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
