duration of seven days. The Funds will
lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Each Fund will not
lend more than 5% of its assets to other funds and will not borrow through
the program if, after doing so, total outstanding borrowings will exceed
15% of total assets. Loans may be called on one day's notice, and the Funds
may have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed. Any delay in repayment to a lending fund
could result in a lost investment opportunity or additional borrowing
costs.
LOWER-QUALITY DEBT SECURITIES are those rated Ba or lower by Moody's
Investors Service, Inc. (Moody's) or BB or lower by Standard & Poor's
Corporation (S&P) that have poor protection against default in the payment
of principal and interest, or may already be in default. These securities
are often considered to be speculative and involve greater risk of loss or
price changes due to changes in the issuer's capacity to pay. The market
prices of lower-quality debt securities may fluctuate more than those of
higher-rated securities, and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates.
OPTIONS AND FUTURES CONTRACTS. Each Fund may buy and sell options and
futures contracts to manage its exposure to changing interest rates,
security prices, and currency exchange rates. Some options and futures
strategies, including selling futures, buying puts, and writing calls, tend
to hedge a Fund's investments against price fluctuations. Other strategies,
including buying futures, writing puts, and buying calls, tend to increase
market exposure. Options and futures may be combined with each other or
with forward contracts in order to adjust the risk and return
characteristics of the overall strategy. Each Fund may invest in options
and futures based on any type of security, index, or currency, including
options and futures traded on foreign exchanges and options not traded on
exchanges.
Options and futures can be volatile investments, and involve certain
risks. If FMR applies a hedge at an inappropriate time or judges market
conditions incorrectly, options and futures strategies may lower a Fund's
return. A Fund could also experience losses if the prices of its options
and futures positions were poorly correlated with its other investments, or
if it could not close out its positions because of an illiquid secondary
market.
Each Fund will not hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In
addition, a Fund will not buy futures or write puts whose underlying value
exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement, a
Fund buys a security and simultaneously agrees to sell it back at a higher
price. In the event of the bankruptcy of the other party to a repurchase
agreement or a loan, a Fund could experience delays in recovering either
the cash or the securities it lent. To the extent that, in the meantime,
the value of the securities the Fund purchased had decreased, and the value
of securities the Fund lent had increased, the Fund could experience a
loss. In all cases, FMR must find the creditworthiness of the other party
to the transaction to be satisfactory. The Funds may lend portfolio
securities to an affiliate, FBSI.
RESTRICTED SECURITIES are securities which cannot be sold to the public
without registration under the Securities Act of 1933. Unless registered
for sale, these securities can only be sold in privately negotiated
transactions or pursuant to an exemption from registration.
SWAP AGREEMENTS. As one way of managing its exposure to different
types of investments, each Fund may enter into interest rate swaps,
currency swaps, and other types of swap agreements such as caps, collars,
and floors. In a typical interest rate swap, one party agrees to make
regular payments equal to a floating interest rate times a "notional
principal amount," in return for payments equal to a fixed rate times the
same amount, for a specified period of time. If a swap agreement provides
for payments in different currencies, the parties might agree to exchange
the notional principal amount as well. Swaps may also depend on other
prices or rates, such as the value of an index or mortgage prepayment
rates.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on a Fund's performance. Swap agreements are subject to
risks related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. A Fund may also
suffer losses if it is unable to terminate outstanding swap agreements or
reduce its exposure through offsetting transactions.
DEBT OBLIGATIONS. The table below provides a summary of ratings assigned
to debt holdings (not including money market instruments) in each Fund's
portfolio. These figures are dollar-weighted averages of month-end fund
holdings during the twelve months ended September 30, 1994, presented as a
percentage of total investments. These percentages are historical and are
not necessarily indicative of the quality of current or future fund
holdings, which may vary. Refer to page F- 5 for policies regarding
the quality of Fund investments.
S&P RATING MOODY'S
AVERAGE DESTINY I DESTINY II RATING AVERAGE DESTINY I DESTINY II
INVESTMENT GRADE
AAA/AA/A 3.39 % 3.28 % Aaa/Aa/A 3.45 % 3.36 %
Highest quality, High quality,
Upper medium
BBB 0 % 0 % Baa 0 % 0 % Medium grade, speculative
characters
LOWER QUALITY
BB 0 % 0 % Ba 0 % 0 % Moderately speculative
B 0 % 0 % B 0.11 % 0.26 % Speculative
CCC 0 % 0 % Caa 0 % 0 % Highly speculative
CC/C 0 % 0 % Ca/C 0 % 0 % Poor quality, Lowest
quality,
no interest
D 0 % 0 % In default, in arrears
The dollar-weighted average of debt securities not rated by either S&P or
Moody's amounted to 0 % and 0 % for Destiny I and Destiny II,
respectively. This may include securities rated by other nationally
recognized statistical rating organizations as well as unrated securities.
Unrated securities are not necessarily lower-quality securities. Please
refer to the Funds' SAI for a more complete discussion of these ratings.
FIDELITY DESTINY PORTFOLIOS: DESTINY I AND DESTINY II
(THE FUND OR THE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1994
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Funds' current Prospectus dated
November 29, 1994. Please retain this document for future reference. The
Funds' financial statements and financial highlights, included in the
Annual Report, for the fiscal year ended September 30, 1994 are
incorporated herein by reference. To obtain an additional copy of the
Prospectus, Statement of Additional Information (SAI) or Annual
Report , please call your investment professional or Fidelity
Distributors Corporation:
NATIONWIDE (TOLL FREE) 1-800-752-2347
ALASKA OR OVERSEAS (CALL COLLECT) 617-439-0547
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Fund Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Contracts With Companies Affiliated With FMR
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (Distributors)
TRANSFER AGENT
Fidelity Service Co. (Service)
CUSTODIAN
The Chase Manhattan Bank, N.A. (Custodian)
I.BD-DESSAI-1194
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Whenever an investment policy or limitation states a maximum
percentage of a Fund's assets which may be invested in any security or
other asset or sets forth a policy regarding quality standards, such
standard or percentage limitation shall be determined immediately after and
as a result of the Fund's acquisition of such security or other asset.
Accordingly, any later increase or decrease resulting from a change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment
policies and limitations.
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The Funds' fundamental investment limitations may not be changed without
approval by a "majority of the outstanding voting securities" (as defined
in the Investment Company Act of 1940 (the 1940 Act)) of the Funds. THE
FOLLOWING ARE THE FUNDS' FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN
THEIR ENTIRETY. EACH FUND MAY NOT:
(1) with respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that each
Fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements:
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) Each Fund does not currently intend to sell securities short, unless it
owns or has the right to obtain such securities equivalent in kind and
amount to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute selling
securities short.
(ii) Each Fund does not currently intend to purchase securities on margin,
except that each Fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) Each Fund may borrow money only (a) from a bank or from a registered
investment company or fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). Neither Fund will
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. Neither Fund will borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of its total assets.
(iv) Each Fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(v) Each Fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) Each Fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
Fund's net assets) to a registered investment company or fund for which FMR
or an affiliate serves as investment adviser or (b) acquiring loans, loan
participations or other forms of direct debt instruments and, in connection
therewith, assuming any associated unfunded commitments of the sellers.
(This limitation does not apply to purchases of debt securities or to
repurchase agreements.)
(vii) Each Fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except to the ordinary broker's commission is paid, or (b) purchase or
retain securities issued by other open-end investment companies.
Limitations (a) and (b) do not apply to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) Each Fund does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that , including predecessors, have a record of
less than three years of continuous operation.
(ix) Each Fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(x) Each Fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of each Fund's net assets.
Included in that amount, but not to exceed 2% of each Fund's net assets,
may be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the Funds in units or
attached to securities are not subject to these restrictions.
(xi) Each Fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For the Funds' limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 8 .
Each Fund's investments must be consistent with its objectives and
policies. Accordingly, not all of the security types and investment
techniques discussed below are eligible investments for each of the
Funds.
AFFILIATED BANK TRANSACTIONS. Each Fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the Fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission (SEC), the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. Each Fund does not intend to direct or
administer the day-to-day operations of any company. Each Fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the b oard of
d irectors, and shareholders of a company when FMR determines that
such matters could have a significant effect on the value of each Fund's
investment in the company. The activities that each Fund may engage in,
either individually or in conjunction with others, may include, among
others, supporting or opposing proposed changes in a company's corporate
structure or business activities; seeking changes in a company's directors
or management; seeking changes in company's direction or policies; seeking
the sale or reorganization of the company or a portion of its assets; or
supporting or opposing third party takeover efforts. This area of corporate
activity is increasingly prone to litigation and it is possible that each
Fund could be involved in lawsuits related to such activities. FMR will
monitor such activities with a view to mitigating, to the extent possible,
the risk of litigation against a Fund and the risk of actual liability if a
Fund is involved in litigation. No guarantee can be made, however, that
litigation against a Fund will not be undertaken or liabilities incurred.
LOWER-QUALITY DEBT SECURITIES. While the market for high-yield corporate
debt securities has been in existence for many years and has weathered
previous economic downturns, the 1980s brought a dramatic increase in the
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high-yield bond market, especially during
periods of economic recession. In fact, from 1989 to 1991, the percentage
of lower-quality securities that defaulted rose significantly above prior
levels, although the default rate decreased in 1992 and 1993.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing service s . Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may
adversely affect the ability of outside pricing services to value
lower-quality debt securities and each Fund's ability to dispose of these
securities.
Since the risk of default is higher for lower-quality securities, FMR's
research and credit analysis are an integral part of managing any
securities of this type held by a Fund. In considering investments for the
Funds, FMR will attempt to identify those high-yielding securities whose
financial condition is adequate to meet future obligations, has improved,
or is expected to improve in the future. FMR's analysis focuses on relative
values based on such factors as interest or dividend coverage, asset
coverage, earnings prospects, and the experience and managerial strength of
the issuer.
Each Fund may choose, at its expense or in conjunction with others, to
pursue litigation seeking to protect the interest of security holders of
investment companies if it determines this to be in the best interest of
a Fund ' s shareholders.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of each Fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of each Fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset a Fund's rights and
obligations relating to the investment).
Investments currently considered by the Fund s to be illiquid
include repurchase agreements not entitling the holder to payment of
principal and interest within seven days, and over-the-counter options.
Also, FMR may determine some restricted securities, loans and other direct
debt instruments, and swap agreements to be illiquid. However, with respect
to over-the-counter options the Funds write, all or a portion of the value
of the underlying instruments may be illiquid depending on the assets held
to cover the option and the nature and terms of any agreement the Funds may
have to close out the option before expiration. In the absence of market
quotations, illiquid investments are priced at fair value as determined in
good faith by a committee appointed by the Board of Trustees. If through a
change in values, net assets or other circumstances, a Fund were in a
position where more than 10% of its net assets were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, each Fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time a Fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, a Fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each Fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
principal and interest. Direct debt instruments may not be rated by any
nationally recognized rating service. If a Fund does not receive scheduled
interest or principal payments on such indebtedness, the Fund's share price
and yield could be adversely affected. Loans that are fully secured offer a
Fund more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral could be liquidated. Indebtedness of
borrowers whose creditworthiness is poor involves substantially greater
risks and may be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a small
fraction of the amount owed. Direct indebtedness of developing countries
also involves a risk that the governmental entities responsible for the
repayment of the debt may be unable, or unwilling, to pay interest and
repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional risks
to a Fund. For example, if a loan is foreclosed, a Fund could become part
owner of any collateral, and would bear the costs and liabilities
associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, a Fund
could be held liable as a co-lender. Direct debt instruments may also
involve a risk of insolvency of the lending bank or other intermediary.
Direct debt instruments that are not in the form of securities may offer
less legal protection to a Fund in the event of fraud or misrepresentation.
In the absence of definitive regulatory guidance, each Fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect a Fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, a Fund has direct recourse against the borrower, it may
have to rely on the agent to apply appropriate credit remedies against a
borrower. If assets held by the agent for the benefit of a Fund were
determined to be subject to the claims of the agent's general creditors, a
Fund might incur certain costs and delays in realizing payment on the loan
or loan participation and could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating a Fund to pay additional cash on demand. These commitments may
have the effect of requiring a Fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
A Fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
Each Fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations 1 and 5).
For purposes of these limitations, a Fund generally will treat the borrower
as the "issuer" of indebtedness held by a Fund. In the case of loan
participations where a bank or other lending institution serves as
financial intermediary between a Fund and the borrower, if the
participation does not shift to the Fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the Fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict a Fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements. It is a policy of each Fund to enter into reverse repurchase
agreements only with those member banks of the Federal Reserve System,
primary dealers in United States government securities and other selected
dealers approved by the Board of Trustees whose creditworthiness has been
reviewed and found satisfactory by FMR. Such agreements involve the sale of
securities held by a Fund, subject to such Fund's agreement to repurchase
and the purchaser's agreement to resell the securities at an agreed-upon
price and date. When a Fund enters into a reverse repurchase agreement,
securities in a dollar amount equal in value to the securities subject to
the agreement will be maintained in a segregated account with the
Fund ' s custodian bank and will be marked to market daily. The
segregation of assets could impair a Fund's ability to meet its current
obligations or impede investment management if a large portion of a Fund's
assets are involved. FMR will consider reverse repurchase agreements to be
borrowings for the purposes of determining the Fund's abilities described
in fundamental limitation 3, and will enter into such agreements only for
temporary or emergency purposes.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price and date . The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed-upon
resale price, which obligation is in effect secured by the value (at least
equal to the amount of the agreed-upon resale price and marked to market
daily) of the underlying security. Each Fund may engage in a repurchase
agreement with respect to any type of security in which it is authorized to
invest. While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delays and costs to a
Fund in connection with bankruptcy proceedings), it is each Fund's current
policy to limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a Fund's exposure to long- or
short-term interest rates (in the United States or abroad), foreign
currency values, mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. Each Fund is
not limited to any particular form of swap agreement if FMR determines it
is consistent with the Fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the Fund's exposure to United States interest
rates and increase its exposure to foreign currency and interest rates.
Caps and floors have an effect similar to buying or writing options.
Depending on how they are used, swap agreements may increase or decrease
the overall volatility of a Fund's investments and its share price.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a Fund. If a swap
agreement calls for payments by a Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. Each Fund expects to be able to eliminate
its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
Each Fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a Fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If a Fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the Fund's accrued obligations under the
agreement.
INDEXED SECURITIES. Each Fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than United
States dollar-denominated securities of equivalent issuers.
Currency-indexed securities may be positively or negatively indexed; that
is, their maturity value may increase when the specified currency value
increases, resulting in a security that performs similarly to a
foreign-denominated instrument, or their maturity value may decline when
foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values
of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
United States and abroad. At the same time, indexed securities are subject
to the credit risks associated with the issuer of the security, and their
values may decline substantially if the issuer's creditworthiness
deteriorates. Recent issuers of indexed securities have included banks,
corporations, and certain United States government agencies.
ZERO COUPON DEBT SECURITIES AND PAY-IN-KIND SECURITIES. Each Fund may
invest in zero coupon securities. Zero coupon debt securities do not make
regular interest payments. Instead, they are sold at a deep discount from
face value. In calculating its dividends, a Fund must take into account as
income a portion of the difference between these securities' purchase price
and their face value. Each Fund may also purchase pay-in-kind securities.
Pay-in-kind securities pay all or a portion of their interest or dividends
in the form of additional securities. Because they do not pay current
income, the prices of zero coupon and pay-in-kind securities can be very
volatile when interest rates change.
SECURITIES LENDING. Each Fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a Fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC staff that each Fund
may engage in loan transactions only under the following conditions: (1) a
Fund must receive 100% collateral in the form of cash or cash equivalents
(e.g., U.S. Treasury bills or notes) from the borrower; (2) the borrower
must increase the collateral whenever the market value of the securities
loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, a Fund must be able to terminate the
loan at any time; (4) a Fund must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) a Fund may pay only reasonable custodian
fees in connection with the loan; and (6) the Board of Trustees must be
able to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which a Fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U. S . dollar. In
addition, there is generally less publicly available information about
foreign issuers' financial condition and operations, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to U .S. issuers. Further, economics
of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects. T h e considerations noted above generally are
intensified for investments in developing countries. Developing countries
may have relatively unstable governments, economies based on only a few
industries, and securities markets that trade a small number of securities.
Foreign markets may offer less protection to investors than U.S. markets.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may expose a fund to increased risk
in the event of a failed trade or the insolvency of a foreign
broker-dealer, and may involve substantial delays. In addition, the costs
of foreign investing, including withholding taxes, brokerage commissions
and custodial costs, are generally higher than for U.S. investors. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers, and listed companies than in the United
States. It may also be difficult to enforce legal rights in foreign
countries.
Each F und may invest in foreign securities that impose restrictions
on transfer within the United States or to U.S. persons. Although
securities subject to such transfer restrictions may be marketable abroad,
they may be less liquid than foreign securities of the same class that are
not subject to such restrictions.
Each F und may invest in American Depository Receipts and European
Depository Receipts (ADRs and EDRs) which are certificates evidencing
ownership of shares of a foreign-based issuer held in trust by a bank or
similar financial institution. Designed for use in the U.S. and European
securities markets, respectively, ADRs and EDRs are alternatives to the
purchase of the underlying securities in their national markets and
currencies.
FOREIGN CURRENCY TRANSACTIONS. Each Fund may conduct foreign currency
transactions on a spot (i.e., cash) basis or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. The Funds will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer.
Forward contracts are generally traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and
their customers. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
Each Fund may use currency forward contracts for any purpose consistent
with its investment objective. The following discussion summarizes the
principal currency management strategies involving forward contracts that
could be used by each Fund. The Funds may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When a Fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, a Fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The Funds may also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
The Funds may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a Fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A Fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
Each Fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if a Fund held investments denominated in
Deutschemarks, the Fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if a Fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause a Fund to assume the risk of fluctuations in the
value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the Funds will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The Funds will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
may substantially change a Fund's investment exposure to changes in
currency exchange rates, and could result in losses to the Fund if
currencies do not perform as FMR anticipates. For example, if a currency's
value rose at a time when FMR had hedged a Fund by selling that currency in
exchange for dollars, the Fund would be unable to participate in the
currency's appreciation. If FMR hedges currency exposure through proxy
hedges, a Fund could realize currency losses from the hedge and the
security position at the same time if the two currencies do not move in
tandem. Similarly, if FMR increases a Fund's exposure to a foreign
currency, and that currency's value declines, the Fund will realize a loss.
There is no assurance that FMR's use of currency management strategies will
be advantageous to the Funds or that it will hedge at an appropriate time.
SHORT SALES "AGAINST THE BOX." If a Fund enters into a short sale against
the box, it will be required to set aside securities equivalent in kind and
amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The Funds will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each Fund has
filed a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets, before engaging in any purchases or sales
of futures contracts or options on futures contracts. Each Fund intends to
comply with Rule 4.5 under the Commodity Exchange Act, which limits the
extent to which the Funds can commit assets to initial margin deposits and
option premiums.
In addition, each Fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of each
Fund's total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, each Fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by each Fund would
exceed 5% of each Fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the Funds' investments in futures contracts and
options, and the Funds' policies regarding futures contracts and options
discussed elsewhere in this SAI, may be changed as regulatory agencies
permit.
FUTURES CONTRACTS. When a Fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a Fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the Fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's Composite Index of 500
Stocks (S&P 500). Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a Fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a Fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a Fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a Fund, a Fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses
to a Fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a Fund obtains
the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the Fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. A Fund may
terminate its position in a put option it has purchased by allowing it to
expire or by exercising the option. If the option is allowed to expire, the
Fund will lose the entire premium it paid. If the Fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A Fund may also terminate a put option position by closing it out in
the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures contract
the Fund will be required to make margin payments to an FCM as described
above for futures contracts. A Fund may seek to terminate its position in a
put option it writes before exercise by closing out the option in the
secondary market at its current price. If the secondary market is not
liquid for a put option the Fund has written, however, the Fund must
continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a Fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A Fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a Fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a Fund's current or
anticipated investments exactly. The Funds may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which they typically invest
which involves a risk that the options or futures position will not track
the performance of a Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a Fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a Fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a Fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
Fund's access to other assets held to cover its options or futures
positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
Funds greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. A Fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. A Fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a Fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
Fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a Fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of a Fund's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Funds will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and if the guidelines so require
will set aside appropriate liquid assets in a segregated custodial account
in the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of a Fund's assets could impede
portfolio management or a Fund's ability to meet redemption requests or
other current obligations.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each Fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to the
sub-advis e rs (see the section entitled "Management Contracts"), the
sub-advis e rs are authorized to place orders for the purchase and
sale of portfolio securities, and will do so in accordance with the
policies described below. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to: the size
and type of the transaction, the nature and character of the markets for
the security to be purchased or sold, the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions, and arrangements for payment of Fund
expenses. Generally, commissions for foreign investments traded will be
higher than for U.S. investments and may not be subject to negotiation.
The Funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the Funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Funds may be useful to FMR in rendering investment management
services to the Funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the Funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each Fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the Funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the Funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with FBSI and Fidelity Brokerage
Services, Ltd. (FBSL), subsidiaries of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. Prior to September 4, 1992,
FBSL operated under the name Fidelity Fund Services, Ltd. (FPSL) as a
wholly owned subsidiary of Fidelity International Limited (FIL). Edward C.
Johnson 3d, is Chairman of FIL. Mr. Johnson 3d, Johnson family members, and
various trusts for the benefit of the Johnson family own, directly or
indirectly, more than 25% of the voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by each Fund toward payment of the Fund's
expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts that they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Funds and review the commissions paid by each Fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the Fund.
Each Fund's annual portfolio turnover rate generally will not exceed 100%
but may be substantially greater than that of similar investment companies.
Each Fund's turnover rate for the periods shown is illustrated in the
following table.
TURNOVER RATES
PERIOD JULY 1, 1993
FISCAL YEAR ENDED THROUGH
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
DESTINY I 77% 82%*
DESTINY II 72% 80%*
* Annualized
The following tables list the total brokerage commissions paid by each
Fund; the percentage of brokerage commissions paid to brokerage firms that
provided research services; and the dollar amount and percentage of
commissions paid to FBSI for the periods shown. Each Fund pays both
commissions and spreads in connection with the placement of portfolio
transactions; FBSI is paid on a commission basis. The tables also list the
percentage of each fund's aggregate dollar amount of transactions executed
through FBSI during the same periods. The difference in the percentage of
brokerage commissions paid to and the percentage of the dollar amount of
transactions effected through FBSI is a result of the low commission rates
charged by FBSI.
DESTINY I
% Paid to Commissions % of Commissions
Firms Providing Paid Paid
TOTAL Research To FBSI To FBSI
Fiscal Year Ended September 30, 1994 $3,962,343 59% $1,385,392 35%
July 1 - September 30, 1993 1,596,724 67% 423,987 30%
Year Ended June 30, 1993 3,827,788 64% 1,097,933 29%
DESTINY II
% Paid to Commissions % of Commissions
Firms Providing Paid Paid
TOTAL Research To FBSI To FBSI
Fiscal Year Ended September 30, 1994 $1,688,528 57% $617,397 37%
July 1 - September 30, 1993 525,505 66% 159,489 30%
Year Ended June 30, 1993 1,507,367 64% 439,041 29%
From time to time, the Fund's Trustees will review whether the recapture
for the benefit of the Funds of some portion of the brokerage commissions
or similar fees paid by the Funds on portfolio transactions is legally
permissible and advisable. Each Fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine, in the exercise of their
business judgment, whether it would be advisable for each Fund to seek such
recapture.
Although the Trustees and officers of the Funds are substantially the same
as those of other funds managed by FMR, investment decisions for the Funds
are made independently from those of other funds advised by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
volume of the security as far as each Fund is concerned. In other cases,
however, the ability of each Fund to participate in volume transactions
will produce better executions and prices for each Fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each Fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF FUND SECURITIES
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for which
the primary market is the United States are valued at last sale price or,
if no sale has occurred, at the closing bid price. Most equity securities
for which the primary market is outside the United States are valued using
the official closing price or the last sale price in the principal market
where they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or last bid price is normally used.
Short-term securities are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value.
Convertible securities and fixed-income securities are valued primarily by
a pricing service that uses a vendor security valuation matrix which
incorporates both dealer-supplied valuations and electronic data processing
techniques. This two-fold approach is believed to more accurately reflect
fair value because it takes into account appropriate factors such as
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon quoted, exchange, or over-the
counter prices. Use of pricing services has been approved by the Board of
Trustees.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by a F und if, in the opinion of a
committee appointed by the Board of Trustees, some other method (e.g.,
closing over-the-counter bid prices in the case of debt instruments traded
on an exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close
of the NYSE. The values of any such securities held by each Fund is
determined as of such time for the purpose of computing the Fund's net
asset value (NAV). Foreign security prices are furnished by independent
brokers or quotation services which express the value of securities in
their local currency. Service gathers all exchange rates daily at the
close of the NYSE using the last quoted price o f the local currency
and then translates the value of foreign securities from their local
currency into U.S. dollars. Any changes in the value of forward contracts
due to exchange rate fluctuations and days to maturity are included in the
calculation of NAV. If an extraordinary event that is expected to
materially affect the value of a portfolio security occurs after the close
of an exchange on which that security is traded, then the security will be
valued as determined in good faith by a committee appointed by the Board of
Trustees.
PERFORMANCE
Each Fund may quote its performance in various ways. All performance
information supplied by the Funds in advertising is historical and is not
intended to indicate future returns. Each Fund's share price and total
returns fluctuate in response to market conditions and other factors, and
the value of each Fund's shares when redeemed may be worth more or less
than their original cost.
TOTAL RETURN CALCULATIONS. TOTAL RETURNS quoted in advertising reflect all
aspects of each Fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in each Fund's NAV
over the period. Total returns quoted by each Fund do es not
include the effect of paying the separate Creation and Sales Charges and
Custodian Fees associated with the purchase of shares of the Funds through
Fidelity Destiny Systematic Investment Plans; of course , total
returns would be lower if C reation and S ales C harges
and C ustodian F ees were taken into account.
AVERAGE ANNUAL TOTAL RETURNS are calculated by determining the growth or
decline in value of a hypothetical historical investment in each Fund over
a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or
decline in value had been constant over the period. For example, a
cumulative return of 100% over 10 years would produce an average annual
return of 7.18%, which is the steady annual rate that would equal 100%
growth on a compounded basis in 10 years. While average annual returns are
a convenient means of comparing investment alternatives, investors should
realize that each Fund's performance is not constant over time, but changes
from year to year, and that average annual returns represent averaged
figures as opposed to the actual year-to-year performance of each Fund.
In addition to average annual returns, each Fund may quote unaveraged or
CUMULATIVE TOTAL RETURNS reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a
series of redemptions, over any time period. Total returns may be broken
down into their components of income and capital (including capital gains
and changes in share price) in order to illustrate the relationship of
these factors and their contributions to total return. An example of this
type of illustration is given below. Total returns and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using the Funds' NAVs, adjusted NAVs,
and benchmark indices may be used to exhibit performance. An adjusted NAV
includes any distributions paid by a Fund and reflects all elements of its
return. Unless otherwise indicated, a Fund's adjusted NAVs is not
adjusted for sales charges, if any.
MOVING AVERAGES. The Funds may illustrate performance using moving
averages. A long-term moving average is the average of each week's
adjusted closing NAV for a specified period. A short-term moving average
is the average of each day's adjusted closing NAV for a specified period.
Moving Average Activity Indicators combine adjusted closing NAVs from the
last business day of each week with moving averages for a specified period
to produce indicators showing when an NAV has crossed, stayed above, or
stayed below its moving average. On September 30 , 1994, the 13-week
and 39-week moving averages were $ 17.69 and $ 17.45 for
Destiny I, respectively, and $ 28.55 and $ 28.17 for Destiny
II, respectively.
HISTORICAL FUND RESULTS. The following charts show Destiny Plans
I and Destiny Plans II average annual total returns calculated for the one,
five, ten years and Life of Plan ended September 30, 1994 for a $50/month,
15 year Plan. Life of Plan figures are for the periods October 1, 1979 to
September 30, 1994 for Destiny Plans I and Commencement of Operations
(December 30, 1985) through September 30, 1994 for Destiny Plans II. The
following Plan-related average annual total returns include change in share
price, reinvestment of dividends and capital gains, and the effects of the
separate Creation and Sales Charges and Custodian Fees assessed through the
Plans. Consult the Plans' Prospectus for more complete information on
applicable charges and fees.
DESTINY PLANS I
AVERAGE ANNUAL TOTAL RETURNS
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LIFE OF
$50/MONTH, ONE YEAR FIVE YEARS TEN YEARS PLAN
15 YEAR PLAN:
-46.32% 10.63% 16.39% 17.44%
</TABLE>
DESTINY PLANS II
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE OF
$50/MONTH, ONE YEAR FIVE YEARS TEN YEARS PLAN
15 YEAR PLAN:
-46.14% 11.71% N/A 20.14%
</TABLE>
INDEX COMPARISONS. Each Fund may compare its performance to that of the
S&P 500 , which is a registered trademark of Standard & Poor's
Corporation, and the Dow Jones Industrial Average (the Dow or DJIA). The
S&P 500 and the DJIA are widely recognized, unmanaged indexes of common
stock prices. The performance of the S&P 500 and the DJIA are based on
changes in the prices of stocks comprising the Index and assumes the
reinvestment of all dividends paid on such stocks. Taxes, brokerage
commissions and other fees are disregarded in computing the level of the
S&P 500 and the DJIA. Each Fund's performance also may be compared to the
increase in the cost of living as measured by the Consumer Price Index
(CPI) and to the NASDAQ Composite Index (NASDAQ), an index of 500
over-the-counter stocks.
The following charts show the income and capital elements of Destiny I's
total return for the 15 year period ended September 30, 1994, and Destiny
II's total return from December 30, 1985, the date it commenced operations,
until September 30, 1994. The charts compare each Fund's return to the
record of the S&P 500, the DJIA, the NASDAQ and the cost of living
(measured by the CPI) over the same period. The comparison to the S&P 500
shows how each Fund's total return compared to the record of a broad
average of common stock prices; the comparison to the DJIA shows how each
Fund's total return compared to the record of a narrower set of stocks of
major industrial companies; and the comparison to the NASDAQ shows how each
Fund's total return compared to the record of a broad range of
over-the-counter stocks. The Funds have the ability to invest in
securities not included in the indices, and their investment portfolios may
or may not be similar in composition to the indices. The S&P 500, DJIA and
the NASDAQ are based on the prices of unmanaged groups of stocks, and,
unlike each Fund's returns, their returns do not include the effect of
paying brokerage commissions and other costs of investing.
During the period from September 30, 1979 to September 30, 1994, a
hypothetical $10,000 investment in Destiny I would have grown to
$ 125,066 , assuming all distributions were reinvested, and during the
period from December 30, 1985 to September 30, 1994, a hypothe tica l
$10,000 investment in Destiny II would have grown to $ 57,297 . These
were periods of widely fluctuating stock prices, and the charts should not
necessarily be considered representative of the income or capital gain or
loss that could be realized from an investment in Destiny I or Destiny II
today.
DESTINY I INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE OF VALUE OF
YEAR INITIAL VALUE OF REINVESTED
ENDED $10,000 REINVESTED CAPITAL GAIN TOTAL
SEPTEMBER INVESTMENT DIVIDENDS DISTRIBUTIONS VALUE NASDAQ S&P DJIA CPI
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1980 10,041 369 967 11,378 12,519 12,120 11,282 11,260
1981 8,560 769 2,291 1 1,620 1 2,004 11,799 10,902 12,493
1982 9,177 1, 374 2,944 13,495 1 2,512 1 2,970 12,275 13,123
1983 13,385 2,517 7,592 2 3,494 19,779 18,723 17,701 13,499
1984 1 1,337 2,817 9,875 24,029 1 6,665 19,608 18,178 14,075
1985 11,111 3,727 12,073 26,911 18,691 22,457 20,992 14,517
1986 12,233 4,874 19,414 36,521 23,381 29,587 28,973 14,772
1987 15,278 6,896 31,166 53,340 29,623 4 2,442 4 3,859 15,416
1988 12,263 6,532 28,711 47,506 25,851 37,196 36,999 16,059
1989 15,278 9,452 38,086 62,815 31,532 49,471 48,929 16,756
1990 11,389 8,239 32,261 51,889 22,970 44,896 46,309 17,788
1991 16,193 1 3,278 47,907 77,378 35,130 58,894 59,008 18,391
1992 15,473 1 4,344 57,961 87,778 38,890 65,407 65,901 18,941
1993 17,346 17,892 76,131 111,369 50,859 73,917 73,742 19,450
1994 18,210 19,562 87,294 125,066 50,959 76,641 81,909 20,027
</TABLE>
EXPLANATORY NOTES: With an initial investment of $10,000 made on September
30, 197 9 , the net amount invested in Fund shares was $10,000. The
cost of the initial investment ($10,000), together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (that is, their cash value at the time they were reinvested),
amounted to $ 90,960 . If distributions had not been reinvested, the
amount of distributions earned from the Fund over time would have been
smaller, and the cash payments for the period would have come to
$ 4,918 for income dividends and $ 21,204 for capital gain
distributions. Tax consequences of different investments have not been
factored into the above figures.
DESTINY II INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE OF VALUE OF
YEAR INITIAL VALUE OF REINVESTED
ENDED $10,000 REINVESTED CAPITAL GAIN TOTAL
SEPTEMBER INVESTMENT DIVIDENDS DISTRIBUTIONS VALUE NASDAQ S&P DJIA CPI**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
1986 $14,780 $ 0 $ 285 $ 15,065 $ 10,865 $ 11,333 $ 11,769 $ 10,082
1987 20,860 0 2,267 23,127 13,766 16,257 17,816 10,522
1988 18,220 127 2,953 21,300 12,013 14,247 15,029 10,961
1989 21,480 517 5,408 27,405 14,653 18,949 19,875 11,436
1990 16,490 919 5,277 22,686 10,674 17,196 18,811 12,141
1991 23,600 1,818 10,214 3 5,632 16,325 22,558 23,970 12,553
1992 22,750 2,327 14,747 39,823 18,072 25,053 26,769 12,928
1993 26,680 3,340 20,831 50,851 23,634 28,312 29,9 55 13,275
1994 28,550 3,820 24,927 57,297 23,681 29,356 33,272 13,669
</TABLE>
* December 30, 1985 (commencement of operations) - September 30, 1986
** From month-end closest to initial investment.
EXPLANATORY NOTES: With an initial investment of $10,000 made on December
30, 1985, the net amount invested in Fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(that is, their cash value at the time they were reinvested), amounted to
$ 32,078 . If distributions had not been reinvested, the amount of
distributions earned from the Fund over time would have been smaller, and
the cash payments for the period would have come to $ 1,940 for
income dividends and $ 13,485 for capital gain distributions. If FMR
had not reimbursed certain Fund expenses during the periods shown above,
the Fund's returns would have been lower. Tax consequences of different
investments have not been factored into the above figures.
The following table illustrates, on a calendar year basis, Destiny I's and
Destiny II's total returns that are based on the changes in NAV, with all
dividends and capital gains reinvested, as compared with the S&P 500, and
the DJIA figures that are based on the changes in NAV, with all dividends
reinvested. No brokerage commissions or other fees have been factored into
any of these figures and no adjustment has been made for a shareholder's
income tax liability on dividends or capital gains. The Funds' performance
figures do not reflect operation expenses incurred at the Plan level. The
S&P 500, DJIA and NASDAQ are unmanaged indices of security prices. They
were selected because many investors regard them as representative of the
stock market in general. The period covered was one of widely fluctuating
stock prices, and the table should not necessarily be considered
representative of the dividend income or capital gain or loss, which may be
realized on an investment in Destiny I or Destiny II today.
TOTAL RETURN
YEAR DESTINY I DESTINY II NASDAQ S&P DJIA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1978 21.27% N/A 12.31% 6.38% 2.67%
1979 34.27 N/A 28.11 18.20 10.53
1980 20.11 N/A 33.88 32.27 22.04
1981 7.32 N/A -3.21 -5.01 -3.59
1982 37.27 N/A 18.67 21.44 27.32
1983 37.63 N/A 19.87 22.38 25.84
1984 4.81 N/A -11.22 6.10 1.14
1985 29.06 1.30%* * 31.36 31.57 33.56
1986 18.60 60.29 7.36 18.56 27.03
1987 5.90 7.06 -5.26 5.10 5.43
1988 19.48 22.82 15.41 16.61 15.92
1989 25.54 26.41 19.26 31.69 31.76
1990 -3.15 -2.52 -17.80 -3.10 -0.54
1991 38.92 41.42 56.84 30.47 24.34
1992 15.15 15.48 15.45 7.62 7.30
1993 26.42 26.81 1 4.75 10.08 16.99
September 1994 5.29 5.16 -1.61 1.34 4.49
Life of Fund * 5,599.24 ** 465.61 N/A N/A N/A
</TABLE>
* From commencement of operations, July 10, 1970.
** From commencement of operations, December 30, 1985.
Each Fund may compare its performance to that of other compilations or
indices of comparable quality to those listed above which may be developed
and made available in the future.
PERFORMANCE COMPARISONS. Each Fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey which monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. In addition to the mutual fund
rankings, each Fund's performance may be compared to mutual fund
performance indices prepared by Lipper. As of September 30, 1994, FMR
managed $1 6 5 billion in equity fund assets as defined and tracked by
Lipper.
From time to time, each Fund's performance also may be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the Funds may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
The Funds may be compared in advertising to certificates of deposit (CDs)
or other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, a Fund may offer greater
liquidity or higher potential returns than CDs, and a Fund does not
guarantee your principal or your return.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging. In addition, Fidelity may
quote financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques.
Each Fund may present its fund number, Quotron(trademark) number, CUSIP
number, and discuss or quote its current fund manager.
VOLATILITY. The Funds may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Funds may compare
these measures to those of other funds. Measures of volatility seek to
compare each Fund's historical share price fluctuations or total returns
compared to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical
data.
MOMENTUM INDICATORS indicate each Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
Fund's percentage change in price movements over that period.
The Funds may advertise examples of the effects of periodic investment
plans, including the principle of "dollar-cost averaging." In such a
program, the investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high, more
shares when prices are low. While such a strategy does not assure a profit
nor guard against loss in a declining market, the investor's average cost
per share is lower than if fixed numbers of shares are purchased at those
intervals. In evaluating such a plan, investors should consider their
financial ability to continue purchasing shares during periods of low price
levels.
The Funds may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after 10 years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after 10 years, assuming tax was deducted at a
31% rate from the tax-deferred earnings at the end of the ten year period.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each Fund is open for business and each Fund's NAV is calculated
each day the NYSE is open for trading. The NYSE has designated the
following holiday closings for 1995: New Year's Day (observed),
Presidents' Day, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. Although FMR expects
the same holiday schedule to be observed in the future, the NYSE may modify
its holiday schedule at any time. On any day that the NYSE closes early,
or as permitted by the SEC, the right is reserved to advance the time on
that day by which purchase and redemption orders must be received. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a Fund's NAV may be affected on days when investors do
not have access to the Fund to purchase or redeem shares. Certain Fidelity
funds may follow different holiday closing schedules.
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each Fund's NAV. Shareholders receiving securities or other
property on redemption may realize either a gain or loss for tax purposes,
and will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each Fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement
may be waived if, (i) the only effect of a modification would be to reduce
or eliminate an administrative fee, redemption fee, or deferred sales
charge ordinarily payable at the time of exchange, or (ii) the Fund
suspends the redemption of the shares to be exchanged as permitted under
the 1940 Act or the rules and regulations thereunder, or the Fund to be
acquired suspends the sale of its shares because it is unable to invest
amounts effectively in accordance with its investment objective and
policies.
In the prospectus, the Funds have notified shareholders that they reserve
the right at any time, without prior notice, to refuse exchange purchases
by any person or group if, in FMR's judgment, a Fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of each Fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that each Fund's income is derived from qualifying dividends.
Because each Fund may also earn other types of income, such as interest,
income from securities loans, non-qualifying dividends and short-term
capital gains, the percentage of dividends from the equity portfolios that
qualify for the deduction will generally be less than 100%. Each Fund will
notify corporate shareholders annually of the percentage of Fund dividends
which qualify for the dividends received deduction. A portion of the
Fund's dividends derived from certain U.S. government obligations may be
exempt from state and local taxation. Gains (losses) attributable to
foreign currency fluctuations are generally taxable as ordinary income and
therefore increase (decrease) dividend distributions. Each Fund will send
each shareholder a notice in January describing the tax status of dividends
and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains realized by each Fund
on the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a Fund and such shares are held less
than six months and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by each Fund are taxable to
shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends-received
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes from dividends or
interest paid with respect to foreign securities typically at a rate
between 10% and 35%. The Funds intend to elect to pass through foreign
taxes paid in order for a shareholder to take a credit or deduction if, at
the close of its fiscal year, more than 50% of each Fund's assets are
invested in securities of foreign issuers.
TAX STATUS OF THE FUND. Each Fund has qualified and intends to continue to
qualify as a "regulated investment company" for tax purposes, so that it
will not be liable for federal tax on income and capital gains distributed
to shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes, each Fund intends to
distribute substantially all of its net investment income and realized
capital gains within each calendar year as well as on a fiscal year basis.
Each Fund also intends to comply with other tax rules applicable to
regulated investment companies, including a requirement that capital gains
from the sale of securities held for less than three months must constitute
less than 30% of each Fund's gross income for each fiscal year. Gains from
some forward currency contracts, futures contracts, and options are
included in this 30% calculation, which may limit each Fund's investments
in such instruments. If a Fund purchases shares in certain foreign
investment entities, called passive foreign investment companies (PFIC's),
it may be subject to U.S. federal income tax on a portion of any excess
distribution or gain from the disposition of such shares. Interest charges
may also be imposed on the Fund with respect to deferred taxes arising from
such distributions gains.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the Funds and their shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of a Fund may be subject to
state and local taxes on distributions received from the Fund. Investors
should consult their tax advisors to determine whether the Funds are
suitable to their particular tax situation.
Each Fund is treated as a separate entity for tax purposes.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson, 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: Service, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for institutional customers and
funds sold through intermediaries; and Fidelity Investments Retail
Marketing Company, which provides marketing services to various companies
within the Fidelity organization.
Fidelity investment pe rsonnel may invest in securities for their own
account p ursuant to a code of ethics that sets forth all
employees' fiduciary responsibilities regarding the funds, establishes
procedures for personal investing and restricts certain transactions. For
example, all personal trades require pre-clearance, and participation in
initial public offerings is prohibited. In addition, restrictions on
the timing of personal investing relative to trades by Fidelity funds and
on short-term trading have been adopted.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far
East research and visit thousands of domestic and foreign companies each
year. FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989,
supplies portfolio management and research services in connection with
certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Fund's Trustees and executive officers are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, MA 02109, which is also the address of FMR.
Those Trustees who are "interested persons" as defined in the 1940 Act by
virtue of their affiliation with either the Fund or FMR, are indicated by
an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1993), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he served
on the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1993).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation Funds and Warburg, Pincus Partnership
Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of
Distributors.
GEORGE A. VANDERHEIDEN, Vice President, is Managing Director of FMR Co. and
Leader of the Growth Group of mutual funds managed by Fidelity.
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's equity
funds, is Vice President of FMR.
Under a retirement program, which became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the Funds, based on their basic trustee fees and length of
service. Currently, Messrs. William R. Spaulding, Bertram H. Witham, and
David L. Yunich participate in the program.
MANAGEMENT CONTRACTS
Each Fund employs FMR to furnish investment advisory and other services.
Under its Management Contract with each Fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the Fund in accordance with its investment objective,
policies and limitations. FMR also provides each Fund with all necessary
office facilities and personnel for servicing the Funds' investments, and
compensates all officers of the Trust, all Trustees who are "interested
persons" of the Trust or FMR performing services relating to research,
statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of each Fund. These services include: providing
facilities for maintaining the Funds' organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with the Funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
Fund's records and the registration of each Fund's shares under federal and
state law; developing management and shareholder services for the Funds;
and furnishing reports, evaluations and analyses on a variety of subjects
to the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
Service, each Fund pays all of its expenses, without limitation, that are
not assumed by those parties. Each Fund pays for typesetting, printing and
mailing of its prospectuses, SAIs, reports, and proxy material to
shareholders, legal expenses, and the fees of the custodian, auditor, and
non-interested Trustees. With respect only to those accounts not
associated with the Plans, although each Fund's management contract
provides that the Fund will pay for typesetting, printing, and mailing of
prospectuses, statements of additional information, notices, and reports to
existing shareholders, the Trust has entered into a revised transfer agent
agreement with Service, pursuant to which Service bears the cost of
providing these services to existing shareholders. Other expenses paid by
the Funds include interest, taxes, brokerage commissions, each Fund's
proportionate share of insurance premiums and Investment Company Institute
dues, and the costs of registering shares under federal and state
securities laws. Each Fund is also liable for such nonrecurring or
extraordinary expenses as may arise, including those relating to litigation
to which it may be a party and any obligation it may have to indemnify the
Funds' officers and Trustees with respect to litigation.
FMR is each Fund's manager pursuant to management contracts dated November
1, 1993, which were approved by each Fund's shareholders on October 20,
1993. For the services of FMR under the contract, each Fund pays a monthly
management fee composed of the sum of two elements: a basic fee and a
performance adjustment based on the comparison of each Fund's performance
to that of the S&P 500.
COMPUTING THE BASIC FEE. Each Fund's basic fee rate is composed of two
elements: a group fee rate and an individual fund fee rate. The group fee
rate is based on the monthly average net assets of all of the registered
investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown on the left of the table below . On the right, the
effective fee rate schedule are the results of cumulatively applying the
annualized rates at varying asset levels. For example, the effective
annual fee rate at $ 271 billion of group net assets - their
approximate level for September 1994 - was . 3193 %, which is the
weighted average of the respective fee rates for each level of group net
assets.
GROUP FEE EFFECTIVE ANNUAL
RATE SCHEDULE* FEE RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annualized Group Effective Annual
Group Assets Rate Net Assets Fee Rates
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 10 .4840
6 - 9 .4600 20 .4398
9 - 12 .4300 30 .4115
12 - 15 .4000 40 .3944
15 - 18 .3850 50 .3823
18 - 21 .3700 60 .3728
21 - 24 .3600 70 .3656
24 - 30 .3500 80 .3599
30 - 36 .3450 90 .3552
36 - 42 .3400 100 .3512
42 - 48 .3350 110 .3475
48 - 66 .3250 120 .3444
66 - 84 .3200 130 .3417
84 - 102 .3150 140 .3394
102 - 138 .3100 150 .3371
138 - 174 .3050 160 .3351
</TABLE>
174 - 228 .3050 170 .3351
228 - 282 .2950 180 .3316
282 - 336 .2900 190 .3299
Over 336 .2850 200 .3284
* Under each Fund's current management contract with FMR, the group
fee rate is based on a schedule with breakpoints ending at .3000% for
average group assets in excess of $174 billion. Prior to November 1, 1993,
the group fee rate breakpoints shown above for average group assets in
excess of $138 billion and under $228 billion were voluntarily adopted by
FMR, and went into effect on January 1, 1992. The additional breakpoints
shown above for average group assets in excess of $228 billion were
voluntarily adopted by FMR on November 1, 1993. On August 1, 1994, FMR
voluntarily revised the prior extensions to the group fee rate schedule,
and added new breakpoints. The revised group fee rate schedule provides for
lower management fee rates as FMR's assets under management increase. The
revised group fee rate schedule is identical to the above schedule for
average group assets under management under $210 billion. For average group
assets in excess of $210 billion, the group fee rate schedule voluntarily
adopted by FMR is as follows:
GROUP FEE EFFECTIVE ANNUAL
RATE SCHEDULE FEE RATES
Average Annualized Group Effective Annual
Group Assets Rate Net Assets Fee Rates
138 - 174 billion .3050% 150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
350 .3113
375 .3090
400 .3067
The individual fund fee rates for Destiny I and Destiny II are .17% and
.30%, respectively. Based on the average group net assets of the funds
advised by FMR for September 1994 the annual basic fee rates would be
calculated as follows:
GROUP FEE RATE INDIVIDUAL FUND FEE RATE BASIC FEE RATE
Destiny I .3193% + .17% = .4893 %
Destiny II .3193% + .30% = .6193 %
One-twelfth (1/12) of the annual basic fee rate is then applied to each
Fund's net assets averaged for the most recent month, giving a dollar
amount, which is the fee for that month.
To comply with the California Code of Regulations, FMR will reimburse
the Portfolios if and to the extent that a Portfolio's aggregate annual
operating expenses exceed specified percentages of its average net assets.
The applicable percentages are 2 1/2% of the first $30 million, 2% of the
next $70 million, and 1 1/2% of average net assets in excess of $100
million. When calculating a Portfolio's expenses for purposes of this
regulation, each Portfolio may exclude interest taxes, broker commissions,
and extraordinary expenses, as well as a portion of its custodian fees
attributable to investments in foreign securities.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee will be subject to
upward or downward adjustment, depending upon whether, and to what extent,
a Fund's investment performance for the performance period exceeds, or is
exceeded by, the record of the S&P 500 over the same period. Each
percentage point of difference is multiplied by a performance adjustment
rate of .02%. The maximum adjustment rate is limited to +.24% of the
average net assets up to and including $100,000,000 and +.20% of the
average net assets in excess of $100,000,000. This performance comparison
is made at the end of each month. One-twelfth (1/12) of this rate is then
applied to the Fund's average net assets for the entire performance period,
giving a dollar amount that will be added to (or subtracted from) the basic
fee.
Each Fund's performance is calculated based on change in NAV. For the
purpose of calculating the performance adjustment, any dividends or capital
gains distributions paid by a Fund is treated as if reinvested in Fund
shares at the NAV as of the record date for payment. The record of the S&P
500 is based on change in value and is adjusted for any cash distributions
from the companies whose securities comprise the S&P 500.
Because the adjustment to the basic fee is based on a Fund's performance
compared to the investment record of the S&P 500, the controlling factor is
not whether a Fund's performance is up or down per se, but whether it is up
or down more or less than the record of the S&P 500. Moreover, the
comparative investment performance of a Fund is based solely on the
relevant performance period without regard to the cumulative performance
over a longer or shorter period of time.
During the periods shown in the table below, FMR received payments for its
services as investment adviser to the Funds. These fees include both the
basic fee and the performance adjustment. If FMR had not voluntarily
adopted an extended group fee rate schedule, these fees would have been
higher.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MANAGEMENT FEE MANAGEMENT FEE PERFORMANCE
FISCAL PERIODS INCLUDING AS A % OF ADJUSTMENT
FUND NAME ENDED PERFORMANCE ADJUSTMENT AVERAGE NET ASSETS TO BASIC FEE
Destiny I 9/30/94 $ 20,816,212 .65 % $ 5,165,391
7/1/93 - 9/30/93 4,412,827 .60%* 1,149,524
6/30/93 15,770,970 .61% 4,110,266
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Destiny II 9/30/94 $ 9,701,148 .73 % $ 1,447,673
7/1/93 - 9/30/93 1,982,470 .71%* 257,067
6/30/93 4,984,918 .75% 779,084
</TABLE>
* Annualized
SUB-ADVISERS. Effective November 1, 1993, FMR entered into sub-advisory
agreements with FMR U.K. and FMR Far East. Pursuant to the sub-advisory
agreements, FMR may receive investment advice and research services outside
the United States from the sub-advisers.
Currently, FMR U.K. and FMR Far East each focus on issuers in countries
other than the United States such as those in Europe, Asia, and the Pacific
Basin. FMR U.K. and FMR Far East are wholly owned subsidiaries of FMR.
Under the sub-advisory agreements, FMR pays the fees of FMR U.K. and FMR
Far East. For providing non-discretionary investment advice and research
services, FMR pays FMR U.K. and FMR Far East fees equal to 110% and 105%,
respectively, of FMR U.K.'s and FMR Far East's costs incurred in connection
with providing investment advice and research services.
For providing investment advice and research services, the table below
shows the fees paid to the sub-advisers during each Fund's last three
fiscal periods:
FISCAL YEAR ENDED PERIOD JULY 1 THROUGH YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993 JUNE 30, 1993
DESTINY I
FMR U.K. $ 80,505 NA NA
FMR Far East $ 107,706 NA NA
DESTINY II
FMR U.K. $ 31,206 NA NA
FMR Far East $ 41,006 NA NA
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
Under revised transfer agent arrangements, effective January 1, 1993, each
Fund, with respect only to accounts not associated with Fidelity Systematic
Investment Plans, pays fees based on the type, size, and number of
transactions made by shareholders of the Fund. In addition to providing
transfer agent and shareholder servicing functions, the transfer agent pays
all transfer agent out-of-pocket expenses and for typesetting, printing and
mailing of Prospectuses and SAIs, reports, notices and statements of all
related accounts.
Each revised contract with Service changed the structure of fees payable to
Service for transfer agent services. Each Fund pays an annual fee of
$25.50 per regular shareholder account with a balance of $5,000 or more,
$15 per regular shareholder account with a balance of less than $5,000 and
a supplemental activity charge of $5.61 for monetary transactions. With
respect to certain institutional client master accounts, each Fund pays
Service a per account fee and a monetary transaction fee of $95 and $20 or
$17.50, respectively, or for broker/dealer accounts, $30 and $6,
respectively, depending on the nature of services provided. Fees for
certain institutional retirement plan accounts may be based on the NAV of
all such accounts in a Fund.
The table below shows the transfer agent fees, including reimbursement for
out-of-pocket expenses, paid to Service during each Fund's last three
fiscal periods.
TRANSFER AGENT FEES
FISCAL YEAR ENDED PERIOD JULY 1 THROUGH YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993 JUNE 30, 1993
DESTINY I $ 125,929 $ 21,209 $ 80,856
DESTINY II $ 63,171 $18,312 $ 22,165
Each Fund's contract with Service also provides that Service will
perform the calculations necessary to determine each Fund's NAV and
dividends and maintains each Fund's accounting records. Prior to July 1,
1991, the annual fee for these pricing and bookkeeping services was based
on two schedules, one pertaining to each Fund's average net assets, and one
pertaining to the type and number of transactions each Fund made. The fee
rates in effect as of July 1, 1991 are based on each Fund's average net
assets, specifically, .06% for the first $500 million of average net assets
and .03% for average net assets in excess of $500 million. The fee is
limited to a minimum of $45,000 and a maximum of $750,000 per year.
The table below shows the fees paid to Service for pricing and bookkeeping
services, including related out-of-pocket expenses during each Fund's last
three fiscal periods.
PRICING AND BOOKKEEPING FEES
FISCAL YEAR ENDED PERIOD JULY 1 THROUGH YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993 JUNE 30, 1993
DESTINY I $ 761,590 $ 191,621 $ 761,960
DESTINY II $ 551,751 $120,980 $ 352,799
Service also receives fees for administering each Fund's securities lending
program. Securities lending fees are based on the number and duration of
individual securities loans.
The table below shows the fees paid to Service for securities lending fees
during each Fund's last three fiscal periods:
SECURITIES LENDING FEES
FISCAL YEAR ENDED PERIODS JULY 1 THROUGH YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993 JUNE 30, 1993
DESTINY I $ 0 $ 0 $ 0
DESTINY II $ 0 $ 0 $ 0
FMR may, from time to time, agree to waive its fees or to reimburse the
Funds for certain expenses above a specified percentage of average net
assets. Fee waivers or expense limitations will increase the Funds'
returns. The fee waivers or expense limitations may be terminated at any
time without notice, at which time the Funds' expenses will go up and their
yield will be reduced.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Destiny I and Destiny II are funds of Fidelity Destiny
Portfolios (the Trust), an open-end management investment company;
originally organized as a Massachusetts corporation on January 7, 1969. On
June 20, 1984, the Trust was reorganized as a Massachusetts business trust,
at which time its name was changed to Fidelity Destiny Fund. On December
20, 1985, the Trust's name was changed to Fidelity Destiny Portfolios to
reflect the creation of a second series - the original series was named
Destiny I and the second series was named Destiny II. Currently Destiny I
and Destiny II are the only funds of the Trust. The Declaration of Trust
permits the trustees to create additional series (or portfolios).
In the event that FMR ceases to be the investment adviser to a fund, the
right of the Trust or a fund to use the identifying name "Fidelity" may be
withdrawn. There is a remote possibility that one fund might become liable
for any misstatement in its prospectus or statement of additional
information about another fund.
The assets of the Trust received for the issue or sale of shares of each
Fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each Fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the Trust. Expenses with respect to the Trust are to
be allocated in proportion to the asset value of the respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the Trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given F und, or which are general or allocable to all of the Funds.
In the event of the dissolution or liquidation of the Trust, shareholders
of each Fund are entitled to receive as a class the underlying assets of
such F und available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a Trust may, under certain circumstances, be held
personally liable for the obligations of the Trust. The Declaration of
Trust provides that the Trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
Trust or the Trustees shall include a provision limiting the obligations
created thereby to the Trust and its assets. The Declaration of Trust
provides for indemnification out of each Fund's property of any shareholder
held personally liable for the obligations of the Fund. The Declaration of
Trust also provides that each Fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
Fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a Fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each Fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value per share you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of redemption,
and the privilege of exchange are described in the Prospectus. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder and Trustee Liability" above. Shareholders representing 10%
or more of the Fund may, as set forth in the Declaration of Trust, call
meetings of the Trust or a Fund for any purpose related to the Trust or a
Fund, as the case may be, including, in the case of a meeting of the entire
Trust, the purpose of voting on removal of one or more Trustees. The Trust
or any Fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the Trust or the Fund, as determined by the current value of
each shareholder's investment in the Fund or Trust.
CUSTODIAN. The Chase Manhattan Bank, N.A., 1 Chase Manhattan Plaza, New
York, NY 10081, is custodian of the assets of each Fund. The Custodian is
responsible for the safekeeping of each Fund's assets and the appointment
of subcustodian banks and clearing agencies. The Custodian takes no part
in determining the investment policies of a Fund or in deciding which
securities are purchased or sold by a Fund. Each Fund may, however, invest
in obligations of the Custodian and may purchase securities from or sell
securities to the Custodian.
FMR, its officers and directors, its affiliated companies, and the Funds'
Trustees may from time to time have transactions with various banks,
including custodian banks serving as custodians for certain of the funds
advised by FMR. Transactions that have occurred to date included mortgages
and personal and general business loans. In the judgment of FMR, the terms
and conditions of those transactions were not influenced by existing or
potential custodial or other Fund relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, serves as the Trust's independent accountant. The auditor
examines financial statements for the Funds and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The Funds' financial statements and financial highlights for the fiscal
year ended September 30, 1994 are included in the Funds' Annual Report,
which is a separate report supplied with this Statement of Additional
information. The Funds' financial statements and financial highlights are
incorporated herein by reference.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "GILT
EDGE." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will
also be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Audited financial statements and financial highlights for the Funds
for fiscal year ended September 30, 1994 are electronically filed herein as
Exhibit 24(a).
(b) Exhibits:
1. (a) Amended and Restated Declaration of Trust of Registrant dated June
20, 1984, is incorporated herein by reference to Exhibit 1(a) to
Post-Effective Amendment No, 33.
(b) Supplement to Declaration of Trust dated February 1, 1985 is
incorporated herein by reference to Exhibit 1(b) to Post-Effective
Amendment No. 35.
(c) Supplement to Declaration of Trust dated December 20, 1985 is
incorporated herein by reference to Exhibit 1(c) to Post-Effective
Amendment No. 37.
(d) Supplement to Declaration of Trust dated January 16, 1986 is
incorporated herein by reference to Exhibit 1(d) to Post-Effective
Amendment No. 45.
(e) Supplement to Declaration of Trust dated January 1, 1989 is
incorporated herein by reference to Exhibit 1(e) to Post-Effective
Amendment No. 45.
2. Bylaws of Registrant are incorporated herein by reference to Exhibit 2
to Post-Effective Amendment No. 33 to Registration Statement.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract between Registrant, on behalf of Destiny I and
Fidelity Management & Research Company dated November 1, 1993 was
electronically filed and is incorporated herein by reference as Exhibit
5(a) to Post-Effective No. 57.
(b) Management Contract between Registrant, on behalf of Destiny II and
Fidelity Management & Research Company dated November 1, 1993 was
electronically filed and is incorporated herein by reference as Exhibit
5(b) to Post-Effective No. 57.
(c) Sub-Advisory Agreement between Destiny I and FMR U.K. and Fidelity
Management & Research Company dated November 1, 1993 ) was electronically
filed and is incorporated herein by reference as Exhibit 5(c) to
Post-Effective No. 57.
(d) Sub-Advisory Agreement between Destiny II and FMR U.K. and Fidelity
Management & Research Company dated November 1, 1993 was electronically
filed and is incorporated herein by reference as Exhibit 5(d) to
Post-Effective No. 57.
(e) Sub-Advisory Agreement between Destiny I and FMR Far East and Fidelity
Management & Research Company dated November 1, 1993 was electronically
filed and is incorporated herein by reference as Exhibit 5(e) to
Post-Effective No. 57.
(f) Sub-Advisory Agreement between Destiny II and FMR Far East and Fidelity
Management & Research Company dated November 1, 1993 was electronically
filed and is incorporated herein by reference as Exhibit 5(f) to
Post-Effective No. 57.
6. (a) Franchise Agreement dated August 2, 1984, between Registrant, on
behalf of Destiny I, and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(b ) to Post-Effective Amendment No. 41.
(b) Franchise Agreement dated December 30, 1985, between Registrant, on
behalf of Destiny II, and Fidelity Distributors Corporation, is
incorporated herein by reference to Exhibit 6(c) to Post-Effective
Amendment No. 41.
7. Retirement Plan for Non- Interested Person Trustees, Directors or
General Partners, effective November 1, 1989, was electronically filed and
is incorporated herein by reference as Exhibit 7 to Union Street Trust's
Post-Effective Amendment No. 87.
8. (a) Custodian Contract dated July 18, 1991, between Registrant and The
Chase Manhattan Bank, N.A., is electronically filed herein as Exhibit 8(a).
(b) Custodian fee schedule is electronically filed herein as Exhibit
8(b).
9. Not applicable.
10. Not applicable.
11. Opinion of Coopers & Lybrand L.L.P. is filed herein as part of the
Financial Statements contained in Exhibit 24(a). Consent of Coopers &
Lybrand L.L.P. is electronically filed herein as Exhibit 11.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account, as amended and as currently
in effect, was electronically filed and is incorporated herein by reference
as Exhibit 14(a) to Union Street Trust's Post-Effective Amendment No. 87.
(b) Forms of Pension Plan and Trust Agreement and Profit-Sharing Plan and
Trust Agreement, as amended and as currently in effect, was electronically
filed and is incorporated herein by reference as Exhibit 14(b) to Union
Street Trust's Post-Effective Amendment No. 87.
(c) Form of Destiny Individual Retirement Account Plan is electronically
filed herein as Exhibit 14(c).
15. Not applicable.
16. (a) Schedule for computation of performance data contained in the
Registration Statement pursuant to Item 22 is incorporated herein by
reference to Exhibit 16(a) to Post-Effective Amendment No. 56.
(b) Schedule for computation of performance data for the Destiny
Plans contained in the Registration Statement pursuant to Item 22 is
incorporated herein by reference to Exhibit 16(b) to Post-Effective
Amendment No. 56.
(c) Schedule for computation of performance data (moving average
calculation) for the Destiny Portfolios are incorporated herein by
reference to Exhibit 16(c) to Post Effective Amendment No. 56.
(17.) Financial Data Schedules are electronically filed herein as exhibit
17.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of Registrant is the same as the boards of other
funds advised by FMR, each of which has Fidelity Management & Research
Company as its investment adviser. In addition, the officers of these funds
are substantially identical. Nonetheless, Registrant takes the position
that it is not under common control with these other funds since the power
residing in the respective boards and officers arises as the result of an
official position with the respective funds.
Item 26. Number of Holders of Securities
October 31, 1994
Title of Class Number of Record Holders
Shares of Beneficial Interest
Destiny I 3,654
Destiny II 4,819
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the reasonable
and fair means for determining whether indemnification shall be provided to
any past or present Trustee or officer. It states that the Registrant
shall indemnify any present or past Trustee or officer to the fullest
extent permitted by law against liability and all expenses reasonably
incurred by him in connection with any claim, action, suit or proceeding in
which he is involved by virtue of his service as a trustee, an officer, or
both. Additionally, amounts paid or incurred in settlement of such matters
are covered by this indemnification. Indemnification will not be provided
in certain circumstances, however. These include instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the
duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen Jonas Treasurer and Vice President of FMR (1993); Treasurer of
FMR Texas Inc. (1993), Fidelity Management & Research
(U.K.) Inc. (1993), and Fidelity Management & Research
(Far East) Inc. (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. McNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund .
Thomas T. Soviero Vice President of FMR (1993).
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income
Division Leader.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
FMR U.K. provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management & Research
(Far East) Inc.; President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director of
Worldwide Research of FMR.
Rick Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).
Stephen Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
Treasurer and Vice President of FMR (1993).
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The directors
and officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; Senior Vice President and Trustee
of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research (U.K.)
Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Stephen Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); Treasurer and Vice President of FMR (1993).
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' custodian: The
Chase Manhattan Bank, 1211 Avenue of the Americas, New York, N.Y.
Item 31. Management Services
Not applicable
Item 32. Undertakings
The Registrant on behalf of Destiny I and Destiny II undertakes, provided
the information required by Item 5A is contained in the annual report, to
furnish each person to whom a prospectus has been delivered, upon their
request and without charge, a copy of the Registrant's latest report to
shareholders.
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as a Board Member (collectively, the "Funds"), hereby severally
constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C.
Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A. Xupolos, each
of them singly, my true and lawful attorneys-in-fact, with full power of
substitution, and with full power to each of them, to sign for me and in my
name in the appropriate capacity, all Pre-Effective Amendments to any
Registration Statements of the Funds, any and all subsequent Post-Effective
Amendments to said Registration Statements, any Registration Statements on
Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or
appropriate, to comply with the provisions of the Securities Act of 1933
and Investment Company Act of 1940, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact or their substitutes may do or cause to be done
by virtue hereof.
WITNESS my hand on the date set forth below.
_____________________________ October 20, 1993
Ralph F. Cox
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorney-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 58 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 22nd day of November
1994.
FIDELITY DESTINY PORTFOLIOS
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee November 22, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer November 22, 1994
Gary L. French
/s/J. Gary Burkhead Trustee November 22, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee November 22, 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee November 22, 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee November 22, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee November 22, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee November 22, 1994
Donald J. Kirk
/s/Edward H. Malone * Trustee November 22, 1994
Edward H. Malone
/s/Marvin L. Mann * Trustee November 22, 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee November 22, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee November 22, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signatures affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
FIDELITY
DESTINY
PORTFOLIOS:
DESTINY I
DESTINY II
PROSPECTUS/ANNUAL REPORT
NOVEMBER 29, 1994
I.BD-DESPROSH-1194
Printed on recycled paper
AN INTERVIEW WITH
GEORGE A. VANDERHEIDEN,
PORTFOLIO MANAGER OF
FIDELITY DESTINY PORTFOLIOS
WE'VE PROVIDED THE FOLLOWING MARKET RECAP AS CONTEXT FOR THE MANAGER'S
INTERVIEW:
RISING INTEREST RATES CONTRIBUTED TO BELOW AVERAGE RETURNS IN THE U.S.
STOCK MARKET DURING THE 12 MONTHS ENDED SEPTEMBER 30, 1994. THE STANDARD &
POOR'S 500 STOCK INDEX FINISHED THE 12-MONTH PERIOD WITH A TOTAL RETURN OF
3.68% - BELOW ITS HISTORICAL AVERAGE OF MORE THAN 10%. AFTER THREE MONTHS
OF STEADY GAINS, STOCKS STUMBLED FROM FEBRUARY THROUGH JUNE 1994. DURING
THAT TIME, THE FEDERAL RESERVE BOARD RAISED SHORT-TERM INTEREST RATES FOUR
TIMES IN AN EFFORT TO CURB POSSIBLE FUTURE INFLATION TRIGGERED BY A
STRENGTHENING ECONOMY. HIGHER RATES HURT STOCKS BECAUSE THEY RAISE THE COST
OF BORROWING FOR COMPANIES AND CONSUMERS, OFTEN DAMPENING CORPORATE
PROFITS. IN ADDITION, HIGHER RATES OFTEN MAKE BONDS AND OTHER FIXED-INCOME
INVESTMENTS MORE ATTRACTIVE RELATIVE TO STOCKS. DESPITE A FIFTH FED RATE
HIKE IN AUGUST, THE MARKET RALLIED FROM JULY THROUGH MID-SEPTEMBER, FUELED
BY STRENGTHENING CORPORATE EARNINGS AND A FLURRY OF MERGER AND ACQUISITION
ACTIVITY. OVERSEAS, RESULTS WERE MIXED. JAPANESE STOCKS SURGED IN EARLY
1994, ONLY TO STALL OVER THE SUMMER. AFTER SUFFERING CORRECTIONS EARLY IN
THE YEAR, SEVERAL EMERGING MARKETS - MOST NOTABLY BRAZIL - BOUNCED BACK
STRONGLY IN JULY AND AUGUST. THE MORGAN STANLEY EAFE (EUROPE, AUSTRALIA,
FAR EAST) INDEX RETURNED 9.83% FOR THE 12 MONTHS ENDED SEPTEMBER 30, WHILE
THE MORGAN STANLEY EMERGING MARKETS FREE INDEX WAS UP 43.55% DURING THE
SAME PERIOD.
Q. GEORGE, HOW DID THE FUNDS DO?
A. Both funds outperformed their peer group. For the year ended September
30, 1994, Destiny I's total return was 12.30%, and Destiny II's was 12.67%.
During the same period, the average growth fund's total return was 1.42%,
according to Lipper Analytical Services.
Q. WHY HAVE THE FUNDS PERFORMED SO WELL?
A. Most of the gains took place in the first half of the fiscal year when
the funds had big positions in autos, technology, and capital goods. In the
second half of the fiscal year, I moved the funds back into the health care
sector, which helped, but this was offset by underperformance in some of
the financial stocks positions the fund had.
Q. WHAT'S BEEN HAPPENING TO THE FUND'S MIX BETWEEN GROWTH AND
CYCLICAL STOCKS?
A. During the first half of the funds' fiscal year, I sold cyclicals such
as housing and appliances, but retained positions in other cyclicals such
as machinery, steel, paper and aluminum. Earnings growth in the economy
peaked out in the second quarter of 1994. At mid-year I began to increase
weighting among the growth stocks because they generally perform well when
the rate of corporate earnings growth starts declining.
Q. WHAT TYPES OF GROWTH STOCKS ARE YOU BUYING?
A. I'm buying them all - everything from the big blue chips of yesteryear
like Philip Morris, Johnson & Johnson and Toys "R" Us to fast-growing
mid-size growth companies like Solectron, Best Buy, and Tech Data to
smaller cap growth stocks such as Rex Stores. One thing to remember about
growth stocks is that the growth stocks of the 1980s will not necessarily
be the growth stocks of the 1990s. Many of the last decades' growth
companies have gone to growth stock heaven - done in by private labels, the
Clinton Administration, loss of pricing power, too much competition or just
plain old mismanagement. Due to a domestic capital spending revival, growth
stocks in the 1990s will have a more industrial flavor (versus the consumer
flavor of the 1980s). More of them may come out of the technology and
equipment sectors.
Q. WHAT OTHER INVESTMENT STRATEGIES ARE YOU USING?
A. I like consolidating industries. By that I mean mature industries in
which capacity and the number of competitors are shrinking and the barriers
to entry are high. The stock prices are low enough in these industries that
opportunistic managements can make acquisitions that add to earnings, such
as what Loral and Columbia/HCA Healthcare have done. Also when revenues
pick up, earnings leverage is huge because costs have been pared and
break-even levels have been lowered. This is what has happened in rails,
autos, steels and defense, and is currently occurring in the banking
industry.
Q. WHAT MISTAKES HAVE YOU MADE IN THE PAST YEAR?
A. I bought electric utility stocks early in the year because I felt the
yields offered good protection in what I thought would be a difficult
market in 1994. Unfortunately, I did not anticipate Treasury bonds going to
8% yields or the quick deterioration in utility industry fundamentals. I
consequently cut back the position and the remaining stocks will be sold
when prices aren't so depressed. Another mistake was a purchase of Treasury
bonds when they reached yields of 7.5%. At the time, the economy looked
like it may be on the cusp of a slowdown as banks were telling us that
mortgage refinancings were down sharply and home builders were saying that
orders were drying up. I was early, but I don't think I'll be wrong.
Q. WHAT'S YOUR OUTLOOK FOR 1995?
A. I expect the market environment to remain difficult for maybe another
quarter or two, but to improve in the second half of 1995. The problem
currently is that interest rates are rising and putting downward pressure
on the market while earnings are rising and buoying the market. The
question is whether rates will rise too much and plunge the economy into a
recession, or whether the economy will merely go through a slowing in the
rate of growth and thereby continue to show modestly growing corporate
earnings. Whatever scenario arises, the stock market may be difficult for a
while, as it eventually adjusts to lower earnings expectations. Beyond this
transition the market should resume its upward trend led by growth stocks.
However, whether
the leadership be growth, value or cyclical, I will continue to work for
the shareholder by picking the best stocks.
DISTRIBUTIONS:
0.4% of the dividends distributed during the fiscal year was derived from
interest
on U.S. Government securities which is generally exempt from state income
tax
for Destiny I.
30% and 21% of the dividends distributed during the fiscal year qualifies
for
the dividends-received deductions for corporate shareholders for Destiny I
and Destiny II, respectively.
The funds will notify shareholders in January 1995 of these percentages for
use in preparing 1994 income tax returns.
(CONTINUED AT BACK)
TOP TEN EQUITY HOLDINGS - DESTINY I
AS OF SEPTEMBER 30, 1994 AS OF MARCH 31, 1994
Federal National Mortgage Association
Philip Morris Companies, Inc.
Intel Corp.
Compaq Computer Corp.
Chrysler Corp.
International Business Machines Corp.
Motorola, Inc.
Vodafone Group PLC sponsored ADR
Pfizer, Inc.
British Petroleum PLC ADR
Federal National Mortgage Association
Compaq Computer Corp.
Philip Morris Companies, Inc.
Intel Corp.
Citicorp
British Petroleum PLC ADR
Microsoft Corp.
Columbia/HCA Healthcare Corp.
Caterpillar, Inc.
Motorola, Inc.
TOP TEN EQUITY HOLDINGS - DESTINY II
AS OF SEPTEMBER 30, 1994 AS OF MARCH 31, 1994
Federal National Mortgage Association
Philip Morris Companies, Inc.
Intel Corp.
Compaq Computer Corp.
Chrysler Corp.
International Business Machines Corp.
Vodafone Group PLC sponsored ADR
Motorola, Inc.
Pfizer, Inc.
British Petroleum PLC ADR
Federal National Mortgage Association
Compaq Computer Corp.
Philip Morris Companies, Inc.
Intel Corp.
Citicorp
British Petroleum PLC ADR
Microsoft Corp.
Columbia/HCA Healthcare Corp.
Motorola, Inc.
Caterpillar, Inc.
TOP FIVE INDUSTRIES - DESTINY I
AS OF SEPTEMBER 30, 1994 AS OF MARCH 31, 1994
Finance 18.7%
Technology 14.3%
Utilities 8.2%
Energy 8.2%
Nondurables 6.8%
Finance 19.5%
Technology 15.1%
Energy 9.6%
Utilities 8.9%
Basic Industries 6.0%
TOP FIVE INDUSTRIES - DESTINY II
AS OF SEPTEMBER 30, 1994 AS OF MARCH 31, 1994
Finance 18.4%
Technology 13.4%
Utilities 8.2%
Energy 7.4%
Nondurables 6.7%
Finance 19.6%
Technology 14.5%
Utilities 9.1%
Energy 8.5%
Basic Industries 5.8%
PERFORMANCE UPDATE - DESTINY I
$10,000 OVER 10 YEARS
Destiny I (006) Standard & Poor'
09/30/84 10000.00 10000.00
10/31/84 10099.82 10039.00
11/30/84 10081.67 9926.56
12/31/84 10381.13 10188.62
01/31/85 11279.49 10982.32
02/28/85 11134.30 11117.40
03/31/85 11025.41 11125.18
04/30/85 10862.07 11115.17
05/31/85 11397.46 11757.63
06/30/85 11624.32 11942.22
07/31/85 11778.58 11924.31
08/31/85 11624.32 11822.95
09/30/85 11199.17 11452.89
10/31/85 11748.76 11982.02
11/30/85 12713.13 12803.98
12/31/85 13397.52 13423.70
01/31/86 13729.35 13498.87
02/28/86 15108.51 14508.58
03/31/86 16103.99 15318.16
04/30/86 16052.14 15145.07
05/31/86 16529.14 15950.79
06/30/86 16632.84 16220.35
07/31/86 15419.60 15313.64
08/31/86 16476.90 16449.91
09/30/86 15198.63 15089.50
10/31/86 15940.03 15960.17
11/30/86 16195.68 16348.00
12/31/86 15888.90 15931.12
01/31/87 17998.04 18077.05
02/28/87 19199.62 18791.09
03/31/87 19416.92 19334.15
04/30/87 19404.14 19162.08
05/31/87 19544.75 19328.79
06/30/87 20362.84 20304.89
07/31/87 21589.98 21334.35
08/31/87 22736.09 22130.12
09/30/87 22197.96 21645.47
10/31/87 16562.52 16983.04
11/30/87 15142.45 15583.63
12/31/87 16825.81 16769.55
01/31/88 17438.83 17475.55
02/29/88 18664.87 18289.91
03/31/88 18229.31 17724.75
04/30/88 18632.61 17921.49
05/31/88 18713.27 18077.41
06/30/88 20068.37 18907.16
07/31/88 19874.78 18835.32
08/31/88 19023.87 18194.92
09/30/88 19770.23 18970.02
10/31/88 20035.60 19497.39
11/30/88 19571.20 19218.57
12/31/88 20102.78 19554.90
01/31/89 21806.12 20986.32
02/28/89 21317.04 20463.76
03/31/89 21806.12 20940.56
04/30/89 22801.14 22027.38
05/31/89 24200.92 22919.49
06/30/89 23661.24 22788.85
07/31/89 25246.53 24846.68
08/31/89 25929.98 25333.67
09/30/89 26141.23 25229.81
10/31/89 25261.05 24644.47
11/30/89 25384.28 25147.22
12/31/89 25237.23 25750.75
01/31/90 23727.47 24022.88
02/28/90 24230.73 24332.77
03/31/90 24752.62 24977.59
04/30/90 23951.14 24353.15
05/31/90 26597.88 26727.59
06/30/90 26541.96 26545.84
07/31/90 25796.40 26460.89
08/31/90 23154.79 24068.83
09/30/90 21594.23 22896.67
10/31/90 21438.17 22798.22
11/30/90 23271.83 24270.98
12/31/90 24442.25 24948.14
01/31/91 27075.69 26035.88
02/28/91 28948.36 27897.45
03/31/91 29631.10 28572.57
04/30/91 30001.74 28641.14
05/31/91 31796.38 29878.44
06/30/91 29709.13 28510.01
07/31/91 31679.34 29838.57
08/31/91 32754.12 30545.75
09/30/91 32201.74 30035.63
10/31/91 32058.53 30438.11
11/30/91 30094.51 29211.45
12/31/91 33955.41 32553.24
01/31/92 34322.38 31947.75
02/29/92 35574.39 32363.08
03/31/92 34775.69 31732.00
04/30/92 36027.70 32664.92
05/31/92 36329.91 32824.97
06/30/92 35703.91 32335.88
07/31/92 37150.19 33658.42
08/31/92 36165.26 32968.42
09/30/92 36529.59 33357.45
10/31/92 36310.99 33474.20
11/30/92 38059.75 34615.67
12/31/92 39100.42 35041.44
01/31/93 40307.86 35335.79
02/28/93 40436.31 35816.36
03/31/93 42440.14 36572.08
04/30/93 42697.05 35687.04
05/31/93 43904.48 36643.45
06/30/93 44238.46 36749.72
07/31/93 44803.64 36602.72
08/31/93 46347.15 37989.96
09/30/93 46347.15 37697.44
10/31/93 48051.49 38477.78
11/30/93 47749.11 38112.24
12/31/93 49430.38 38573.40
01/31/94 52576.75 39884.89
02/28/94 51782.80 38804.01
03/31/94 49342.16 37112.16
04/30/94 50812.43 37587.19
05/31/94 51194.70 38203.62
06/30/94 49753.84 37267.63
07/31/94 51400.53 38490.01
08/31/94 53723.56 40068.10
09/30/94 52047.45 39086.43
$52,047
$39,086
$10,000 OVER 10 YEARS: LET'S SAY YOU INVESTED $10,000 IN DESTINY I FUND ON
SEPTEMBER 30, 1984. BY SEPTEMBER 30, 1994, THE VALUE OF YOUR INVESTMENT
WOULD HAVE GROWN TO $52,047 - A 420.47% INCREASE ON YOUR INITIAL
INVESTMENT. FOR COMPARISON LOOK AT HOW A $10,000 INVESTMENT IN THE S&P 500
(WITH DIVIDENDS REINVESTED) DID OVER THE SAME PERIOD. IT WOULD HAVE GROWN
TO $39,086 - A 290.86% INCREASE.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1994
One Five Ten
Year Years Years
DESTINY I FUND 12.30 99.10 420.47
% % %
S&P 500(registered trademark) 3.68% 54.92 290.86
% %
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1994
One Year Five Ten
Years Years
DESTINY I 12.30% 14.77% 17.93%
FUND
$50/MONTH
15-YEAR PLAN -46.32% 10.63% 16.39%
THE CHARTS ABOVE SHOW DESTINY I FUND'S TOTAL RETURNS WHICH INCLUDE CHANGES
IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE FUND'S
CUMULATIVE TOTAL RETURNS AND AVERAGE ANNUAL TOTAL RETURNS DO NOT INCLUDE
THE EFFECTS OF THE SEPARATE SALES CHARGES AND CUSTODIAN FEES ASSESSED
THROUGH FIDELITY SYSTEMATIC INVESTMENT PLANS (THE PLANS); AVERAGE ANNUAL
TOTAL RETURNS FOR A $50/MONTH 15-YEAR PLAN INCLUDE THE EFFECTS OF THE
SEPARATE SALES CHARGES AND CUSTODIAN FEES ASSESSED THROUGH DESTINY I'S
$50/MONTH 15-YEAR PLAN. AS SHARES OF THE FUNDS MAY BE ACQUIRED ONLY THROUGH
THE PLANS, INVESTORS SHOULD CONSULT THE PLANS' PROSPECTUS FOR MORE COMPLETE
INFORMATION ON THE IMPACT OF THE SEPARATE CHARGES AND FEES APPLICABLE TO
EACH PLAN. THE RATE (%) OF DEDUCTIONS DECREASES PROPORTIONATELY AS PLAN
SIZES INCREASE. FIGURES FOR THE S&P 500, AN UNMANAGED INDEX OF COMMON STOCK
PRICES, INCLUDE REINVESTMENT OF DIVIDENDS. THE S&P 500 FIGURE FOR ONE YEAR
IS PUBLISHED BY S&P. THE S&P 500 IS A REGISTERED TRADEMARK OF STANDARD &
POOR'S CORPORATION.
ALL PERFORMANCE NUMBERS ARE HISTORICAL; THE FUND'S SHARE PRICE AND RETURN
WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
PERFORMANCE UPDATE - DESTINY II
$10,000 OVER LIFE OF FUND
Destiny II (210)Standard & Poor
12/30/85 10000.00 10000.00
12/31/85 10130.00 10081.75
01/31/86 11240.00 10138.21
02/28/86 12320.00 10896.55
03/31/86 14600.00 11504.57
04/30/86 15280.00 11374.57
05/31/86 16140.00 11979.70
06/30/86 16530.00 12182.15
07/31/86 15620.00 11501.17
08/31/86 16003.10 12354.56
09/30/86 15065.34 11332.84
10/31/86 15972.53 11986.74
11/30/86 16288.51 12278.02
12/31/86 16237.54 11964.93
01/31/87 18215.00 13576.61
02/28/87 20141.49 14112.88
03/31/87 20335.15 14520.74
04/30/87 20365.73 14391.51
05/31/87 20508.44 14516.72
06/30/87 21385.04 15249.81
07/31/87 22628.59 16022.98
08/31/87 23791.87 16620.63
09/30/87 23126.67 16256.64
10/31/87 16884.91 12754.96
11/30/87 15499.08 11703.95
12/31/87 17383.76 12594.62
01/31/88 17898.14 13124.86
02/29/88 19476.36 13736.47
03/31/88 19359.45 13312.02
04/30/88 19862.14 13459.78
05/31/88 19663.40 13576.88
06/30/88 21335.14 14200.06
07/31/88 21218.24 14146.10
08/31/88 20470.05 13665.13
09/30/88 21300.07 14247.27
10/31/88 21346.83 14643.34
11/30/88 20680.48 14433.94
12/31/88 21350.63 14686.53
01/31/89 23136.89 15761.59
02/28/89 22678.25 15369.13
03/31/89 22967.92 15727.23
04/30/89 24295.54 16543.47
05/31/89 25828.34 17213.48
06/30/89 24911.08 17115.36
07/31/89 26407.67 18660.88
08/31/89 27251.47 19026.63
09/30/89 27404.57 18948.62
10/31/89 26511.50 18509.02
11/30/89 26766.66 18886.60
12/31/89 26990.12 19339.88
01/31/90 25234.88 18042.17
02/28/90 25707.45 18274.92
03/31/90 26342.03 18759.20
04/30/90 25531.92 18290.22
05/31/90 28448.31 20073.52
06/30/90 28502.32 19937.02
07/31/90 27489.69 19873.22
08/31/90 24515.38 18076.68
09/30/90 22685.67 17196.35
10/31/90 22520.59 17122.40
11/30/90 24831.80 18228.51
12/31/90 26309.30 18737.08
01/31/91 29263.38 19554.02
02/28/91 31551.75 20952.13
03/31/91 32550.31 21459.18
04/30/91 33188.28 21510.68
05/31/91 35074.45 22439.94
06/30/91 32591.92 21412.19
07/31/91 34880.28 22410.00
08/31/91 36250.87 22941.12
09/30/91 35631.85 22558.00
10/31/91 35480.86 22860.28
11/30/91 33185.93 21939.01
12/31/91 37207.74 24448.83
01/31/92 37924.50 23994.08
02/29/92 39517.29 24306.00
03/31/92 38306.77 23832.04
04/30/92 39596.93 24532.70
05/31/92 40202.20 24652.91
06/30/92 39310.23 24285.58
07/31/92 40887.10 25278.86
08/31/92 39700.86 24760.64
09/30/92 39823.40 25052.82
10/31/92 39805.89 25140.50
11/30/92 41801.44 25997.80
12/31/92 42968.77 26317.57
01/31/93 44452.35 26538.64
02/28/93 44562.24 26899.56
03/31/93 46430.45 27467.14
04/30/93 46430.45 26802.44
05/31/93 48042.24 27520.74
06/30/93 48463.50 27600.55
07/31/93 48921.39 27490.15
08/31/93 50717.94 28532.03
09/30/93 50851.36 28312.33
10/31/93 52757.33 28898.40
11/30/93 52547.68 28623.86
12/31/93 54487.06 28970.21
01/31/94 57918.85 29955.20
02/28/94 57216.43 29143.41
03/31/94 54426.86 27872.76
04/30/94 56052.44 28229.53
05/31/94 56453.82 28692.49
06/30/94 54788.10 27989.53
07/31/94 56574.23 28907.58
08/31/94 59163.12 30092.80
09/30/94 57296.71 29355.52
$57,297
$29,356
$10,000 OVER LIFE OF FUND: LET'S SAY YOU INVESTED $10,000 IN DESTINY II
FUND ON DECEMBER 30, 1985, WHEN THE FUND STARTED. BY SEPTEMBER 30, 1994,
THE VALUE OF YOUR INVESTMENT WOULD HAVE GROWN TO $57,297 - A 472.97%
INCREASE ON YOUR INITIAL INVESTMENT. FOR COMPARISON LOOK AT HOW A $10,000
INVESTMENT IN THE S&P 500 (WITH DIVIDENDS REINVESTED) DID OVER THE SAME
PERIOD. IT WOULD HAVE GROWN TO $29,356 - A 193.56% INCREASE.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1994
One Five Life of
Year Years Fund*
DESTINY II FUND 12.67 109.08 472.97
% % %
S&P 500(registered trademark) 3.68 54.92 193.56
% % %
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1994
Life of
One Year Five Fund/Pla
Years n*
DESTINY II 12.67% 15.89% 22.05%
FUND
$50/MONTH
15-YEAR PLAN -46.14% 11.71% 20.14%
THE CHARTS ABOVE SHOW DESTINY II FUND'S TOTAL RETURNS WHICH INCLUDE CHANGES
IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE FUND'S
CUMULATIVE TOTAL RETURNS AND AVERAGE ANNUAL TOTAL RETURNS DO NOT INCLUDE
THE EFFECTS OF THE SEPARATE SALES CHARGES AND CUSTODIAN FEES ASSESSED
THROUGH FIDELITY SYSTEMATIC INVESTMENT PLANS (THE PLANS); AVERAGE ANNUAL
TOTAL RETURNS FOR A $50/MONTH 15-YEAR PLAN INCLUDE THE EFFECTS OF THE
SEPARATE SALES CHARGES AND CUSTODIAN FEES ASSESSED THROUGH DESTINY II'S
$50/MONTH 15-YEAR PLAN. AS SHARES OF THE FUNDS MAY BE ACQUIRED ONLY THROUGH
THE PLANS, INVESTORS SHOULD CONSULT THE PLANS' PROSPECTUS FOR MORE COMPLETE
INFORMATION ON THE IMPACT OF THE SEPARATE CHARGES AND FEES APPLICABLE TO
EACH PLAN. THE RATE (%) OF DEDUCTIONS DECREASES PROPORTIONATELY AS PLAN
SIZES INCREASE. FIGURES FOR THE S&P 500, AN UNMANAGED INDEX OF COMMON STOCK
PRICES, INCLUDE REINVESTMENT OF DIVIDENDS. THE S&P 500 FIGURE FOR ONE YEAR
IS PUBLISHED BY S&P. THE S&P 500 IS A REGISTERED TRADEMARK OF STANDARD &
POOR'S CORPORATION.
* THE LIFE OF FUND AND LIFE OF PLAN FIGURES ARE FROM COMMENCEMENT OF
OPERATIONS, DECEMBER 30, 1985, TO THE PERIOD ENDED SEPTEMBER 30, 1994.
ALL PERFORMANCE NUMBERS ARE HISTORICAL; THE FUND'S SHARE PRICE AND RETURN
WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
FIDELITY DESTINY
PORTFOLIOS:
DESTINY I AND
DESTINY II
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS
PROSPECTUS
November 29, 1994
Fidelity Destiny Portfolios: Destiny I and Destiny II (the Fund or the
Funds) is an open-end management investment company made up of two separate
diversified portfolios. Each Fund seeks to achieve capital growth. Income
generally will not be considered when securities are purchased by the
Funds, although many securities may indeed be income-producing.
Please read this Prospectus before investing. It is designed to provide
you with information and to help you decide if either of the Fund's goals
match your own. YOU SHOULD RETAIN THIS DOCUMENT FOR FUTURE REFERENCE.
Shares of each Fund may be purchased only through Fidelity Systematic
Investment Plans: Destiny Plans I and Destiny Plans II (the Plans or a
Plan), a unit investment trust. Details of the Plans, including the
Creation and Sales Charges, as well as Custodian Fees, are discussed in the
Prospectus for the Plans. The charges for the first year of a Plan may
amount to as much as 50% of the amounts paid under a Plan. Prospective
investors should read this Prospectus in conjunction with the Plans'
Prospectus.
A Statement of Additional Information (SAI) dated November 29, 1994 for
the Funds has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference. This SAI is available
free upon request from Fidelity Distributors Corporation
(Distributors).
FIDELITY DISTRIBUTORS CORPORATION
FIDELITY INVESTMENTS INSTITUTIONAL SERVICES COMPANY, INC., BROKER/DEALER
SERVICES DIVISION
NATIONWIDE (TOLL FREE) 1-800-752-2347
IN ALASKA OR OVERSEAS (CALL COLLECT) 617-439-0547
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD
OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE PAGE
The Funds' Expenses F-2 The Funds' Financial Histories F-3
The Funds' Investment Objective F- 5
The Funds' Investment Policies, Risks
and Limitations F- 5
Portfolio Transactions F- 7
A Few Words About Distributions and Taxes F- 7
Destiny Funds and the Fidelity Organization F- 8
Management and Service Fees F- 9
The Funds' Performance F- 10
How to Buy Shares
Shareholder Services
How to Redeem Shares
Appendix
Financial Statements F-1 7
THE FUNDS' EXPENSES
The expense summary format below was developed for use by all mutual funds
to help you make your investment decisions. Of course, you should consider
this expense information along with other important information, including
the Funds' investment objectives and their past performance and the fees
and expenses associated with investment through the Plans.
A. SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases See Note A
Sales Load on Reinvested Distributions See Note A
Deferred Sales Load Imposed on Redemptions None
Redemption Fees None
Exchange Fees None
B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
DESTINY I DESTINY II
Management Fees . 65 % . 73 %
Other Expenses . 05 % .07 %
Total Operating Expenses .70 % . 80 %
C. EXAMPLE
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each period:
1 YR 3 YRS 5 YRS 10 YRS
Destiny I $ 7 $ 22 $ 39 $ 87
Destiny II $ 8 $ 26 $ 44 $ 99
EXPLANATION OF TABLE
A. SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or
sell shares of a Fund. Neither Fund will offer its shares publicly except
through the Plans, which impose separate Creation and Sales Charges.
Applicable Creation and Sales Charges vary according to the monthly
investment size and duration of each Plan. Please refer to the Destiny
Plans' Prospectus for details. If you exchange shares of the Funds, other
charges may apply. (See "Exchange Privilege" on page for information.)
B. ANNUAL FUND OPERATING EXPENSES are based on the Funds' historical
expenses. Management fees are paid by each Fund to Fidelity Management &
Research Company (FMR) for managing its investments and business affairs
and will vary based on performance. A portion of the brokerage commissions
that the Funds paid were used to reduce F und expenses. Each Fund
incurs other expenses for maintaining shareholder records, furnishing
shareholder statements and reports, and for other services. Management fees
and other expenses are reflected in each Fund's share price and are not
charged directly to individual shareholder accounts. For accounts
maintained within the Plans, separate Custodian fees and an annual service
fee are charged directly to Planholders. Please refer to the section
"Management and Service Fees," beginning on page and the Destiny Plans'
Prospectus for further information.
C. The hypothetical EXAMPLE illustrates the expenses associated with a
$1,000 investment over periods of 1, 3, 5 and 10 years, based on the
expenses in the table above and an assumed annual return of 5%. THE RETURN
OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED INDICATIONS OF ACTUAL OR
EXPECTED FUND PERFORMANCE OR EXPENSES, BOTH OF WHICH WILL VARY. Please
refer to page F-10 for the Funds' past performance. As stated above,
Creation and Sales Charges vary for each Plan. Generally, however, these
charges are structured to decrease as a percentage of the monthly
investment as the Plan progresses. Consequently, the major portion of the
total Creation and Sales Charges incurred during the life of a Plan are
assessed within its first year. For a detailed explanation of applicable
rate structure, please refer to the Destiny Plans' Prospectus.
THE FUNDS' FINANCIAL HISTORIES
FINANCIAL HIGHLIGHTS
The tables that follow are included in the Fund's Annual Report and have
been audited by Coopers & Lybrand L.L.P. , independent accountants.
Their report on the financial statements and financial highlights is
included in the Annual Report. The financial statements and financial
highlights are incorporated by reference into the Funds' SAI.
The tables that follow are included in the Fund's Annual Report and have
been audited by Coopers & Lybrand L.L.P. , independent accountants.
Their report on the financial statements and financial highlights is
included in the Annual Report. The financial statements and financial
highlights are a part of this Prospectus.
A LOOK AT DESTINY I'S HISTORY
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Three
Ended Months Years Ended June 30,
Septemb Ended
er 30, Septemb
er 30,
1994 1993 1993 1992 1991 1990 1989 1988 1987 1986 1985
SELECTED PER-SHARE DATA
Net asset value,
$ 16.86 $ 17.22 $ 16.54 $ 15.23 $ 14.24 $ 14.03 $ 12.44 $ 15.93 $ 16.04 $ 12.81 $ 12.12
beginning of period
Income from Investment
Operations
Net investment income
.30 .04 .26 .31 .33 .46C .30 .24 .28 .33 .44
Net realized and unrealized
1.69 .75 3.16 2.55 1.25 1.18 1.81 (.35) 2.47 4.50 2.30
gain (loss) on investments
Total from investment
1.99 .79 3.42 2.86 1.58 1.64 2.11 (.11) 2.75 4.83 2.74
operations
Less Distributions
From net investment income
(.11) (.14) (.30) (.49) (.10) (.38) (.26) (.39) (.32) (.46) (.34)
From net realized gain
(1.04) (1.01) (2.44) (1.06) (.49) (1.05) (.26) (2.99) (2.54) (1.14) (1.71)
Total distributions
(1.15) (1.15) (2.74) (1.55) (.59) (1.43) (.52) (3.38) (2.86) (1.60) (2.05)
Net asset value, end of
$ 17.70 $ 16.86 $ 17.22 $ 16.54 $ 15.23 $ 14.24 $ 14.03 $ 12.44 $ 15.93 $ 16.04 $ 12.81
period
TOTAL RETURNB
12.30% 4.77% 23.90% 20.18% 11.93% 12.17% 17.90% (1.45)% 22.43% 43.09% 27.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
$ 3,273 $ 2,973 $ 2,869 $ 2,373 $ 2,023 $ 1,832 $ 1,662 $ 1,440 $ 1,461 $ 1,165 $ 764
period (in millions)
Ratio of expenses to
.70% .65%A .66% .61% .50% .53% .60% .60% .60% .60% .60%
average net assets
Ratio of net investment
1.69% 1.11%A 1.83% 2.00% 2.45% 3.37% 2.35% 2.10% 2.20% 2.70% 4.20%
income to average net C
assets
Portfolio turnover rate
77% 82%A 75% 75% 84% 75% 72% 80% 91% 108% 86%
</TABLE>
A Annualized
B Total returns for periods of less than one year are not annualized.
C Investment income per share reflects special dividends of $.06 and $.03
per share, respectively.
A LOOK AT DESTINY II'S HISTORY
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Three December 30,
Ended Months 1985
Septemb Ended (Commencement
er 30, Septemb of Operations)
er 30, Years Ended June 30, to June 30,
1994 1993 1993 1992 1991 1990 1989 1988 1987 1986
SELECTED PER-SHARE DATA
Net asset value,
$ 26.68 $ 26.46 $ 24.68 $ 23.50 $ 21.11 $ 20.64 $ 18.25 $ 20.98 $ 16.53 $ 10.00
beginning of period
Income from Investment
Operations
Net investment income
.42 .04 .26 .33 .29 .56C .24 .13 .02 .03
Net realized and
2.86 1.23 4.85 4.08 2.61 2.27 2.72 (.19) 4.73 6.50
unrealized gain (loss)
on investments
Total from investment
3.28 1.27 5.11 4.41 2.90 2.83 2.96 (.06) 4.75 6.53
operations
Less Distributions
From net investment
(.12) (.14) (.36) (.34) (.35) (.36) (.18) (.09) -- --
income
From net realized gain
(1.29) (.91) (2.97) (2.89) (.16) (2.00) (.39) (2.58) (.30) --
Total distributions
(1.41) (1.05) (3.33) (3.23) (.51) (2.36) (.57) (2.67) (.30) --
Net asset value, end of
$ 28.55 $ 26.68 $ 26.46 $ 24.68 $ 23.50 $ 21.11 $ 20.64 $ 18.25 $ 20.98 $ 16.53
period
TOTAL RETURNB
12.67% 4.93% 23.28% 20.61% 14.35% 14.42% 16.76% (.23)% 29.37% 65.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
$ 1,437 $ 1,143 $ 1,061 $ 479 $ 326 $ 221 $ 143 $ 78 $ 37 $ 5
period (in millions)
Ratio of expenses to
.80% .84% .84% .88% .84% .87% .97% 1.12% 1.50% 1.50%A,D
average net assets
A
Ratio of net investment
1.56% .69% 1.41% 1.60% 1.70% 3.07% 1.53% 1.07% .39% 1.07%A
income to average net
A C
assets
Portfolio turnover rate
72% 80% 81% 113% 129% 112% 128% 148% 183% 228%A
A
</TABLE>
A Annualized
B Total returns for periods of less than one year are not
annualized.
C Investment income per share reflects special dividends of $.14 and
$.06 per share, respectively.
D Expenses have been limited to a percentage of average net assets in
accordance with various state expense limitation regulations. Expenses
borne by the investment adviser amounted to $.14 per share for the period
ended June 30, 1986.
THE FUNDS' INVESTMENT OBJECTIVE
Each Fund seeks to achieve capital growth. Income generally will not be
considered when securities are purchased by the Funds, although many of
such securities may indeed be income-producing. Each Fund may not always
achieve its objective, but each will always follow the investment style
described below .
THE FUNDS' INVESTMENT POLICIES, RISKS AND LIMITATIONS
Each Fund's assets will tend to be invested fully in common stocks or
securities convertible into common stocks. Each Fund also has the ability
to purchase preferred stocks or bonds that may produce capital growth.
The Funds may purchase all types of securities, such as:
(medium solid bullet) common and preferred stocks;
(medium solid bullet) bonds, debentures, notes and other debt securities;
or
(medium solid bullet) warrants and rights to purchase securities.
FMR normally invests each Fund's assets according to its investment
strategy. Each Fund also reserves the right to invest without limitation in
preferred stock and investment-grade debt instruments for temporary,
defensive purposes.
Each Fund may invest in lower-quality, high-yielding securities (sometimes
referred to as "junk bonds"), although each Fund intends to limit its
investments in these securities to 10% of its assets. Each Fund may
purchase restricted securities, illiquid investments, enter into repurchase
agreements, and may invest in indexed securities. Each Fund may also invest
in loans and other direct debt instruments, foreign securities, options and
futures contracts, real estate-related investments, and swap agreements.
See the "Appendix" beginning on page F-1 4 for more information.
MATCHING THE FUNDS TO YOUR INVESTMENT NEEDS
Shares of each Fund may be acquired only through the purchase of an
interest in Fidelity Systematic Investment Plans: Destiny Plans I or
Destiny Plans II. The Funds are designed for you if you are seeking
accumulation of capital through regular, systematic investing over a period
of 10 years or more. Investments in the Funds are based on the concept of
"dollar-cost averaging." This involves consistently buying uniform dollar
amounts of a security regardless of the price, at regular intervals. When
prices are low, more shares are bought than when prices are high. Because
the value of the securities in each Fund fluctuates with market conditions,
if you liquidate your Plan investment when the market value of your shares
is less than their original cost, including the initial Plan's Creation and
Sales Charges, you will incur a loss. Investments in a systematic
investment plan do not eliminate market risk. While FMR will seek to
realize capital growth over the lifetime of a Plan, the policies FMR
follows may not be appropriate if you are unable to complete your Plan. You
should also consider your ability to continue to invest during periods of
varying economic and market conditions.
Receipt by each Fund of investments on a systematic basis tends to provide
a more consistent level of Fund assets than might be the case for those
funds whose shares are sold directly and may allow each Fund to plan for
the gradual accumulation of various individual security positions. One
example of how each Fund could employ this concept is through the program
of dollar-cost averaging as described above. Such a program could be
hampered by increased net redemptions or the failure of Plan investors to
purchase shares.
FMR is also the investment adviser to certain other investment companies
not sold through systematic investment plans, which also have objectives of
capital growth. The investment policies employed by each of these funds
vary, as do the sales charges assessed to fund share purchases and the
investment results each has attained.
LIMITING INVESTMENT RISKS
Each Fund has adopted the following investment limitations designed to
reduce investment risk. The policies and limitations discussed
below , in the section "The Funds' Investment Policies, Risks and
Limitations" on page F- 5 , and in the "Appendix" beginning on page
F-1 4 , are considered at the time of purchase. With the exception of
each Fund's borrowing policy, the sale of portfolio securities is not
required in the event of a subsequent change in circumstances.
DIVERSIFICATION: Limitations (a) and (b) are fundamental. These limitations
do not apply to U.S. government securities.
(medium solid bullet) Each Fund may not (except that up to 25% of the
Fund's total assets may be invested without regard to these limitations)
purchase a security if, as a result, (a) more than 5% of its total assets
would be invested in the securities of any issuer or (b) it would hold more
than 10% of the outstanding voting securities of any issuer.
(medium solid bullet) As a fundamental policy, each Fund may not purchase
the securities of any issuer if, as a result, more than 25% of the Fund's
total assets would be invested in the securities of companies having their
principal business activities in the same industry.
BORROWING:
The following limitation is fundamental:
(medium solid bullet) Each Fund may borrow money for temporary or
emergency purposes, in an amount not exceeding 33% of the value of its
total assets .
The following limitations are non-fundamental:
(medium solid bullet) Each Fund may borrow money from a bank or from a
fund advised by FMR or an affiliate and may engage in reverse repurchase
agreements; and
(medium solid bullet) E ach Fund may not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
LENDING: Percentage limitations are fundamental.
(medium solid bullet) Each Fund (a) may lend portfolio securities to a
broker-dealer or institution when the loan is fully collateralized; and (b)
may lend money to a mutual fund advised by FMR or an affiliate. Each Fund
will limit loans in the aggregate to 33% of its total assets.
(medium solid bullet) Each Fund may acquire loans, loan participations and
other forms of direct debt instruments.
Each Fund has received permission from the SEC to lend money to and borrow
money from other mutual funds advised by FMR or its affiliates, subject to
certain restrictions (see the "Appendix" on page F-1 4 ). If a Fund
borrows money, its share price may be subject to greater fluctuation until
the borrowing is paid off. To this extent, purchasing securities when
borrowings are outstanding involves an element of leverage.
As a non-fundamental policy, each Fund may not purchase a security, if, as
a result, more than 10% of its net assets would be invested in illiquid
investments.
Each Fund's investment objective is fundamental and may only be changed by
the affirmative vote of the outstanding shares of that Fund. Each Fund's
policies and limitations, except as noted, are non-fundamental and may be
changed without shareholder approval.
PORTFOLIO TRANSACTIONS
FMR chooses broker-dealers by judging professional ability and quality of
service. FMR uses various brokerage firms to carry out its portfolio
transactions. Since FMR places a large number of transactions, including
those of Fidelity's other funds, each Fund pays commissions lower than
those generally paid by individual investors. Also, each Fund incurs lower
costs than those generally incurred by individuals when purchasing debt
securities.
Each Fund has authorized FMR to allocate transactions to some
broker-dealers who help distribute each Fund's shares or shares of
Fidelity's other funds, and on an agency basis to Fidelity Brokerage
Services, Inc. (FBSI) and Fidelity Brokerage Services, Ltd. (FBSL),
affiliates of FMR. FMR will make such allocations if commissions are
comparable to those charged by non-affiliated, qualified broker-dealers for
similar services.
FMR also may allocate brokerage transactions to the Funds' custodian,
acting as broker-dealer, or to other broker-dealers, so long as transaction
quality and commission rates are comparable to those of other
broker-dealers, where the broker-dealers will allocate a portion of the
commissions paid toward payment of the Funds' expenses. These expenses
currently include transfer agent and custodian fees.
Higher commissions may be paid to those firms that provide research
services, to the extent permitted by law. FMR also is authorized to
allocate brokerage transactions to FBSI in order to secure from FBSI
research services produced by third-party, independent entities. FMR may
use this research information in managing the Funds' assets, as well as
assets of other clients.
The frequency of portfolio transactions - the Funds' turnover rates - will
vary from year to year depending on market conditions. For the fiscal year
ended September 30, 1994, the annualized turnover rates for Destiny I and
Destiny II were 77% and 72%, respectively. Because higher turnover rates
increase transaction costs and may increase taxable capital gains, FMR
carefully weighs the anticipated benefits of short-term investing against
these consequences.
A FEW WORDS ABOUT DISTRIBUTIONS AND TAXES
Each Fund distributes substantially all of its net investment income and
capital gains to shareholders each year, normally in December.
FEDERAL TAXES. Distributions from each Fund's income and short-term
capital gains are taxed as dividends, and long-term capital gain
distributions are taxed as long-term capital gains. Each Fund's
distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares, except that distributions declared
in December and paid in January are taxable as if paid on December 31st.
Each Fund will send you a tax statement by January 31, showing the tax
status of the distributions you received in the past year, and will file a
copy with the Internal Revenue Service (IRS).
CAPITAL GAINS. You may realize a capital gain or loss when you sell
(redeem) or exchange shares. For most types of accounts, each Fund will
report the proceeds of your redemptions to you and the IRS annually.
However, because the tax treatment also depends on your purchase price and
your personal tax position, you should also keep your regular account
statements to use in determining your tax basis.
"BUYING A DIVIDEND." On the record date for a distribution, each Fund's
share value is reduced by the amount of the distribution. If you buy shares
just before the record date (buying a dividend), you will pay the full
price for the shares, and then receive a portion of the price back as a
taxable distribution.
OTHER TAX INFORMATION. In addition to federal taxes, you may be subject to
state or local taxes on your investment . Investors should consult their
tax advisers for details and up-to-date information on the tax laws in
their state to determine whether the Fund is suitable to their particular
tax situation .
When you sign your Plan Application, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the Funds
to withhold 31% of your taxable distributions and redemptions.
Each Fund is treated as a separate entity for federal income tax purposes.
DESTINY FUNDS AND THE FIDELITY ORGANIZATION
Fidelity Destiny Portfolios (the trust) is an open-end management
investment company made up of two separate diversified funds. Originally
organized as a Massachusetts corporation on January 7, 1969, the Trust was
reorganized as a Massachusetts business trust on June 20, 1984. The Board
of Trustees supervises each Fund's activities and reviews contractual
arrangements with companies that provide each Fund with services. Each Fund
offers its own shares exclusively. As a trust, it is not required to hold
annual shareholder meetings. However, special meetings may be called for a
specific Fund or the Trust as a whole for purposes such as electing or
removing Trustees, changing fundamental policies or approving a management
contract. As a shareholder, the number of votes you are entitled to is
based upon the dollar value of your investment. If a matter affects just
one Fund, a separate vote of the shareholders of that Fund is taken.
Fidelity Investments is one of the largest investment management
organizations in the U.S. and has its principal business address at 82
Devonshire Street, Boston, MA 02109. It includes a number of different
companies that provide a variety of financial services and products. Each
Fund employs various Fidelity companies to perform certain activities
required to operate each Fund.
FMR, the Funds' investment adviser, is the original Fidelity
company, founded in 1946. It provides a number of mutual funds and other
clients with investment research and fund management services. It maintains
a large staff of experienced investment personnel and a full complement of
related support facilities. As of September 30, 1994, FMR advised funds
having approximately 20 million shareholder accounts with a total
value of more than $250 billion. Fidelity Distributors Corporation, 82
Devonshire Street, Boston, MA 02109 , an affiliate of FMR,
distributes shares for the Fidelity funds. FMR Corp. is the parent company
for the Fidelity companies. FMR Corp. is the ultimate parent company of
FMR, Fidelity Management & Research (U.K.) Inc. (FMR U.K.) and Fidelity
Management & Research (Far East) Inc. (FMR Far East). Through ownership of
voting common stock, members of the Edward C. Johnson 3d family form a
controlling group with respect to FMR Corp. Changes may occur in the
Johnson family group, through death or disability, which would result in
changes in each individual family members' holding of stock. Such changes
could result in one or more family members becoming holders of over 25% of
the stock. The Funds have received an opinion of counsel that changes in
the composition of the Johnson family group under these circumstances would
not result in the termination of the Funds' management or distribution
contracts and, accordingly, would not require a shareholder vote to
continue operation under those contracts.
George A. Vanderheiden is manager and Vice President of Destiny I and
Destiny II, which he has managed since 1980 and 1985, respectively. Mr.
Vanderheiden also manages the Fidelity Advisor Growth Opportunities Fund.
Mr. Vanderheiden is a managing director of FMR Corp., and leader of the
Growth Group. He joined Fidelity in 1971.
MANAGEMENT AND SERVICE FEES
For managing its investment and business affairs, each Fund pays FMR a
monthly fee based on a basic fee rate, which is the sum of two components:
1. A GROUP FEE RATE based on the monthly average net assets of all the
mutual funds advised by FMR. The rate cannot rise above .52%, and
drops (to as low as a marginal rate of .31%*) as total assets in all
these funds rise. The effective group fee rate for September 1994 was
. 3193 %.
* On October 20, 1993, each Fund's shareholders approved new management
contracts with the group
fee rate schedule providing for a marginal rate as low as .30% when average
group net assets exceed
$174 billion. Effective November 1, 1993, FMR voluntarily agreed to adopt a
revised group fee rate
schedule providing for a marginal rate as low as .285% when average group
net assets exceed $336
billion. Effective August 1, 1994, FMR voluntarily agreed to adopt a
revised group fee rate schedule
providing for a marginal rate as low as .270% when average group assets
exceed $390 billion. These
revised schedules will be presented to shareholders for approval at the
next shareholder s meeting.
2. An INDIVIDUAL FUND FEE RATE, which varies for each Fund.
One-twelfth of the annual basic fee rate is applied to each Fund's net
assets averaged over the most recent month, giving a dollar amount, which
is the basic fee for that month.
The following are the individual Fund fee rates, total management fees and
total operating expenses for the Funds' most recent fiscal year end,
expressed as a percentage of average net assets:
INDIVIDUAL FUND TOTAL TOTAL OPERATING
FEE RATES MANAGEMENT FEE EXPENSES
Destiny I .17% .65 % . 70 %
Destiny II .30% .73 % . 80 %
_______________
In addition to the basic fee, each Fund's management fee varies based on
performance. The performance adjustment rate is added to or subtracted from
the management fee and is calculated monthly. It is based on a comparison
of each Fund's performance to that of the Standard & Poor's Composite Index
of 500 Stocks (S&P 500 (registered trademark) ), a widely recognized,
unmanaged index of common stock prices, over the most recent 36-month
period. The difference is converted into a dollar amount that is added to
or subtracted from the management fee. This adjustment rewards FMR when
a Fund outperforms the S&P 500 and reduces FMR's fee when the Fund
underperforms the S&P 500. The maximum annualized performance adjustment
rate is +/ - .24% of average net assets up to and including
$100,000,000 and + / - .20% of average net assets in excess of
$100,000,000.
Effective November 1, 1993, FMR entered into sub-advisory agreements on
behalf of the Funds with FMR U.K. and FMR Far East. FMR U.K. focuses
primarily on issuers based in Europe, and FMR Far East focuses primarily on
issuers based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR, not the Funds, pays FMR U.K. and FMR Far East fees equal
to 110% and 105%, respectively, of each sub-advisor's costs incurred in
connection with its sub-advisory agreement. Sub-advis e rs provide
research and investment advice and research services with respect to
issuers based outside the United States and FMR may grant sub-advisors
investment management authority to buy and sell securities if FMR believes
it would be beneficial to a Fund.
Fidelity Service Co. (Service), 82 Devonshire Street, Boston, MA
02109 , an affiliate of FMR, acts as each Fund's transfer and
dividend-paying agent and maintains the Funds' shareholder records. With
respect to those accounts not associated with the Plans, each Fund pays
fees based on the type, size, and number of accounts, and the number of
transactions made by shareholders. For the fiscal year ended September 30,
1994, Destiny I and Destiny II's transfer agent fees amounted to
$ 125,929 and $ 63,171 , respectively. The Funds also pay
Service to calculate their net asset value (NAV) per share, to maintain
their general accounting records, and to administer their securities
lending programs. The fees for pricing and bookkeeping services are based
on each Fund's average net assets, but must fall within a range of $45,000
to $750,000 per year. The fees for securities lending are based on the
number and duration of individual securities loans. For the fiscal year
ended September 30, 1994, fees for pricing and bookkeeping and securities
lending services (including related out-of-pocket expenses) for Destiny I
and Destiny II amounted to $ 761,590 and $ 551,751 ,
respectively.
THE FUNDS' PERFORMANCE
Each Fund's performance may be quoted in advertising in various ways. All
performance information is historical and is not intended to indicate
future performance. Share price, yield and total return fluctuate in
response to market conditions and other factors, and the value of each
Fund's shares when redeemed may be worth more or less than their original
cost.
Each Fund's performance may be quoted in advertising in terms of
cumulative or average annual total return. A CUMULATIVE TOTAL RETURN
reflects each Fund's performance over a stated period of time. An AVERAGE
ANNUAL TOTAL RETURN reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if each Fund's
performance had been constant over the entire period. Because average
annual total returns tend to smooth out variations in each Fund's
performance, shareholders should recognize that those returns are
not the same as actual year-by-year results. All total returns quoted below
do not include the effect of paying the separate Creation and Sales Charges
and Custodian Fees associated with the purchase of shares of the Funds
through the Plans. Total returns would be lower if Creation and Sales
Charges and Custodian Fees were taken into account. As previously
discussed, shares of the Funds may be acquired only through Fidelity
Systematic Investment Plans. Investors should consult the Plans' Prospectus
for complete information regarding Creation and Sales Charges and Custodian
Fees.
HISTORICAL FUND RESULTS. The following charts show each Fund's
total returns for the period ended September 30, 1994:
DESTINY I
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND* ONE YEAR FIVE YEARS TEN YEARS
LIFE OF FUND*
12.30 % 14.77 % 17.93 % 18.15 % 12.30 %
99.10 % 420.47 % 5599.24 %
DESTINY II
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND** ONE YEAR FIVE YEARS TEN YEARS
LIFE OF FUND**
12.67 % 15.89 % N/A 22.05 % 12.67 %
109.08 % N/A 472.97 %
* Life of Fund - July 10, 1970 (Commencement of Operations) - September 30,
1994.
** Life of Fund - December 30, 1985 (Commencement of Operations) -
September 30, 1994.
To illustrate the components of overall performance, each Fund may
separate its cumulative and average annual total returns into income
results and capital gain or loss. Other illustrations of performance may
show moving averages over specified periods.
HISTORICAL FUND RESULTS. The following charts show Destiny Plans
I and Destiny Plans II average annual total returns calculated for the one,
five, ten years and Life of Plan ended September 30, 1994 for a $50/month,
15 year Plan. Life of Plan figures are for the periods October 1, 1979 to
September 30, 1994 for Destiny Plans I and Commencement of Operations
(December 30, 1985) through September 30, 1994 for Destiny Plans II. The
following Plan-related average annual total returns include change in share
price, reinvestment of dividends and capital gains, and the effects of the
separate Creation and Sales Charges and Custodian Fees assessed through the
Plans. Consult the Plans' Prospectus for more complete information on
applicable charges and fees.
DESTINY PLANS I
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE OF
$50/MONTH, ONE YEAR FIVE YEARS TEN YEARS PLAN
15 YEAR PLAN
-46.32% 10.63% 16.39% 17.44%
</TABLE>
DESTINY PLANS II
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE OF
$50/MONTH, ONE YEAR FIVE YEARS TEN YEARS PLAN
15 YEAR PLAN
-46.14% 11.71% N/A 20.14%
</TABLE>
HOW TO BUY SHARES
Each Fund has an agreement with Distributors under which each Fund issues
shares at NAV to State Street Bank and Trust Company as Custodian for the
Plans. EACH FUND WILL NOT OFFER ITS SHARES PUBLICLY EXCEPT THROUGH THE
PLANS. Generally, State Street Bank and Trust Company will hold
directly all shares of each Fund unless a Planholder owns Fund shares
directly after completing or terminating a Plan. The terms of the offering
of the Plans are contained in the Plans' Prospectus.
SHARE VALUE
Each Fund's NAV is computed by adding the value of all securities plus
cash and other assets, deducting liabilities and then dividing the result
by the number of shares of that Fund that are outstanding. Service
calculates each Fund's NAV at the close of the Fund's business day which
coincides with the close of business of the New York Stock Exchange (NYSE),
normally 4:00 p.m., Eastern time. Each Fund is open for business each day
the NYSE is open. Purchase orders are processed at the NAV next determined
after an order is received. Securities and other assets held by each
Fund are valued primarily on the basis of market quotations. Foreign
securities are valued based on quotations from the primary market in which
they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. If quotations are not readily
available or if the values have been materially affected by events
occurring after a foreign market's closing, assets are valued by a
method which the Trust's Board of Trustees believes accurately reflects
fair value.
SHAREHOLDER SERVICES
THE FOLLOWING SHAREHOLDER SERVICES ARE APPLICABLE ONLY TO THOSE
SHAREHOLDERS WHO HAVE COMPLETED OR TERMINATED A PLAN AND HOLD SHARES OF
A FU ND DIRECTLY. Planholders should consult the section titled "Rights
and Privileges of Planholders" on page 1 1 of their Plan's Prospectus
for a discussion of distribution options and other pertinent data.
CHOOSING A DISTRIBUTION OPTION
You can choose from three distribution options:
1. The SHARE OPTION reinvests your income dividends and capital gain
distributions in additional shares. You are assigned this option
automatically unless you specify otherwise in writing.
2. The INCOME-EARNED OPTION reinvests your capital gain distributions and
pays your income dividends in cash.
3. With the CASH OPTION you receive both income dividends and capital gain
distributions in cash.
Income dividends and capital gain distributions will be reinvested at the
NAV as of the record date for the distribution. On the day a Fund goes
ex-dividend, the amount of the distribution is deducted from its share
price. Reinvestment of distributions will be made at that day's NAV. Cash
distribution checks will be mailed within seven days.
EXCHANGE PRIVILEGE
The exchange privilege is a convenient way to buy shares in Fidelity's
other funds in order to respond to changes in your goals or in market
conditions and is available only to those who have completed or terminated
a Plan and received shares of the Fund directly. In addition, those who
have completed or terminated a Plan and received shares directly may
exchange at NAV into any of the Fidelity funds, including the
Fidelity Advisor Funds. However, to protect the Funds' performance and
shareholders, Fidelity discourages frequent trading in response to
short-term market fluctuations. The Fidelity family of funds includes,
among others, common stock funds, tax-exempt and corporate bond funds and
money market funds. Before you make an exchange from either Fund please
note the following:
1. You may exchange shares of the Funds for shares of Fidelity's other
funds that are registered in your state as long as the funds will not be
adversely affected by your exchange. You will not have to pay any sales
charge on the shares of another Fidelity fund you acquire by exchange from
the Funds.
2. Fidelity's Investor Centers can provide information and a prospectus for
any of Fidelity's other funds registered in your state excluding the
Fidelity Advisor Funds. For information on those funds, ask your investment
professional. Read the prospectus of the fund into which you want to
exchange for relevant information.
3. You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.
4. RESTRICTIONS: Although the exchange privilege is an important benefit,
fund performance and shareholders can be hurt by excessive trading. To
protect the interests of shareholders, the Funds reserve the right to
temporarily or permanently terminate the exchange privilege for any person
who makes more than four exchanges out of each Fund during the calendar
year. For purposes of the four exchange limit, accounts under common
ownership or control, including accounts having the same taxpayer
identification number, will be aggregated. There are currently no
administrative or redemption fees applicable to exchanges out of the
Destiny Funds. However, other funds may restrict or limit exchanges, and
may impose administrative fees of up to $7.50 and redemption fees of up to
1.5% on exchanges. Read the prospectus of each fund into which you want to
exchange for details.
5. TAXES: Each exchange actually represents the sale of shares of one fund
and the purchase of shares in another, which may produce a gain or loss for
tax purposes.
The Funds reserve the right at any time without prior notice to refuse
exchange purchases by any person or group if, in FMR's judgment, a Fund
would be unable to invest effectively in accordance with its investment
objective and policies or might otherwise be adversely affected. In
particular, a pattern of exchanges that coincide with a "market timing"
strategy may be disruptive to the Funds. Although each Fund will attempt to
give you prior notice whenever it is reasonably able to do so, it may
impose these restrictions at any time. The Funds may terminate or modify
the exchange privilege in the future.
You can make exchanges either in writing or by telephone by calling
1-800-544-7777. You may initiate many transactions by telephone.
Fidelity may only be liable for losses resulting from
unauthorized transactions if it does not follow reasonable
procedures designed to verify the identity of the caller. Fidelity will
request personalized security codes or other information, and may also
record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions. Written requests for exchange should be sent to Fidelity
Investments, P.O. Box 660602, Dallas, TX 75266-0602.
STATEMENTS AND REPORTS
For accounts not associated with the Plans, Service will send a statement
of account after every transaction that affects the share balance or the
account registration (the Funds currently do not issue share certificates).
A statement with tax information will be mailed to you by January 31 of
each year, and will also be filed with the IRS. To reduce annual expenses
only one copy of most reports (such as the Funds' Annual Report) may be
mailed to your household. Please call Fidelity if you need additional
copies.
Service pays for shareholder services but not for special services, such
as producing and mailing historical account documents. You may be required
to pay a fee for special services.
HOW TO REDEEM SHARES
THE FOLLOWING DISCUSSION RELATES ONLY TO THOSE INVESTORS WHO HOLD SHARES
OF THE FUNDS DIRECTLY. PLANHOLDERS SHOULD CONSULT THEIR PLANS' PROSPECTUS
FOR THE REQUIREMENTS FOR REDEMPTION OF SHARES FROM A PLAN.
You may sell (redeem) all or a portion of your shares on any business day.
Your shares will be redeemed at the NAV next calculated after Service has
received and accepted your written redemption request. Each Fund may hold
payment until it is reasonably satisfied that investments which were made
by check have been collected (which may take up to seven (7) days).
Once your shares are redeemed, each Fund normally will send you the
proceeds on the next business day. However, if making immediate payment
could affect the Fund adversely, it may take up to seven (7) days to pay
you. Also, when the NYSE is closed (or when trading is restricted) for any
reason other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, each
Fund may suspend redemption or postpone payment dates. If you are unable to
execute your transaction by telephone (for example, during periods of
unusual market activity) consider placing your order by mail or contact
your investment professional.
If you have certificates for your shares, you must submit them to Service
in order to redeem your shares, and you should call Service for specific
instructions. The Funds currently do not issue share certificates.
TO REDEEM BY MAIL - Send a "letter of instruction" to Fidelity
Investments, P.O. Box 660602, Dallas, TX 75266-0602. The letter
should specify the name of the Fund, the number of shares to be sold, your
name, your account number, and the additional requirements listed below
that apply to your particular account.
TYPE OF REGISTRATION REQUIREMENTS
Individual, Joint Tenants, Sole Proprietorship, Letter of instruction
signed by all person(s) required to
Custodial (Uniform Gifts/Transfers to Minors Act), sign for the
account exactly as it is registered, accompa-
General Partners nied by signature guarantee(s).
Corporations, Associations Letter of instruction and a corporate
resolution, signed by person(s) required to sign for the account by
signature guarantee(s).
Trusts A letter of instruction signed by the Trustee(s) with a signature
guarantee. (If the Trustee's name is not registered on your account, also
provide a copy of the trust document, certified within the last 60 days.)
If you do not fall into any of the above registration categories (e.g.,
Executors, Administrators, Conservators or Guardians) please call Service
for further instructions.
A signature guarantee is a widely accepted way to protect you and Service
by guaranteeing the signature on your request; it may not be provided by a
notary public. Signature guarantees will be accepted from banks, brokers,
dealers, municipal securities dealers, municipal securities brokers,
government securities dealers, government securities brokers, credit unions
(if authorized under state law), national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Planholders who have redeemed shares under "Cancellation and Refund
Rights" (discussed in the Plans' Prospectus, page 1 4 ), may not
reinstate at NAV the proceeds from such a cancellation or refund until all
refunded Creation and Sales Charges included in the cancellation have first
been deducted in full from the amount being replaced. To redeem shares from
a Plan, see page 1 5 of the Plans' Prospectus.
APPENDIX
The following paragraphs provide a brief description of securities in
which each Fund may invest and transactions they may make. The Funds are
not limited by this discussion, however, and may purchase other types of
securities and enter into other types of transactions if they are
consistent with the Funds' investment objectives and policies.
FOREIGN INVESTMENTS. Investment in foreign securities involve
additional risks. Foreign securities and securities denominated in or
indexed to foreign currencies may be affected by the strength of foreign
currencies relative to the U.S. dollar, or by political or economic
developments in foreign countries. Foreign companies may not be subject to
accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations.
Foreign markets may be less liquid or more volatile than U.S. markets, and
may offer less protection to investors. In addition to the political and
economic factors that can affect foreign securities, a governmental issuer
may be unwilling to repay principal and interest when due, and may require
that the conditions for payment be renegotiated. These factors could make
foreign investments, especially those in developing countries, more
volatile. FMR considers these factors when making foreign investments.
A Fund may enter into currency forward contracts (agreements to
exchange one currency for another at a future date) to manage currency
risks and to facilitate transactions in foreign securities. Although
currency forward contracts can be used to protect a Fund from adverse
exchange rate changes, they involve a risk of loss if FMR fails to predict
foreign currency values correctly.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of each Fund's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for a Fund to sell them promptly at an acceptable price.
INDEXED SECURITIES. Each Fund may invest in indexed securities whose value
is linked to currencies, interest rates, commodities, indices, or other
financial indicators. Most indexed securities are short to intermediate
term fixed-income securities whose values at maturity or interest rates
rise or fall according to the change in one or more specified underlying
instruments. Indexed securities may be positively or negatively indexed
(i.e., their value may increase or decrease if the underlying instrument
appreciates), and may have return characteristics similar to direct
investments in the underlying instrument or to one or more options on the
underlying instrument. Indexed securities may be more volatile than the
underlying instrument itself.
INTERFUND BORROWING PROGRAM. The Funds have received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. Interfund loans and borrowings normally will extend
overnight, but can have a maximum duration of seven days. The Funds will
lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Each Fund will not
lend more than 5% of its assets to other funds and will not borrow through
the program if, after doing so, total outstanding borrowings will exceed
15% of total assets. Loans may be called on one day's notice, and the Funds
may have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed. Any delay in repayment to a lending fund
could result in a lost investment opportunity or additional borrowing
costs.
LOWER-QUALITY DEBT SECURITIES are those rated Ba or lower by Moody's
Investors Service, Inc. (Moody's) or BB or lower by Standard & Poor's
Corporation (S&P) that have poor protection against default in the payment
of principal and interest, or may already be in default. These securities
are often considered to be speculative and involve greater risk of loss or
price changes due to changes in the issuer's capacity to pay. The market
prices of lower-quality debt securities may fluctuate more than those of
higher-rated securities, and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates.
OPTIONS AND FUTURES CONTRACTS. Each Fund may buy and sell options and
futures contracts to manage its exposure to changing interest rates,
security prices, and currency exchange rates. Some options and futures
strategies, including selling futures, buying puts, and writing calls, tend
to hedge a Fund's investments against price fluctuations. Other strategies,
including buying futures, writing puts, and buying calls, tend to increase
market exposure. Options and futures may be combined with each other or
with forward contracts in order to adjust the risk and return
characteristics of the overall strategy. Each Fund may invest in options
and futures based on any type of security, index, or currency, including
options and futures traded on foreign exchanges and options not traded on
exchanges.
Options and futures can be volatile investments, and involve certain
risks. If FMR applies a hedge at an inappropriate time or judges market
conditions incorrectly, options and futures strategies may lower a Fund's
return. A Fund could also experience losses if the prices of its options
and futures positions were poorly correlated with its other investments, or
if it could not close out its positions because of an illiquid secondary
market.
Each Fund will not hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In
addition, a Fund will not buy futures or write puts whose underlying value
exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement, a
Fund buys a security and simultaneously agrees to sell it back at a higher
price. In the event of the bankruptcy of the other party to a repurchase
agreement or a loan, a Fund could experience delays in recovering either
the cash or the securities it lent. To the extent that, in the meantime,
the value of the securities the Fund purchased had decreased, and the value
of securities the Fund lent had increased, the Fund could experience a
loss. In all cases, FMR must find the creditworthiness of the other party
to the transaction to be satisfactory. The Funds may lend portfolio
securities to an affiliate, FBSI.
RESTRICTED SECURITIES are securities which cannot be sold to the public
without registration under the Securities Act of 1933. Unless registered
for sale, these securities can only be sold in privately negotiated
transactions or pursuant to an exemption from registration.
SWAP AGREEMENTS. As one way of managing its exposure to different
types of investments, each Fund may enter into interest rate swaps,
currency swaps, and other types of swap agreements such as caps, collars,
and floors. In a typical interest rate swap, one party agrees to make
regular payments equal to a floating interest rate times a "notional
principal amount," in return for payments equal to a fixed rate times the
same amount, for a specified period of time. If a swap agreement provides
for payments in different currencies, the parties might agree to exchange
the notional principal amount as well. Swaps may also depend on other
prices or rates, such as the value of an index or mortgage prepayment
rates.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on a Fund's performance. Swap agreements are subject to
risks related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. A Fund may also
suffer losses if it is unable to terminate outstanding swap agreements or
reduce its exposure through offsetting transactions.
DEBT OBLIGATIONS. The table below provides a summary of ratings assigned
to debt holdings (not including money market instruments) in each Fund's
portfolio. These figures are dollar-weighted averages of month-end fund
holdings during the twelve months ended September 30, 1994, presented as a
percentage of total investments. These percentages are historical and are
not necessarily indicative of the quality of current or future fund
holdings, which may vary. Refer to page F- 5 for policies regarding
the quality of Fund investments.
S&P RATING MOODY'S
AVERAGE DESTINY I DESTINY II RATING AVERAGE DESTINY I DESTINY II
INVESTMENT GRADE
AAA/AA/A 3.39 % 3.28 % Aaa/Aa/A 3.45 % 3.36 %
Highest quality, High quality,
Upper medium
BBB 0 % 0 % Baa 0 % 0 % Medium grade, speculative
characters
LOWER QUALITY
BB 0 % 0 % Ba 0 % 0 % Moderately speculative
B 0 % 0 % B 0.11 % 0.26 % Speculative
CCC 0 % 0 % Caa 0 % 0 % Highly speculative
CC/C 0 % 0 % Ca/C 0 % 0 % Poor quality, Lowest
quality,
no interest
D 0 % 0 % In default, in arrears
The dollar-weighted average of debt securities not rated by either S&P or
Moody's amounted to 0 % and 0 % for Destiny I and Destiny II,
respectively. This may include securities rated by other nationally
recognized statistical rating organizations as well as unrated securities.
Unrated securities are not necessarily lower-quality securities. Please
refer to the Funds' SAI for a more complete discussion of these ratings.
FIDELITY DESTINY PORTFOLIOS: DESTINY I
INVESTMENTS/SEPTEMBER 30, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENT IN SECURITIES)
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - 85.7%
AEROSPACE & DEFENSE - 0.6%
AEROSPACE & DEFENSE - 0.1%
Boeing Co. 90,000 $ 3,881,250
DEFENSE ELECTRONICS - 0.5%
Loral Corp. 134,700 5,303,813
Raytheon Co. 199,500 12,792,938
18,096,751
TOTAL AEROSPACE & DEFENSE 21,978,001
BASIC INDUSTRIES - 3.1%
CHEMICALS & PLASTICS - 0.5%
Albemarle Corp. 290,750 4,179,531
Grace (W.R.) & Co. 168,200 6,980,300
Nalco Chemical Co. 120,500 3,961,438
15,121,269
IRON & STEEL - 0.4%
Inland Steel Industries, Inc. (a) 63,500 2,500,313
LTV Corp. (a) 55,300 1,133,650
Nucor Corp. 12,000 835,500
Oregon Steel Mills, Inc. 102,300 1,815,825
USX-U.S. Steel Group 175,300 7,340,688
13,625,976
METALS & MINING - 1.3%
Alcan Aluminum Ltd. 96,527 2,541,508
Aluminum Co. of America 22,400 1,898,400
Broken Hill Proprietary Co. Ltd. (The) 62,119 903,179
Noranda, Inc. 369,200 7,453,797
Reynolds Metals Co. 530,400 30,033,900
42,830,784
PACKAGING & CONTAINERS - 0.6%
Owens-Illinois, Inc. (a) 1,616,500 18,791,813
PAPER & FOREST PRODUCTS - 0.3%
Bowater, Inc. 44,000 1,281,500
International Paper Co. 69,900 5,487,150
Stone Consolidated Corp. (a) 270,000 3,843,364
10,612,014
TOTAL BASIC INDUSTRIES 100,981,856
CONSTRUCTION & REAL ESTATE - 0.3%
BUILDING MATERIALS - 0.2%
Tecumseh Products Co. Class A 155,000 7,643,438
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Crown American Realty Trust (SBI) 74,000 989,750
Vornado Realty Trust 30,400 1,041,200
2,030,950
TOTAL CONSTRUCTION & REAL ESTATE 9,674,388
DURABLES - 4.5%
AUTOS, TIRES, & ACCESSORIES - 3.5%
Chrysler Corp. 1,435,800 $ 64,431,525
Discount Auto Parts, Inc. (a) 419,200 6,916,800
Ford Motor Co. 312,900 8,682,975
General Motors Corp. 658,646 30,874,031
Lonrho Ltd. Ord. 2,742,418 5,706,012
116,611,343
HOME FURNISHINGS - 0.1%
LADD Furniture, Inc. 497,100 2,982,600
TEXTILES & APPAREL - 0.9%
Burlington Industries, Inc. (a) 766,900 8,052,450
Fruit of the Loom, Inc. Class A (a) 264,600 6,780,375
Unifi, Inc. 303,600 7,590,000
VF Corp. 115,800 5,717,625
Westpoint Stevens, Inc. Class A (a) 106,500 1,544,250
29,684,700
TOTAL DURABLES 149,278,643
ENERGY - 8.2%
ENERGY SERVICES - 1.5%
Baker Hughes, Inc. 651,100 12,126,738
Dreco Energy Services Ltd. Class A (a) 50,600 468,050
McDermott International, Inc. 28,800 741,600
Schlumberger Ltd. 655,300 35,631,938
48,968,326
OIL & GAS - 6.7%
Amerada Hess Corp. 255,300 11,871,450
Apache Corp. 133,100 3,360,775
Atlantic Richfield Co. 169,200 17,068,050
British Petroleum PLC:
ADR 559,748 42,400,911
Ord. 969 6,110
Burlington Resources, Inc. 652,700 24,476,250
Enron Oil & Gas Co. 53,500 1,090,063
Kerr-McGee Corp. 389,400 18,934,575
Louisiana Land & Exploration Co. 563,600 24,657,500
Mesa, Inc. (a) 143,900 791,450
Murphy Oil Corp. 92,100 4,006,350
Noble Affiliates, Inc. 111,500 2,982,625
Oryx Energy Co. 186,600 2,589,075
Royal Dutch Petroleum Co. 70,000 7,516,250
Texaco, Inc. 374,300 22,458,000
Tosco Corp. 581,900 16,511,413
Unocal Corp. 699,076 19,748,897
220,469,744
TOTAL ENERGY 269,438,070
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
FINANCE - 18.7%
BANKS - 7.0%
Banc One Corp. 523,030 $ 15,625,521
Bank of Boston Corp. 1,036,415 27,594,549
BankAmerica Corp. 112,700 4,972,888
Barnett Banks, Inc. 137,500 6,084,375
Boatmen's Bancshares, Inc. 151,100 4,693,544
Chemical Banking Corp. 226,900 7,941,500
Citicorp 367,934 15,637,195
Comerica, Inc. 551,000 15,290,250
CoreStates Financial Corp. 4,400 117,150
First Union Corp. 673,367 29,123,123
Fleet Financial Group, Inc. 292,243 10,995,643
Keycorp. 543,481 16,576,171
Midlantic Corp. 149,900 4,140,988
NationsBank Corp. 472,617 23,158,233
Norwest Corp. 46,300 1,145,925
PNC Financial Corp. 39,300 1,016,888
Regions Financial Corp. 41,303 1,443,023
Shawmut National Corp. 1,838,013 38,138,770
Southern National Corp. 63,000 1,299,375
State Street Boston Corp. 119,500 4,361,750
Union Planters Corp. 509 12,471
229,369,332
FEDERAL SPONSORED CREDIT - 5.6%
Federal Home Loan Mortgage Corporation 425,200 22,695,050
Federal National Mortgage Association 2,034,900 160,248,375
182,943,425
INSURANCE - 4.2%
Allstate Corp. 882,100 21,060,138
American International Group, Inc. 38,100 3,386,138
General Re Corp. 139,500 14,769,563
John Alden Financial Corp. 508,300 18,616,488
MBIA, Inc. 130,300 7,769,138
Providian Corp. 262,400 8,265,600
SAFECO Corp. 246,100 12,674,150
St. Paul Companies, Inc. (The) 592,100 24,054,063
Travelers, Inc. (The) 59,233 1,947,285
UNUM Corp. 598,700 27,540,200
140,082,763
SAVINGS & LOANS - 1.2%
Ahmanson (H.F.) & Co. 881,100 18,392,963
American Savings of Florida FSB (a) 92,500 1,699,688
Golden West Financial Corp. 522,800 20,715,950
40,808,601
SECURITIES INDUSTRY - 0.7%
Lehman Brothers Holdings, Inc. 311,200 $ 4,590,200
Merrill Lynch & Co., Inc. 170,800 5,913,950
Morgan Stanley Group, Inc. 141,800 8,809,325
United Asset Management Corp. 94,200 3,544,275
22,857,750
TOTAL FINANCE 616,061,871
HEALTH - 4.8%
DRUGS & PHARMACEUTICALS - 3.1%
Allergan, Inc. 156,400 3,968,650
Bristol-Myers Squibb Co. 85,400 4,899,825
Carter-Wallace, Inc. 317,800 4,330,025
Elan PLC ADR (a) 129,800 5,094,650
Pfizer, Inc. 663,300 45,850,613
Schering-Plough Corp. 303,600 21,555,600
Warner-Lambert Co. 214,700 17,229,675
102,929,038
MEDICAL EQUIPMENT & SUPPLIES - 0.9%
Baxter International, Inc. 594,200 16,711,875
Johnson & Johnson 172,400 8,900,150
Medtronic, Inc. 74,200 3,923,325
Pall Corp. 15,100 259,984
29,795,334
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 618,125 26,888,438
TOTAL HEALTH 159,612,810
INDUSTRIAL MACHINERY & EQUIPMENT - 3.1%
ELECTRICAL EQUIPMENT - 0.5%
General Electric Co. 204,000 9,817,500
Philips NV 183,400 5,570,775
15,388,275
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
Caterpillar, Inc. 565,000 30,580,625
Deere & Co. 539,000 36,988,875
Joy Technologies, Inc. Class A (a) 147,500 2,138,750
69,708,250
POLLUTION CONTROL - 0.5%
Attwoods PLC:
ADR 364,820 3,328,983
Ord. 1,240,580 2,229,235
Laidlaw, Inc. Class B 1,466,300 11,322,886
16,881,104
TOTAL INDUSTRIAL MACHINERY
& EQUIPMENT 101,977,629
MEDIA & LEISURE - 3.0%
BROADCASTING - 1.1%
Home Shopping Network, Inc. (a) 303,217 3,259,583
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
People's Choice TV Corp. (a) 47,100 $ 1,106,850
Tele-Communications, Inc. Class A (a) 1,437,400 31,892,313
36,258,746
ENTERTAINMENT - 0.3%
Royal Caribbean Cruises Ltd. 368,500 9,581,000
LEISURE DURABLES & TOYS - 0.3%
Outboard Marine Corp. 444,200 10,105,550
PUBLISHING - 0.7%
American Greetings Corp. Class A 56,700 1,637,213
Enquirer/Star Group, Inc. Class A 115,800 1,954,125
Gannett Co., Inc. 333,600 16,012,800
Knight-Ridder, Inc. 54,800 2,726,300
22,330,438
RESTAURANTS - 0.6%
Au Bon Pain, Inc. Class A (a) 171,400 2,860,238
Bertucci's, Inc. (a) 158,000 1,777,500
Brinker International, Inc. (a) 59,600 1,430,400
McDonald's Corp. 476,400 12,505,500
18,573,638
TOTAL MEDIA & LEISURE 96,849,372
NONDURABLES - 6.5%
BEVERAGES - 0.2%
PepsiCo, Inc. 190,200 6,300,375
FOODS - 1.1%
Borden, Inc. 1,336,000 18,370,000
IBP, Inc. 564,785 18,496,709
36,866,709
TOBACCO - 5.2%
Philip Morris Companies, Inc. 2,111,200 129,047,059
RJR Nabisco Holdings Corp. (a) 3,773,500 25,942,813
UST, Inc. 570,700 16,336,288
171,326,160
TOTAL NONDURABLES 214,493,244
PRECIOUS METALS - 0.1%
Homestake Mining Co. 164,200 3,489,250
RETAIL & WHOLESALE - 6.4%
APPAREL STORES - 0.5%
TJX Companies, Inc. 761,425 15,989,925
DRUG STORES - 0.2%
Rite Aid Corporation 310,400 6,440,800
GENERAL MERCHANDISE STORES - 2.7%
Dayton Hudson Corp. 16,400 1,254,600
Dillard Department Stores, Inc. Class A 253,000 6,767,750
Federated Department Stores, Inc. (a) 1,511,973 $ 34,775,379
Sears, Roebuck & Co. 503,500 24,168,000
Value City Department Stores, Inc. (a) 363,100 4,811,075
Wal-Mart Stores, Inc. 805,300 18,823,888
90,600,692
GROCERY STORES - 0.5%
Food Lion, Inc. Class A 1,137,100 6,396,188
Safeway, Inc. (a) 241,300 7,088,188
Stop & Shop Companies, Inc. (a) 137,000 3,442,125
16,926,501
RETAIL & WHOLESALE, MISCELLANEOUS - 2.5%
Best Buy Co., Inc. (a) 417,200 16,322,950
Body Shop International PLC (a) 709,900 2,495,327
Circuit City Stores, Inc. 560,700 14,508,113
Good Guys, Inc. (a) 211,500 2,617,313
Home Depot, Inc. (The) 317,800 13,347,600
Office Depot, Inc. 101,700 2,644,200
Rex Stores Corp. (a) 149,000 2,998,625
Staples, Inc. (a) 36,300 1,193,363
Toys "R" Us, Inc. (a) 747,500 26,629,688
82,757,179
TOTAL RETAIL & WHOLESALE 212,715,097
SERVICES - 0.3%
Borg Warner Securities Corp. (a) 89,100 980,100
Pinkertons, Inc. (a) 239,900 3,778,425
Supercuts, Inc. (a) 149,400 1,718,100
Zebra Technologies Corp. Class A (a) 118,900 4,369,575
10,846,200
TECHNOLOGY - 14.3%
COMMUNICATIONS EQUIPMENT - 0.9%
Cabletron Systems, Inc. (a) 276,000 13,144,500
Cisco Systems, Inc. (a) 260,700 7,136,663
Newbridge Networks Corp. (a) 144,800 4,633,600
Wellfleet Communications, Inc. (a) 185,800 3,599,875
28,514,638
COMPUTER SERVICES & SOFTWARE - 1.0%
Cheyenne Software, Inc. (a) 162,650 1,504,513
MicroAge, Inc. (a) 21,300 266,250
Microsoft Corp. (a) 270,900 15,204,263
Oracle Systems Corp. (a) 54,700 2,352,100
Peoplesoft, Inc. (a) 56,300 2,716,475
SHL Systemhouse, Inc. (a) 534,600 3,007,125
Viewlogic Systems, Inc. (a) 453,300 8,839,350
33,890,076
COMPUTERS & OFFICE EQUIPMENT - 6.3%
Compaq Computer Corp. (a) 2,206,700 71,993,588
Digital Equipment Corp. (a) 253,800 6,725,700
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Hewlett-Packard Co. 296,200 $ 25,880,475
International Business Machines Corp. 836,300 58,122,850
SCI Systems, Inc. (a) 785,500 16,593,688
Silicon Graphics, Inc. (a) 76,300 1,964,725
Sun Microsystems, Inc. (a) 344,600 10,122,625
Tandem Computers, Inc. (a) 384,300 6,244,875
Tech Data Corp. (a) 437,800 8,427,650
206,076,176
ELECTRONIC INSTRUMENTS - 0.1%
Kulicke & Soffa Industries, Inc. (a) 295,400 4,800,250
ELECTRONICS - 6.0%
Anthem Electronics, Inc. (a) 349,400 11,268,150
Intel Corp. 1,215,200 74,734,800
Methode Electronics, Inc.:
Class A (d) 1,546,800 30,549,300
Class B 30,000 585,000
Molex, Inc. 70,700 2,774,975
Motorola, Inc. 1,049,200 55,345,300
Solectron Corp. (a) 808,100 21,313,638
Texas Instruments, Inc. 26,700 1,825,613
198,396,776
TOTAL TECHNOLOGY 471,677,916
TRANSPORTATION - 3.6%
AIR TRANSPORTATION - 0.8%
AMR Corp. (a) 358,000 18,437,000
Delta Air Lines, Inc. 190,900 8,542,775
26,979,775
RAILROADS - 2.7%
Burlington Northern, Inc. 77,100 3,874,275
CSX Corp. 157,600 10,795,600
Canadian Pacific Ltd. Ord. 1,729,600 28,965,058
Chicago & North Western Holdings
Corp. (a) 135,400 2,792,625
Conrail, Inc. 35,200 1,742,400
Santa Fe Pacific Corp. 1,267,600 28,679,450
Southern Pacific Rail Corp. (a) 635,500 11,915,625
88,765,033
TRUCKING & FREIGHT - 0.1%
Yellow Corp. 97,700 1,819,663
TOTAL TRANSPORTATION 117,564,471
UTILITIES - 8.2%
CELLULAR - 2.2%
Airtouch Communications (a) 673,100 $ 19,267,488
Vodafone Group PLC sponsored ADR 1,716,500 53,855,188
73,122,676
ELECTRIC UTILITY - 4.2%
American Electric Power Co., Inc. 236,300 7,413,913
Baltimore Gas & Electric Co. 307,600 7,074,800
Carolina Power & Light Co. 229,100 6,042,513
Central & South West Corp. 201,400 4,481,150
Consolidated Edison Co. of New York, Inc. 246,500 6,131,688
Detroit Edison Company 231,300 5,898,150
Dominion Resources, Inc. (Va.) 146,600 5,460,850
Duke Power Co. 148,300 5,783,700
Entergy Corp. 154,700 3,596,775
FPL Group, Inc. 172,600 5,609,500
Houston Industries, Inc. 134,300 4,734,075
Niagara Mohawk Power Corp. 315,400 4,179,050
Northern States Power Co. (Minn.) 97,800 4,132,050
Ohio Edison Co. 276,300 5,249,700
PSI Resources, Inc. 275,000 6,153,125
Pacific Gas & Electric Co. 243,500 5,539,625
PacifiCorp. 448,400 7,566,750
Peco Energy Co. 319,200 8,099,700
Public Service Enterprise Group, Inc. 221,200 5,806,500
SCEcorp. 379,800 4,937,400
Southern Co. 410,900 7,653,013
Texas Utilities Co. 145,400 4,743,675
Unicom Corp. 251,300 5,591,425
Union Electric Co. 144,600 5,061,000
136,940,127
GAS - 0.1%
ENSERCH Corp. 131,800 1,828,725
Noram Energy Corp. 122,800 798,200
2,626,925
TELEPHONE SERVICES - 1.7%
AT&T Corp. 190,200 10,270,800
Ameritech Corp. 500,500 20,145,125
Bell Atlantic Corp. 46,600 2,469,800
BellSouth Corp. 82,800 4,616,100
NYNEX Corp. 12,600 485,100
Southwestern Bell Corp. 460,400 19,567,000
57,553,925
TOTAL UTILITIES 270,243,653
TOTAL COMMON STOCKS
(Cost $2,402,611,544) 2,826,882,471
VALUE
SHARES (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - 0.3%
NONDURABLES - 0.3%
TOBACCO - 0.3%
RJR Nabisco Holdings Corp., Series A,
depositary shares representing 1/4 shares
(Cost $7,453,476) 1,234,100 $ 8,792,963
MOODY'S
RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (B)
CONVERTIBLE BONDS - 0.2%
BASIC INDUSTRIES - 0.1%
PAPER & FOREST PRODUCTS - 0.1%
Stone Consolidated Corp. 8%,
12/31/03 B2 CAD 2,800,000 2,855,123
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Food Lion, Inc. 5%, 6/1/03 (c) A2 $ 2,000,000 1,887,500
TOTAL CONVERTIBLE BONDS
(Cost $4,105,485) 4,742,623
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 7.0%
U.S. TREASURY OBLIGATIONS - 6.9%
stripped coupon 0%, 8/15/19 Aaa 41,000,000 5,557,550
8 1/8%, 8/15/19 Aaa 220,000,000 222,406,800
227,964,350
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.1%
Financing Corp. stripped coupon
0%, 9/26/19 Aaa 25,000,000 3,212,500
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $247,231,273) 231,176,850
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 6.8%
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 4.91% dated
9/30/94 due 10/3/94 $ 224,678,894 224,587,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,885,988,778) $ 3,296,181,907
CURRENCY ABBREVIATIONS:
CAD - Canadian dollar
LEGEND:
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $1,887,500 or 0.1% of net
assets.
(d) Affiliated company (see Note 6 of Notes to Financial Statements).
OTHER INFORMATION:
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S S&P
RATINGS RATINGS
Aaa, Aa, A 7.1% AAA, AA, A 7.0%
Baa 0.0% BBB 0.0%
Ba 0.0% BB 0.0%
B 0.1% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.0%.
INCOME TAX INFORMATION:
At September 30, 1994, the aggregate cost of investment securities for
income tax purposes was $2,887,613,981. Net unrealized appreciation
aggregated $408,567,926, of which $538,537,782 related to appreciated
investment securities and $129,969,856 related to depreciated investment
securities.
The fund hereby designates $15,502,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $224,587,000) (cost $ 3,296,181,907
$2,885,988,778) - See accompanying schedule
Cash 720
Receivable for investments sold 35,483,687
Receivable for fund shares sold 444,381
Dividends receivable 7,939,198
Interest receivable 2,338,089
Other receivables 1,565,208
Total assets 3,343,953,190
LIABILITIES
Payable for investments purchased $ 68,538,478
Accrued management fee 1,816,874
Other payables and accrued expenses 357,447
Total liabilities 70,712,799
NET ASSETS $ 3,273,240,391
Net Assets consist of:
Paid in capital $ 2,357,818,470
Undistributed net investment income 43,805,352
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 461,396,405
Net unrealized appreciation (depreciation) on investments 410,220,164
NET ASSETS, for 184,896,598 shares outstanding $ 3,273,240,391
NET ASSET VALUE, offering price and redemption price per share ($3,273,240,391 (divided by) 184,896,598 shares) $17.70
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended September 30, 1994
INVESTMENT INCOME $ 60,606,457
Dividends (including $106,729 received from affiliated issuers)
Interest 15,804,145
Total income 76,410,602
EXPENSES
Management fee $ 15,650,821
Basic fee
Performance adjustment 5,165,391
Transfer agent fees 125,929
Accounting fees and expenses 761,590
Non-interested trustees' compensation 19,258
Custodian fees and expenses 338,621
Registration fees 14,697
Audit 83,605
Legal 37,034
Interest 19,425
Miscellaneous 71,288
Total expenses before reductions 22,287,659
Expense reductions (8,010) 22,279,649
Net investment income 54,130,953
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 513,857,446
Foreign currency transactions (25,525) 513,831,921
Change in net unrealized appreciation (depreciation) on:
Investment securities (203,657,249)
Assets and liabilities in 27,035 (203,630,214)
foreign currencies
Net gain (loss) 310,201,707
Net increase (decrease) in $ 364,332,660
net assets resulting from operations
</TABLE>
Statement of Changes in Net Assets
DRAFT
YEAR ENDED THREE MONTHS YEAR ENDED
SEPTEMBER 30, ENDED JUNE 30,
1994 SEPTEMBER 30, 1993
1993
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations $ 54,130,953 $ 8,223,822 $ 47,110,814
Net investment income
Net realized gain (loss) 513,831,921 137,464,586 286,103,905
Change in net unrealized appreciation (depreciation) (203,630,214) (10,287,058) 227,662,206
Net increase (decrease) in net assets resulting from operations 364,332,660 135,401,350 560,876,925
Distributions to shareholders: (19,385,874) (23,304,303) (45,364,933)
From net investment income
From net realized gain (183,280,710) (168,123,876) (361,912,739)
Total distributions (202,666,584) (191,428,179) (407,277,672)
Share transactions 138,945,156 30,602,732 126,604,125
Net proceeds from sales of shares
Reinvestment of distributions 193,082,050 181,894,825 393,224,600
Cost of shares redeemed (193,677,416) (52,021,231) (177,496,388)
Net increase (decrease) in net assets resulting from share transactions 138,349,790 160,476,326 342,332,337
Total increase (decrease) in net assets 300,015,866 104,449,497 495,931,590
NET ASSETS
Beginning of period 2,973,224,525 2,868,775,028 2,372,843,438
End of period (including undistributed net investment income of $43,805,352, $ 3,273,240,391 $ 2,973,224,525 $ 2,868,775,028
$36,359,014 and $51,439,495 respectively)
OTHER INFORMATION
Shares
Sold 7,991,172 1,794,188 7,993,828
Issued in reinvestment of distributions 11,701,953 11,077,639 26,251,547
Redeemed (11,149,412) (3,080,615) (11,147,606)
Net increase (decrease) 8,543,713 9,791,212 23,097,769
</TABLE>
FIDELITY DESTINY PORTFOLIOS: DESTINY II
INVESTMENTS/SEPTEMBER 30, 1994
(SHOWING PERCENTAGE OF TOTAL VALUE OF
INVESTMENT IN SECURITIES)
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - 84.0%
AEROSPACE & DEFENSE - 0.7%
AEROSPACE & DEFENSE - 0.1%
Boeing Co. 35,000 $ 1,509,375
DEFENSE ELECTRONICS - 0.6%
Loral Corp. 58,600 2,307,375
Raytheon Co. 87,700 5,623,763
7,931,138
TOTAL AEROSPACE & DEFENSE 9,440,513
BASIC INDUSTRIES - 3.0%
CHEMICALS & PLASTICS - 0.5%
Albemarle Corp. 125,050 1,797,594
Grace (W.R.) & Co. 71,000 2,946,500
Nalco Chemical Co. 49,300 1,620,738
6,364,832
IRON & STEEL - 0.4%
Inland Steel Industries, Inc. (a) 27,900 1,098,563
LTV Corp. (a) 24,300 498,150
Nucor Corp. 5,000 348,125
Oregon Steel Mills, Inc. 43,600 773,900
USX-U.S. Steel Group 77,000 3,224,375
5,943,113
METALS & MINING - 1.2%
Alcan Aluminum Ltd. 42,456 1,117,845
Aluminum Co. of America 9,800 830,550
Broken Hill Proprietary Co. Ltd. (The) 27,183 395,227
Noranda, Inc. 162,000 3,270,626
Reynolds Metals Co. 215,000 12,174,342
17,788,590
PACKAGING & CONTAINERS - 0.6%
Owens-Illinois, Inc. (a) 703,200 8,174,700
PAPER & FOREST PRODUCTS - 0.3%
Bowater, Inc. 19,300 562,113
International Paper Co. 29,000 2,276,500
Stone Consolidated Corp. (a) 130,000 1,850,508
4,689,121
TOTAL BASIC INDUSTRIES 42,960,356
CONSTRUCTION & REAL ESTATE - 0.2%
BUILDING MATERIALS - 0.2%
Tecumseh Products Co. Class A 64,000 3,156,000
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Vornado Realty Trust 13,400 458,950
TOTAL CONSTRUCTION & REAL ESTATE 3,614,950
DURABLES - 4.6%
AUTOS, TIRES, & ACCESSORIES - 3.5%
Chrysler Corp. 631,600 $ 28,343,050
Discount Auto Parts, Inc. (a) 162,700 2,684,550
Ford Motor Co. 134,300 3,726,825
General Motors Corp. 282,736 13,253,250
Lonrho Ltd. Ord. 1,204,508 2,506,160
50,513,835
CONSUMER ELECTRONICS - 0.1%
Harman International Industries, Inc. 61,700 2,151,788
HOME FURNISHINGS - 0.1%
LADD Furniture, Inc. 286,800 1,720,800
TEXTILES & APPAREL - 0.9%
Burlington Industries, Inc. (a) 337,400 3,542,700
Fruit of the Loom, Inc. Class A (a) 111,600 2,859,750
Unifi, Inc. 124,300 3,107,500
VF Corp. 49,600 2,449,000
Westpoint Stevens, Inc. Class A (a) 42,800 620,600
12,579,550
TOTAL DURABLES 66,965,973
ENERGY - 7.4%
ENERGY SERVICES - 1.5%
Baker Hughes, Inc. 279,100 5,198,238
Dreco Energy Services Ltd. Class A (a) 20,400 188,700
Schlumberger Ltd. 286,000 15,551,250
20,938,188
OIL & GAS - 5.9%
Amerada Hess Corp. 109,800 5,105,700
Apache Corp. 58,600 1,479,650
Atlantic Richfield Co. 75,800 7,646,325
British Petroleum PLC:
ADR 244,855 18,547,766
Ord. 408 2,572
Burlington Resources, Inc. 287,100 10,766,250
Enron Oil & Gas Co. 23,000 468,625
Kerr-McGee Corp. 95,300 4,633,963
Louisiana Land & Exploration Co. 169,900 7,433,125
Mesa, Inc. (a) 62,900 345,950
Murphy Oil Corp. 48,200 2,096,700
Noble Affiliates, Inc. 49,100 1,313,425
Oryx Energy Co. 77,900 1,080,863
Texaco, Inc. 164,700 9,882,000
Tosco Corp. 248,000 7,037,000
Unocal Corp. 290,912 8,218,264
86,058,178
TOTAL ENERGY 106,996,366
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
FINANCE - 18.4%
BANKS - 6.8%
Banc One Corp. 221,870 $ 6,628,366
Bank of Boston Corp. 455,947 12,139,589
BankAmerica Corp. 49,600 2,188,600
Barnett Banks, Inc. 59,500 2,632,875
Boatmen's Bancshares, Inc. 62,900 1,953,831
Chemical Banking Corp. 99,800 3,493,000
Citicorp 161,906 6,881,005
Comerica, Inc. 242,400 6,726,600
First Union Corp. 290,635 12,569,964
Fleet Financial Group, Inc. 128,522 4,835,640
Keycorp 236,409 7,210,475
Midlantic Corp. 65,900 1,820,488
NationsBank Corp. 196,677 9,637,173
Norwest Corp. 20,400 504,900
PNC Financial Corp. 17,300 447,638
Regions Financial Corp. 18,101 632,404
Shawmut National Corp. 790,104 16,394,658
Southern National Corp. 26,600 548,625
State Street Boston Corp. 52,600 1,919,900
Union Planters Corp. 211 5,169
99,170,900
FEDERAL SPONSORED CREDIT - 5.6%
Federal Home Loan Mortgage Corporation 187,100 9,986,463
Federal National Mortgage Association 895,200 70,497,000
80,483,463
INSURANCE - 4.2%
Allstate Corp. 379,400 9,058,175
American International Group, Inc. 15,800 1,404,225
General Re Corp. 61,300 6,490,138
John Alden Financial Corp. 223,500 8,185,688
MBIA, Inc. 56,500 3,368,813
Providian Corp. 113,800 3,584,700
SAFECO Corp. 103,900 5,350,850
St. Paul Companies, Inc. (The) 256,200 10,408,125
Travelers, Inc. (The) 24,700 812,013
UNUM Corp. 263,400 12,116,400
60,779,127
SAVINGS & LOANS - 1.1%
Ahmanson (H.F.) & Co. 371,200 7,748,800
American Savings of Florida FSB (a) 39,100 718,463
Golden West Financial Corp. 206,900 8,198,413
16,665,676
SECURITIES INDUSTRY - 0.7%
Lehman Brothers Holdings, Inc. 132,500 $ 1,954,375
Merrill Lynch & Co., Inc. 75,000 2,596,875
Morgan Stanley Group, Inc. 60,900 3,783,413
United Asset Management Corp. 47,200 1,775,900
10,110,563
TOTAL FINANCE 267,209,729
HEALTH - 4.9%
DRUGS & PHARMACEUTICALS - 3.2%
Allergan, Inc. 119,700 3,037,388
Bristol-Myers Squibb Co. 37,100 2,128,613
Carter-Wallace, Inc. 137,400 1,872,075
Elan PLC ADR (a) 66,200 2,598,350
Pfizer, Inc. 291,800 20,170,675
Schering-Plough Corp. 130,600 9,272,600
Warner-Lambert Co. 93,900 7,535,475
46,615,176
MEDICAL EQUIPMENT & SUPPLIES - 0.9%
Baxter International, Inc. 251,100 7,062,188
Johnson & Johnson 75,300 3,887,363
Medtronic, Inc. 32,600 1,723,725
Pall Corp. 6,600 113,636
12,786,912
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 271,840 11,825,040
TOTAL HEALTH 71,227,128
INDUSTRIAL MACHINERY & EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 0.5%
General Electric Co. 87,700 4,220,563
Philips NV 80,700 2,451,263
6,671,826
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
Caterpillar, Inc. 257,900 13,958,838
Deere & Co. 237,100 16,270,988
Joy Technologies, Inc. Class A (a) 64,900 941,050
31,170,876
POLLUTION CONTROL - 0.6%
Attwoods PLC:
ADR 231,300 2,110,613
Ord. 889,120 1,597,686
Laidlaw, Inc. Class B 702,400 5,423,989
9,132,288
TOTAL INDUSTRIAL MACHINERY &
EQUIPMENT 46,974,990
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
MEDIA & LEISURE - 2.8%
BROADCASTING - 1.0%
Home Shopping Network, Inc. (a) 122,712 $ 1,319,154
People's Choice TV Corp. (a) 20,300 477,050
Tele-Communications, Inc. Class A (a) 597,700 13,261,469
15,057,673
ENTERTAINMENT - 0.3%
Royal Carribean Cruises Ltd. 158,500 4,121,000
LEISURE DURABLES & TOYS - 0.3%
Outboard Marine Corp. 191,100 4,347,525
PUBLISHING - 0.6%
American Greetings Corp. Class A 25,000 721,875
Enquirer/Star Group, Inc. Class A 53,100 896,063
Gannett Co., Inc. 140,300 6,734,400
8,352,338
RESTAURANTS - 0.6%
Au Bon Pain, Inc. Class A (a) 73,400 1,224,863
Bertucci's, Inc. (a) 67,100 754,875
Brinker International, Inc. (a) 25,600 614,400
McDonald's Corp. 204,100 5,357,625
7,951,763
TOTAL MEDIA & LEISURE 39,830,299
NONDURABLES - 6.5%
BEVERAGES - 0.2%
PepsiCo, Inc. 83,700 2,772,563
FOODS - 1.2%
Borden, Inc. 626,400 8,613,000
IBP, Inc. 248,431 8,136,115
16,749,115
TOBACCO - 5.1%
Philip Morris Companies, Inc. 928,800 56,772,900
RJR Nabisco Holdings Corp. (a) 1,570,200 10,795,125
UST, Inc. 243,300 6,964,463
74,532,488
TOTAL NONDURABLES 94,054,166
PRECIOUS METALS - 0.1%
Homestake Mining Co. 71,100 1,510,875
RETAIL & WHOLESALE - 6.5%
APPAREL STORES - 0.5%
TJX Companies, Inc. 318,400 6,686,400
DRUG STORES - 0.2%
Rite Aid Corporation 135,700 2,815,775
GENERAL MERCHANDISE STORES - 2.8%
Dayton Hudson Corp. 7,200 550,800
Dillard Department Stores, Inc. Class A 110,700 2,961,225
Federated Department Stores, Inc. (a) 665,200 $ 15,299,600
Sears, Roebuck & Co. 229,400 11,011,200
Value City Department Stores, Inc. (a) 159,700 2,116,025
Wal-Mart Stores, Inc. 340,200 7,952,175
39,891,025
GROCERY STORES - 0.6%
Food Lion, Inc.:
Class A 500,200 2,813,625
Class B 120,000 705,000
Safeway, Inc. (a) 106,200 3,119,625
Stop & Shop Companies, Inc. (a) 108,600 2,728,575
9,366,825
RETAIL & WHOLESALE, MISCELLANEOUS - 2.4%
Best Buy Co., Inc. (a) 171,300 6,702,113
Body Shop International PLC (a) 304,300 1,069,627
Circuit City Stores, Inc. 241,200 6,241,050
Good Guys, Inc. (a) 88,900 1,100,138
Home Depot, Inc. (The) 139,800 5,871,600
Office Depot, Inc. 44,700 1,162,200
Rex Stores Corp. (a) 63,500 1,277,938
Staples, Inc. (a) 14,700 483,263
Toys "R" Us, Inc. (a) 324,100 11,546,063
35,453,992
TOTAL RETAIL & WHOLESALE 94,214,017
SERVICES - 0.3%
Borg Warner Securities Corp. (a) 39,200 431,200
Pinkertons, Inc. (a) 120,700 1,901,025
Supercuts, Inc. (a) 62,000 713,000
Zebra Technologies Corp. Class A (a) 52,300 1,922,025
4,967,250
TECHNOLOGY - 13.4%
COMMUNICATIONS EQUIPMENT - 0.9%
Cabletron Systems, Inc. (a) 124,800 5,943,600
Cisco Systems, Inc. (a) 112,200 3,071,475
Newbridge Networks Corp. (a) 61,700 1,974,400
Wellfleet Communications, Inc. (a) 78,200 1,515,125
12,504,600
COMPUTER SERVICES & SOFTWARE - 1.0%
Cheyenne Software, Inc. (a) 71,500 661,375
MicroAge, Inc. (a) 9,300 116,250
Microsoft Corp. (a) 119,200 6,690,100
Oracle Systems Corp. (a) 24,000 1,032,000
Peoplesoft, Inc. (a) 23,800 1,148,350
SHL Systemhouse, Inc. (a) 220,100 1,238,063
Viewlogic Systems, Inc. (a) 198,200 3,864,900
14,751,038
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 6.3%
Compaq Computer Corp. (a) 970,100 $ 31,649,513
Digital Equipment Corp. (a) 111,600 2,957,400
Hewlett-Packard Co. 126,900 11,087,888
International Business Machines Corp. 363,700 25,277,150
SCI Systems, Inc. (a) 439,900 9,292,888
Silicon Graphics, Inc. (a) 33,500 862,625
Sun Microsystems, Inc. (a) 147,900 4,344,563
Tandem Computers, Inc. (a) 148,900 2,419,625
Tech Data Corp. (a) 192,600 3,707,550
91,599,202
ELECTRONIC INSTRUMENTS - 0.1%
Kulicke & Soffa Industries, Inc. (a) 120,500 1,958,125
ELECTRONICS - 5.1%
Anthem Electronics, Inc. (a) 142,400 4,592,400
Intel Corp. 534,500 32,871,750
Methode Electronics, Inc. Class A 92,100 1,818,975
Molex, Inc. 28,100 1,102,925
Motorola, Inc. 443,100 23,373,525
Solectron Corp. (a) 355,498 9,376,260
Texas Instruments, Inc. 11,800 806,825
73,942,660
TOTAL TECHNOLOGY 194,755,625
TRANSPORTATION - 3.8%
AIR TRANSPORTATION - 0.8%
AMR Corp. (a) 157,500 8,111,250
Delta Air Lines, Inc. 84,000 3,759,000
11,870,250
RAILROADS - 2.9%
Burlington Northern, Inc. 33,700 1,693,425
CSX Corp. 68,300 4,678,550
Canadian Pacific Ltd. Ord. 967,100 16,195,714
Chicago & North Western
Holdings Corp. (a) 58,000 1,196,250
Conrail, Inc. 15,400 762,300
Santa Fe Pacific Corp. 594,900 13,459,613
Southern Pacific Rail Corp. (a) 249,000 4,668,750
42,654,602
TRUCKING & FREIGHT - 0.1%
Yellow Corp. 38,900 724,513
TOTAL TRANSPORTATION 55,249,365
UTILITIES - 8.2%
CELLULAR - 2.2%
Airtouch Communications (a) 296,100 $ 8,475,863
Vodafone Group PLC sponsored ADR 755,000 23,688,125
32,163,988
ELECTRIC UTILITY - 4.1%
American Electric Power Co., Inc. 103,900 3,259,863
Baltimore Gas & Electric Co. 135,300 3,111,900
Carolina Power & Light Co. 100,700 2,655,963
Central & South West Corp. 81,600 1,815,600
Consolidated Edison Co. of New York, Inc. 99,800 2,482,525
Detroit Edison Company 99,200 2,529,600
Dominion Resources, Inc. (Va.) 61,900 2,305,775
Duke Power Co. 65,200 2,542,800
Entergy Corp. 68,000 1,581,000
FPL Group, Inc. 69,900 2,271,750
Houston Industries, Inc. 58,700 2,069,175
Niagara Mohawk Power Corp. 137,800 1,825,850
Northern States Power Co. (Minn.) 40,900 1,728,025
Ohio Edison Co. 121,500 2,308,500
PSI Resources, Inc. 111,300 2,490,338
Pacific Gas & Electric Co. 106,500 2,422,875
Peco Energy Co. 139,500 3,539,813
PacifiCorp. 193,700 3,268,688
Public Service Enterprise Group, Inc. 97,300 2,554,125
SCEcorp 161,800 2,103,400
Southern Co. 180,700 3,365,538
Texas Utilities Co. 63,600 2,074,950
Unicom Corp. 110,500 2,458,625
Union Electric Co. 60,900 2,131,500
58,898,178
GAS - 0.2%
ENSERCH Corp. 56,700 786,713
Noram Energy Corp. 184,800 1,201,200
1,987,913
TELEPHONE SERVICES - 1.7%
AT&T Corp. 83,000 4,482,000
Ameritech Corp. 220,200 8,863,050
Bell Atlantic Corp. 19,400 1,028,200
BellSouth Corp. 34,200 1,906,650
NYNEX Corp. 5,500 211,750
Southwestern Bell Corp. 202,600 8,610,500
25,102,150
TOTAL UTILITIES 118,152,229
TOTAL COMMON STOCKS
(Cost $1,095,062,077) 1,218,123,831
VALUE
SHARES (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - 0.2%
NONDURABLES - 0.2%
TOBACCO - 0.2%
RJR Nabisco Holdings Corp., Series A,
depositary shares representing 1/4 shares
(Cost $2,978,849) 491,600 $ 3,502,650
MOODY'S
RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (B)
CONVERTIBLE BONDS - 0.3%
BASIC INDUSTRIES - 0.2%
PAPER & FOREST PRODUCTS - 0.2%
Stone Consolidated Corp. 8%,
12/31/03 B2 CAD 2,800,000 2,855,123
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Food Lion, Inc. 5%, 6/1/03 (c) A2 $ 1,000,000 943,750
TOTAL CONVERTIBLE BONDS
(Cost $3,105,485) 3,798,873
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 6.8%
U.S. TREASURY OBLIGATIONS - 6.4%
stripped coupon 0%, 8/15/19 Aaa 82,000,000 11,115,100
8 1/8%, 8/15/19 Aaa 80,000,000 80,875,200
91,990,300
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.4%
Financing Corp. stripped coupon
0%, 9/26/19 Aaa 50,000,000 6,425,000
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $106,029,893) 98,415,300
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 8.7%
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 4.91%
dated 9/30/94 due 10/3/94 $ 126,670,808 126,619,000
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $1,333,795,304) $ 1,450,459,654
CURRENCY ABBREVIATIONS:
CAD - Canadian dollar
LEGEND:
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) 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 $943,750 or 0.1% of net
assets.
OTHER INFORMATION:
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S S&P
RATINGS RATINGS
Aaa, Aa, A 6.9% AAA, AA, A 6.8%
Baa 0.0% BBB 0.0%
Ba 0.0% BB 0.0%
B 0.2% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.0%.
INCOME TAX INFORMATION:
At September 30, 1994, the aggregate cost of investment securities for
income tax purposes was $1,334,613,585. Net unrealized appreciation
aggregated $115,846,069, of which $176,577,021 related to appreciated
investment securities and $60,730,952 related to depreciated investment
securities.
The fund hereby designates $6,057,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $126,619,000) (cost $ 1,450,459,654
$1,333,795,304) - See accompanying schedule
Cash 269
Receivable for investments sold 13,903,017
Receivable for fund shares sold 13,503
Dividends receivable 3,217,330
Interest receivable 867,003
Other receivables 296,598
Total assets 1,468,757,374
LIABILITIES
Payable for investments purchased $ 30,452,476
Accrued management fee 898,885
Other payables and accrued expenses 231,873
Total liabilities 31,583,234
NET ASSETS $ 1,437,174,140
Net Assets consist of:
Paid in capital $ 1,154,880,417
Undistributed net investment income 17,189,720
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 148,438,218
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 116,665,785
NET ASSETS, for 50,341,364 shares outstanding $ 1,437,174,140
NET ASSET VALUE, offering price and redemption price per share ($1,437,174,140 (divided by) 50,341,364 shares) $28.55
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended September 30, 1994
INVESTMENT INCOME $ 24,465,390
Dividends
Interest 6,834,495
Total income 31,299,885
EXPENSES
Management fee $ 8,253,475
Basic fee
Performance adjustment 1,447,673
Transfer agent fees 63,171
Accounting fees and expenses 551,751
Non-interested trustees' compensation 7,837
Custodian fees and expenses 170,568
Registration fees 64,663
Audit 44,731
Legal 13,948
Miscellaneous 45,863
Total expenses before reductions 10,663,680
Expense reductions (3,807) 10,659,873
Net investment income 20,640,012
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 172,596,668
Foreign currency transactions (17,899) 172,578,769
Change in net unrealized appreciation (depreciation) on:
Investment securities (43,204,938)
Assets and liabilities in foreign 1,435 (43,203,503)
currencies
Net gain (loss) 129,375,266
Net increase (decrease) in net assets resulting from operations $ 150,015,278
</TABLE>
Statement of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED THREE MONTHS YEAR ENDED
SEPTEMBER 30, ENDED JUNE 30,
1994 SEPTEMBER 30, 1993
1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 20,640,012 $ 1,910,328 $ 9,378,198
Net investment income
Net realized gain (loss) 172,578,769 35,014,898 57,686,800
Change in net unrealized appreciation (depreciation) (43,203,503) 16,231,218 74,409,803
Net increase (decrease) in net assets resulting from operations 150,015,278 53,156,444 141,474,801
Distributions to shareholders: (5,278,879) (5,712,746) (7,691,426)
From net investment income
From net realized gain (56,743,144) (37,133,128) (61,841,588)
Total distributions (62,022,023) (42,845,874) (69,533,014)
Share transactions 246,738,564 53,100,966 144,853,682
Net proceeds from sales of shares
Net asset value of shares issued in exchange for the net assets of
Security Action - - 343,907,268
Fund
Reinvestment of distributions 61,856,536 41,893,253 68,844,431
Cost of shares redeemed (102,420,292) (23,371,035) (47,880,114)
Net increase (decrease) in net assets resulting from share transactions 206,174,808 71,623,184 509,725,267
Total increase (decrease) in net assets 294,168,063 81,933,754 581,667,054
NET ASSETS
Beginning of period 1,143,006,077 1,061,072,323 479,405,269
End of period (including undistributed net investment income of $17,189,720, $ 1,437,174,140 $ 1,143,006,077 $ 1,061,072,323
$3,186,434 and $6,988,852, respectively)
OTHER INFORMATION
Shares
Sold 8,844,551 2,004,987 5,937,663
Issued in exchange for the net assets of Security Action Fund - - 13,690,576
Issued in reinvestment of distributions 2,322,816 1,620,630 3,004,696
Redeemed (3,672,057) (887,068) (1,951,871)
Net increase (decrease) 7,495,310 2,738,549 20,681,064
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED SEPTEMBER 30, 1994
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Destiny Portfolios: Destiny I and Destiny II (the funds) are
authorized to issue an unlimited number of shares. Each fund 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. Shares of each fund are offered publicly through Fidelity
Systematic Investment Plans: Destiny I and Destiny II (the Plans), a unit
investment trust with two series. The following summarizes the significant
accounting policies of the funds:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities 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 funds 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.
Effective October 1, 1993, the funds adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported 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. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment in securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include 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 funds are 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 can be directly attributed to a fund. Expenses
which cannot be directly attributed are apportioned between the funds.
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 are primarily due to differing treatments for
foreign currency transactions, partnership, non-taxable dividends and
losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part of
the dividends paid deduction for income tax purposes.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share disclosed. Undistributed net
investment income 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.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993, the funds 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,
the funds changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of September 30, 1993 have been reclassified as
follows:
INCREASE (DECREASE) INCREASE (DECREASE) INCREASE (DECREASE)
FUND IN PAID IN CAPITAL IN UNDISTRIBUTED NET INVESTMENT INCOME IN
ACCUMULATED NET REALIZED GAIN
Destiny I $ 28,971,840 $ (27,476,590) $ (1,495,250)
Destiny II $ 3,203,415 $ (1,440,580) $ (1,762,835)
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds may enter into forward
foreign currency contracts. The U.S. dollar value of forward foreign
currency contracts is determined using forward currency exchange rates
supplied by a quotation service. Losses may arise due to changes in the
value of the foreign currency or if the counterparty does not perform under
the contract.
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.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The funds' investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the funds, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the
SEC, the funds, along with other registered investment companies having
management contracts with FMR, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
funds to borrow from, or lend money to, other participating funds.
3. PURCHASES AND SALES OF INVESTMENTS.
Destiny I: Purchases and sales of securities, other than short-term
securities, aggregated $2,378,098,829 and $2,319,279,815, respectively, of
which U.S. government and government agency obligations aggregated
$375,360,613 and $128,470,710, respectively.
Destiny II: Purchases and sales of securities, other than short-term
securities, aggregated $995,359,739 and $889,931,843, respectively, of
which U.S. government and government agency obligations aggregated
$112,780,913 and $7,273,920, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each 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 each 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 .3000% to .5200% for the period October 1, 1993
to October 31, 1993; .2850% to .5200% for the period November 1, 1993 to
July 31, 1994; and .2700% to .5200% for the period August 1, 1994 to
September 30, 1994. In the event that these rates were lower than the
contractual rates in effect during those periods, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. Effective November 1, 1993, Destiny I's individual fund fee
rate was increased from .12% to .17%. Destiny II's individual fund fee rate
is .30%. The basic fee is subject to a performance adjustment (up to a
maximum of (plus/minus) .24%) based on each fund's investment performance
as compared to the appropriate index over a specified period of time. For
the period, the management fees were equivalent to annual rates of .65% and
.73%, respectively of average net assets after the performance adjustment
for the Destiny I and Destiny II funds, respectively.
Fidelity Distributors Corporation (FDC), an affiliate of FMR and sponsor of
the Plans, received $789,240 and $2,270,276 as its portion of the Creation
and Sales Charges of Destiny I and Destiny II, respectively, for the
period.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the funds' transfer, dividend disbursing and shareholder servicing agent.
FSC receives fees based on the type, size, number of accounts and the
number of transactions made by shareholders. FSC pays for typesetting,
printing and mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. FSC maintains the funds' accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. Each fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms for Destiny I and Destiny II
were $1,385,392 and $617,397, respectively.
5. INTERFUND LENDING PROGRAM.
Destiny II participated in the interfund lending program as a lender. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $27,916,000 and $19,815,875,
respectively. The weighted average interest rate was 4.0%. Interest earned
from the interfund lending program amounted to $17,436 and is included in
interest income on the Statement of Operations.
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 with companies which are or
were affiliates are as follows for Destiny I:
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Methode Electronics, Inc. Class A $ - $ - $ 106,729 $ 30,549,300
7. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
Destiny I, the maximum loan and the average daily loan balances during the
periods for which loans were outstanding amounted to $31,124,000 and
$16,744,600, respectively. The weighted average interest rate was 4.2%.
8. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, Destiny I and Destiny II's expenses
were reduced by $8,010 and $3,807, respectively, under this arrangement.
9. MERGERS.
Pursuant to an Agreement and Plan of Reorganization approved by Security
Action Fund shareholders at a meeting held on March 15, 1993, Destiny II
acquired substantially all of the assets of Security Action Fund on March
26, 1993. The acquisition was accomplished by a tax-free exchange of assets
of Security Action Fund in exchange for 13,690,576 shares of Destiny II
(value at $25.12 per share). Security Action Fund's net assets at that date
(value at $343,907,268), including $29,767,865 of unrealized appreciation
were combined with those of Destiny II. The aggregate net assets of Destiny
II and Security Action Fund immediately before the acquisition were
$635,193,723 and $343,907,268, respectively.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE
SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS IN THE FUNDS
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, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS
NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Fidelity Destiny Portfolios: Destiny I
and Destiny II:
We have audited the accompanying statements of assets and liabilities of
Fidelity Destiny Portfolios: Destiny I and Destiny II, including the
schedules of portfolio investments, as of September 30, 1994, and the
related statements of operations for the year then ended, the statements of
changes in net assets for the year then ended, for the three month period
ended September 30, 1993, and for the year ended June 30, 1993, and the
financial highlights for the year then ended, for the three month period
ended September 30, 1993 and for each of the four years in the period ended
June 30, 1993. These financial statements and financial highlights are the
responsibility of the funds' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Destiny Portfolios: Destiny I and Destiny II as of September
30, 1994, the results of their operations for the year then ended, the
changes in their net assets for the year then ended, and for the three
month period ended September 30, 1993, and for the year ended June 30,
1993, and the financial highlights for the year then ended, for the three
month period ended September 30, 1993 and for each of the four years in the
period ended June 30, 1993, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 14, 1994
FIDELITY
DESTINY
PORTFOLIOS:
DESTINY I
DESTINY II
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
George A. Vanderheiden, VICE PRESIDENT
Gary L. French, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
Arthur S. Loring, SECRETARY
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
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
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
CUSTODIAN AGREEMENT
AGREEMENT made as of the 18th day of July, 1991 between Fidelity Destiny
Portfolios (the "Fund") and the Chase Manhatten Bank, N.A. (the
"Custodian").
W I T N E S S E T H
WHEREAS, the Fund may, from time to time organize one or more series of
shares, in addition to the series set forth in Appendix "A" attached
hereto, each of which shall represent an interest in a separate portfolio
of cash, securities and other assets (all such existing and additional
series now or hereafter listed on Appendix "A" being hereinafter referred
to individually, as a "Portfolio," and collectively, as the "Portfolios");
and
WHEREAS, the Fund desires to appoint the Custodian as custodian on behalf
of the Portfolios in accordance with the provisions of the Investment
Company Act of 1940 (the "1940 Act") and the rules and regulations
thereunder, under the terms and conditions set forth in this Agreement, and
the Custodian has agreed so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
On behalf of the Portfolios, the Fund hereby employs and appoints the
Custodian as a custodian, subject to the terms and provisions of this
Agreement. The Fund shall deliver to the Custodian, or shall cause to be
delivered to the Custodian, cash, securities and other assets owned by the
Portfolios from time to time during the term of this Agreement and shall
specify the Portfolio to which such cash, securities and other assets are
to be specifically allocated.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties
set forth in this Article II. Pursuant to and in accordance with Article
IV hereof, the Custodian may appoint one or more Subcustodians (as
hereinafter defined) to exercise the powers and perform the duties of the
Custodian set forth in this Article II and references to the Custodian in
this Article II shall include any Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all cash,
securities and other assets of the Portfolios delivered to the Custodian
and, on behalf of the Portfolios, the Custodian shall, from time to time,
accept delivery of cash, securities and other assets for safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of the Portfolios
either: (i) by physical possession of the share certificates or other
instruments representing such securities in registered or bearer form; or
(ii) in book-entry form by a Securities System (as hereinafter defined) in
accordance with the provisions of Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of each
Portfolio in the name of the Custodian, the Portfolio or a nominee of
either of them, unless specifically directed by Proper Instructions to hold
such registered securities in so-called street name; provided that, in any
event, all such securities and other assets shall be held in an account of
the Custodian containing only assets of a Portfolio, or only assets held by
Custodian as a fiduciary or custodian for customers, and provided further,
that the records of the Custodian shall indicate at all times the Portfolio
or other customer for which such securities and other assets are held in
such account and the respective interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper Instructions
(as hereinafter defined), the Custodian shall pay for and receive
securities purchased for the account of a Portfolio, provided that payment
shall be made by Custodian only upon receipt of the securities: (a) by the
Custodian; (b) by a clearing corporation of a national securities exchange
of which the Custodian is a member; or (c) by a Securities System.
Notwithstanding the foregoing, upon receipt of Proper Instructions: (i) in
the case of a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the Securities System
that the securities underlying such repurchase agreement have been
transferred by book-entry into the Account (as hereinafter defined)
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities system require that the
Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the securities
underlying the repurchase agreement into the Account; (ii) in the case of
time deposits, call account deposits, currency deposits, and other
deposits, foreign exchange transactions, futures contracts or options,
pursuant to Sections 2.09, 2.10, 2.12 and 2.13 hereof, the Custodian may
make payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; (iii) in the case
of the purchase of securities, the settlement of which occurs outside of
the United States of America, the Custodian may make payment therefor and
receive delivery of such securities in accordance with local custom and
practice generally accepted by Institutional Clients (as hereinafter
defined) in the country in which the settlement occurs, but in all events
subject to the standard of care set forth in Article V hereof; and (iv) in
the case of the purchase of securities in which, in accordance with
standard industry custom and practice generally accepted by Institutional
Clients with respect to such securities, the receipt of such securities and
the payment therefor take place in different countries, the Custodian may
receive delivery of such securities and make payment therefor in accordance
with standard industry custom and practice for such securities generally
accepted by Institutional Clients, but in all events subject to the
standard of care set forth in Article V hereof. For purposes of this
Agreement, an "Institutional Client" shall mean a major commercial bank,
corporation, insurance company, or substantially similar institution,
which, as a substantial part of its business operations, purchases or sells
securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the
account of a Portfolio for other securities in connection with any
reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event relating to the securities or the issuer of such
securities, and shall deposit any such securities in accordance with the
terms of any reorganization or protective plan. The Custodian shall,
without receiving Proper Instructions: surrender securities in temporary
form for definitive securities; surrender securities for transfer into the
name of the Custodian, a Portfolio or a nominee of either of them, as
permitted by Section 2.02(b); and surrender securities for a different
number of certificates or instruments representing the same number of
shares or same principal amount of indebtedness, provided that the
securities to be issued will be delivered to the Custodian or a nominee of
the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities which have been sold for
the account of a Portfolio, but only against payment therefor in the form
of: (a) cash, certified check, bank cashier's check, bank credit, or bank
wire transfer; (b) credit to the account of the custodian with a clearing
corporation of a national securities exchange of which the Custodian is a
member; or (c) credit to the Account of the Custodian with a Securities
System, in accordance with the provisions of Section 2.22 hereof.
Notwithstanding the foregoing: (i) in the case of the sale of securities,
the settlement of which occurs outside of the United States of America,
such securities shall be delivered and paid for in accordance with local
custom and practice generally accepted by Institutional Clients in the
country in which the settlement occurs, but in all events subject to the
standard of care set forth in Article V hereof; (ii) in the case of the
sale of securities in which, in accordance with standard industry custom
and practice generally accepted by Institutional Clients with respect to
such securities, the delivery of such securities and receipt of payment
therefor take place in different countries, the Custodian may deliver such
securities and receive payment therefor in accordance with standard
industry custom and practice for such securities generally accepted by
Institutional Clients, but in all events subject to the standard of care
set forth in Article V hereof; and (iii) in the case of securities held in
physical form, such securities shall be delivered and paid for in
accordance with "street delivery custom" to a broker or its clearing agent,
against delivery to the Custodian of a receipt for such securities,
provided that the Custodian shall have taken reasonable steps to ensure
prompt collection of the payment for, or the return of, such securities by
the broker or its clearing agent, and provided further that the Custodian
shall not be responsible for the selection of or the failure or inability
to perform of such broker or its clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used for such
securities by an issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter referred to, collectively, as "ADRs"),
against a written receipt therefor adequately describing such securities
and written evidence satisfactory to the Custodian that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
securities in the name of the Custodian or a nominee of the Custodian, for
delivery to the Custodian at such place as the Custodian may from time to
time designate. Upon receipt of Proper Instructions, the Custodian shall
surrender ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls,
rights or similar securities to the issuer or trustee thereof, or to the
agent of such issuer or trustee, for the purpose of exercise or sale,
provided that the new securities, cash or other assets, if any, acquired as
a result of such actions are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to the
Custodian, or the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Proper Instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or similar rights of
security ownership, and shall promptly notify the Fund of such action in
writing by facsimile transmission or in such other manner as the Fund and
Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and,
upon receipt of Proper Instructions, take action with respect to the same
as directed in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, the Fund relating to compliance
with the rules of the Options Clearing Corporation or of any registered
national securities exchange or similar organization(s), the Custodian
shall: (a) receive and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a security or securities
index by a Portfolio; (b) deposit and maintain in a segregated account,
securities (either physically or by book-entry in a Securities System),
cash or other assets; and (c) pay, release and/or transfer such securities,
cash or other assets in accordance with notices or other communications
evidencing the expiration, termination or exercise of such options
furnished by the Options Clearing Corporation, the securities or options
exchange on which such options are traded, or such other organization as
may be responsible for handling such option transactions. The Fund and the
broker-dealer shall be responsible for the sufficiency of assets held in
any segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or
pursuant to the provisions of any futures margin procedural agreement among
the Fund, on behalf of any Portfolio, the Custodian and any futures
commission merchant (a "Procedural Agreement"), the Custodian shall: (a)
receive and retain confirmations, if any, evidencing the purchase or sale
of a futures contract or an option on a futures contract by a Portfolio;
(b) deposit and maintain in a segregated account, cash, securities and
other assets designated as initial, maintenance or variation "margin"
deposits intended to secure the Portfolio's performance of its obligations
under any futures contracts purchased or sold or any options on futures
contracts written by the Portfolio, in accordance with the provisions of
any Procedural Agreement designed to comply with the rules of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s),
regarding such margin deposits; and (c) release assets from and/or transfer
assets into such margin accounts only in accordance with any such
Procedural Agreements. The Fund and such futures commission merchant shall
be responsible for the sufficiency of assets held in the segregated account
in compliance with applicable margin maintenance requirements and the
performance of any futures contract or option on a futures contract in
accordance with its terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of a Portfolio to lenders or their
agents, or otherwise establish a segregated account as agreed to by the
Fund and the Custodian, as collateral for borrowings effected by the Fund
on behalf of a Portfolio, provided that such borrowed money is payable by
the lender (a) to or upon the Custodian's order, as Custodian for such
Portfolio, and (b) concurrently with delivery of such securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to
collectively, as "Interest Bearing Deposits") for the account of a
Portfolio, the Custodian shall purchase such Interest Bearing Deposits in
the name of a Portfolio with such banks or trust companies (including the
Custodian, any Subcustodian or any subsidiary or affiliate of the
Custodian) (hereinafter referred to as "Banking Institutions") and in such
amounts as the Fund may direct pursuant to Proper Instructions. Such
Interest Bearing Deposits may be denominated in U.S. Dollars or other
currencies, as the Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall include in its records with respect to
the assets of each Portfolio appropriate notation as to the amount and
currency of each such Interest Bearing Bank Deposit, the accepting Banking
Institution and all other appropriate details, and shall retain such forms
of advice or receipt evidencing such account, if any, as may be forwarded
to the Custodian by the Banking Institution. The responsibilities of the
Custodian to the Fund for Interest Bearing Deposits accepted on the
Custodian's books in the United States shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than
those accepted on the Custodian's books, (a) the Custodian shall be
responsible for the collection of income as set forth in Section 2.15 and
the transmission of cash and instructions to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or, so long as the Custodian acts in accordance with
Proper Instructions, for the failure of such Banking Institution to pay
upon demand. Upon receipt of Proper Instructions, the Custodian shall take
such reasonable actions as the Fund deems necessary or appropriate to cause
each such Interest Bearing Deposit Account to be insured to the maximum
extent possible by all applicable deposit insurers including, without
limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other than as Principal. Upon receipt
of Proper Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for spot and
future delivery on behalf of and for the account of a Portfolio with such
currency brokers or Banking Institutions as the Fund may determine and
direct pursuant to Proper Instructions. The Custodian shall be responsible
for the transmission of cash and instructions to and from the currency
broker or Banking Institution with which the contract or option is made,
the safekeeping of all certificates and other documents and agreements
evidencing or relating to such foreign exchange transactions and the
maintenance of proper records as set forth in Section 2.25. The Custodian
shall have no duty with respect to the selection of the currency brokers or
Banking Institutions with which the Fund deals or, so long as the Custodian
acts in accordance with Proper Instructions, for the failure of such
brokers or Banking Institutions to comply with the terms of any contract or
option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal.
However, if the Custodian has made available to the Fund its services as a
principal in foreign exchange transactions, upon receipt of Proper
Instructions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of a Portfolio with the Custodian
as principal. The Custodian shall be responsible for the selection of the
currency brokers or Banking Institutions and the failure of such currency
brokers or Banking Institutions to comply with the terms of any contract or
option.
(c) Payments. Notwithstanding anything to the contrary contained herein,
upon receipt of Proper Instructions the Custodian may, in connection with a
foreign exchange contract, make free outgoing payments of cash in the form
of U.S. Dollars or foreign currency prior to receipt of confirmation of
such foreign exchange contract or confirmation that the countervalue
currency completing such contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the
Custodian shall, in connection with loans of securities by a Portfolio,
deliver securities of such Portfolio to the borrower thereof prior to
receipt of the collateral, if any, for such borrowing; provided that, in
cases of loans of securities secured by cash collateral, the Custodian's
instructions to the Securities System shall require that the Securities
System deliver the securities of the Portfolio to the borrower thereof only
upon receipt of the collateral for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to the Fund with
respect to portfolio securities and other assets of each Portfolio; (b)
promptly credit to the account of each Portfolio all income and other
payments relating to portfolio securities and other assets held by the
Custodian hereunder upon Custodian's receipt of such income or payments or
as otherwise agreed in writing by the Custodian and the Fund; (c) promptly
endorse and deliver any instruments required to effect such collections;
and (d) promptly execute ownership and other certificates and affidavits
for all federal, state and foreign tax purposes in connection with receipt
of income or other payments with respect to portfolio securities and other
assets of each Portfolio, or in connection with the transfer of such
securities or other assets; provided, however, that with respect to
portfolio securities registered in so-called street name, the Custodian
shall use its best efforts to collect amounts due and payable to the Fund.
The Custodian shall promptly notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing if any amount payable with respect to portfolio securities or other
assets of the Portfolios is not received by the Custodian when due. The
Custodian shall not be responsible for the collection of amounts due and
payable with respect to portfolio securities or other assets that are in
default.
Section 2.16. Dividends, Distributions and Redemptions. The Custodian
shall promptly release funds or securities: (a) upon receipt of Proper
Instructions, to one or more Distribution Accounts designated by the Fund
in such Proper Instructions; or (b) upon receipt of Special Instructions,
as otherwise directed by the Fund, for the purpose of the payment of
dividends or other distributions to shareholders of the Portfolios, and
payment to shareholders who have requested repurchase or redemption of
their shares of the Portfolio(s) (collectively, the "Shares"). For
purposes of this Agreement, a "Distribution Account" shall mean an account
established at a Banking Institution designated by the Fund in Special
Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from
time to time by the Fund, and shall promptly credit such funds to the
account(s) of the applicable Portfolio(s). The Custodian shall promptly
notify the Fund of Custodian's receipt of cash in payment for Shares issued
by the Fund by facsimile transmission or in such other manner as the Fund
and Custodian may agree in writing. Upon receipt of Proper Instructions,
the Custodian shall: (a) deliver all federal funds received by the
Custodian in payment for Shares in payment for such investments as may be
set forth in such Proper Instructions and at a time agreed upon between the
Custodian and the Fund; and (b) make federal funds available to the Fund as
of specified times agreed upon from time to time by the Fund and the
Custodian, in the amount of checks received in payment for Shares which are
deposited to the accounts of the Portfolios.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to the
Fund, in the most expeditious manner practicable, all forms of proxies, all
notices of meetings, and any other notices or announcements affecting or
relating to securities owned by the Portfolios that are received by the
Custodian, any Subcustodian, or any nominee of either of them, and, upon
receipt of Proper Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian or nominee to execute and deliver, such proxies or
other authorizations as may be required. Except as directed pursuant to
Proper Instructions, neither the Custodian nor any Subcustodian or nominee
shall vote upon any such securities, or execute any proxy to vote thereon,
or give any consent or take any other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Portfolios.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend to
all nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities or other
assets of the Portfolios held by the Custodian, except as otherwise
directed from time to time pursuant to Proper Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian shall
open and operate a bank account or accounts (hereinafter referred to
collectively, as "Bank Accounts") on the books of the Custodian or any
Subcustodian provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of a Portfolio,
and shall be subject only to the draft or order of the Custodian; provided
however, that such Bank Accounts in countries other than the United States
may be held in an account of the Custodian containing only assets held by
the Custodian as a fiduciary or custodian for customers, and provided
further, that the records of the Custodian shall indicate at all times the
Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein. Such Bank
Accounts may be denominated in either U.S. Dollars or other currencies.
The responsibilities of the Custodian to the Fund for deposits accepted on
the Custodian's books in the United States shall be that of a U.S. bank for
a similar deposit. The responsibilities of the Custodian to the Fund for
deposits accepted on any Subcustodian's books shall be governed by the
provisions of Section 5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open and
operate Bank Accounts on behalf of a Portfolio, in the name of the
Custodian or a nominee of the Custodian, at a Banking Institution other
than the Custodian or any Subcustodian, provided that such account(s) shall
be in the name of the Custodian or a nominee of the Custodian, for the
account of a Portfolio, and shall be subject only to the draft or order of
the Custodian; provided however, that such Bank Accounts may be held in an
account of the Custodian containing only assets held by the Custodian as a
fiduciary or custodian for customers, and provided further, that the
records of the Custodian shall indicate at all times the Portfolio or other
customer for which such securities and other assets are held in such
account and the respective interests therein. Such Bank Accounts may be
denominated in either U.S. Dollars or other currencies. Subject to the
provisions of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such Banking
Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian
shall take such reasonable actions as the Fund deems necessary or
appropriate to cause each deposit account established by the Custodian
pursuant to this Section 2.21 to be insured to the maximum extent possible
by all applicable deposit insurers including, without limitation, the
Federal Deposit Insurance Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by the
Portfolios in: (a) The Depository Trust Company; (b) the Participants
Trust Company; (c) any book-entry system as provided in (i) Subpart O of
Treasury Circular No. 300, 31 CFR 306.115, (ii) Subpart B of Treasury
Circular Public Debt Series No. 27-76, 31 CFR 350.2, or (iii) the
book-entry regulations of federal agencies substantially in the form of 31
CFR 306.115; or (d) any other domestic clearing agency registered with the
Securities and Exchange Commission ("SEC") under Section 17A of the
Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository
or clearing agent for the securities or other assets of investment
companies) which acts as a securities depository and the use of which the
Fund has previously approved by Special Instructions (as hereinafter
defined) (each of the foregoing being referred to in this Agreement as a
"Securities System"). Use of a Securities System shall be in accordance
with applicable Federal Reserve Board and SEC rules and regulations, if
any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held hereunder
in a Securities System, provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System which Account
shall not contain any assets of the Custodian other than assets held as a
fiduciary, custodian, or otherwise for customers.
(B) The books and records of the Custodian shall at all times identify
those securities belonging to each Portfolio which are maintained in a
Securities System.
(C) The Custodian shall pay for securities purchased for the account of a
Portfolio only upon (w) receipt of advice from the Securities System that
such securities have been transferred to the Account of the Custodian, and
(x) the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of such Portfolio. The Custodian
shall transfer securities sold for the account of a Portfolio only upon (y)
receipt of advice from the Securities System that payment for such
securities has been transferred to the Account of the Custodian, and (z)
the making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of such Portfolio. Copies of all
advices from the Securities System relating to transfers of securities for
the account of a Portfolio shall identify such Portfolio, shall be
maintained for the Portfolio by the Custodian. The Custodian shall deliver
to the Fund on the next succeeding business day daily transaction reports
which shall include each day's transactions in the Securities System for
the account of each Portfolio. Such transaction reports shall be delivered
to the Fund or any agent designated by the Fund pursuant to Proper
Instructions, by computer or in such other manner as the Fund and Custodian
may agree in writing.
(D) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian
or any Subcustodian with respect to a Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System.
(E) Upon receipt of Special Instructions, the Custodian shall terminate
the use of any Securities System (except the federal book-entry system) on
behalf of any Portfolio as promptly as practicable and shall take all
actions reasonably practicable to safeguard the securities of the
Portfolios maintained with such Securities System.
Section 2.23. Other Transfers. Upon receipt of Special Instructions, the
Custodian shall make such other dispositions of securities, funds or other
property of the Portfolios in a manner or for purposes other than as
expressly set forth in this Agreement, provided that the Special
Instructions relating to such disposition shall include a statement of the
purpose for which the delivery is to be made, the amount of funds and/or
securities to be delivered, and the name of the person or persons to whom
delivery is to be made, and shall otherwise comply with the provisions of
Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its
books a segregated account or accounts for and on behalf of a Portfolio,
into which account or accounts may be transferred cash and/or securities or
other assets of such Portfolio, including securities maintained by the
Custodian in a Securities System pursuant to Section 2.22 hereof, said
account or accounts to be maintained: (a) for the purposes set forth in
Sections 2.09, 2.10 and 2.11 hereof; (b) for the purposes of compliance by
the Fund with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the SEC relating to the
maintenance of segregated accounts by registered investment companies; or
(c) for such other purposes as set forth, from time to time, in Special
Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall provide
any assistance reasonably requested by the Fund in the preparation of
reports to Fund shareholders and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall maintain complete
and accurate records with respect to securities and other assets held for
the accounts of the Portfolios as required by the rules and regulations of
the SEC applicable to investment companies registered under the 1940 Act,
including: (a) journals or other records of original entry containing a
detailed and itemized daily record of all receipts and deliveries of
securities (including certificate and transaction identification numbers,
if any), and all receipts and disbursements of cash; (b) ledgers or other
records reflecting (i) securities in transfer, (ii) securities in physical
possession, (iii) securities borrowed, loaned or collateralizing
obligations of the Portfolios, (iv) monies borrowed and monies loaned
(together with a record of the collateral therefor and substitutions of
such collateral), and (v) dividends and interest received; and (c)
cancelled checks and bank records related thereto. The Custodian shall
keep such other books and records of the Fund as the Fund shall reasonably
request. All such books and records maintained by the Custodian shall be
maintained in a form acceptable to the Fund and in compliance with the
rules and regulations of the SEC, including, but not limited to, books and
records required to be maintained by Section 31(a) of the 1940 Act and the
rules and regulations from time to time adopted thereunder. All books and
records maintained by the Custodian pursuant to this Agreement shall at all
times be the property of the Fund and shall be available during normal
business hours for inspection and use by the Fund and its agents,
including, without limitation, its independent certified public
accountants. Notwithstanding the preceding sentence, the Funds shall not
take any actions or cause the Custodian to take any actions which would
cause, either directly or indirectly, the Custodian to violate any
applicable laws, regulations or orders.
Section 2.26. Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as the Fund may request to
obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the Fund's Form N-1A and
the Fund's Form N-SAR or other periodic reports to the SEC and with respect
to any other requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At
the request of the Fund, the Custodian shall deliver to the Fund a written
report prepared by the Custodian's independent certified public accountants
with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding cash,
securities and other assets, including cash, securities and other assets
deposited and/or maintained in a Securities System or with a Subcustodian.
Such report shall be of sufficient scope and in sufficient detail as may
reasonably be required by the Fund and as may reasonably be obtained by the
Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of a Portfolio for which there would be, at the close of business on
the date of such payment or transfer, insufficient funds held by the
Custodian on behalf of such Portfolio, the Custodian may, in its
discretion, provide an overdraft (an "Overdraft") to the Fund on behalf of
such Portfolio, in an amount sufficient to allow the completion of such
payment. Any Overdraft provided hereunder: (a) shall be payable on the
next Business Day, unless otherwise agreed by the Fund and the Custodian;
and (b) shall accrue interest from the date of the Overdraft to the date of
payment in full by the Fund on behalf of the applicable Portfolio at a rate
agreed upon in writing, from time to time, by the Custodian and the Fund.
The Custodian and the Fund acknowledge that the purpose of such Overdrafts
is to temporarily finance the purchase or sale of securities for prompt
delivery in accordance with the terms hereof, or to meet emergency expenses
not reasonably foreseeable by the Fund. The Custodian shall promptly
notify the Fund in writing (an "Overdraft Notice") of any Overdraft by
facsimile transmission or in such other manner as the Fund and the
Custodian may agree in writing. At the request of the Custodian, the Fund,
on behalf of a Portfolio, shall pledge, assign and grant to the Custodian a
security interest in certain specified securities of the Portfolio, as
security for Overdrafts provided to such Portfolio, under the terms and
conditions set forth in Appendix "C" attached hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions"
shall mean: (i) a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or certification
signed or initialed by or on behalf of the Fund by one or more Authorized
Persons (as hereinafter defined); (ii) a telephonic or other oral
communication by one or more Authorized Persons; or (iii) a communication
effected directly between an electro-mechanical or electronic device or
system (including, without limitation, computers) by or on behalf of the
Fund by one or more Authorized Persons; provided, however, that
communications of the types described in clauses (ii) and (iii) above
purporting to be given by an Authorized Person shall be considered Proper
Instructions only if the Custodian reasonably believes such communications
to have been given by an Authorized Person with respect to the transaction
involved. Proper Instructions in the form of oral communications shall be
confirmed by the Fund by tested telex or in writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way
affect any action taken by the Custodian in reliance upon such oral
instructions prior to the Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all
telephonic or other oral instructions communicated to the Custodian.
Proper Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the Fund or any other person
designated by the Treasurer of the Fund in writing, which countersignature
or confirmation shall be (i)included on the same instrument containing the
Proper Instructions or on a separate instrument relating thereto, and (ii)
delivered by hand, by facsimile transmission, or in such other manner as
the Fund and the Custodian agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian
at the address and/or telephone, telecopy or telex number agreed upon from
time to time by the Custodian and the Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the Fund
shall deliver to the Custodian, duly certified as appropriate by a
Treasurer or Assistant Treasurer of the Fund, a certificate setting forth:
(a) the names, titles, signatures and scope of authority of all persons
authorized to give Proper Instructions or any other notice, request,
direction, instruction, certificate or instrument on behalf of the Fund
(collectively, the "Authorized Persons" and individually, an "Authorized
Person"); and (b) the names, titles and signatures of those persons
authorized to issue Special Instructions. Such certificate may be accepted
and relied upon by the Custodian as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary. Upon
delivery of a certificate which deletes the name(s) of a person previously
authorized to give Proper Instructions or to issue Special Instructions,
such persons shall no longer be considered an Authorized Person or
authorized to issue Special Instructions.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Trustee, officer, employee or agent of the Fund shall
have physical access to the assets of any Portfolio held by the Custodian
nor shall the Custodian deliver any assets of a Portfolio for delivery to
an account of such person; provided, however, that nothing in this Section
3.03 shall prohibit (a) any Authorized Person from giving Proper
Instructions, or any person authorized to issue Special Instructions from
issuing Special Instructions, so long as such action does not result in
delivery of or access to assets of any Portfolio prohibited by this Section
3.03; or (b) the Fund's independent certified public accountants from
examining or reviewing the assets of the Portfolios held by the Custodian.
The Fund shall deliver to the Custodian a written certificate identifying
such Authorized Persons, Trustees, officers, employees and agents of the
Fund.
Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts
in accordance with (a) Proper Instructions or Special Instructions, as the
case may be, and (b) the terms of this Agreement, the Custodian shall not
be responsible for the title, validity or genuineness of any property, or
evidence of title thereof, received by it or delivered by it pursuant to
this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to
act on behalf of a Portfolio. (For purposes of this Agreement, all duly
appointed Domestic Subcustodians, Foreign Subcustodians, Interim
Subcustodians, and Special Subcustodians are hereinafter referred to
collectively, as "Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any time and
from time to time, appoint any bank as defined in Section 2(a)(5) of the
1940 Act meeting the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act on behalf of one
or more Portfolios as a subcustodian for purposes of holding cash,
securities and other assets of such Portfolios and performing other
functions of the Custodian within the United States (a "Domestic
Subcustodian"); provided, that, the Custodian shall notify the Fund in
writing of the identity and qualifications of any proposed Domestic
Subcustodian at least thirty (30) days prior to appointment of such
Domestic Subcustodian, and the Fund may, in its sole discretion, by written
notice to the Custodian executed by an Authorized Person disapprove of the
appointment of such Domestic Subcustodian. If following notice by the
Custodian to the Fund regarding appointment of a Domestic Subcustodian and
the expiration of thirty (30) days after the date of such notice, the Fund
shall have failed to notify the Custodian of its disapproval thereof, the
Custodian may, in its discretion, appoint such proposed Domestic
Subcustodian as its subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time
to time, appoint: (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the
1940 Act and the rules and regulations thereunder or by order of the
Securities and Exchange Commission exempted therefrom, or (ii) any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder to act on behalf of one or more Portfolios as a subcustodian for
purposes of holding cash, securities and other assets of such Portfolios
and performing other functions of the Custodian in countries other than the
United States of America (a "Foreign Subcustodian"); provided, that, prior
to the appointment of any Foreign Subcustodian, the Custodian shall have
obtained written confirmation of the approval of the Board of Trustees or
other governing body or entity of the Fund on behalf of the applicable
Portfolio(s) (which approval may be withheld in the sole discretion of such
Board of Trustees or other governing body or entity) with respect to (i)
the identity and qualifications of any proposed Foreign Subcustodian, (ii)
the country or countries in which, and the securities depositories or
clearing agencies, if any, through which, any proposed Foreign Subcustodian
is authorized to hold securities and other assets of the Portfolio(s), and
(iii) the form and terms of the subcustodian agreement to be entered into
between such proposed Foreign Subcustodian and the Custodian. Each such
duly approved Foreign Subcustodian and the countries where and the
securities depositories and clearing agencies through which they may hold
securities and other assets of the Funds shall be listed on Appendix "B"
attached hereto, as it may be amended, from time to time, in accordance
with the provisions of Section 9.05(c) hereof. The Fund shall be
responsible for informing the Custodian sufficiently in advance of a
proposed investment which is to be held in a country in which no Foreign
Subcustodian is authorized to act, in order that there shall be sufficient
time for the Custodian to effect the appropriate arrangements with a
proposed foreign subcustodian, including obtaining approval as provided in
this Section 4.02(a). The Custodian shall not amend any subcustodian
agreement entered into with a Foreign Subcustodian, or agree to change or
permit any changes thereunder, or waive any rights under such agreement,
which materially affect the Fund's rights or the Foreign Subcustodian's
obligations or duties to the Fund under such agreement, except upon prior
approval pursuant to Special Instructions.
(b) Interim Subcustodians. Notwithstanding the foregoing, in the event
that a Portfolio shall invest in a security or other asset to be held in a
country in which no Foreign Subcustodian is authorized to act, the
Custodian shall promptly notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in
such country; and the Custodian shall, upon receipt of Special
Instructions, appoint any Person designated by the Fund in such Special
Instructions to hold such security or other asset. (Any Person appointed
as a subcustodian pursuant to this Section 4.02(b) is hereinafter referred
to as an "Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of the Fund for one or more
Portfolios, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act as a subcustodian for
purposes of: (i) effecting third-party repurchase transactions with banks,
brokers, dealers or other entities through the use of a common custodian or
subcustodian; (ii) establishing a joint trading account for the Portfolios
and other registered open-end management investment companies for which
Fidelity Management & Research Company serves as investment adviser,
through which the Portfolios and such other investment companies shall
collectively participate in certain repurchase transactions; (iii)
providing depository and clearing agency services with respect to certain
variable rate demand note securities; and (iv) effecting any other
transactions designated by the Fund in Special Instructions. (Each such
designated subcustodian is hereinafter referred to as a "Special
Subcustodian.") Each such duly appointed Special Subcustodian shall be
listed on Appendix "B" attached hereto, as it may be amended from time to
time in accordance with the provisions of Section 9.05(c) hereof. In
connection with the appointment of any Special Subcustodian, the Custodian
shall enter into a subcustodian agreement with the Special Subcustodian in
form and substance approved by the Fund, provided that such agreement shall
in all events comply with the provisions of the 1940 Act and the rules and
regulations thereunder and the terms and provisions of this Agreement. The
Custodian shall not amend any subcustodian agreement entered into with a
Special Subcustodian, or agree to change or permit any changes thereunder,
or waive any rights under such agreement, except upon prior approval
pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian and Foreign Subcustodian to, and (ii) use
its best efforts to cause each Interim Subcustodian and Special
Subcustodian to, perform all of its obligations in accordance with the
terms and conditions of the subcustodian agreement between the Custodian
and such Subcustodian. In the event that the Custodian is unable to cause
such Subcustodian to fully perform its obligations thereunder, the
Custodian shall forthwith, upon the receipt of Special Instructions,
terminate such Subcustodian with respect to the Fund and, if necessary or
desirable, appoint a replacement Subcustodian in accordance with the
provisions of Section 4.01 or Section 4.02, as the case may be. In
addition to the foregoing, the Custodian (A) may, at any time in its
discretion, upon written notification to the Fund, terminate any Domestic
Subcustodian, Foreign Subcustodian or Interim Subcustodian, and (B) shall,
upon receipt of Special Instructions, terminate any Subcustodian with
respect to the Fund, in accordance with the termination provisions under
the applicable subcustodian agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon
request of the Fund, the Custodian shall deliver to the Fund a certificate
stating: (i) the identity of each Foreign Subcustodian then acting on
behalf of the Custodian; (ii) the countries in which and the securities
depositories and clearing agents through which each such Foreign
Subcustodian is then holding cash, securities and other assets of any
Portfolio; and (iii) such other information as may be requested by the Fund
to ensure compliance with Rule 17(f)-5 under the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under
this Agreement, and shall be liable to the Fund for all loss, damage and
expense suffered or incurred by the Fund or the Portfolios resulting from
the failure of the Custodian to exercise such reasonable care and
diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, securities depository or securities
system utilized by any such Subcustodian, or any nominee of the Custodian
or any Subcustodian (individually, a "Person") is prevented, forbidden or
delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason
of: (i) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or of any foreign
country, or political subdivision thereof or of any court of competent
jurisdiction; or (ii) any act of God or war or other similar circumstance
beyond the control of the Custodian, unless, in each case, such delay or
nonperformance is caused by (A) the negligence, misfeasance or misconduct
of the applicable Person, or (B) a malfunction or failure of equipment
operated or utilized by the applicable Person other than a malfunction or
failure beyond such Person's control and which could not reasonably be
anticipated and/or prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Fund or any
Portfolio, (i) the Custodian shall, (ii) the Custodian shall cause any
applicable Domestic Subcustodian or Foreign Subcustodian to, and (iii) the
Custodian shall use its best efforts to cause any applicable Interim
Subcustodian or Special Subcustodian to, use all commercially reasonable
efforts and take all reasonable steps under the circumstances to mitigate
the effects of such event and to avoid continuing harm to the Fund and the
Portfolios.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act
upon advice of counsel on all matters. The Custodian shall be without
liability for any action reasonably taken or omitted in good faith pursuant
to the advice of (i) counsel for the Fund, or (ii) at the expense of the
Custodian, such other counsel as the Fund and the Custodian may agree upon;
provided, however, with respect to the performance of any action or
omission of any action upon such advice, the Custodian shall be required to
conform to the standard of care set forth in Section 5.01(a).
(e) Expenses of the Fund. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to the Fund for all
reasonable costs and expenses incurred by the Fund in connection with any
claim by the Fund against the Custodian arising from the obligations of the
Custodian hereunder including, without limitation, all reasonable
attorneys' fees and expenses incurred by the Fund in asserting any such
claim, and all expenses incurred by the Fund in connection with any
investigations, lawsuits or proceedings relating to such claim; provided,
that the Fund has recovered from the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by the Fund, insofar as
such loss, damage or expense arises from the performance of the Custodian's
duties hereunder by reason of the Custodian's reliance upon records that
were maintained for the Fund by entities other than the Custodian prior to
the Custodian's employment hereunder.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall
be liable for the actions or omissions of any Domestic Subcustodian or any
Foreign Subcustodian to the same extent as if such action or omission were
performed by the Custodian itself. In the event of any loss, damage or
expense suffered or incurred by the Fund caused by or resulting from the
actions or omissions of any Domestic Subcustodian or Foreign Subcustodian
for which the Custodian would otherwise be liable, the Custodian shall
promptly reimburse the Fund in the amount of any such loss, damage or
expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01
to the contrary, the Custodian shall not be liable to the Fund for any
loss, damage or expense suffered or incurred by the Fund or any Portfolio
resulting from the actions or omissions of an Interim Subcustodian unless
such loss, damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, in the event
of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against such Interim
Subcustodian to protect the interests of the Fund and the Portfolios.
(c) Special Subcustodians. Notwithstanding the provisions of Section 5.01
to the contrary and except as otherwise provided in any subcustodian
agreement to which the Custodian, the Fund and any Special Subcustodian are
parties, the Custodian shall not be liable to the Fund for any loss, damage
or expense suffered or incurred by the Fund or any Portfolio resulting from
the actions or omissions of a Special Subcustodian, unless such loss,
damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, that in the
event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against any Special
Subcustodian to protect the interests of the Fund and the Portfolios.
(d) Securities Systems. Notwithstanding the provisions of Section 5.01 to
the contrary, the Custodian shall not be liable to the Fund for any loss,
damage or expense suffered or incurred by the Fund or any Portfolio
resulting from the use by the Custodian of a Securities System, unless such
loss, damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, that in the
event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against the
Securities System to protect the interests of the Fund and the Portfolios.
(e) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian
for all reasonable out-of-pocket expenses incurred by the Custodian in
connection with the fulfillment of its obligations under this Section 5.02;
provided, however, that such reimbursement shall not apply to expenses
occasioned by or resulting from the negligence, misfeasance or misconduct
of the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in
this Agreement, the Fund agrees to indemnify and hold harmless the
Custodian and its nominees from all loss, damage and expense (including
reasonable attorneys' fees) suffered or incurred by the Custodian or its
nominee caused by or arising from actions taken by the Custodian in the
performance of its duties and obligations under this Agreement; provided,
however, that such indemnity shall not apply to loss, damage and expense
occasioned by or resulting from the negligence, misfeasance or misconduct
of the Custodian or its nominee. In addition, the Fund agrees to indemnify
any Person against any liability incurred by reason of taxes assessed to
such Person, or other loss, damage or expenses incurred by such Person,
resulting from the fact that securities and other property of the
Portfolios are registered in the name of such Person; provided, however,
that in no event shall such indemnification be applicable to income,
franchise or similar taxes which may be imposed or assessed against any
Person.
(b) Notice of Litigation, Right to Prosecute, Etc. The Fund shall not be
liable for indemnification under this Section 5.03 unless a Person shall
have promptly notified the Fund in writing of the commencement of any
litigation or proceeding brought against such Person in respect of which
indemnity may be sought under this Section 5.03. With respect to claims in
such litigation or proceedings for which indemnity by the Fund may be
sought and subject to applicable law and the ruling of any court of
competent jurisdiction, the Fund shall be entitled to participate in any
such litigation or proceeding and, after written notice from the Fund to
any Person, the Fund may assume the defense of such litigation or
proceeding with counsel of its choice at its own expense in respect of that
portion of the litigation for which the Fund may be subject to an
indemnification obligation; provided, however, a Person shall be entitled
to participate in (but not control) at its own cost and expense, the
defense of any such litigation or proceeding if the Fund has not
acknowledged in writing its obligation to indemnify the Person with respect
to such litigation or proceeding. If the Fund is not permitted to
participate or control such litigation or proceeding under applicable law
or by a ruling of a court of competent jurisdiction, such Person shall
reasonably prosecute such litigation or proceeding. A Person shall not
consent to the entry of any judgment or enter into any settlement in any
such litigation or proceeding without providing the Fund with adequate
notice of any such settlement or judgment, and without the Fund's prior
written consent. All Persons shall submit written evidence to the Fund
with respect to any cost or expense for which they are seeking
indemnification in such form and detail as the Fund may reasonably request.
Section 5.04. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its
duties generally, and more particularly in connection with the purchase,
sale or exchange of securities made by or for a Portfolio, the Custodian
shall not be liable to the Fund and the Fund agrees to indemnify the
Custodian and its nominees, for any loss, damage or expense suffered or
incurred by the Custodian and its nominees arising out of any violation of
any investment or other limitation to which the Fund is subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Fund shall have, at its election upon
reasonable notice to the Custodian, the right to enforce, to the extent
permitted by any applicable agreement and applicable law, the Custodian's
rights against any Subcustodian, Securities System, or other Person for
loss, damage or expense caused the Fund by such Subcustodian, Securities
System, or other Person, and shall be entitled to enforce the rights of the
Custodian with respect to any claim against such Subcustodian, Securities
System or other Person, which the Custodian may have as a consequence of
any such loss, damage or expense, if and to the extent that the Fund has
not been made whole for any such loss or damage. If the Custodian makes
the Fund whole for any such loss or damage, the Custodian shall retain the
ability to enforce its rights directly against such Subcustodian,
Securities System or other Person. Upon the Fund's election to enforce any
rights of the Custodian under this Section 5.05, the Fund shall reasonably
prosecute all actions and proceedings directly relating to the rights of
the Custodian in respect of the loss, damage or expense incurred by the
Fund; provided that, so long as the Fund has acknowledged in writing its
obligation to indemnify the Custodian under Section 5.03 hereof with
respect to such claim, the Fund shall retain the right to settle,
compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by the Fund without the Custodian's
consent and provided further, that if the Fund has not made an
acknowledgement of its obligation to indemnify, the Fund shall not settle,
compromise or terminate any such action or proceeding without the written
consent of the Custodian, which consent shall not be unreasonably withheld
or delayed. The Custodian agrees to cooperate with the Fund and take all
actions reasonably requested by the Fund in connection with the Fund's
enforcement of any rights of the Custodian. The Fund agrees to reimburse
the Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian in connection with the fulfillment of its obligations under this
Section 5.05; provided, however, that such reimbursement shall not apply to
expenses occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian.
ARTICLE VI
COMPENSATION
On behalf of each Portfolio, the Fund shall compensate the Custodian in an
amount, and at such times, as may be agreed upon in writing, from time to
time, by the Custodian and the Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement in Full. This Agreement shall
continue in full force and effect until the first to occur of: (a)
termination by the Custodian by an instrument in writing delivered or
mailed to the Fund, such termination to take effect not sooner than ninety
(90) days after the date of such delivery; (b) termination by the Fund by
an instrument in writing delivered or mailed to the Custodian, such
termination to take effect not sooner than thirty (30) days after the date
of such delivery; or (c) termination by the Fund by written notice
delivered to the Custodian, based upon the Fund's determination that there
is a reasonable basis to conclude that the Custodian is insolvent or that
the financial condition of the Custodian is deteriorating in any material
respect, in which case termination shall take effect upon the Custodian's
receipt of such notice or at such later time as the Fund shall designate.
In the event of termination pursuant to this Section 7.01, the Fund shall
make payment of all accrued fees and unreimbursed expenses within a
reasonable time following termination and delivery of a statement to the
Fund setting forth such fees and expenses. The Fund shall identify in any
notice of termination a successor custodian to which the cash, securities
and other assets of the Portfolios shall, upon termination of this
Agreement, be delivered. In the event that no written notice designating a
successor custodian shall have been delivered to the Custodian on or before
the date when termination of this Agreement shall become effective, the
Custodian may deliver to a bank or trust company doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less
than $25,000,000, all securities and other assets held by the Custodian and
all instruments held by the Custodian relative thereto and all other
property held by it under this Agreement. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Agreement. In
the event that securities and other assets remain in the possession of the
Custodian after the date of termination hereof owing to failure of the Fund
to appoint a successor custodian, the Custodian shall be entitled to
compensation for its services in accordance with the fee schedule most
recently in effect, for such period as the Custodian retains possession of
such securities and other assets, and the provisions of this Agreement
relating to the duties and obligations of the Custodian and the Fund shall
remain in full force and effect. In the event of the appointment of a
successor custodian, it is agreed that the cash, securities and other
property owned by the Fund and held by the Custodian, any Subcustodian or
nominee shall be delivered to the successor custodian; and the Custodian
agrees to cooperate with the Fund in the execution of documents and
performance of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
Section 7.02. Termination as to One or More Portfolios. This Agreement
may be terminated as to one or more Portfolios (but less than all of the
Portfolios) by delivery of an amended Appendix "A" deleting such Portfolios
pursuant to Section 9.05(b) hereof, in which case termination as to such
deleted Portfolios shall take effect thirty (30) days after the date of
such delivery. The execution and delivery of an amended Appendix "A" which
deletes one or more Portfolios shall constitute a termination of this
Agreement only with respect to such deleted Portfolio(s), shall be governed
by the preceding provisions of Section 7.01 as to the identification of a
successor custodian and the delivery of cash, securities and other assets
of the Portfolio(s) so deleted, and shall not affect the obligations of the
Custodian and the Fund hereunder with respect to the other Portfolios set
forth in Appendix "A," as amended from time to time.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22
ADRs 2.06
Authorized Person(s) 3.02
Banking Institution 2.12(a)
Business Day Appendix "C"
Bank Accounts 2.21
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Subcustodian 4.02(a)
Institutional Client 2.03
Interim Subcustodian 4.02(b)
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Portfolio Preamble
Procedural Agreement 2.10
Proper Instructions 3.01(a)
SEC 2.22
Securities System 2.22
Shares 2.16
Special Instructions 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by the Fund. Upon request, the Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement, provided that the exercise by the Custodian or any Subcustodian
of any such rights shall in all events be in compliance with the terms of
this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to the Fund or to such other parties as
the Fund may designate in such Proper Instructions, all such documents,
instruments or agreements as may be reasonable and necessary or desirable
in order to effectuate any of the transactions contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY
OF THE DECLARATION OF TRUST OF THE FUND IS ON FILE WITH THE SECRETARY OF
THE STATE OF THE FUND'S FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS
AGREEMENT IS NOT EXECUTED ON BEHALF OF THE TRUSTEES OF THE FUND AS
INDIVIDUALS, AND THE OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY
OF THE TRUSTEES, OFFICERS, SHAREHOLDERS OR PARTNERS OF THE FUND
INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS AND PROPERTY OF THE
PORTFOLIOS. THE CUSTODIAN AGREES THAT NO SHAREHOLDER, TRUSTEE, OFFICER OR
PARTNER OF THE FUND MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE FOR ANY
OBLIGATIONS OF THE FUND ARISING OUT OF THIS AGREEMENT.
Section 9.03. Several Obligations of the Portfolios. WITH RESPECT TO ANY
OBLIGATIONS OF THE FUND ON BEHALF OF THE PORTFOLIOS ARISING OUT OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS ARISING UNDER
SECTIONS 2.28, 5.03, 5.05 and ARTICLE VI HEREOF, THE CUSTODIAN SHALL LOOK
FOR PAYMENT OR SATISFACTION OF ANY OBLIGATION SOLELY TO THE ASSETS AND
PROPERTY OF THE PORTFOLIO TO WHICH SUCH OBLIGATION RELATES AS THOUGH THE
FUND HAD SEPARATELY CONTRACTED WITH THE CUSTODIAN BY SEPARATE WRITTEN
INSTRUMENT WITH RESPECT TO EACH PORTFOLIO.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of the Fund. The Fund hereby
represents and warrants that each of the following shall be true, correct
and complete at all times during the term of this Agreement: (i) the Fund
is duly organized under the laws of its jurisdiction of organization and is
registered as an open-end management investment company under the 1940 Act;
and (ii) the execution, delivery and performance by the Fund of this
Agreement are (w) within its power, (x) have been duly authorized by all
necessary action, and (y) will not (A) contribute to or result in a breach
of or default under or conflict with any existing law, order, regulation or
ruling of any governmental or regulatory agency or authority, or (B)
violate any provision of the Fund's corporate charter, Declaration of Trust
or other organizational document, or bylaws, or any amendment thereof or
any provision of its most recent Prospectus or Statement of Additional
Information.
(b) Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants that each of the following shall be true,
correct and complete at all times during the term of this Agreement: (i)
the Custodian is duly organized under the laws of its jurisdiction of
organization and qualifies to act as a custodian to open-end management
investment companies under the provisions of the 1940 Act; and (ii) the
execution, delivery and performance by the Custodian of this Agreement are
(w) within its power, (x) have been duly authorized by all necessary
action, and (y) will not (A) contribute to or result in a breach of or
default under or conflict with any existing law, order, regulation or
ruling of any governmental or regulatory agency or authority, or (B)
violate any provision of the Custodian's corporate charter, or other
organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the
subject matter hereof and accordingly, supersedes as of the effective date
of this Agreement any custodian agreement heretofore in effect between the
Fund and the Custodian.
Section 9.06. Waivers and Amendments. No provision of this Agreement may
be waived, amended or terminated except by a statement in writing signed by
the party against which enforcement of such waiver, amendment or
termination is sought; provided, however: (a) Appendix "A" listing the
Portfolios for which the Custodian serves as custodian may be amended from
time to time to add one or more Portfolios, by the Fund's execution and
delivery to the Custodian of an amended Appendix "A", and the execution of
such amended Appendix by the Custodian, in which case such amendment shall
take effect immediately upon execution by the Custodian; (b) Appendix "A"
may be amended from time to time to delete one or more Portfolios (but less
than all of the Portfolios), by the Fund's execution and delivery to the
Custodian of an amended Appendix A", in which case such amendment shall
take effect thirty (30) days after such delivery, unless otherwise agreed
by the Custodian and the Fund in writing; (c) Appendix "B" listing Foreign
Subcustodians and Special Subcustodians approved by the Fund may be amended
from time to time to add or delete one or more Foreign Subcustodians or
Special Subcustodians by the Fund's execution and delivery to the Custodian
of an amended Appendix "B", in which case such amendment shall take effect
immediately upon execution by the Custodian; and (d) Appendix "C" setting
forth the procedures relating to the Custodian's security interest may be
amended only by an instrument in writing executed by the Fund and the
Custodian.
Section 9.07. Interpretation. In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to
time on such provisions interpretative of or in addition to the provisions
of this Agreement as may in their joint opinion be consistent with the
general tenor of this Agreement. No interpretative or additional
provisions made as provided in the preceding sentence shall be deemed to be
an amendment of this Agreement.
Section 9.08. Captions. Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the
parties hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may
arise in connection with the custodianship of foreign securities pursuant
to an agreement with a Foreign Subcustodian that is governed by the laws of
the State of New York, the provisions of this Agreement shall be construed
in accordance with and governed by the laws of the State of New York,
provided that in all other instances this Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of
Massachusetts, in each case without giving effect to principles of
conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or
Special Instructions, notices and other writings contemplated by this
Agreement shall be delivered by hand or by facsimile transmission (provided
that in the case of delivery by facsimile transmission, notice shall also
be mailed postage prepaid to the parties at the following addresses:
(a) If to the Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: John E. Ferris
Telephone: (617) 570-6556
Telefax: (617) 742-1231
(b) If to the Custodian:
Global Securities Services - Financial Institutions Market
1211 Avenue of the Americas
New York, New York 10036
Attn: Division Executive
Telephone: (212) 789-4141
Telefax: (212) 789-4181
or to such other address as either party may have designated in writing to
the other party hereto.
Section 9.11. Assignment. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that, subject to the provisions of Section
7.01 hereof, neither party hereto may assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the
other party.
Section 9.12. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original. This Agreement
shall become effective when one or more counterparts have been signed and
delivered by each of the parties.
Section 9.13. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and conditions
of this Agreement and all information provided by each party to the other
regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely
for the purpose of rendering services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be
disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is
publicly available when provided or thereafter becomes publicly available
other than through a breach of this Agreement, or that is required to be
disclosed by any bank examiner of the Custodian or any Subcustodian, any
auditor of the parties hereto, by judicial or administrative process or
otherwise by applicable law or regulation. The provisions of this Section
9.13 and Sections 9.01, 9.02, 9.03, 9.09, Section 2.28, Section 3.04,
Section 7.01, Article V and Article VI hereof and any other rights or
obligations incurred or accrued by any party hereto prior to termination of
this Agreement shall survive any termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIDELITY DESTINY PORTFOLIOS THE CHASE MANHATTEN
BANK, N.A.
By: __________________________ By: _______________________
Name: John E. Ferris Name: Rif Samuel
Title: Treasurer Title: Vice President
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity Destiny Portfolios
and
The Chase Manhattan Bank, N.A.
Dated as of March 19, 1992
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated as of July 18, 1991 (the "Agreement"):
Portfolio Name Effective as of:
Destiny I April 10, 1992
Destiny II April 10, 1992
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to
be executed in its name and behalf as of the day and year first set forth
opposite each such Portfolio.
Fidelity Destiny Portfolios The Chase Manhattan Bank, N.A.
By: By:
Name: Gary L. French Name:
Title: Treasurer Title:
APPENDIX "B"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity Destiny Portfolios and The Chase Manhattan Bank, N.A.
Dated as of June 14, 1994
The following is a list of Foreign Subcustodians and Special Subcustodians
under the Custodian Agreement dated as of July 18, 1991:
A. Special Subcustodians:
SUBCUSTODIAN PURPOSE
Morgan Guaranty Trust Company of New York FICASH
B. Foreign Subcustodians:
COUNTRY SUBCUSTODIAN DEPOSITORY
Argentina Chase Manhattan Bank, Caja de Valores, S.A.
N.A., Buenos Aires
Australia Chase Manhattan Bank Australia Ltd., Austraclear Limited
Sydney RITS
Austria Creditanstalt Bankverein, OeKB-WSB
Vienna (Kontrollbank)
Bangladesh Standard Chartered Bank, Dhaka None
Belgium Generale Bank, Brussels CIK
Brazil Banco Chase Manhattan, S.A., BOVESPA
Sao Paulo
Canada Royal Bank of Canada, Toronto CDS
Canada Trust Company, Toronto
Chile Chase Manhattan Bank, N.A., None
Santiago
China Hongkong & Shanghai Banking Shenzhen Stock Exhange Corporation,
Ltd., and Shenzhen Securities
Shanghai and Shenzhen Registrars Co.
Shanghai Stock Exchange and SSCCRC
Colombia Cititrust Colombia S.A. Sociedad None
Fiduciaria, Bogota
COUNTRY SUBCUSTODIAN DEPOSITORY
Czech Republic Ceskoslovenska Obchodni Banka, Securities Center (SCP)
A.S., Prague
Denmark Den Danske Bank, Copenhagen VP Center
Egypt National Bank of Egypt None
Finland Kansallis-Osake-Pankki, Pankkitarkastus
Helsinki Virasto
France Banque Paribas, Paris SICOVAM
Germany Chase Bank, A.G., Frankfurt Deutscher Kassenverein A.G.
(KV)
Greece Barclays Bank, Plc Apothetirio Titlon A.E.
Hong Kong Chase Manhattan Bank, N.A., Central Clearing &
Hong Kong Settlement System
Hungary Citibank Budapest Rt. None
India Hongkong & Shanghai Banking Corp. None
Ltd., Bombay
Indonesia Hongkong & Shanghai Banking None
Corporation, Ltd., Jakarta
Ireland Bank of Ireland, Dublin None
Israel Bank Leumi Le-Israel, B.M., Tel Aviv *Tel Aviv Stock Exchange
Clearing House, Ltd.
Italy Chase Manhattan Bank, N.A., Milan Monte Titoli
Japan Chase Manhattan Bank, N.A., Tokyo None
Jordan Arab Bank, PLC, Amman None
Malaysia Chase Manhattan Bank, N.A., Malaysian Central Depository
Kuala Lumpur Sdn Bhd
Mexico Chase Manhattan Bank, N.A., Indeval
New York
Banco Nacional De Mexico, S.A.,
Mexico
Morocco Banque Commerciale du Maroc None
Netherlands ABN-AMRO Bank, N.V., Amsterdam NECIGEF/KAS Associatie
NOTE: * subject to issuance of SEC no-action letter or opinion of counsel
COUNTRY SUBCUSTODIAN DEPOSITORY
New Zealand National Nominees Ltd., Auckland None
Norway Den norske Bank, Oslo VPS
Pakistan Citibank, N.A., Karachi None
Peru Citibank, N.A. Lima None
Philippines Hongkong & Shanghai Banking None
Corporation Ltd., Manila
Poland Bank Handlowy W. Warszawie, CDKPW
S.A., Warsaw
Portugal Banco Espirito Santo E Comercial Central de Valores
de Lisboa, S.A., Lisbon Mobiliaros
Singapore Chase Manhattan Bank, N.A., CDP
Singapore
South Africa The Standard Bank of South Africa, None
Ltd., Johannesburg
South Korea Hongkong & Shanghai Banking Korean Securities
Corporation Ltd., Seoul Depository Corporation
Spain Chase Manhattan Bank, N.A., Madrid Servicio de Compensacion
Banque Bruxelles Lambert, Madrid y Liquidacion de Valores (S&L)
Sri Lanka Hongkong & Shanghai Banking Central Depository
Corporation Ltd., Colombo System Ltd.
Sweden Skandinaviska Enskilda Banken, VPC
Stockholm
Switzerland Union Bank of Switzerland, Zurich SEGA
Taiwan Chase Manhattan Bank, N.A., Taipei Taiwan Securities Central
Depository Co., Ltd. (TSCD)
Thailand Chase Manhattan Bank, N.A., The Shares Depository Center
Bangkok (SCD)
Transnational Cedel
Turkey Chase Manhattan Bank, N.A., None
Istanbul
United Kingdom Chase Manhattan Bank, N.A., None
London
First National Bank of Chicago,
London
COUNTRY SUBCUSTODIAN DEPOSITORY
Uruguay The First National Bank of Boston, None
Montevideo
Venezuela Citibank, N.A., Caracas None
Zimbabwe Barclays Bank of Zimbabwe Ltd. None
FIDELLITY DESTINY PORTFOLIOS
By: /s/ Gary L. French
Name: Gary L. French
Title: Treasurer
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the Prospectus
and Statement of Additional Information in Post-Effective Amendment No. 58
to the Registration Statement on Form N-1A of Fidelity Destiny Portfolios:
Destiny I and Destiny II, of our report dated November 14, 1994 on the
financial statements and financial highlights included in the September 30,
1994 Annual Report to Shareholders of Fidelity Destiny Portfolios: Destiny
I and Destiny II.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectus and "Auditor" in the Statement of
Additional Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 22, 1994
DESTINY CUSTODIAL Under Section 408(a) of the
INDIVIDUAL AGREEMENT Internal Revenue Code
RETIREMENT
ACCOUNT
The Depositor whose name appears on the attached Application is
establishing an individual retirement account (under Section 408(a) of the
Internal Revenue Code) to provide for his or her retirement and for the
support of his or her beneficiaries after death.
The Custodian named on the attached Application has given the Depositor
the Disclosure Statement required under the Income Tax Regulations under
Section 408(i) of the Code.
The Depositor has deposited with the Custodian an initial contribution in
cash, as set forth in the attached Application.
The Depositor and the Custodian make the following Agreement:
ARTICLE I The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(C) of the
Code (BUT ONLY AFTER DECEMBER 31, 1992), 403(A)(4), 403(B)(8), 408(D)(3),
or an employer contribution to a Simplified Employee Pension plan as
described in Section 408(k). ROLLOVER CONTRIBUTIONS BEFORE JANUARY 1,
1993, INCLUDE ROLLOVERS DESCRIBED IN SECTION 402(A)(5), 402(A)(6),
402(A)(7), 403(A)(4), 403(B)(8), 408(D)(3), OR AN EMPLOYER CONTRIBUTION TO
A SIMPLIFIED EMPLOYEE PENSION PLAN AS DESCRIBED IN SECTION 408(K).
ARTICLE II The Depositor's interest in the balance in the Custodial
Account is nonforfeitable.
ARTICLE III 1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the Custodial Account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of Section 408(m) of the Code) EXCEPT AS OTHERWISE PERMITTED BY
SECTION 408(M)(3) WHICH PROVIDES AN EXCEPTION FOR CERTAIN GOLD AND SILVER
COINS AND COINS ISSUED UNDER THE LAWS OF ANY STATE.
ARTICLE IV 1. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE
CONTRARY, THE DISTRIBUTION OF THE DEPOSITOR'S interest in the Custodial
Account SHALL be made IN ACCORDANCE WITH THE FOLLOWING REQUIREMENTS AND
SHALL OTHERWISE COMPLY WITH SECTION 408(A)(6) AND PROPOSED REGULATIONS
SECTION 1.408-8, INCLUDING THE INCIDENTAL DEATH BENEFIT PROVISIONS OF
PROPOSED REGULATIONS SECTION 1.401(A)(9)-2, THE PROVISIONS OF WHICH ARE
INCORPORATED BY REFERENCE.
2. UNLESS OTHERWISE ELECTED BY THE TIME DISTRIBUTIONS ARE REQUIRED TO
BEGIN TO THE DEPOSITOR UNDER PARAGRAPH 3, OR TO THE SURVIVING SPOUSE UNDER
PARAGRAPH 4, OTHER THAN IN THE CASE OF A LIFE ANNUITY, LIFE EXPECTANCIES
SHALL BE RECALCULATED ANNUALLY. SUCH ELECTION SHALL BE IRREVOCABLE AS TO
THE DEPOSITOR AND THE SURVIVING SPOUSE AND SHALL APPLY TO ALL SUBSEQUENT
YEARS. THE LIFE EXPECTANCY OF A NONSPOUSE BENEFICIARY MAY NOT BE
RECALCULATED.
3. The Depositor's entire interest in the Custodial Account must be, or
begin to be, distributed by the Depositor's required beginning date (April
1 following the calendar year end in which the Depositor reaches age 70
1/2). By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the Custodial Account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated Beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of
the Depositor and his or her designated Beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as
follows:
(a) If the Depositor dies on or after DISTRIBUTION OF HIS OR HER
INTEREST HAS BEGUN, distribution must continue to be made in accordance
with paragraph 3.
(b) If the Depositor dies before DISTRIBUTION OF HIS OR HER INTEREST
HAS BEGUN, the entire remaining interest will, at the election of the
DEPOSITOR or, IF THE DEPOSITOR HAS NOT SO ELECTED, at the election of the
Beneficiary or Beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated Beneficiary or Beneficiaries
STARTING by December 31 of the year following the year of the Depositor's
death. If, HOWEVER, the Beneficiary is the Depositor's surviving spouse,
THEN THIS DISTRIBUTION IS NOT REQUIRED TO BEGIN BEFORE DECEMBER 31 OF THE
YEAR IN WHICH THE DEPOSITOR WOULD HAVE TURNED AGE 70 1/2.
(c) EXCEPT WHERE DISTRIBUTION IN THE FORM OF AN ANNUITY MEETING THE
REQUIREMENTS OF SECTION 408(B)(3) AND ITS RELATED REGULATIONS HAS
IRREVOCABLY COMMENCED, DISTRIBUTIONS ARE TREATED AS HAVING BEGUN ON THE
DEPOSITOR'S REQUIRED BEGINNING DATE, EVEN THOUGH PAYMENTS MAY ACTUALLY HAVE
BEEN MADE BEFORE THAT DATE.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the Beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
Custodial Account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated Beneficiary, or the life expectancy of the designated
Beneficiary, whichever applies). In the case of distributions under
paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and
designated Beneficiary as of their birthdays in the year the Depositor
reaches age 70 1/2. In the case of A distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated Beneficiary as of the Beneficiary's birthday in the year
distributions are required to commence.
6. THE OWNER OF TWO OR MORE INDIVIDUAL RETIREMENT ACCOUNTS MAY USE THE
"ALTERNATIVE METHOD" DESCRIBED IN NOTICE 88-38, 1988-1 C.B. 524, TO SATISFY
THE MINIMUM DISTRIBUTION REQUIREMENTS DESCRIBED ABOVE. THIS METHOD PERMITS
AN INDIVIDUAL TO
SATISFY THESE REQUIREMENTS BY TAKING FROM ONE INDIVIDUAL RETIREMENT ACCOUNT
THE AMOUNT REQUIRED TO SATISFY THE REQUIREMENT FOR ANOTHER.
ARTICLE V 1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) of the Code and Regulations SECTIONS 1.408-5 AND
1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through Ill and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) of the Code and the related regulations will be invalid.
ARTICLE VII This Agreement will be amended from time to time to comply
with the provisions of the Code and related regulations. Other amendments
may be made with the consent of the Depositor and the Custodian.
ARTICLE VIII 1. DEFINITIONS. The following definitions shall apply to
terms used in this Article VIII:
(A) "ACCOUNT" OR "CUSTODIAL ACCOUNT" MEANS THE CUSTODIAL ACCOUNT
ESTABLISHED HEREUNDER FOR THE BENEFIT OF THE DEPOSITOR.
(B) "AGREEMENT" MEANS THE DESTINY IRA CUSTODIAL AGREEMENT, INCLUDING THE
INFORMATION AND PROVISIONS SET FORTH IN ANY ACCOUNT APPLICATION THAT GOES
WITH THIS AGREEMENT. THIS AGREEMENT, INCLUDING THE ACCOUNT APPLICATION AND
ANY DESIGNATION OF BENEFICIARY FILED WITH THE CUSTODIAN, MAY BE PROVED
EITHER BY AN ORIGINAL COPY OR BY A REPRODUCED COPY THEREOF, INCLUDING,
WITHOUT LIMITATION, A COPY REPRODUCED BY PHOTOCOPYING, FACSIMILE
TRANSMISSION, OR ELECTRONIC IMAGING.
(C) "APPLICATION" SHALL MEAN THE APPLICATION BY WHICH THIS AGREEMENT,
AS MAY BE AMENDED FROM TIME TO TIME, IS ESTABLISHED BETWEEN THE DEPOSITOR
AND THE CUSTODIAN. THE STATEMENTS CONTAINED THEREIN SHALL BE INCORPORATED
INTO THIS AGREEMENT.
(D) "AUTHORIZED AGENT" MEANS THE PERSON OR PERSONS AUTHORIZED BY THE
DEPOSITOR, ON A SIGNED FORM ACCEPTABLE TO AND FILED WITH THE CUSTODIAN, TO
PURCHASE OR SELL SHARES IN THE DEPOSITOR'S ACCOUNT.
(E) "BENEFICIARY" MEANS THE PERSON OR PERSONS (INCLUDING A TRUST OR
ESTATE) DESIGNATED AS SUCH BY THE DEPOSITOR ON A SIGNED FORM ACCEPTABLE TO
AND FILED WITH THE CUSTODIAN PURSUANT TO ARTICLE VIII, SECTION 7 OF THIS
AGREEMENT.
(F) "CODE" SHALL MEAN THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
(g) "Company" shall mean FMR Corp., a Massachusetts corporation, or any
successor or affiliate thereof to which FMR Corp. may, from time to time,
delegate or assign any or all of its rights or responsibilities under this
Agreement.
(H) "CUSTODIAN" SHALL MEAN STATE STREET BANK AND TRUST COMPANY, A
MASSACHUSETTS TRUST COMPANY, OR ITS SUCCESSOR, AS SPECIFIED IN THE ACCOUNT
APPLICATION.
(I) "DEPOSITOR" MEANS THE PERSON NAMED IN THE ACCOUNT APPLICATION.
(j) "INVESTMENT COMPANY SHARES" OR "SHARES" SHALL MEAN SHARES OF
FIDELITY DESTINY PORTFOLIOS, A SERIES FUND REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940 FOR WHICH FIDELITY MANAGEMENT & RESEARCH COMPANY, A
MASSACHUSETTS CORPORATION, OR ITS SUCCESSORS OR AFFILIATES, SERVES AS
INVESTMENT ADVISOR.
(k) "Plans" shall mean the Fidelity Systematic Investment Plans, a unit
investment trust, the assets of which are invested in Investment Company
Shares.
2. LNVESTMENT OF CONTRIBUTIONS. CONTRIBUTIONS TO THE ACCOUNT MAY BE
INVESTED ONLY IN INVESTMENT COMPANY SHARES, AND SHALL BE INVESTED AS
FOLLOWS:
(A) GENERAL. Contributions will be invested in accordance with the
Depositor's written instructions in the Application, and with subsequent
instructions given by the Depositor OR THE AUTHORIZED AGENT APPOINTED BY
THE DEPOSITOR (or, following the death of the Depositor, his or her
Beneficiary) to the CUSTODIAN in a manner acceptable to the CUSTODIAN. By
giving such instructions to the CUSTODIAN, SUCH PERSON will be deemed to
have acknowledged receipt of the then current prospectus, if any, for any
Investment Company Shares in which the Depositor (OR THE AUTHORIZED AGENT
APPOINTED BY THE DEPOSITOR) directs the CUSTODIAN to invest assets in his
or her Account. All charges incidental to carrying out such instructions
shall be charged and collected in accordance with ARTICLE VIII, SECTION 15.
CONTRIBUTIONS MAY ONLY BE INVESTED IN UNITS OF THE PLANS. ALL UNITS OF THE
PLANS IN THE CUSTODIAL ACCOUNT SHALL BE HELD IN THE NAME OF THE CUSTODIAN
OR ITS NOMINEE OR NOMINEES.
(B) INITIAL CONTRIBUTION. The Custodian will invest all contributions
promptly after their receipt, as set forth below; provided, however, that
the Custodian shall NOT be obligated to invest the Depositor's initial
contribution to his Custodial Account as indicated on the Application,
until at least seven (7) calendar days have elapsed from the date of
acceptance of the Application by or on behalf of the Custodian.
(c) UNCLEAR INSTRUCTIONS. If the Depositor's Custodial Account at any
time contains cash as to which investment instructions in accordance with
this Section 2 have not been received by the CUSTODIAN, or if the Custodian
receives instructions as to investment selection or allocation which are,
in THE OPINION OF THE CUSTODIAN, NOT CLEAR, THE CUSTODIAN MAY HOLD
UNINVESTED, OR RETURN ALL OR A PORTION OF THE CASH WITHOUT LIABILITY FOR
LOSS OF INCOME OR APPRECIATION OR FOR OTHER LOSS, AND WITHOUT LIABILITY FOR
INTEREST, PENDING RECEIPT OF WRITTEN INVESTMENT INSTRUCTIONS OR
CLARIFICATION.
(D) NO DUTY. The Custodian shall NOT have any duty to question the
directions of a Depositor (OR THE DEPOSITOR'S AUTHORIZED AGENT,
BENEFICIARY, EXECUTOR, OR ADMINISTRATOR) in the investment of his or her
Custodial Account or to advise him or her regarding the purchase, retention
or sale of assets credited to the Custodial Account, nor shall the
Custodian, or any of their affiliates, be liable for any loss which results
from the Depositor's (OR THE DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY,
EXECUTOR, OR ADMINISTRATOR) exercise of control (whether by his or her
action or inaction) over the Custodial Account.
3. CONTRIBUTIONS BY DIVORCED OR SEPARATED SPOUSES. All alimony and
separate maintenance payments received by a divorced or separated spouse,
and taxable under Section 71 of the Code, shall be considered compensation
for purposes of computing the maximum annual contribution to the Custodial
Account, and the limitations for contributions by a divorced or separated
spouse shall be the same as for any other individual.
4. TIMING OF CONTRIBUTIONS. A contribution is deemed to have been made
on the last day of the preceding taxable year if the contribution is made
by the deadline for filing the Depositor's income tax return (not including
extensions), OR SUCH LATER DATE AS MAY BE DETERMINED BY THE DEPARTMENT OF
THE TREASURY OR THE IRS, PROVIDED the Depositor (OR THE DEPOSITOR'S
AUTHORIZED AGENT) designates, IN A MANNER ACCEPTABLE TO THE CUSTODIAN, the
contribution as a contribution for the preceding taxable year.
5. ROLLOVER CONTRIBUTIONS. The CUSTODIAN will accept for the Custodial
Account all rollover contributions which consist of cash, and it may, but
shall be under no obligation to, accept all or any part of any other
rollover contribution. The Depositor shall designate each rollover
contribution as such to the CUSTODIAN, AND BY SUCH DESIGNATION SHALL
CONFIRM to the CUSTODIAN that a proposed rollover contribution qualifies as
a rollover contribution within the meaning of Sections 402(a)(5),
402(A)(6), 402(a)(7), 402(c), 403(a)(4), 403(b)(8), AND/OR 408(d)(3) of the
Code. 6. REINVESTMENT OF EARNINGS. In the absence of other instructions
pursuant to Section 2, distributions of every nature received in respect of
the assets in a Depositor's Custodial Account shall be reinvested as
follows:
(a) in the case of a distribution in respect of Investment Company
Shares which may be received, at the election of the shareholder, in cash
or in additional Shares of such Investment Company, the Custodian shall
elect to receive such distribution in additional Investment Company Shares;
(b) in the case of a cash distribution which is received in respect of
Investment Company Shares, the Custodian shall reinvest such cash in
additional Shares of that Investment Company;
(c) in the case of any other distribution of any nature received in
respect of assets in the Custodial Account, the distribution shall be
liquidated to cash, if necessary, and shall be reinvested in accordance
with the Depositor's instructions pursuant to Section 2.
7. DESIGNATION OF BENEFICIARY. A DEPOSITOR MAY DESIGNATE A BENEFICIARY
AS FOLLOWS:
(a) GENERAL. A Depositor may designate a Beneficiary or Beneficiaries
at any time, and any such designation may be changed or revoked at any
time, by written designation signed by the Depositor on a form acceptable
to, and filed with, the CUSTODIAN; provided, however, that such
designation, or change or revocation of a prior designation, shall not be
effective unless IT IS received AND ACCEPTED by the CUSTODIAN NO LATER THAN
thirty (30) days after the death of the Depositor, and provided further
that the latest such designation or change or revocation shall control. If
the Depositor had not by the date of his or her death properly designated a
Beneficiary in accordance with the preceding sentence, or if no designated
Beneficiary survives the Depositor, the Depositor's Beneficiary shall be
his or her surviving spouse, but if he or she has no surviving spouse, his
or her estate. Unless otherwise specified in the Depositor's designation
of Beneficiary, if a Beneficiary dies before receiving his or her entire
interest in the Custodial Account, his or her remaining interest in the
Custodial Account shall be paid to the Beneficiary's estate.
(B) MINORS. IF A DISTRIBUTION UPON THE DEATH OF THE DEPOSITOR IS
PAYABLE TO A PERSON KNOWN BY THE CUSTODIAN TO BE A MINOR OR OTHERWISE UNDER
A LEGAL DISABILITY, THE CUSTODIAN MAY, IN ITS ABSOLUTE DISCRETION, MAKE
ALL, OR ANY PART OF THE DISTRIBUTION TO (A) A PARENT OF SUCH PERSON, (B)
THE GUARDIAN , CONSERVATOR, OR OTHER LEGAL REPRESENTATIVE, WHEREVER
APPOINTED, OF SUCH PERSON, (C) A CUSTODIAL ACCOUNT ESTABLISHED UNDER A
UNIFORM GIFTS TO MINORS ACT, UNIFORM TRANSFERS TO MINORS ACT, OR SIMILAR
ACT, (D) ANY PERSON HAVING CONTROL OR CUSTODY OF SUCH PERSON, OR (E) TO
SUCH PERSON DIRECTLY.
(C) JUDICIAL DETERMINATION. ANYTHING TO THE CONTRARY HEREIN
NOTWITHSTANDING, IN THE EVENT OF REASONABLE DOUBT RESPECTING THE PROPER
COURSE OF ACTION TO BE TAKEN, THE CUSTODIAN MAY IN ITS SOLE AND ABSOLUTE
DISCRETION RESOLVE SUCH DOUBT BY JUDICIAL DETERMINATION WHICH SHALL BE
BINDING ON ALL PARTIES CLAIMING ANY INTEREST IN THE ACCOUNT. IN SUCH EVENT
ALL COURT COSTS, LEGAL EXPENSES, REASONABLE COMPENSATION OF TIME EXPENDED
BY THE CUSTODIAN IN THE PERFORMANCE OF ITS DUTIES, AND OTHER APPROPRIATE
AND PERTINENT EXPENSES AND COSTS SHALL BE COLLECTED BY THE CUSTODIAN FROM
THE CUSTODIAL ACCOUNT IN ACCORDANCE WITH ARTICLE VIII, SECTION 15.
(D) NO DUTY. THE CUSTODIAN SHALL NOT HAVE ANY DUTY TO QUESTION THE
DIRECTIONS OF THE DEPOSITOR (OR THE DEPOSITOR'S AUTHORIZED AGENT,
BENEFICIARY, EXECUTOR OR ADMINISTRATOR) AS TO THE TIME(S) AND AMOUNT(S) OF
DISTRIBUTIONS FROM THE CUSTODIAL ACCOUNT, OR TO ADVISE HIM OR HER
REGARDING THE COMPLIANCE OF SUCH DISTRIBUTIONS WITH SECTION 401(A)(9),
SECTION 2056(B)(7) OR SECTION 2056A OF THE CODE.
8. DISTRIBUTIONS FROM THE ACCOUNT. SUBJECT TO SECTION 10 BELOW,
dISTRIBUTIONS FROM THE ACCOUNT WILL BE MADE ONLY UPON THE REQUEST OF THE
DEPOSITOR (OR THE DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY, EXECUTOR, OR
ADMINISTRATOR) TO THE CUSTODIAN IN SUCH FORM AND IN SUCH MANNER AS IS
ACCEPTABLE TO THE CUSTODIAN. FOR DISTRIBUTIONS REQUESTED PURSUANT TO
ARTICLE IV, LIFE EXPECTANCY AND JOINT LIFE AND LAST SURVIVOR EXPECTANCY ARE
CALCULATED BASED ON INFORMATION PROVIDED BY THE DEPOSITOR (OR THE
DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY, EXECUTOR, OR ADMINISTRATOR)
USING THE EXPECTED RETURN MULTIPLES IN SECTION 1.72-9 OF THE INCOME TAX
REGULATIONS. THE CUSTODIAN SHALL NOT INCUR ANY LIABILITY FOR ERRORS IN
SUCH CALCULATIONS AS A RESULT OF RELIANCE ON INFORMATION PROVIDED BY THE
DEPOSITOR (OR THE DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY, EXECUTOR, OR
ADMINISTRATOR). Without limiting the generality of the foregoing, the
Custodian is NOT obligated to make any distribution, INCLUDING A MINIMUM
REQUIRED DISTRIBUTION AS SPECIFIED IN ARTICLE IV ABOVE, absent a specific
WRITTEN direction from the Depositor (OR THE DEPOSITOR'S AUTHORIZED AGENT,
BENEFICIARY, EXECUTOR, OR ADMINISTRATOR) to do so.
9. ACTIONS IN THE ABSENCE OF SPECIFIC INSTRUCTIONS. If the CUSTODIAN
receives no response to communications sent to the Depositor (OR THE
DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY, EXECUTOR, OR ADMINISTRATOR) at
the Depositor's (OR THE DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY,
EXECUTOR, OR ADMINISTRATOR'S) last known address as shown in the records of
the CUSTODIAN, or if the CUSTODIAN determines, on the basis of evidence
satisfactory to it, that the Depositor is legally incompetent, the
CUSTODIAN thereafter may make such determinations with respect to
distributions, investments, and other administrative matters arising under
this Agreement as it considers reasonable, notwithstanding any prior
instructions or directions given by or on behalf of the Depositor. Any
determinations so made shall be binding on all persons having or claiming
any interest under the Custodial Account, and the Custodian shall NOT incur
any obligation or liability for any such determination made in good faith,
for any action taken in pursuance thereof, OR FOR ANY FLUCTUATIONS IN THE
VALUE OF THE ACCOUNT IN THE EVENT OF A DELAY RESULTING FROM THE CUSTODIAN'S
GOOD FAITH DECISION TO AWAIT ADDITIONAL INFORMATION OR EVIDENCE.
10. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS. The Custodian
will NOT under any circumstances be responsible for the timing, purpose or
propriety of any contribution or of any distribution made hereunder, nor
shall the Custodian incur any liability or responsibility for any tax
imposed on account of any such contribution or distribution.
NOTWITHSTANDING SECTION 8 ABOVE, THE CUSTODIAN IS EMPOWERED TO MAKE A
DISTRIBUTION ABSENT SUCH AN INSTRUCTION IF DIRECTED TO DO SO PURSUANT TO A
COURT ORDER OF ANY KIND AND THE NEITHER THE CUSTODIAN NOR THE COMPANY SHALL
IN SUCH EVENT INCUR ANY LIABILITY FOR ACTING IN ACCORDANCE WITH SUCH COURT
ORDER.
11. WRITTEN INSTRUCTIONS AND NOTICES. All WRITTEN notices OR
COMMUNICATIONS required to be given by the Custodian to the Depositor shall
be deemed to have been given when sent by mail to the LAST KNOWN address of
the Depositor in the records of the CUSTODIAN. All WRITTEN INSTRUCTIONS,
notices, OR COMMUNICATIONS required to be given by the Depositor to the
Custodian shall be MAILED OR DELIVERED TO THE CUSTODIAN AT ITS DESIGNATED
MAILING ADDRESS AS SPECIFIED ON THE APPLICATION, AND NO SUCH INSTRUCTION,
NOTICE, OR COMMUNICATION SHALL BE EFFECTIVE UNTIL THE CUSTODIAN'S ACTUAL
RECEIPT THEREOF.
12. EFFECT OF WRITTEN INSTRUCTIONS AND NOTICES. THE CUSTODIAN SHALL BE
ENTITLED TO RELY CONCLUSIVELY UPON, AND SHALL BE FULLY PROTECTED IN ANY
ACTION OR NON-ACTION TAKEN IN GOOD FAITH IN RELIANCE UPON ANY WRITTEN
INSTRUCTIONS, NOTICES, COMMUNICATIONS OR INSTRUMENTS BELIEVED TO HAVE BEEN
GENUINE AND PROPERLY EXECUTED. ANY SUCH NOTIFICATION MAY BE PROVED BY
ORIGINAL COPY OR REPRODUCED COPY THEREOF, INCLUDING, WITHOUT LIMITATION, A
COPY PRODUCED BY PHOTOCOPYING, FACSIMILE TRANSMISSION, OR ELECTRONIC
IMAGING. FOR THIS PURPOSE, THE CUSTODIAN MAY (BUT IS NOT REQUIRED TO) GIVE
THE SAME EFFECT TO A TELEPHONIC INSTRUCTION AS IT GIVES TO A WRITTEN A
INSTRUCTION, AND THE CUSTODIAN'S ACTION IN DOING SO SHALL BE PROTECTED TO
THE SAME EXTENT AS IF SUCH TELEPHONIC INSTRUCTIONS WERE, IN FACT, A WRITTEN
INSTRUCTION. ANY SUCH TELEPHONIC INSTRUCTION MAY BE PROVED BY AUDIO
RECORDED TAPE.
13. TAX MATTERS.
(a) General. The Custodian shall submit required reports to the IRS and
the Depositor (OR THE DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY, EXECUTOR,
OR ADMINISTRATOR); provided, however, that SUCH INDIVIDUAL shall prepare
any return or report required IN CONNECTION WITH MAINTAINING THE ACCOUNT,
OR as a result of liability incurred by the Account for tax on unrelated
business taxable income, or windfall profits tax.
(B) ANNUAL REPORT. AS SOON AS IS PRACTICABLE AFTER THE CLOSE OF EACH
TAXABLE YEAR, AND WHENEVER REQUIRED BY THE CODE, THE CUSTODIAN SHALL
DELIVER TO THE DEPOSITOR A WRITTEN REPORT(S) REFLECTING RECEIPTS,
DISBURSEMENTS AND OTHER TRANSACTIONS EFFECTED IN THE CUSTODIAL ACCOUNT
DURING SUCH PERIOD AND THE FAIR MARKET VALUE OF THE ASSETS AND LIABILITIES
OF THE CUSTODIAL ACCOUNT AS OF THE CLOSE OF SUCH PERIOD IN A MANNER
PRESCRIBED BY THE INTERNAL REVENUE SERVICE. THE COMPANY SHALL NOT INCUR
ANY LIABILITY IN THE EVENT THE CUSTODIAN DOES NOT SATISFY ITS OBLIGATIONS
AS DESCRIBED HEREIN.
(C) WITHHOLDING. ANY DISTRIBUTIONS FROM THE CUSTODIAL ACCOUNT MAY BE
MADE BY THE CUSTODIAN NET OF ANY REQUIRED TAX WITHHOLDING.
14. SPENDTHRIFT PROVISION. THE INTEREST OF A DEPOSITOR IN THE ACCOUNT
SHALL NOT BE TRANSFERRED OR ASSIGNED BY VOLUNTARY OR INVOLUNTARY ACT OF THE
DEPOSITOR OR BY OPERATION OF LAW; NOR SHALL IT BE SUBJECT TO ALIENATION,
ASSIGNMENT, GARNISHMENT, ATTACHMENT, RECEIVERSHIP, EXECUTION OR LEVY OF ANY
KIND. HOWEVER, THIS SECTION 14 SHALL NOT IN ANY WAY BE CONSTRUED TO, AND
THE CUSTODIAN IS IN NO WAY OBLIGATED OR EXPECTED TO, COMMENCE OR DEFEND ANY
LEGAL ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR THE
CUSTODIAL ACCOUNT. COMMENCEMENT OF LEGAL ACTION OR PROCEEDING OR DEFENSE
OF SUCH LEGAL ACTION OR PROCEEDING SHALL BE THE SOLE RESPONSIBILITY OF THE
DEPOSITOR UNLESS AGREED UPON BY THE CUSTODIAN AND THE DEPOSITOR, AND UNLESS
THE CUSTODIAN IS FULLY INDEMNIFIED FOR DOING SO TO THE CUSTODIAN'S
SATISFACTION. NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF A PROPERTY
SETTLEMENT BETWEEN A DEPOSITOR AND HIS OR HER FORMER SPOUSE PURSUANT TO
WHICH THE TRANSFER OF A DEPOSITOR'S INTEREST HEREUNDER, OR A PORTION
THEREOF, IS INCORPORATED IN A DIVORCE DECREE OR IN A WRITTEN INSTRUMENT
INCIDENT TO SUCH DIVORCE OR LEGAL SEPARATION, THEN THE INTEREST SO DECREED
BY A COURT TO BE THE PROPERTY OF SUCH FORMER SPOUSE SHALL BE TRANSFERRED TO
A SEPARATE CUSTODIAL ACCOUNT FOR THE BENEFIT OF SUCH FORMER SPOUSE, IN
ACCORDANCE WITH SECTION 408(D)(6) OF THE CODE.
15. FEES AND EXPENSES.
(a) General. The fees of the Custodian for performing ITS duties
hereunder shall be in such amount as it shall establish from time to time.
All such fees, as well as expenses (such as, without limitation, brokerage
commissions upon the investment of funds, fees for special legal services,
taxes levied or assessed, or expenses in connection with the liquidation or
retention of all or part of a rollover contribution), shall be collected by
the CUSTODIAN from cash available in the Custodial Account, or if
insufficient cash shall be available, by sale of sufficient assets in the
Custodial Account and application of the sales proceeds to pay such fees
and expenses. Alternatively, but only with the consent of the CUSTODIAN,
fees and expenses may be paid directly to the CUSTODIAN by the Depositor by
separate check.
(B) ADVISOR FEES. THE CUSTODIAN SHALL, UPON DIRECTION FROM THE
DEPOSITOR, DISBURSE FROM THE CUSTODIAL ACCOUNT PAYMENT TO THE DEPOSITOR'S
REGISTERED INVESTMENT ADVISOR OF ANY FEES FOR FINANCIAL ADVISORY SERVICES
RENDERED WITH REGARD TO THE ASSETS HELD IN THE ACCOUNT. SUCH DIRECTION
MUST BE PROVIDED IN A FORM AND MANNER ACCEPTABLE TO THE CUSTODIAN, AND THE
CUSTODIAN SHALL NOT INCUR ANY LIABILITY FOR EXECUTING SUCH DIRECTION.
(C) SALE OF ASSETS. Whenever it shall be necessary in accordance with
this Section 15 to sell assets in order to pay fees or expenses, the
CUSTODIAN shall request the Depositor (OR THE DEPOSITOR'S AUTHORIZED AGENT,
BENEFICIARY, EXECUTOR, OR ADMINISTRATOR) to provide specific instructions.
IF SUCH INSTRUCTIONS ARE NOT RECEIVED BY THE CUSTODIAN WITHIN TEN (10)
BUSINESS DAYS OF THE CUSTODIAN'S request, the CUSTODIAN may sell any or all
of the assets credited to the Custodial Account at that time, and shall
invest the portion of the sales proceeds remaining after collection of the
applicable fees and expenses therefrom in accordance with Section 2. The
COMPANY OR THE Custodian shall NOT incur any liability on account of its
sale or retention of assets under such circumstances.
16. VOTING WITH RESPECT TO SECURITIES. THE CUSTODIAN SHALL MAIL TO THE
DEPOSITOR ALL PROSPECTUSES AND PROXIES THAT MAY COME INTO THE CUSTODIAN'S
POSSESSION BY REASON OF ITS HOLDING OF INVESTMENT COMPANY SHARES OR OTHER
SECURITIES IN THE CUSTODIAL ACCOUNT. A Depositor may direct the Custodian
as to the manner in which any securities or Investment Company Shares held
in the Custodial Account shall be voted with respect to any matters as to
which the Custodian as holder of record is entitled to vote, coming before
any meeting of shareholders of the corporation which issued such
securities, or of holders of interest in the Investment Company which
issued such Investment Company Shares. All such directions shall be in
writing on a form approved by the CUSTODIAN and signed by the Depositor,
and delivered to the CUSTODIAN within the time prescribed by it. The
Custodian shall vote only those securities and Shares with respect to which
IT has received timely written directions from the Depositor; however, THE
Custodian may without such direction vote Shares "present" TO THE EXTENT
THAT SUCH A VOTE IS NEEDED TO establish a quorum.
17. LIMITATIONS ON CUSTODIAL LIABILITY AND INDEMNIFICATION. THE
DEPOSITOR AND THE CUSTODIAN INTEND THAT THE CUSTODIAN SHALL HAVE AND
EXERCISE NO DISCRETION, AUTHORITY, OR RESPONSIBILITY AS TO ANY INVESTMENT
IN CONNECTION WITH THE ACCOUNT AND THE CUSTODIAN SHALL NOT BE RESPONSIBLE
IN ANY WAY FOR THE PURPOSE, PROPRIETY OR TAX TREATMENT OF ANY CONTRIBUTION,
OR OF ANY DISTRIBUTION, OR ANY OTHER ACTION OR NONACTION TAKEN PURSUANT TO
THE DEPOSITOR'S DIRECTION (OR THAT OF THE DEPOSITOR'S AUTHORIZED AGENT,
BENEFICIARY, EXECUTOR OR ADMINISTRATOR). THE DEPOSITOR WHO DIRECTS THE
INVESTMENT OF HIS OR HER ACCOUNT SHALL BEAR SOLE RESPONSIBILITY FOR THE
SUITABILITY OF ANY DIRECTED INVESTMENT AND FOR ANY ADVERSE CONSEQUENCES
ARISING FROM SUCH AN INVESTMENT, INCLUDING, WITHOUT LIMITATION, THE
INABILITY OF THE CUSTODIAN TO VALUE OR TO SELL AN ILLIQUID INVESTMENT, OR
THE GENERATION OF UNRELATED BUSINESS TAXABLE INCOME WITH RESPECT TO AN
INVESTMENT. TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEPOSITOR (OR THE
DEPOSITOR'S AUTHORIZED AGENT, BENEFICIARY, EXECUTOR OR ADMINISTRATOR, AS
APPROPRIATE) SHALL AT ALL TIMES FULLY INDEMNIFY AND SAVE HARMLESS THE
CUSTODIAN, THE COMPANY AND THEIR AGENTS, AFFILIATES, SUCCESSORS AND ASSIGNS
AND THEIR OFFICERS, DIRECTORS AND EMPLOYEES, FROM ANY AND ALL LIABILITY
ARISING FROM THE DEPOSITOR'S INVESTMENT DIRECTION UNDER THIS ACCOUNT AND
FROM ANY AND ALL OTHER LIABILITY WHATSOEVER WHICH MAY ARISE IN CONNECTION
WITH THIS AGREEMENT EXCEPT LIABILITY ARISING UNDER APPLICABLE LAW, OR
LIABILITY ARISING FROM GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART
OF THE INDEMNIFIED PERSON. ALTHOUGH THE CUSTODIAN SHALL HAVE NO
RESPONSIBILITY TO GIVE EFFECT TO A DIRECTION FROM ANYONE OTHER THAN THE
DEPOSITOR (OR THE DEPOSITOR'S BENEFICIARY, EXECUTOR OR ADMINISTRATOR), THE
CUSTODIAN MAY, IN ITS DISCRETION, ESTABLISH PROCEDURES PURSUANT TO WHICH
THE DEPOSITOR MAY DELEGATE TO A THIRD PARTY ANY OR ALL OF THE DEPOSITOR'S
POWERS AND DUTIES HEREUNDER, PROVIDED, HOWEVER, THAT IN NO EVENT MAY ANYONE
OTHER THAN THE DEPOSITOR EXECUTE THE APPLICATION BY WHICH THIS AGREEMENT IS
ADOPTED OR THE FORM BY WHICH THE BENEFICIARY IS APPOINTED, AND PROVIDED,
FURTHER, THAT ANY SUCH THIRD PARTY TO WHOM THE DEPOSITOR HAS SO DELEGATED
POWERS AND DUTIES SHALL BE TREATED AS THE DEPOSITOR FOR PURPOSES OF
APPLYING THE PRECEDING SENTENCES OF THIS PARAGRAPH AND THE PROVISIONS OF
ARTICLE VIII, SECTION 2.
18. DELEGATION TO AGENTS. THE CUSTODIAN MAY DELEGATE TO ONE OR MORE
CORPORATIONS AFFILIATED WITH THE CUSTODIAN THE PERFORMANCE OF RECORD
KEEPING AND OTHER MINISTERIAL SERVICES IN CONNECTION WITH THE CUSTODIAL
ACCOUNT, FOR A REASONABLE FEE TO BE BORNE BY THE CUSTODIAN AND NOT BY THE
CUSTODIAL ACCOUNT. ANY SUCH AGENT'S DUTIES AND RESPONSIBILITIES SHALL BE
CONFINED SOLELY TO THE PERFORMANCE OF SUCH SERVICES, AND SHALL CONTINUE
ONLY FOR SO LONG AS THE CUSTODIAN NAMED IN THE APPLICATION SERVES AS
CUSTODIAN.
19. AMENDMENT OF AGREEMENT. The Depositor and Custodian authorize and
direct the Company to amend this Agreement in any respect at any time
(including retroactively), so that it may conform with applicable
provisions of the Internal Revenue Code, OR WITH ANY OTHER APPLICABLE LAW
as in effect from time to time, or to MAKE SUCH OTHER CHANGES TO THIS
AGREEMENT AS THE COMPANY DEEMS ADVISABLE. Any such amendment shall be
effected by delivery to the Custodian and mailing to the Depositor at his
OR HER LAST KNOWN address as shown in the records of the CUSTODIAN a copy
of SUCH AMENDMENT, OR A RESTATEMENT OF THIS CUSTODIAL AGREEMENT INCLUDING
ANY SUCH AMENDMENT. The Depositor shall be deemed to consent to any such
amendment(s) if he or she fails to object thereto by written notice
received by the CUSTODIAN within fifteen (15) calendar days from the date
of the Company's mailing to the Depositor a copy of such amendment(s) OR
RESTATEMENT.
20. RESIGNATION OR REMOVAL OF CUSTODIAN. THE COMPANY MAY REMOVE THE
CUSTODIAN AT ANY TIME, AND the Custodian may resign at any time, upon
thirty (30) days' written notice to the Depositor. Upon THE REMOVAL OR
resignation OF the Custodian, THE COMPANY may, but shall not be required
to, appoint a successor custodian under this Custodial Agreement; provided
that any successor custodian shall satisfy the requirements of Section
408(a)(2) of the Code. Upon any such successor's acceptance of
appointment, the Custodian shall transfer the assets of the Custodial
Account, together with copies of relevant books and records, to such
successor custodian; provided, however, that the Custodian is authorized to
reserve such sum of money or property as it may deem advisable for payment
of any liabilities constituting a charge on or against the assets of the
Custodial Account, or on or against the Custodian or the Company. The
Custodian shall not be liable for the acts or omissions of any successor to
it. If no successor custodian is appointed by the COMPANY, the Custodial
Account shall be terminated, AND THE ASSETS OF THE ACCOUNT, REDUCED BY THE
AMOUNT OF ANY UNPAID FEES OR EXPENSES, WILL BE DISTRIBUTED TO THE
DEPOSITOR.
21. TERMINATION OF THE CUSTODIAL ACCOUNT. The Depositor may terminate
the Custodial Account at any time upon notice to the CUSTODIAN IN A MANNER
AND FORM ACCEPTABLE TO THE CUSTODIAN. Upon such termination, the
Custodian shall transfer the assets of the Custodial Account, reduced by
the amount of any unpaid fees or expenses, to the custodian or trustee of
another individual retirement account (within the meaning of Section 408 of
the Code) OR OTHER RETIREMENT PLAN designated by the Depositor. The
Custodian shall NOT be liable for losses arising from the acts, omissions,
delays or other inaction of any such transferee custodian or trustee. IF
NOTICE OF THE DEPOSITOR'S INTENTION TO TERMINATE THE CUSTODIAL ACCOUNT IS
RECEIVED BY THE CUSTODIAN AND THE DEPOSITOR HAD NOT DESIGNATED A TRANSFEREE
CUSTODIAN OR TRUSTEE FOR THE ASSETS IN THE ACCOUNT, THEN THE ACCOUNT,
REDUCED BY ANY UNPAID FEES OR EXPENSES, WILL BE DISTRIBUTED TO THE
DEPOSITOR.
22. GOVERNING LAW. THIS AGREEMENT, AND THE DUTIES AND OBLIGATIONS OF THE
COMPANY AND THE CUSTODIAN UNDER THE AGREEMENT, SHALL BE CONSTRUED,
ADMINISTERED AND ENFORCED ACCORDING TO THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS, EXCEPT AS SUPERSEDED BY FEDERAL LAW OR STATUTE.
23. WHEN EFFECTIVE. This Agreement shall not become effective until
acceptance of the Application by or on behalf of the Custodian at its
principal office, as evidenced by a written notice to the Depositor.
DESTINY DISCLOSURE
INDIVIDUAL STATEMENT
RETIREMENT
ACCOUNT
The following information is provided to you in accordance with the
requirements of the Internal Revenue Code (the "Code") and should be
reviewed in conjunction with both the Custodial Agreement and the
Application for your Individual Retirement Account ("IRA"). This
information reflects the provisions of the Internal Revenue Code as are
effective January 1, 1987 and therefore applies to contributions for years
after, and to distributions taken after 1986.
RIGHT TO CANCEL YOU MAY REVOKE THIS ACCOUNT AT ANY TIME WITHIN SEVEN
CALENDAR DAYS AFTER IT IS ESTABLISHED BY MAILING OR DELIVERING A WRITTEN
REQUEST FOR REVOCATION TO :
STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8300
BOSTON, MASSACHUSETTS 02266-8300
ATTN. CONTRACTUAL SERVICES
UPON REVOCATION, YOU WILL RECEIVE A FULL REFUND OF YOUR INITIAL
CONTRIBUTION, INCLUDING SALES COMMISSIONS (IF ANY) AND/OR ADMINISTRATIVE
FEES. IF YOU HAVE ANY QUESTIONS RELATIVE TO THIS PROCEDURE, PLEASE PHONE
1-800-225-5270 (OVERSEAS CALL COLLECT 617-328-5000).
TYPES OF IRAS REGULAR IRA. You may make a Regular IRA contribution of
$2,000 or 100% of your compensation, whichever is less. (To determine the
amount of your income tax deduction for your IRA contribution, see "Limits
on Deductible Contributions" below.)
SPOUSAL IRA. If you and your spouse file a joint federal income tax
return, you may make a Spousal IRA contribution, even if your spouse has
received compensation during the tax year. Your contribution to a Spousal
IRA must not exceed the lesser of $2,000, or the excess of $2,250 (or if
less, 100% of your compensation) over your contribution to your Regular
IRA. Note: if your spouse has more than $250 in compensation for the tax
year, the two of you may make a larger total contribution if you each
contribute to a Regular IRA.
ROLLOVER IRA. IF YOU RETIRE OR CHANGE JOBS, YOU MAY BE ELIGIBLE FOR A
DISTRIBUTION FROM YOUR EMPLOYER'S RETIREMENT PLAN. TO AVOID MANDATORY
WITHHOLDING OF 20% OF YOUR DISTRIBUTION FOR FEDERAL INCOME TAX, AND TO
PRESERVE THE TAX-DEFERRED STATUS OF THIS DISTRIBUTION, YOU CAN TRANSFER IT
DIRECTLY TO A ROLLOVER IRA. IF YOU CHOOSE TO HAVE THE DISTRIBUTION PAID
DIRECTLY TO YOU, YOU WILL BE SUBJECT TO THE 20% WITHHOLDING RULES. YOU MAY
STILL REINVEST UP TO 100% OF THE TOTAL AMOUNT OF YOUR DISTRIBUTION WHICH IS
ELIGIBLE FOR ROLLOVER IN A ROLLOVER IRA BY REPLACING THE 20% WHICH WAS
WITHHELD FOR TAXES WITH OTHER ASSETS YOU OWN. YOU MUST REINVEST IN A
ROLLOVER IRA WITHIN 60 DAYS OF RECEIPT OF YOUR DISTRIBUTION. THE AMOUNT
INVESTED IN A ROLLOVER IRA WILL NOT BE included in your taxable income for
the year in which you receive the qualified plan distribution.
DESCRIPTION Your IRA is a custodial account created for your exclusive
benefit. Your interest
OF ACCOUNT in the account is nonforfeitable.
______________________________________________________________________
ELIGIBILITY Employees and self-employed individuals are eligible to
contribute to an IRA even if they are already covered under another
tax-qualified plan.
CONTRIBUTIONS GENERAL. You may make annual cash contributions to an IRA
in any amount up to 100% of your compensation for the year or $2,000,
whichever is less. Your employer may make contributions to your account,
but, except as noted below under a SEP, the total contributions from you
and your employer may not exceed this limitation. Contributions (other
than rollover contributions described below) must be made in "cash" and not
in "kind". Therefore, securities or other assets already owned cannot be
contributed to an IRA but can be converted to cash and then contributed.
No part of your contribution may be invested in life insurance or be
commingled with other property, except in a common trust fund or common
investment fund.
SPOUSAL ACCOUNTS. If you are married and file a joint tax return, you
may make cash contributions to a "spousal" IRA in addition to your own IRA
(even if your spouse has compensation). The total amounts contributed to
your own and to your spouse's IRA may not exceed 100% of your combined
compensation or $2,250, whichever is less. In no event, however, may the
annual contribution to either your account or your spouse's account exceed
$2,000.
COMPENSATION means wages, salaries, professional fees, or other amounts
derived from or received for personal service actually rendered and
includes the earned income of a self-employed individual, and any alimony
or separate maintenance payment includible in the individual's gross
income.
ADJUSTED GROSS INCOME is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the IRA
deduction (see below), adjusted gross income is modified to take into
account deductions for IRA contributions, taxable benefits under the Social
Security Act and the Railroad Retirement Act, and passive loss limitations
under Code Section 86.
TIME OF CONTRIBUTION. You may make contributions to your IRA any time up
to and including the due date for filing your tax return for the year. You
may continue to make annual contributions to your IRA up to (but not
including) the calendar year in which you reach age 70 1/2. You may
continue to make annual contributions to your spouse's IRA up to (but not
including) the calendar year in which your spouse reaches age 70 1/2.
ROLLOVER CONTRIBUTIONS. YOUR DESTINY IRA CAN RECEIVE ROLLOVER
CONTRIBUTIONS FROM AN IRA HELD BY YOU WITH ANOTHER CUSTODIAN. IN ADDITION,
QUALIFYING DISTRIBUTIONS FROM TAX-QUALIFIED PLANS (FOR EXAMPLE, PENSION,
PROFIT-SHARING, AND KEOGH PLANS) MAY BE ELIGIBLE FOR ROLLOVER INTO YOUR
IRA. HOWEVER, STRICT LIMITATIONS APPLY TO SUCH ROLLOVERS AND YOU SHOULD
SEEK COMPETENT TAX ADVICE REGARDING THESE RESTRICTIONS.
SIMPLIFIED EMPLOYEE PENSION PLAN CONTRIBUTIONS. YOUR IRA CANNOT BE USED
AS PART OF A SEP ESTABLISHED BY YOUR EMPLOYER, EXCEPT FOR THOSE SEP-IRAS
ESTABLISHED ON OR BEFORE DECEMBER 31, 1988.
EXCESS CONTRIBUTIONS. Contributions which exceed the allowable maximum
PER YEAR are CONSIDERED excess contributions. A nondeductible penalty tax
of 6% of the excess amount contributed will be INCURRED for each year in
which the excess contribution remains in your IRA. If you make a
contribution (or your employer makes a SEP contribution, including a salary
reduction contribution, on your behalf) in excess of your allowable maximum
for any taxable year, you may correct the excess contribution and avoid the
6% penalty tax for that year by withdrawing the excess contribution and its
earnings on or before the date, including extensions, for filing your tax
return for that year.
The amount of the excess contribution withdrawn will generally not be
considered a premature distribution nor be taxed as ordinary income, but
the earnings withdrawn will be taxed as ordinary income to you, and may be
subject to a 10% penalty for early withdrawal. Alternatively, excess
contributions for one year may be carried forward and reported in the next
year to the extent that the excess, when aggregated with your IRA
contribution (if any) for the subsequent year, does not exceed the maximum
amount for that year. The 6% excise tax will be imposed on excess
contributions in each year they are neither returned nor carried forward.
DEDUCTIBLE IRA If you are not married and are not an active participant in
an employer-maintained
CONTRIBUTIONS retirement plan, you may make a fully deductible IRA
contribution in any amount up to 100% of your compensation for the year or
$2,000, whichever is less. The same limits apply if you are married and
you file a joint return with your spouse, and neither of you is an active
participant in an employer-maintained retirement plan. An
"employer-maintained retirement plan" includes any of the following types
of retirement plans:
- a qualified pension, profit-sharing, or stock bonus plan established
in
accordance with IRC (sub-section)401 (a) or 401 (k).
- a Simplified Employee Pension Plan (SEP) (IRC (sub-section)408(k)).
- a deferred compensation plan maintained by a governmental unit or
agency.
- tax sheltered annuities and custodial accounts (IRC
(sub-section)403(b) and 403(b)(7)).
- a qualified annuity plan under IRC (sub-section)403(a).
You are an active participant in an employer maintained retirement plan
even if you do not have a vested right to any benefits under your
employer's plan. Whether you are an "active participant" depends on the
type of plan maintained by your employer. Generally, you are considered an
active participant in a defined contribution plan if an employer
contribution or forfeiture was credited to your account under the plan
during the year. You are considered an active participant in a defined
benefit plan if you are eligible to participate in the plan, even though
you elect not to participate. You are also treated as an active
participant for a year during which you make a voluntary or mandatory
contribution to any type of plan, even though your employer makes no
contribution to the plan.
If you (or your spouse, if you are filing a joint tax return) are covered
by an employer-maintained retirement plan, your IRA contribution is tax
deductible only to the extent that your adjusted gross income does not
exceed the deductibility limits discussed below.
LIMITS ON The deduction of your IRA contribution is reduced
proportionately for adjusted
DEDUCTIBLE gross income which exceeds the applicable dollar amount. The
applicable dollar
CONTRIBUTIONS amount for an individual is $25,000 and $40,000 for married
couples filing a joint tax return. The applicable dollar limit for married
individuals filing separate returns is $0. If your adjusted gross income
exceeds the applicable dollar amount by not more than $10,000, you may make
a deductible IRA contribution (but the deductible amount will be less than
$2,000). To determine the amount of your deductible contribution, use the
following calculation:
1. Subtract the applicable dollar amount from your adjusted gross income.
If the result is $10,000 or more, stop; you can only make a nondeductible
contribution.
2. Subtract the above figure from $10,000.
3. Divide the above figure by $10,000.
4. Multiply $2,000 by the fraction resulting from the above steps. This
is your maximum deductible contribution limit.
If the deduction limit is not a multiple of $10, then it is to be rounded
up to the next highest $10. There is a $200 minimum floor on the deduction
limit if your adjusted gross income does not exceed $35,000 (for a single
taxpayer), $50,000 (for married taxpayers filing jointly) or $10,000 (for a
married taxpayer filing separately).
Adjusted gross income for married couples filing a joint tax return is
calculated by aggregating the compensation of both spouses. The deduction
limitations on IRA contributions, as determined above, then apply to each
spouse.
NONDEDUCTIBLE Even if your income exceeds the limits described above, you
may make a
IRA contribution to your IRA up to the lesser of $2,000 or 100% of your
compensation. To
CONTRIBUTIONS the extent that your contribution exceeds the deductible
limits, it will be nondeductible. Earnings on all IRA contributions are
tax deferred until distribution.
You are required to designate on your tax return the extent to which your
IRA contribution is nondeductible. Therefore, your designation must be
made by the due date (including extensions) for filing your tax return. If
you overstate the amount of nondeductible contributions for a taxable year,
a penalty of $100 will be assessed for each overstatement unless you can
show that the overstatement was due to a reasonable cause.
INVESTMENT The assets in your IRA will be invested in INVESTMENT COMPANY
SHARES IN
OF FIDELITY DESTINY PORTFOLIOS. As with any investment, you should read
any publicly ACCOUNT available information (e.g., prospectuses, annual
reports, the terms and conditions of any insurance annuity contract, etc.)
which would enable you to make an informed investment decision.
IF NO INVESTMENT INSTRUCTIONS ARE RECEIVED FROM YOU, OR IF THE
INSTRUCTIONS RECEIVED ARE, IN THE OPINION OF THE CUSTODIAN, UNCLEAR, YOU
MAY BE REQUESTED TO PROVIDE INSTRUCTIONS. IN THE ABSENCE OF SUCH
INSTRUCTIONS, YOUR INVESTMENT MAY BE HELD UNINVESTED, OR RETURNED TO YOU.
WITH REGARD TO INVESTMENTS IN DESTINY HELD IN YOUR ACCOUNT, growth in the
value of your account cannot be guaranteed or projected.
DISTRIBUTIONS GENERAL. Distributions from your IRA should begin no
earlier than the date you reach age 59 1/2 (except in cases of your earlier
disability or death) and no later than the April 1 following the year in
which you reach age 70 1/2. Distributions from your account will be
included in your gross income for federal income tax purposes for the year
in which you receive them.
PREMATURE DISTRIBUTIONS. To the extent they are included in income,
distributions from your IRA made before you reach age 59 1/2 will be
subject to a 10% nondeductible penalty tax (in addition to being taxable as
ordinary income) unless the distribution is an exempt withdrawal of an
excess contribution, or the distribution is rolled over to another
qualified retirement plan, or the distribution is made on account of your
death or disability, or the distribution is one of a scheduled series of
payments over your life or life expectancy or the joint life expectancies
of yourself and your Beneficiary.
LATEST TIME TO WITHDRAW. You must begin receiving distributions of the
assets in your account by April 1 of the calendar year following the
calendar year in which you reach age 70 1/2. Subsequent distributions must
be made by December 31 of each year. IF YOU MAINTAIN MORE THAN ONE IRA,
YOU MAY TAKE FROM ANY OF YOUR IRAS THE AGGREGATE AMOUNT TO BE WITHDRAWN .
MINIMUM DISTRIBUTIONS. Once distributions are required to begin, they
must not be less than the amount each year (determined by actuarial tables)
which would exhaust the value of the account over the required distribution
period, which is generally your life expectancy or the joint life and last
survivor expectancy of you and an individual you have designated as your
Beneficiary. You will be subject to a 50% excise tax on the amount by
which the distribution you actually received in any year falls short of the
minimum distribution required for the year.
METHODS OF DISTRIBUTION. Assets may be distributed from your account
according to one or more of the following methods selected by you:
(A) total distribution
(B) distribution over a certain period
(C) purchase of an annuity contract
(See Article IV of your IRA Custodial Agreement for a full description of
these distribution methods.)
DISTRIBUTION UPON DEATH. THE ASSETS REMAINING IN YOUR ACCOUNT WILL BE
DISTRIBUTED UPON YOUR DEATH TO THE BENEFICIARY(IES) NAMED BY YOU ON RECORD
WITH THE CUSTODIAN. IF THERE IS NO BENEFICIARY DESIGNATED FOR YOUR ACCOUNT
IN THE CUSTODIAN'S RECORDS, OR IF THE BENEFICIARY YOU HAD DESIGNATED DIES
BEFORE YOU DO, YOUR ACCOUNT WILL BE PAID TO YOUR SURVIVING SPOUSE, OR IF
NONE, TO YOUR ESTATE.
If YOUR SPOUSE WAS YOUR PRIMARY BENEFICIARY AND you HAD STARTED TO
RECEIVE DISTRIBUTIONS FROM YOUR ACCOUNT, BUT die before receiving the
balance of your account, YOUR SPOUSE HAS SEVERAL OPTIONS. YOUR SPOUSE CAN
EITHER KEEP RECEIVING DISTRIBUTIONS FROM YOUR ACCOUNT AT LEAST AS RAPIDLY,
OR ROLL OVER ALL OR PART OF YOUR ACCOUNT INTO AN IRA IN HIS OR HER NAME.
IF DISTRIBUTIONS FROM YOUR ACCOUNT HAD NOT YET BEGUN, YOUR SPOUSE MAY DEFER
TAKING DISTRIBUTIONS UNTIL APRIL 1ST OF THE YEAR YOU WOULD HAVE TURNED 70
1/2, AND THEN RECEIVE DISTRIBUTIONS OVER HIS OR HER LIFE EXPECTANCY, OR
ROLL OVER THE ACCOUNT INTO AN IRA IN THEIR NAME, AND TREAT THE IRA AS THEIR
OWN.
IF YOUR BENEFICIARY IS NOT YOUR SPOUSE, AND DISTRIBUTIONS HAD BEGUN FROM
YOUR ACCOUNT, YOUR BENEFICIARY MAY CONTINUE TO RECEIVE THEM AT LEAST AS
RAPIDLY AS THE PAYMENT SCHEDULE YOU HAD ESTABLISHED. IF DISTRIBUTIONS HAD
NOT YET BEGUN, YOUR BENEFICIARY MUST DEPLETE YOUR ACCOUNT WITHIN 5 YEARS OF
YOUR DEATH, OR START TAKING DISTRIBUTIONS FROM YOUR ACCOUNT WITHIN ONE YEAR
OF YOUR DEATH OVER HIS OR HER OWN LIFE EXPECTANCY.
DISTRIBUTION OF NONDEDUCTIBLE CONTRIBUTIONS. To the extent that a
distribution constitutes a return of your nondeductible contributions, it
will not be included in your income. The amount of any distribution
excludable from income is the portion that bears the same ratio to the
total distribution that your aggregate nondeductible contributions bear to
the balance at the end of the year (calculated after adding back
distributions during the year) of your IRA. For this purpose, all of your
IRAs are treated as a single IRA. Furthermore, all distributions from an
IRA during a taxable year are to be treated as one distribution. The
aggregate amount of distributions excludable from income for all years is
not to exceed the aggregate nondeductible contributions for all calendar
years. There is a 10% additional income tax assessed against premature
distributions to the extent such distributions are includible in income
(See "Premature Distributions" above).
EXCESS DISTRIBUTIONS. There is a 15% excise tax assessed against annual
distributions from tax-favored retirement plans, including IRAs, which
exceed the greater of $150,000 or $112,500 (INDEXED TO REFLECT
COST-OF-LIVING INCREASES). To determine whether you have distributions in
excess of this limit, you must aggregate the amounts of all distributions
received by you during the calendar year from all retirement plans,
including IRAs. Please consult with your tax advisor for more complete
information, including the availability of favorable elections.
ROLLOVER TREATMENT. Distributions from your IRA representing all or any
part of the assets in your IRA account are also eligible for rollover
treatment. You may roll over all or any part of the same property from
this distribution of assets, within 60 days of receipt, into another IRA or
individual retirement annuity, and maintain the tax-deferred status of
these assets. A 60 DAY ROLLOVER CAN BE MADE once every twelve months PER
IRA.
DIVORCE OR IF ALL OR ANY PORTION OF YOUR IRA IS AWARDED TO A FORMER
SPOUSE PURSUANT TO
LEGAL DIVORCE OR LEGAL SEPARATION, SUCH PORTION CAN BE TRANSFERRED TO AN
IRA IN THE RECEIVING
SEPARATION SPOUSE'S NAME. THIS TRANSACTION CAN BE PROCESSED WITHOUT ANY
TAX IMPLICATIONS TO YOU PROVIDED A WRITTEN INSTRUMENT EXECUTED BY A COURT
INCIDENT TO THE DIVORCE OR LEGAL SEPARATION IN ACCORDANCE WITH SECTION
408(D)(6) OF THE CODE IS RECEIVED BY THE CUSTODIAN, AND SPECIFICALLY
DIRECTS SUCH TRANSFER. IN ADDITION, YOU MUST ALSO PROVIDE THE CUSTODIAN
WITH A LETTER OF INSTRUCTION AND AN IRA APPLICATION EXECUTED BY THE
RECEIVING SPOUSE, IF SHE OR HE DOESN'T ALREADY MAINTAIN SUCH IRA AT
FIDELITY.
________________________________________________________________________
FEES AND Fees and other expenses of maintaining your Destiny IRA account
are described in
EXPENSES the Application and IN THE FIDELITY STSTEMATIC INVESTMENT PLANS:
DESTINY PLANS I AND DESTINY PLANS II PROSPECTUS. THE FEES AND OTHER
EXPENSES ASSOCIATED WITH MAINTAINING YOUR DESTINY IRA may be changed from
time to time, as provided in the Custodial Agreement.
PROHIBITED If any of the events prohibited by Section 4975 of the Code
(such as any sale,
TRANSACTIONS exchange or leasing of any property between you and your IRA)
occurs during the existence of your IRA, your account will be disqualified
and the entire balance in your account will be treated as if distributed to
you as of the first day of the year in which the prohibited event occurs.
This "distribution" would be subject to ordinary income tax and, if you
were under age 59 1/2 at the time, to the 10% penalty tax on premature
distributions.
If you or your Beneficiary use (pledge) all or any part of your IRA as
security for a loan, then the portion so pledged will be treated as if
distributed to you, and will be taxable to you as ordinary income and
subject to the 10% penalty during the year in which you make such a pledge.
OTHER TAX NO SPECIAL TAX TREATMENT. No distribution to you or anyone else
from your
CONSIDERATIONS account can qualify for capital gain treatment under the
federal income tax laws. It is taxed to the person receiving the
distribution as ordinary income. (Similarly, you are not entitled to the
five-year averaging rule for lump sum distributions available to persons
receiving distributions from certain other types of retirement plans.)
GIFT TAX. If you elect during your lifetime to have all or any part of
your account payable to a Beneficiary at or after your death, the election
will not subject you to any gift tax liability.
TAX WITHHOLDING. Federal income tax will be withheld from distributions
you receive from an IRA unless you elect not to have tax withheld.
However, if IRA distributions are to be delivered outside of the United
States, this tax is mandatory and you may not elect otherwise unless you
certify to the Custodian that you are not a U.S. citizen residing overseas
or a "tax avoidance expatriate" as described in Code Section 877. FEDERAL
INCOME tax will be withheld at THE RATE OF 10%. REPORTING FOR TAX
PURPOSES. Contributions to your IRA must be reported on your tax Form 1040
or 1040A for the taxable year contributed. You will be required to
designate your IRA contribution as deductible or nondeductible. You are
also required to attach a Form 8606 to your 1040 or 1040A form. Form 8606
is used to report nondeductible IRA contributions and to calculate the
basis (nontaxable part) of your IRA. Other reporting will be required by
you in the event that special taxes or penalties described herein are due.
You must also file Treasury Form 5329 with the IRS for each taxable year in
which the contribution limits are exceeded, a premature distribution takes
place, or less than the required minimum amount is distributed from your
IRA. The Tax Reform Act of 1986 also requires you to report the amount of
all distributions you received from your IRA and the aggregate account
balance of all IRAs as of the end of the calendar year.
IRS APPROVAL The form of your Individual Retirement Account has been
approved by the Internal Revenue Service. The Internal Revenue Service
approval is a determination only as to the form and does not represent a
determination of the merits of the Account. You may obtain further
information with respect to your IRA from any district office of the
Internal Revenue Service.
1. Written authorization is needed from Vanderheiden that it is okay to
accept rollovers.
2. SSB&T must sign off on the document.
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