FIDELITY
DESTINY
PORTFOLIOS:
DESTINY I
DESTINY II
Annual Report
Annual Report
September 30, 1998
September 30, 1995
Printed on recycled paper
6i-64780
FIDELITY
DESTINY
PORTFOLIOS:
DESTINY I
DESTINY II
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Abigail P. Johnson, VICE PRESIDENT
George A. Vanderheiden, VICE PRESIDENT
Beth Terrana, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
State Street Bank and Trust Company
Boston, MA
DES-ANN-1198
1.537812.101
6i
* INDEPENDENT TRUSTEES
CONTENTS
ANNUAL REPORT
<TABLE>
<CAPTION>
<S> <C> <C>
PERFORMANCE A-2 How the funds have done over time.
FUND TALK A-4 The managers' review of the funds' performance,
strategy and outlook.
INVESTMENT CHANGES A-10 A summary of major shifts in the funds' investments
over the past six months.
DESTINY I
INVESTMENTS A-11 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS A-16 Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights.
DESTINY II
INVESTMENTS A-20 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS A-25 Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights.
NOTES A-29 Notes to the financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS A-32 The auditors' opinion
DISTRIBUTIONS A-33
</TABLE>
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 BANK OR DEPOSITORY INSTITUTION.
SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY, AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FIDELITY DESTINY PORTFOLIOS: DESTINY I
PERFORMANCE: THE BOTTOM LINE
$10,000 OVER 10 YEARS
Destiny I S&P 500
00006 SP001
1988/09/30 10000.00 10000.00
1988/10/31 10134.23 10278.00
1988/11/30 9899.33 10131.02
1988/12/31 10168.21 10308.32
1989/01/31 11029.78 11062.89
1989/02/28 10782.40 10787.42
1989/03/31 11029.78 11038.77
1989/04/30 11533.07 11611.68
1989/05/31 12241.09 12081.95
1989/06/30 11968.12 12013.09
1989/07/31 12769.97 13097.87
1989/08/31 13115.67 13354.59
1989/09/30 13222.52 13299.83
1989/10/31 12777.32 12991.28
1989/11/30 12839.65 13256.30
1989/12/31 12765.27 13574.45
1990/01/31 12001.62 12663.60
1990/02/28 12256.17 12826.96
1990/03/31 12520.15 13166.88
1990/04/30 12114.75 12837.71
1990/05/31 13453.50 14089.38
1990/06/30 13425.22 13993.57
1990/07/31 13048.11 13948.80
1990/08/31 11711.95 12687.82
1990/09/30 10922.60 12069.93
1990/10/31 10843.66 12018.03
1990/11/30 11771.15 12794.39
1990/12/31 12363.16 13151.35
1991/01/31 13695.18 13724.75
1991/02/28 14642.40 14706.07
1991/03/31 14987.74 15061.96
1991/04/30 15175.21 15098.11
1991/05/31 16082.96 15750.35
1991/06/30 15027.21 15028.98
1991/07/31 16023.76 15729.33
1991/08/31 16567.40 16102.12
1991/09/30 16288.00 15833.21
1991/10/31 16215.56 16045.38
1991/11/30 15222.14 15398.75
1991/12/31 17175.02 17160.36
1992/01/31 17360.64 16841.18
1992/02/29 17993.92 17060.12
1992/03/31 17589.93 16727.44
1992/04/30 18223.21 17219.23
1992/05/31 18376.07 17303.61
1992/06/30 18059.43 17045.78
1992/07/31 18790.98 17742.95
1992/08/31 18292.79 17379.22
1992/09/30 18477.07 17584.30
1992/10/31 18366.50 17645.84
1992/11/30 19251.04 18247.57
1992/12/31 19777.43 18472.01
1993/01/31 20388.17 18627.18
1993/02/28 20453.14 18880.51
1993/03/31 21466.70 19278.89
1993/04/30 21596.64 18812.34
1993/05/31 22207.38 19316.51
1993/06/30 22376.31 19372.53
1993/07/31 22662.18 19295.04
1993/08/31 23442.90 20026.32
1993/09/30 23442.90 19872.11
1993/10/31 24304.98 20283.47
1993/11/30 24152.03 20090.77
1993/12/31 25002.44 20333.87
1994/01/31 26593.91 21025.22
1994/02/28 26192.32 20455.44
1994/03/31 24957.81 19563.58
1994/04/30 25701.49 19814.00
1994/05/31 25894.85 20138.95
1994/06/30 25166.04 19645.54
1994/07/31 25998.96 20289.92
1994/08/31 27173.97 21121.80
1994/09/30 26326.18 20604.32
1994/10/31 26906.25 21067.92
1994/11/30 25984.09 20300.62
1994/12/31 26109.88 20601.68
1995/01/31 26360.08 21135.88
1995/02/28 27253.64 21959.55
1995/03/31 28022.10 22607.57
1995/04/30 29076.50 23273.37
1995/05/31 30434.72 24203.60
1995/06/30 31471.25 24765.85
1995/07/31 32597.14 25587.09
1995/08/31 32883.08 25651.31
1995/09/30 33562.18 26733.80
1995/10/31 33830.25 26638.36
1995/11/30 34795.30 27807.78
1995/12/31 35757.54 28343.36
1996/01/31 36425.37 29308.17
1996/02/29 36291.80 29579.85
1996/03/31 36196.40 29864.71
1996/04/30 36883.31 30304.91
1996/05/31 37684.70 31086.48
1996/06/30 37951.84 31204.92
1996/07/31 36787.90 29826.28
1996/08/31 37093.20 30455.32
1996/09/30 38944.04 32169.35
1996/10/31 40432.35 33056.58
1996/11/30 43504.37 35555.32
1996/12/31 42389.01 34850.97
1997/01/31 44462.96 37028.46
1997/02/28 44865.05 37318.76
1997/03/31 42558.31 35785.34
1997/04/30 44695.75 37921.72
1997/05/31 47573.88 40230.40
1997/06/30 49097.60 42032.72
1997/07/31 52822.25 45377.26
1997/08/31 50917.60 42835.23
1997/09/30 53076.20 45181.31
1997/10/31 51996.90 43672.26
1997/11/30 53880.38 45693.84
1997/12/31 55497.58 46478.41
1998/01/31 55708.87 46992.46
1998/02/28 59300.71 50381.56
1998/03/31 61225.76 52961.59
1998/04/30 61108.38 53494.39
1998/05/31 60591.90 52574.82
1998/06/30 62141.33 54710.41
1998/07/31 62352.61 54127.74
1998/08/31 54253.35 46301.95
1998/09/30 57704.34 49268.06
IMATRL PRASUN SHR__CHT 19980930 19981005 122948 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Destiny I on September 30, 1988. As the chart shows, by
September 30, 1998, the value of the investment would have grown to
$57,704 - a 477.04% increase on the initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $49,268 - a 392.68% increase.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
SEPTEMBER 30, 1998 YEAR YEARS YEARS
Destiny I 8.72% 146.15% 477.04%
S&P 500 (registered trademark) 9.05% 147.93% 392.68%
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
SEPTEMBER 30, 1998 YEAR YEARS YEARS
Destiny I 8.72% 19.74% 19.16%
$50/month 15-Year Plan -48.03% 15.42% 17.60%
The charts above show Destiny I 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); the figures provided for a "$50/month 15-year plan" illustrate
the fund's performance adjusted to reflect fees and sales charges
assessed by the Plans. The illustrations assume an initial investment
at the beginning of each period shown. Because the illustrations
assume lump sum investments, they do not reflect what investors would
have earned had they made regular monthly investments over the period.
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, a widely recognized,
unmanaged index of common stocks, include reinvestment of dividends.
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 II
PERFORMANCE: THE BOTTOM LINE
$10,000 OVER 10 YEARS
Destiny II S&P 500
00306 SP001
1988/09/30 10000.00 10000.00
1988/10/31 10021.95 10278.00
1988/11/30 9709.11 10131.02
1988/12/31 10023.73 10308.32
1989/01/31 10862.35 11062.89
1989/02/28 10647.03 10787.42
1989/03/31 10783.02 11038.77
1989/04/30 11406.32 11611.68
1989/05/31 12125.94 12081.95
1989/06/30 11695.30 12013.09
1989/07/31 12397.92 13097.87
1989/08/31 12794.07 13354.59
1989/09/30 12865.95 13299.83
1989/10/31 12446.67 12991.28
1989/11/30 12566.46 13256.30
1989/12/31 12671.38 13574.45
1990/01/31 11847.33 12663.60
1990/02/28 12069.19 12826.96
1990/03/31 12367.11 13166.88
1990/04/30 11986.78 12837.71
1990/05/31 13355.97 14089.38
1990/06/30 13381.33 13993.57
1990/07/31 12905.92 13948.80
1990/08/31 11509.53 12687.82
1990/09/30 10650.52 12069.93
1990/10/31 10573.01 12018.03
1990/11/30 11658.09 12794.39
1990/12/31 12351.74 13151.35
1991/01/31 13738.63 13724.75
1991/02/28 14812.98 14706.07
1991/03/31 15281.78 15061.96
1991/04/30 15581.30 15098.11
1991/05/31 16466.82 15750.35
1991/06/30 15301.32 15028.98
1991/07/31 16375.66 15729.33
1991/08/31 17019.14 16102.12
1991/09/30 16728.51 15833.21
1991/10/31 16657.63 16045.38
1991/11/30 15580.20 15398.75
1991/12/31 17468.37 17160.36
1992/01/31 17804.87 16841.18
1992/02/29 18552.66 17060.12
1992/03/31 17984.34 16727.44
1992/04/30 18590.05 17219.23
1992/05/31 18874.21 17303.61
1992/06/30 18455.45 17045.78
1992/07/31 19195.76 17742.95
1992/08/31 18638.84 17379.22
1992/09/30 18696.37 17584.30
1992/10/31 18688.15 17645.84
1992/11/30 19625.03 18247.57
1992/12/31 20173.07 18472.01
1993/01/31 20869.59 18627.18
1993/02/28 20921.18 18880.51
1993/03/31 21798.27 19278.89
1993/04/30 21798.27 18812.34
1993/05/31 22554.97 19316.51
1993/06/30 22752.75 19372.53
1993/07/31 22967.72 19295.04
1993/08/31 23811.17 20026.32
1993/09/30 23873.80 19872.11
1993/10/31 24768.62 20283.47
1993/11/30 24670.19 20090.77
1993/12/31 25580.70 20333.87
1994/01/31 27191.86 21025.22
1994/02/28 26862.09 20455.44
1994/03/31 25552.44 19563.58
1994/04/30 26315.62 19814.00
1994/05/31 26504.06 20138.95
1994/06/30 25722.03 19645.54
1994/07/31 26560.59 20289.92
1994/08/31 27776.03 21121.80
1994/09/30 26899.78 20604.32
1994/10/31 27483.94 21067.92
1994/11/30 26607.70 20300.62
1994/12/31 26726.15 20601.68
1995/01/31 27006.11 21135.88
1995/02/28 27889.09 21959.55
1995/03/31 28642.85 22607.57
1995/04/30 29687.34 23273.37
1995/05/31 31022.57 24203.60
1995/06/30 32067.07 24765.85
1995/07/31 33165.40 25587.09
1995/08/31 33456.14 25651.31
1995/09/30 34156.06 26733.80
1995/10/31 34436.03 26638.36
1995/11/30 35372.84 27807.78
1995/12/31 36336.97 28343.36
1996/01/31 37016.17 29308.17
1996/02/29 36857.69 29579.85
1996/03/31 36733.17 29864.71
1996/04/30 37412.37 30304.91
1996/05/31 38193.44 31086.48
1996/06/30 38442.48 31204.92
1996/07/31 37321.81 29826.28
1996/08/31 37627.44 30455.32
1996/09/30 39427.31 32169.35
1996/10/31 40853.62 33056.58
1996/11/30 43943.96 35555.32
1996/12/31 42826.22 34850.97
1997/01/31 44855.02 37028.46
1997/02/28 45334.56 37318.76
1997/03/31 43047.54 35785.34
1997/04/30 45076.35 37921.72
1997/05/31 47879.79 40230.40
1997/06/30 49318.39 42032.72
1997/07/31 52970.24 45377.26
1997/08/31 51015.21 42835.23
1997/09/30 53117.79 45181.31
1997/10/31 52048.06 43672.26
1997/11/30 53966.20 45693.84
1997/12/31 55519.73 46478.41
1998/01/31 55721.03 46992.46
1998/02/28 59425.03 50381.56
1998/03/31 61317.29 52961.59
1998/04/30 60995.20 53494.39
1998/05/31 60230.25 52574.82
1998/06/30 63571.90 54710.41
1998/07/31 64095.29 54127.74
1998/08/31 54191.12 46301.95
1998/09/30 56647.03 49268.06
IMATRL PRASUN SHR__CHT 19980930 19981005 124911 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Destiny II on September 30, 1988. As the chart shows, by
September 30, 1998, the value of the investment would have grown to
$56,647 - a 466.47% increase on the initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $49,268 - a 392.68% increase.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
SEPTEMBER 30, 1998 YEAR YEARS YEARS
Destiny II 6.64% 137.28% 466.47%
S&P 500 9.05% 147.93% 392.68%
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
SEPTEMBER 30, 1998 YEAR YEARS YEARS
Destiny II 6.64% 18.86% 18.94%
$50/month 15-Year Plan -49.02% 14.58% 17.38%
The charts above show Destiny II 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); the figures provided for a "$50/month 15-year plan" illustrate
the fund's performance adjusted to reflect fees and sales charges
assessed by the Plans. The illustrations assume an initial investment
at the beginning of each period shown. Because the illustrations
assume lump sum investments, they do not reflect what investors would
have earned had they made regular monthly investments over the period.
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, a widely recognized,
unmanaged index of common stocks, include reinvestment of dividends.
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
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
The 12-month period that drew to a close on
September 30, 1998, is one equity investors will
remember for years to come. The period began as
it ended: with extreme volatility. In October 1997,
the Dow Jones Industrial Average - an index of 30
blue-chip stocks - tumbled over 550 points in one
day on the news of worsening economic conditions
in Asia. The Dow rebounded the following day,
however, rising 330 points as investors focused
on higher-quality stocks with strong liquidity and
minimal international exposure. This trend continued
in the first and second quarters of 1998, as U.S.
economic growth chugged along on the rails of
near-record lows for inflation, unemployment and
interest rates. Unfortunately, emerging markets -
particularly in Russia and Latin America - seemed
to catch the so-called "Asian contagion," causing a
free-fall in the U.S. stock market. On August 31, the
Dow plunged 512.61 points - erasing all previous
gains for the year. Appropriately, the Dow closed
on September 30 with a 237.90 loss, triggered by
investor disappointment over a
lower-than-hoped-for decrease in the federal funds
rate. For the 12-month period ended September 30,
1998, the Dow eked out a barely positive gain of
0.40%, while the Standard & Poor's 500 Index - a
market-capitalization weighted index of 500 widely
held U.S. stocks - returned 9.05%. As a safe
haven from turbulent stock markets worldwide,
bond markets reaped the benefits from the flight
to quality. The Lehman Brothers Aggregate Bond
Index - a broad measure of the U.S. taxable
investment-grade bond market - returned 11.51%
over the past year. Meanwhile, Treasury-bond yields
- - which move in the opposite direction of bond
prices - fell to their lowest level in over three
decades, as the yield on the benchmark 30-year
bond fell to 4.96%. The Lehman Brothers
Corporate Bond Index returned 11.07% for the
12-month period.
AN INTERVIEW WITH
GEORGE A. VANDERHEIDEN,
PORTFOLIO MANAGER OF
FIDELITY DESTINY I PORTFOLIO
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the 12-month period that ended September 30, 1998, Destiny I
returned 8.72%. The growth funds average returned -1.44% in that same
time span, according to Lipper Analytical Services. The Standard &
Poor's 500 Index had a 12-month return of 9.05% as of September 30,
1998.
Q. WHICH MARKET SECTORS HELPED FUND PERFORMANCE?
A. Over the past year, the fund's performance was helped by limited
exposure - relative to its benchmark - to such economically sensitive
segments as basic industries, energy, and aerospace and defense.
Strong growth in consumer spending helped propel the retail sector to
solid gains, and while some of the fund's retail stocks performed
poorly towards the end of the period, the fund benefited from an
overall emphasis on retail stocks during the past 12 months.
Additionally, good stock selection in the finance, utilities and
nondurables sectors contributed to Destiny I's performance relative to
the S&P 500. Some of the better performers resided in the finance
sector, as declining interest rates and an increase in home
refinancing activity fueled a strong price increase for fund holdings
such as Fannie Mae and Freddie Mac. In the utilities area, Vodafone
Group - a telecommunications company based in the United Kingdom -
benefited from strong earnings growth. The decline in interest rates
and accompanying concern over a deceleration in corporate earnings
growth also propelled bonds to strong gains. As a result, the fund's
bond holdings helped relative performance.
Q. WHICH MARKET SECTORS HURT FUND PERFORMANCE?
A. On the flip side, disappointing returns from some of the fund's
positions in the health care, technology and durables sectors hurt
performance. Throughout much of the past year, I believed the ongoing
economic problems in Asia posed formidable investment risks -
particularly in the technology sector - even though the immediate
concerns faced by U.S. investors seemed, at times, to diminish.
Consequently, Destiny I remained underweighted in the technology
sector, a stance that hurt performance as technology outperformed the
S&P 500 during the period. At the same time, disappointing returns
from technology holdings such as Compaq Computer and SCI Systems, for
example, detracted from fund performance as both stocks declined due
to concerns over earnings growth. Several of the fund's health care
holdings had weak returns during the period, including Columbia/HCA
Healthcare. As the period progressed, market sentiment turned against
Columbia due to the uncertainty surrounding resolution of the
government's investigation of the company's billing practices and
Columbia's weaker-than-expected operating revenues.
Q. HOW DID THE MARKET VOLATILITY OVER THE PAST YEAR AFFECT YOUR
INVESTMENT DECISIONS?
A. Over much of the past 12 months, I positioned Destiny I for an
environment of economic weakness. For instance, I focused the fund's
stock selection on companies I believed were less sensitive to
downturns in the domestic economy and to disruption in foreign
markets. Fannie Mae, Freddie Mac, Wal-Mart Stores and Home Depot are
all examples of fund holdings that - despite the emergence of a global
financial crisis and increased market volatility - met or exceeded
earnings growth expectations during the period. Fannie Mae, a
federally chartered company that helps provide low- and
moderate-income family housing by purchasing mortgage loans from
lenders, was the fund's top individual contributor during the year.
The company has proven capable of performing well in both economic
booms and busts, and the market has consistently rewarded them for it.
I also maintained an allocation to bonds to hedge against a
deceleration in corporate earnings growth, a downturn in the stock
market and a financial crisis outside of the U.S. The fund's bond
positions performed pretty much as I expected they would, and this
allocation helped the fund's performance relative to the S&P 500. At
the end of the period, bonds accounted for around 13% of the fund's
total assets.
Q. WHAT FACTORS HAVE CONTRIBUTED TO THE RECENT WEAK PERFORMANCE OF THE
STOCK MARKET?
A. The ongoing economic weakness in Asia and other overseas countries,
a lack of pricing power - or the ability of companies to set prices -
across almost all industry groups and rising labor costs all began to
overwhelm the "Goldilocks" economic scenario, which was a widely held
view earlier in the year. In this scenario, real Gross Domestic
Product, or GDP, was forecast to grow between 2.5% to 3% per year,
inflation would stay restrained, corporate profits would grow at their
long-term growth rate of 7% to 8% and the stock market would rise
in-line with corporate earnings. During the past few months, however,
speculation has intensified that economic turmoil in Asia and other
emerging countries would further slow the already softening domestic
economy, leading to a reduction in corporate profits and pushing the
U.S. into a recession. Corporate profits are dependent upon both unit
volume and pricing power. The pricing side of the earnings equation
has remained weak, but it has also become apparent that volume
increases would not be sufficient to maintain earnings growth rates.
Further, the stock market has become somewhat disconnected from
interest rates. Consequently, lower rates were no longer enough to
support already stretched stock market values.
Q. WHAT'S YOUR OUTLOOK?
A. Let me first say that I don't know how the U.S. stock market will
perform over the next year. My positioning of Destiny I, however,
should continue to reflect an environment of anemic pricing power,
flat-to-declining corporate earnings and decreasing inflation. Over
the past year, consumer spending was robust, retail sales were strong,
GDP growth was healthy and many companies reported strong top-line
revenue growth. Nevertheless, U.S. corporate earnings growth has
decelerated and in many cases has turned negative. A lack of pricing
power across a broad number of industries, wage inflation and a
decrease in exports has contributed to this weakness in earnings
growth. While the recent correction brought stock values back to more
reasonable levels compared to their underlying fundamentals, many
economic forecasts remain downcast. Deterioration in underlying
fundamental business prospects and the fact that many stock valuations
remain overextended still pose the risk of further stock market
declines. In addition, the turmoil in Asia and other economies around
the world has continued to roll on. From my standpoint, I believe the
U.S. is already in an earnings recession; the question remains if this
will evolve into an economic recession as well.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
GEORGE VANDERHEIDEN ON MANAGING
THE FUND THROUGH MARKET DOWNTURNS:
"Even though I discussed the importance of
being a long-term investor in the fund's annual
report 12 months ago, the message bears
repeating given the recent market volatility we've
seen. Seeing the personal financial impact of the
recent market decline in dollars and cents can be
an unpleasant awakening. As rough as the recent
volatility appeared, however, overall returns were
well within the historical range for the U.S. stock
market. In the post World War II era, quarterly
declines of 10% or more by the Standard & Poor's
500 Index have occurred eight times, or about
every seven years. Nevertheless, if history is any
indication, the stock market will continue to be the
most profitable investment arena for investors with
a long-term perspective. Although the past few
years have proven difficult for active fund
managers to outperform the S&P 500, I have
remained focused on investing in securities that I
believe offer the best return potential over the
next five to 10 years. I have also invested a
portion of the fund in bonds, particularly at times
when I felt bonds were attractively priced. During
my tenure on Destiny I, shareholders have
benefited from this approach. While historical
performance is certainly not guaranteed to repeat
itself, the fund compared quite favorably to both
the S&P 500 and its Lipper peer group from
December 1, 1980 through September 30, 1998. In
that time, Destiny I has produced an average annual
return of 19.14%, compared to 15.66% for the
S&P 500 and 13.15% for the Lipper group. This
gives me confidence that Destiny I shareholders
will be positioned to benefit in the future, just as
they have during the past 18 years."
FUND FACTS
GOAL: seeks capital growth
START DATE: July 10, 1970
SIZE: as of September 30, 1998,
more than $6.2 billion
MANAGER: George Vanderheiden, since 1980;
manager, Fidelity Destiny II Fund, 1985-June
1998; joined Fidelity in 1971
(checkmark)
FIDELITY DESTINY PORTFOLIOS: DESTINY II
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
THE 12-MONTH PERIOD THAT DREW TO A CLOSE ON
SEPTEMBER 30, 1998, IS ONE EQUITY INVESTORS WILL
REMEMBER FOR YEARS TO COME. THE PERIOD BEGAN AS
IT ENDED: WITH EXTREME VOLATILITY. IN OCTOBER 1997,
THE DOW JONES INDUSTRIAL AVERAGE - AN INDEX OF 30
BLUE-CHIP STOCKS - TUMBLED OVER 550 POINTS IN ONE
DAY ON THE NEWS OF WORSENING ECONOMIC CONDITIONS
IN ASIA. THE DOW REBOUNDED THE FOLLOWING DAY,
HOWEVER, RISING 330 POINTS AS INVESTORS FOCUSED
ON HIGHER-QUALITY STOCKS WITH STRONG LIQUIDITY AND
MINIMAL INTERNATIONAL EXPOSURE. THIS TREND CONTINUED
IN THE FIRST AND SECOND QUARTERS OF 1998, AS U.S.
ECONOMIC GROWTH CHUGGED ALONG ON THE RAILS OF
NEAR-RECORD LOWS FOR INFLATION, UNEMPLOYMENT AND
INTEREST RATES. UNFORTUNATELY, EMERGING MARKETS -
PARTICULARLY IN RUSSIA AND LATIN AMERICA - SEEMED
TO CATCH THE SO-CALLED "ASIAN CONTAGION," CAUSING A
FREE-FALL IN THE U.S. STOCK MARKET. ON AUGUST 31, THE
DOW PLUNGED 512.61 POINTS - ERASING ALL PREVIOUS
GAINS FOR THE YEAR. APPROPRIATELY, THE DOW CLOSED
ON SEPTEMBER 30 WITH A 237.90 LOSS, TRIGGERED BY
INVESTOR DISAPPOINTMENT OVER A
LOWER-THAN-HOPED-FOR DECREASE IN THE FEDERAL FUNDS
RATE. FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30,
1998, THE DOW EKED OUT A BARELY POSITIVE GAIN OF
0.40%, WHILE THE STANDARD & POOR'S 500 INDEX - A
MARKET-CAPITALIZATION WEIGHTED INDEX OF 500 WIDELY
HELD U.S. STOCKS - RETURNED 9.05%. AS A SAFE
HAVEN FROM TURBULENT STOCK MARKETS WORLDWIDE,
BOND MARKETS REAPED THE BENEFITS FROM THE FLIGHT
TO QUALITY. THE LEHMAN BROTHERS AGGREGATE BOND
INDEX - A BROAD MEASURE OF THE U.S. TAXABLE
INVESTMENT-GRADE BOND MARKET - RETURNED 11.51%
OVER THE PAST YEAR. MEANWHILE, TREASURY-BOND YIELDS
- - WHICH MOVE IN THE OPPOSITE DIRECTION OF BOND
PRICES - FELL TO THEIR LOWEST LEVEL IN OVER THREE
DECADES, AS THE YIELD ON THE BENCHMARK 30-YEAR
BOND FELL TO 4.96%. THE LEHMAN BROTHERS
CORPORATE BOND INDEX RETURNED 11.07% FOR THE
12-MONTH PERIOD.
AN INTERVIEW WITH
BETH TERRANA, PORTFOLIO
MANAGER OF FIDELITY
DESTINY II PORTFOLIO
Q. HOW DID THE FUND PERFORM, BETH?
A. For the 12-month period that ended September 30, 1998, Destiny II
returned 6.64%. The growth funds average returned -1.44% during that
time, according to Lipper Analytical Services, while the Standard &
Poor's 500 Index returned 9.05%. Relative to the S&P 500,
disappointing returns from positions in several sectors - including
technology, industrial machinery and nondurables - hurt the fund's
performance.
Q. BEFORE WE GET INTO SPECIFICS ABOUT THE FUND, WHAT'S YOUR TAKE ON
THE MARKET VOLATILITY WE'VE SEEN OVER THE PAST YEAR?
A. The level of volatility we experienced was extraordinary. The
obvious and primary driver of this volatility was the turmoil in the
emerging markets, which began in a number of Asian countries and
spread to Russia and Latin America. The impact of the so-called "Asian
contagion" became obvious in the U.S., as severe economic weakness in
much of the world slowed revenue and profit growth for many U.S.
corporations. Prior to the recent decline in the U.S. stock market,
stocks reflected a very rosy earnings outlook. As one company after
another reported weakening business conditions, however, the stock
market reacted, often violently. On the positive side, many
high-quality companies were unfairly penalized and this created a
number of attractive buying opportunities.
Q. IN TERMS OF THE FUND, WHAT SORTS OF STRATEGIC CHANGES HAVE BEEN
MADE TO THE PORTFOLIO?
A. Overall, the sector allocation within the portfolio did not change
dramatically. There were, however, notable changes in terms of fund
holdings. When I've taken over funds in the past, I've tried to
refocus the fund's investment style to emphasize stocks that I really
believe in. With this in mind, the fund now has more of an emphasis on
growth stocks. This is simply due to the fact that my investment style
typically leads to a higher mix of growth stocks than George
Vanderheiden typically owned. I prefer large-cap companies with
improving financial returns whose growth potential may be
underestimated or misperceived by the market. Therefore, companies
such as media holding Time Warner, industrial machinery position
General Electric and pharmaceutical firm Merck were among the fund's
top positions at the close of the period. I also reduced the number of
stocks in the fund because I feel more comfortable with a smaller
universe of holdings. Another change I made was to minimize the fund's
exposure to bonds. As a manager, I feel one of my chief strengths lies
in identifying companies in the midst of change and assessing whether
their evolving prospects are accurately reflected in their stock
prices. I feel I'm much better suited to make investment decisions
based on specific company profiles, rather than determining an
appropriate asset allocation mix for the fund.
Q. TOGETHER, RETAIL- AND FINANCE-RELATED STOCKS REPRESENTED
APPROXIMATELY 27% OF THE FUND'S INVESTMENTS AT THE END OF THE PERIOD.
HOW DID THESE TWO SECTORS FARE?
A. Both retail and bank-related stocks experienced disappointing
performance over the past several months, with bank stocks
particularly hard hit. This was a result of a number of interrelated
events. First, many global banks suffered from trading losses and
credit losses in emerging markets. Two of the more significant
detractors from fund performance were Citicorp and Chase Manhattan.
Also, lending to hedge funds became a loss-making proposition, and
equity market-related revenue sources dried up. The subsequent
tightening of credit markets further impacted U.S. stock and bond
markets. Retail stocks on the other hand performed well during the
period, but the poor performance of retail stocks in recent months was
directly related to this credit crunch. Market participants assumed
that the tightening of credit standards would slow the already
softening domestic economy further and lead to a slowdown in consumer
spending.
Q. YOU'VE INCREASED THE FUND'S EXPOSURE TO MEDIA-RELATED STOCKS SINCE
TAKING THE REINS. WHAT WAS THE APPEAL?
A. Several of these companies - most notably top holding Time Warner -
had characteristics that I look for when picking stocks. Time Warner
has always had premier entertainment franchises, but the company
itself was not always managed well. During the past year, Time Warner
benefited from a renewed emphasis on balance-sheet management, as the
company specifically focused on maximizing long-term returns on
assets. In pursuit of this goal, Time Warner reduced its expenses and
grew assets at a slower pace than revenue. This resulted in improved
returns on assets and translated into a dramatic increase in the
company's stock price.
Q. WERE THERE ANY OTHER GROUPS OF STOCKS THAT CAUGHT YOUR EYE?
A. I increased the fund's health-care holdings during the period, as
the business profiles for both the pharmaceutical and medical device
industries continued to be healthy. Unit growth was quite strong in
both areas, driven primarily by favorable demographics and new product
development. The pricing environment within each industry was also
fairly benign and, in general, the high growth rates for these
companies appeared sustainable based on new, full product pipelines.
I've played health care in a couple of ways. The fund has investments
in several of the larger drug makers, including Merck, American Home
Products and Schering-Plough. The fund also held positions in two of
the largest drug wholesalers during the period - McKesson and Cardinal
Health. Both companies benefited from industry consolidation, a
strategic focus on bringing more value to their customers and the
underlying growth in pharmaceutical usage. Retail drug stores such as
CVS also appealed to me. CVS has similarly benefited from increased
pharmaceutical usage, as well as from excellent merchandising in its
stores and strong management. At the end of the period, CVS was among
the fund's top 10 holdings.
Q. WERE THERE ANY OTHER STOCKS THAT PERFORMED WELL?
A. Over the past year, returns in the finance and utilities sectors
were positive contributors to performance relative to the S&P 500.
Aside from the bank stocks I mentioned earlier, stock selection was
particularly strong in the finance sector. Declining interest rates
and increased home refinancing activity, for instance, fueled strong
stock price increases for both Fannie Mae and Freddie Mac and the fund
had significant positions in each. Another good performer was Vodafone
Group - a telecommunications company based in the United Kingdom -
which benefited from solid earnings growth.
Q. WHAT ARE YOUR THOUGHTS GOING FORWARD?
A. I think the market will continue to focus its attention on the
state of the U.S. economy and whether or not we will enter a recession
in tandem with other parts of the world. Actions by central bankers
and government policy around the world will be scrutinized and much
attention will be focused on U.S. consumers who, to some extent, have
the weight of the world resting on their shoulders. While this may
sound drastic, it's not very far from the truth. High employment
levels, high personal income and low interest rates have made the U.S.
consumer one of the last strengths in the global economy. As corporate
profit growth slows from very high levels - as I feel it will - it
becomes even more important to know what you own and to understand the
risks and potential rewards of any particular stock.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
BETH TERRANA ON HOW SHE PICKS STOCKS:
"I've been picking stocks for a long time and
while market trends change constantly, my
investment approach has pretty much stayed the
same. I have an eclectic, company-specific
approach to stock picking that typically leads to
investments in both growth and value stocks. The
mix between the two is usually a function of
market conditions and overall valuation levels.
When choosing stocks, I emphasize fundamental,
bottom-up analysis and also favor frequent contact
with companies. In my years as a portfolio
manager at Fidelity, I've been most successful at
identifying companies in the midst of change and
assessing whether their business prospects are
accurately reflected in their share prices. My
preferred investments include
turnarounds/restructurings and undervalued growth
stocks. The former category includes companies
that are undergoing strategic restructuring that
enhances their growth potential. The latter includes
companies whose growth prospects are
misperceived by the market. In other words, I
focus on "growth at a price" as opposed to
growth at ANY price. Similarly, I won't purchase
value stocks solely because of their value merits
- - earnings growth must be expected. I also keep
the funds diversified across industry sectors. My
experience and track record at Fidelity give me the
confidence that Destiny II shareholders will be
positioned to benefit in the future, just as they
have in the past."
FUND FACTS
GOAL: seeks capital growth
START DATE: December 30, 1985
SIZE: as of September 30, 1998, more than
$3.9 billion
MANAGER: Beth Terrana, since June 1998; manager,
Fidelity Fund, since 1993; joined Fidelity in 1983
(checkmark)
INVESTMENT CHANGES
TOP TEN EQUITY HOLDINGS - DESTINY I
AS OF SEPTEMBER 30, 1998 AS OF MARCH 31, 1998
Fannie Mae Fannie Mae
Philip Morris Companies, Inc. Philip Morris Companies, Inc.
Fleet Financial Group, Inc. Fleet Financial Group, Inc.
Freddie Mac Freddie Mac
Wal-Mart Stores, Inc. Columbia/HCA Healthcare Corp.
Home Depot, Inc. Wal-Mart Stores, Inc.
Vodafone Group PLC sponsored ADR Vodafone Group PLC sponsored ADR
MCI WorldCom, Inc. Home Depot, Inc.
Columbia/HCA Healthcare Corp. General Motors Corp.
Solectron Corp. Allstate Corp.
TOP TEN EQUITY HOLDINGS - DESTINY II
AS OF SEPTEMBER 30, 1998 AS OF MARCH 31, 1998
Time Warner, Inc. Fannie Mae
General Electric Co. Philip Morris Companies, Inc.
Fannie Mae Fleet Financial Group, Inc.
Microsoft Corp. Columbia/HCA Healthcare Corp.
Merck & Co., Inc. Freddie Mac
Tyco International Ltd. Wal-Mart Stores, Inc.
Freddie Mac Tyco International Ltd.
MCI WorldCom, Inc. Vodafone Group PLC sponsored ADR
Wal-Mart Stores, Inc. Lowe's Companies, Inc.
CVS Corp. Home Depot, Inc.
TOP FIVE MARKET SECTORS - DESTINY I
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AS OF SEPTEMBER 30, 1998 % OF FUND'S INVESTMENTS AS OF MARCH 31, 1998 % OF FUND'S INVESTMENTS
Finance 20.3% Finance 21.4%
Technology 10.6% Technology 10.2%
Utilities 9.5% Utilities 9.2%
Retail & Wholesale 8.4% Retail & Wholesale 8.8%
Health 8.4% Health 7.8%
</TABLE>
TOP FIVE MARKET SECTORS - DESTINY II
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AS OF SEPTEMBER 30, 1998 % OF FUND'S INVESTMENTS AS OF MARCH 31, 1998 % OF FUND'S INVESTMENTS
Finance 17.1% Finance 20.0%
Technology 14.4% Technology 10.1%
Health 12.0% Retail & Wholesale 9.5%
Retail & Wholesale 10.2% Utilities 9.2%
Media & Leisure 9.8% Health 8.7%
</TABLE>
FIDELITY DESTINY PORTFOLIOS: DESTINY I
INVESTMENTS SEPTEMBER 30, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 82.2%
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - 1.8%
CHEMICALS & PLASTICS - 1.2%
Cabot Corp. 194,100 $ 4,840,369
du Pont (E.I.) de Nemours & Co. 764,600 42,913,175
Raychem Corp. 601,200 14,654,250
Union Carbide Corp. 216,900 9,353,813
71,761,607
PACKAGING & CONTAINERS - 0.6%
Corning, Inc. 23,100 680,006
Owens-Illinois, Inc. (a) 1,496,600 37,415,000
38,095,006
PAPER & FOREST PRODUCTS - 0.0%
Willamette Industries, Inc. 102,400 2,937,600
TOTAL BASIC INDUSTRIES 112,794,213
CONSTRUCTION & REAL ESTATE - 1.4%
BUILDING MATERIALS - 0.4%
Armstrong World Industries, Inc. 68,000 3,638,000
Owens-Corning 535,500 17,437,219
Sherwin-Williams Co. 167,300 3,617,863
24,693,082
CONSTRUCTION - 0.6%
Centex Corp. 217,000 7,486,500
D.R. Horton, Inc. 430,380 6,886,080
Fleetwood Enterprises, Inc. 387,007 11,682,774
Kaufman & Broad Home Corp. 538,300 12,616,406
38,671,760
ENGINEERING - 0.4%
Fluor Corp. 581,100 23,861,419
TOTAL CONSTRUCTION & REAL ESTATE 87,226,261
DURABLES - 3.4%
AUTOS, TIRES, & ACCESSORIES - 2.4%
AutoZone, Inc. (a) 256,400 6,313,850
Cummins Engine Co., Inc. 365,800 10,882,550
Discount Auto Parts, Inc. (a) 335,500 8,072,969
General Motors Corp. 1,675,107 91,607,414
SHARES VALUE (NOTE 1)
Goodyear Tire & Rubber Co. 206,300 $ 10,598,663
Magna International, Inc. Class A 383,300 22,154,622
149,630,068
CONSUMER DURABLES - 0.2%
Minnesota Mining & 167,100 12,313,181
Manufacturing Co.
CONSUMER ELECTRONICS - 0.2%
Newell Co. 99,300 4,574,006
Whirlpool Corp. 110,000 5,170,000
9,744,006
TEXTILES & APPAREL - 0.6%
Burlington Industries, Inc. (a) 944,900 8,976,550
Jones Apparel Group, Inc. (a) 130,200 2,986,463
Liz Claiborne, Inc. 610,000 15,974,375
NIKE, Inc. Class B 151,200 5,566,050
Shaw Industries, Inc. 126,900 2,062,125
Warnaco Group, Inc. Class A 56,800 1,313,500
36,879,063
TOTAL DURABLES 208,566,318
ENERGY - 6.3%
ENERGY SERVICES - 0.2%
McDermott International, Inc. 466,400 12,563,650
Schlumberger Ltd. 26,300 1,323,219
13,886,869
OIL & GAS - 6.1%
Amerada Hess Corp. 941,100 54,289,706
Apache Corp. 110,200 2,954,738
Atlantic Richfield Co. 116,200 8,242,938
British Petroleum Co. PLC ADR 896,518 78,221,196
Burlington Resources, Inc. 925,322 34,583,910
Chevron Corp. 176,700 14,853,844
Cooper Cameron Corp. (a) 129,500 3,642,188
Elf Aquitaine SA sponsored ADR 107,764 6,701,574
Occidental Petroleum Corp. 1,812,100 38,960,150
Royal Dutch Petroleum Co. 1,629,500 77,604,938
(NY Registry Gilder 1.25)
Tosco Corp. 1,206,000 25,929,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Total SA:
Class B 67,156 $ 8,432,404
sponsored ADR 175,436 11,019,574
Unocal Corp. 90,823 3,292,334
USX-Marathon Group 138,500 4,908,094
373,636,588
TOTAL ENERGY 387,523,457
FINANCE - 20.3%
BANKS - 0.6%
Banc One Corp. 183,000 7,800,375
Bank of Tokyo-Mitsubishi Ltd. 914,000 5,852,329
Wells Fargo & Co. 68,700 24,388,500
38,041,204
CREDIT & OTHER FINANCE - 4.0%
Associates First Capital Corp. 19,600 1,278,900
Fleet Financial Group, Inc. 2,801,730 205,752,047
Providian Financial Corp. 468,000 39,692,250
246,723,197
FEDERAL SPONSORED CREDIT - 10.4%
Fannie Mae 6,875,200 441,731,600
Freddie Mac 4,075,700 201,492,419
643,224,019
INSURANCE - 4.9%
AFLAC, Inc. 479,600 13,698,575
Allmerica Financial Corp. 235,200 14,023,800
Allstate Corp. 1,948,080 81,210,585
American International Group, Inc. 982,575 75,658,275
CIGNA Corp. 538,100 35,581,863
Loews Corp. 191,000 16,115,625
MGIC Investment Corp. 935,800 34,507,625
PMI Group, Inc. 123,700 5,659,275
Reliastar Financial Corp. 36,836 1,436,604
Torchmark Corp. 482,900 17,354,219
Travelers Property Casualty Corp. Class A 290,000 9,261,875
304,508,321
SAVINGS & LOANS - 0.2%
Golden West Financial Corp. 122,850 10,050,666
SHARES VALUE (NOTE 1)
SECURITIES INDUSTRY - 0.2%
Nomura Securities Co. Ltd. 1,600,000 $ 11,474,150
Travelers Group, Inc. (The) 57,700 2,163,750
United Asset Management Corp. 94,800 2,038,200
15,676,100
TOTAL FINANCE 1,258,223,507
HEALTH - 8.4%
DRUGS & PHARMACEUTICALS - 3.7%
American Home Products Corp. 1,147,600 60,105,550
Amgen, Inc. (a) 605,100 45,722,869
Astra AB Class A Free shares 1,369,900 23,536,169
Merck & Co., Inc. 259,200 33,582,600
Novartis AG (Reg.) 3,800 6,113,612
Schering-Plough Corp. 606,800 62,841,725
231,902,525
MEDICAL EQUIPMENT & SUPPLIES - 1.9%
AmeriSource Health Corp. Class A (a) 319,400 17,387,338
Baxter International, Inc. 65,900 3,921,050
Biomet, Inc. 255,200 8,852,250
Johnson & Johnson 942,500 73,750,625
St. Jude Medical, Inc. (a) 476,212 11,012,403
114,923,666
MEDICAL FACILITIES MANAGEMENT - 2.8%
Columbia/HCA Healthcare Corp. 5,214,387 104,613,639
Humana, Inc. (a) 1,114,300 18,246,663
Tenet Healthcare Corp. (a) 1,115,800 32,079,250
United HealthCare Corp. 551,100 19,288,500
174,228,052
TOTAL HEALTH 521,054,243
HOLDING COMPANIES - 0.0%
U.S. Industries, Inc. 173,250 2,609,578
INDUSTRIAL MACHINERY & EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 2.4%
Alcatel Alsthom Compagnie Generale d'Electricite SA 246,600 20,950,889
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT - CONTINUED
Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 27,700 $ 470,900
Emerson Electric Co. 479,400 29,842,650
General Electric Co. 467,800 37,219,338
Grainger (W.W.), Inc. 121,300 5,109,763
Philips Electronics NV:
(Bearer) 311,900 16,638,819
(NY shares) 652,700 34,837,863
145,070,222
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
Caterpillar, Inc. 403,500 17,980,969
Tyco International Ltd. 428,600 23,680,150
Ultratech Stepper, Inc. (a) 329,400 5,002,763
United States Filter Corp. (a) 279,900 4,478,400
51,142,282
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 196,212,504
MEDIA & LEISURE - 2.3%
BROADCASTING - 0.6%
Comcast Corp. Class A special 81,700 3,834,794
Cox Communications, Inc. Class A (a) 81,500 4,451,938
MediaOne Group, Inc. (a) 466,800 20,743,425
Tele-Communications, Inc. (TCI Group) Series A (a) 141,521 5,537,009
34,567,166
ENTERTAINMENT - 0.5%
Cedar Fair LP (depository unit) 35,600 872,200
King World Productions, Inc. (a) 114,800 2,999,150
Royal Carribean Cruises Ltd. 117,400 3,118,438
Tele-Communications, Inc. (TCI Ventures Group) Series A (a) 1,386,758 24,874,972
31,864,760
LODGING & GAMING - 0.6%
Circus Circus Enterprises, Inc. (a) 491,200 4,635,700
Mirage Resorts, Inc. (a) 562,500 9,421,875
Promus Hotel Corp. (a) 397,900 10,967,119
Sun International Hotels Ltd. (a) 336,900 12,781,144
37,805,838
SHARES VALUE (NOTE 1)
RESTAURANTS - 0.6%
McDonald's Corp. 205,700 $ 12,277,719
Papa John's International, Inc. (a) 108,200 3,570,600
Wendy's International, Inc. 1,080,000 23,962,500
39,810,819
TOTAL MEDIA & LEISURE 144,048,583
NONDURABLES - 5.9%
BEVERAGES - 0.0%
PepsiCo, Inc. 72,000 2,119,500
TOBACCO - 5.9%
Philip Morris Companies, Inc. 7,942,300 365,842,194
TOTAL NONDURABLES 367,961,694
PRECIOUS METALS - 0.0%
Newmont Mining Corp. 124,206 3,011,996
RETAIL & WHOLESALE - 8.4%
APPAREL STORES - 0.4%
Gap, Inc. 199,200 10,507,800
TJX Companies, Inc. 853,300 15,199,406
25,707,206
GENERAL MERCHANDISE STORES - 3.2%
Federated Department Stores, Inc. (a) 597,573 21,736,718
J.C. Penney Co., Inc. 123,000 5,527,313
Saks Holdings, Inc. (a) 710,454 15,940,812
Wal-Mart Stores, Inc. 2,816,800 153,867,700
197,072,543
GROCERY STORES - 0.4%
Safeway, Inc. (a) 570,000 26,433,750
RETAIL & WHOLESALE, MISCELLANEOUS - 4.4%
Circuit City Stores, Inc. - 1,194,000 39,775,125
Circuit City Group
Ebay, Inc. (a) 1,700 76,606
Home Depot, Inc. 3,337,500 131,831,250
Lowe's Companies, Inc. 2,129,700 67,751,081
Office Depot, Inc. (a) 530,600 11,905,338
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Officemax, Inc. (a) 754,850 $ 7,406,966
Staples, Inc. (a) 495,550 14,556,781
273,303,147
TOTAL RETAIL & WHOLESALE 522,516,646
SERVICES - 0.4%
ADVERTISING - 0.0%
Interpublic Group of Companies, Inc. 49,950 2,694,178
SERVICES - 0.4%
AccuStaff, Inc. (a) 421,100 6,132,269
Medpartners, Inc. (a) 333,600 1,084,200
Service Corp. International 462,400 14,739,000
21,955,469
TOTAL SERVICES 24,649,647
TECHNOLOGY - 10.6%
COMMUNICATIONS EQUIPMENT - 0.0%
Cisco Systems, Inc. (a) 14,550 899,372
COMPUTER SERVICES & SOFTWARE - 3.0%
Automatic Data Processing, Inc. 301,400 22,529,650
Black Box Corp. (a) 108,200 2,623,850
Ceridian Corp. (a) 342,900 19,673,888
CompUSA, Inc. (a) 223,400 3,867,613
E Trade Group, Inc. (a) 294,400 5,501,600
Electronics for Imaging, Inc. (a) 486,100 10,268,863
First Data Corp. 564,900 13,275,150
IMS Health, Inc. 154,300 9,556,956
Microsoft Corp. (a) 505,800 55,669,613
Oracle Corp. (a) 581,050 16,923,081
Policy Management Systems Corp. (a) 613,600 24,850,800
184,741,064
COMPUTERS & OFFICE EQUIPMENT - 2.4%
Compaq Computer Corp. 950,200 30,050,075
Hewlett-Packard Co. 233,200 12,345,025
Ingram Micro, Inc. Class A (a) 76,900 4,118,956
International Business Machines Corp. 364,900 46,707,200
SHARES VALUE (NOTE 1)
SCI Systems, Inc. (a) 1,317,500 $ 35,490,156
Tech Data Corp. (a) 412,900 20,670,806
149,382,218
ELECTRONIC INSTRUMENTS - 0.5%
Applied Materials, Inc. (a) 31,400 792,850
Cognex Corp. (a) 133,300 1,549,613
KLA-Tencor Corp. (a) 295,200 7,343,100
Lam Research Corp. (a) 551,000 5,510,000
Novellus Systems, Inc. (a) 121,200 3,181,500
Thermo Electron Corp. (a) 471,400 7,100,463
Varian Associates, Inc. 90,200 3,179,550
28,657,076
ELECTRONICS - 4.7%
Altera Corp. (a) 169,200 5,943,150
AMP, Inc. 487,600 17,431,700
Intel Corp. 364,000 31,213,000
International Rectifier Corp. (a) 214,300 1,098,288
Methode Electronics, Inc. Class A 1,304,200 19,563,000
Micrel, Inc. (a) 122,300 3,240,950
Microchip Technology, Inc. (a) 473,900 10,366,563
Micron Technology, Inc. (a) 1,461,500 44,484,406
Molex, Inc. 477,981 12,965,235
Motorola, Inc. 722,500 30,841,719
Solectron Corp. (a) 2,045,400 98,179,200
Thomas & Betts Corp. 366,300 13,942,294
Vishay Intertechnology, Inc. 69,225 835,027
290,104,532
TOTAL TECHNOLOGY 653,784,262
TRANSPORTATION - 0.3%
RAILROADS - 0.3%
Bombardier, Inc. Class B 4,100 44,986
CSX Corp. 379,500 15,962,719
16,007,705
UTILITIES - 9.5%
CELLULAR - 2.4%
AirTouch Communications, Inc. (a) 291,200 16,598,400
Vodafone Group PLC sponsored ADR 1,138,680 128,386,170
144,984,570
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - 0.5%
American Electric Power Co., Inc. 286,400 $ 13,979,900
Consolidated Edison, Inc. 22,400 1,167,600
Duke Energy Corp. 92,000 6,089,250
Houston Industries, Inc. 127,400 3,965,325
Niagara Mohawk Power Corp. (a) 142,600 2,192,475
PG&E Corp. 131,126 4,187,837
31,582,387
TELEPHONE SERVICES - 6.6%
Ameritech Corp. 337,900 16,008,013
AT&T Corp. 629,800 36,803,938
Bell Atlantic Corp. 665,822 32,250,753
BellSouth Corp. 492,800 37,083,200
EXCEL Communications, Inc. (a) 109,200 2,470,650
MCI WorldCom, Inc. (a) 2,463,178 120,387,825
Qwest Communications 392,469 12,289,186
International, Inc. (a)
SBC Communications, Inc. 732,100 32,532,694
Sprint Corp. 1,023,500 73,692,000
Telebras sponsored ADR 656,000 45,264,000
408,782,259
TOTAL UTILITIES 585,349,216
TOTAL COMMON STOCKS 5,091,539,830
(Cost $3,198,976,478)
U.S. TREASURY OBLIGATIONS - 12.6%
PRINCIPAL
AMOUNT
U.S. Treasury Bond:
stripped principal:
0% 2/15/19 $ 115,000,000 38,493,950
0% 8/15/19 100,000,000 32,486,000
0% 8/15/20 392,000,000 120,155,840
0% 8/15/21 130,000,000 37,792,300
8.125% 8/15/19 401,000,000 549,305,820
TOTAL U.S. TREASURY OBLIGATIONS 778,233,910
(Cost $588,857,482)
CASH EQUIVALENTS - 5.2%
SHARES VALUE (NOTE 1)
Taxable Central Cash Fund (b) 320,491,509 $ 320,491,509
(Cost $320,491,509)
TOTAL INVESTMENT IN SECURITIES - 100% $ 6,190,265,249
(Cost $4,108,325,469)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.36%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
INCOME TAX INFORMATION
At September 30, 1998, the aggregate cost of investment securities for
income tax purposes was $4,110,278,454. Net unrealized appreciation
aggregated $2,079,986,795, of which $2,436,389,873 related to
appreciated investment securities and $356,403,078 related to
depreciated investment securities.
The fund hereby designates approximately $411,529,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY DESTINY PORTFOLIOS: DESTINY I
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
ASSETS
Investment in securities, at value
(cost $4,108,325,469) - See accompanying schedule $ 6,190,265,249
Receivable for investments sold 3,322,621
Receivable for fund shares sold 659,680
Dividends receivable 8,981,234
Interest receivable 5,339,123
Other receivables 210,641
TOTAL ASSETS 6,208,778,548
LIABILITIES
Payable for fund shares redeemed $ 981,741
Accrued management fee 1,496,829
Other payables and accrued expenses 241,483
TOTAL LIABILITIES 2,720,053
NET ASSETS $ 6,206,058,495
Net Assets consist of:
Paid in capital $ 3,552,570,260
Undistributed net investment income 85,475,956
Accumulated undistributed net realized gain (loss)
on investments and foreign currency transactions 486,040,833
Net unrealized appreciation (depreciation) on investments
and assets and liabilities in foreign currencies 2,081,971,446
NET ASSETS, for 252,452,956 shares outstanding $ 6,206,058,495
NET ASSET VALUE, offering price and redemption price per
share ($6,206,058,495 (divided by) 252,452,956 shares) $24.58
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998
INVESTMENT INCOME $ 72,918,200
Dividends
Interest 57,752,529
TOTAL INCOME 130,670,729
EXPENSES
Management fee $ 29,485,219
Basic fee
Performance adjustment (9,828,127)
Transfer agent fees 383,506
Accounting fees and expenses 824,006
Non-interested trustees' compensation 38,082
Custodian fees and expenses 207,099
Registration fees 16,907
Audit 75,443
Legal 21,168
Interest 1,247
Miscellaneous 23,087
Total expenses before reductions 21,247,637
Expense reductions (52,673) 21,194,964
NET INVESTMENT INCOME 109,475,765
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 517,627,920
Foreign currency transactions (84,087) 517,543,833
Change in net unrealized appreciation (depreciation) on:
Investment securities (106,183,618)
Assets and liabilities in foreign currencies 34,548 (106,149,070)
NET GAIN (LOSS) 411,394,763
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 520,870,528
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
Operations $ 109,475,765 $ 115,717,638
Net investment income
Net realized gain (loss) 517,543,833 475,671,787
Change in net unrealized appreciation (depreciation) (106,149,070) 1,031,114,903
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 520,870,528 1,622,504,328
Distributions to shareholders (111,209,839) (100,379,101)
From net investment income
From net realized gain (480,404,897) (385,905,369)
TOTAL DISTRIBUTIONS (591,614,736) (486,284,470)
Share transactions 194,919,194 145,821,046
Net proceeds from sales of shares
Reinvestment of distributions 531,084,059 455,487,338
Cost of shares redeemed (409,942,772) (342,267,830)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS 316,060,481 259,040,554
TOTAL INCREASE (DECREASE) IN NET ASSETS 245,316,273 1,395,260,412
NET ASSETS
Beginning of period 5,960,742,222 4,565,481,810
End of period (including undistributed net investment
income of $85,475,956 and $89,779,250, respectively) $ 6,206,058,495 $ 5,960,742,222
OTHER INFORMATION
Shares
Sold 7,674,934 6,693,954
Issued in reinvestment of distributions 23,221,864 22,797,165
Redeemed (16,076,270) (15,580,927)
Net increase (decrease) 14,820,528 13,910,192
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 25.08 $ 20.41 $ 18.78 $ 17.70 $ 16.86
Income from Investment Operations
Net investment income .44 C .49 C .45 .41 .30
Net realized and unrealized gain (loss) 1.56 6.36 2.42 3.54 1.69
Total from investment operations 2.00 6.85 2.87 3.95 1.99
Less Distributions
From net investment income (.47) (.45) (.43) (.34) (.11)
From net realized gain (2.03) (1.73) (.81) (2.53) (1.04)
Total distributions (2.50) (2.18) (1.24) (2.87) (1.15)
Net asset value, end of period $ 24.58 $ 25.08 $ 20.41 $ 18.78 $ 17.70
TOTAL RETURN B 8.72% 36.29% A 16.04% 27.49% 12.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 6,206 $ 5,961 $ 4,565 $ 4,053 $ 3,273
Ratio of expenses to average net assets .33% .39% .65% .68% .70%
Ratio of expenses to average net assets after expense reductions .33% .38% D .65% .68% .70%
Ratio of net investment income to average net assets 1.71% 2.20% 2.40% 2.35% 1.69%
Portfolio turnover rate 27% 32% 42% 55% 77%
</TABLE>
A THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF THE SEPARATE SALES
CHARGE AND CUSTODIAN FEES ASSESSED THROUGH FIDELITY SYSTEMATIC
INVESTMENT PLANS.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
FIDELITY DESTINY PORTFOLIOS: DESTINY II
INVESTMENTS SEPTEMBER 30, 1998
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 92.7%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.2%
AEROSPACE & DEFENSE - 1.0%
AlliedSignal, Inc. 116,600 $ 4,124,725
Gulfstream Aerospace Corp. (a) 200,900 8,086,225
Textron, Inc. 463,400 28,093,625
40,304,575
SHIP BUILDING & REPAIR - 0.2%
General Dynamics Corp. 104,300 5,234,556
TOTAL AEROSPACE & DEFENSE 45,539,131
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.5%
du Pont (E.I.) de Nemours & Co. 31,600 1,773,550
Monsanto Co. 337,200 19,009,650
20,783,200
CONSTRUCTION & REAL ESTATE - 1.4%
BUILDING MATERIALS - 1.1%
Masco Corp. 1,757,600 43,280,900
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Duke Realty Investments, Inc. 122,500 2,840,469
Equity Residential Properties Trust (SBI) 224,100 9,454,219
Public Storage, Inc. 52,200 1,399,613
13,694,301
TOTAL CONSTRUCTION & REAL ESTATE 56,975,201
DURABLES - 1.1%
AUTOS, TIRES, & ACCESSORIES - 0.4%
Danaher Corp. 91,200 2,736,000
Federal-Mogul Corp. 205,000 9,583,750
Pep Boys-Manny, Moe & Jack 103,800 1,388,325
13,708,075
CONSUMER ELECTRONICS - 0.4%
Black & Decker Corp. 408,800 17,016,300
HOME FURNISHINGS - 0.1%
Leggett & Platt, Inc. 84,600 1,755,450
SHARES VALUE (NOTE 1)
TEXTILES & APPAREL - 0.2%
Liz Claiborne, Inc. 128,300 $ 3,359,856
VF Corp. 147,600 5,479,650
8,839,506
TOTAL DURABLES 41,319,331
ENERGY - 3.8%
OIL & GAS - 3.8%
Atlantic Richfield Co. 48,100 3,412,094
British Petroleum Co. PLC ADR 439,402 38,337,825
Chevron Corp. 191,600 16,106,375
Exxon Corp. 150,000 10,528,125
Mobil Corp. 50,000 3,796,875
Royal Dutch Petroleum Co. 509,800 24,279,225
(NY Registry Gilder 1.25)
Texaco, Inc. 439,700 27,563,694
Total SA:
Class B 37,456 4,703,141
sponsored ADR 84,904 5,333,033
USX-Marathon Group 388,700 13,774,556
147,834,943
FINANCE - 16.8%
BANKS - 4.5%
Bank of New York Co., Inc. 1,482,500 40,583,438
BankAmerica Corp. 105,600 6,349,200
Chase Manhattan Corp. 845,700 36,576,525
Citicorp 558,100 51,868,419
U.S. Bancorp 1,128,800 40,142,950
175,520,532
CREDIT & OTHER FINANCE - 2.7%
American Express Co. 653,000 50,689,125
Associates First Capital Corp. 399,300 26,054,325
Household International, Inc. 846,900 31,758,750
108,502,200
FEDERAL SPONSORED CREDIT - 4.8%
Fannie Mae 1,714,100 110,130,925
Freddie Mac 1,554,100 76,830,819
186,961,744
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.5%
AFLAC, Inc. 625,700 $ 17,871,556
Allmerica Financial Corp. 234,600 13,988,025
Allstate Corp. 362,390 15,107,133
American International Group, Inc. 760,937 58,592,149
MBIA, Inc. 95,800 5,143,263
MGIC Investment Corp. 274,500 10,122,188
Progressive Corp. 7,000 789,250
Travelers Property Casualty Corp. Class A 163,700 5,228,169
UNUM Corp. 187,000 9,291,563
136,133,296
SAVINGS & LOANS - 0.4%
Ahmanson (H.F.) & Co. 40,000 2,220,000
Dime Bancorp, Inc. 530,000 13,415,625
15,635,625
SECURITIES INDUSTRY - 0.9%
Merrill Lynch & Co., Inc. 103,300 4,893,838
Morgan Stanley, Dean Witter, Discover & Co. 254,400 10,955,100
Travelers Group, Inc. (The) 554,550 20,795,625
36,644,563
TOTAL FINANCE 659,397,960
HEALTH - 12.0%
DRUGS & PHARMACEUTICALS - 7.1%
Allergan, Inc. 44,700 2,609,363
American Home Products Corp. 1,010,700 52,935,413
Amgen, Inc. (a) 216,100 16,329,056
Bristol-Myers Squibb Co. 369,100 38,340,263
Elan Corp. PLC ADR (a) 38,600 2,781,613
Lilly (Eli) & Co. 395,300 30,956,931
Merck & Co., Inc. 672,000 87,066,000
Schering-Plough Corp. 451,900 46,799,894
277,818,533
MEDICAL EQUIPMENT & SUPPLIES - 4.2%
Abbott Laboratories 141,400 6,142,063
Bard (C.R.), Inc. 77,500 2,857,813
Baxter International, Inc. 67,000 3,986,500
Biomet, Inc. 113,300 3,930,094
SHARES VALUE (NOTE 1)
Boston Scientific Corp. (a) 50,200 $ 2,579,025
Cardinal Health, Inc. 404,300 41,743,975
Guidant Corp. 52,000 3,861,000
Johnson & Johnson 454,800 35,588,100
McKesson Corp. 387,600 35,513,850
Medtronic, Inc. 365,200 21,135,950
St. Jude Medical, Inc. (a) 203,307 4,701,474
Steris Corp. (a) 60,200 1,700,650
Stryker Corp. 61,100 2,077,400
165,817,894
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp. 589,460 11,826,041
Tenet Healthcare Corp. (a) 570,100 16,390,375
28,216,416
TOTAL HEALTH 471,852,843
HOLDING COMPANIES - 0.2%
CINergy Corp. 204,800 7,833,600
INDUSTRIAL MACHINERY & EQUIPMENT - 6.5%
ELECTRICAL EQUIPMENT - 3.7%
Alcatel Alsthom Compagnie Generale d'Electricite SA 10,900 926,053
Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 43,800 744,600
Emerson Electric Co. 187,200 11,653,200
General Electric Co. 1,507,700 119,956,381
Honeywell, Inc. 14,300 916,094
Siemens AG 176,700 9,478,339
143,674,667
INDUSTRIAL MACHINERY & EQUIPMENT - 2.5%
Illinois Tool Works, Inc. 28,700 1,564,150
Stanley Works 601,800 17,903,550
Tyco International Ltd. 1,404,700 77,609,675
97,077,375
POLLUTION CONTROL - 0.3%
Waste Management, Inc. 262,700 12,626,019
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 253,378,061
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 9.8%
BROADCASTING - 6.1%
CBS Corp. 889,700 $ 21,575,225
Comcast Corp. Class A special 444,900 20,882,494
Cox Communications, Inc. Class A (a) 48,500 2,649,313
MediaOne Group, Inc. (a) 392,800 17,455,050
Tele-Communications, Inc. (TCI Group) Series A (a) 814,671 31,874,003
Time Warner, Inc. 1,638,100 143,436,114
237,872,199
ENTERTAINMENT - 1.5%
Carnival Corp. 189,100 6,015,744
Disney (Walt) Co. 48,300 1,222,594
Tele-Communications, Inc. (TCI Ventures Group) Series A (a) 825,858 14,813,828
Viacom, Inc. (a):
Class A 66,400 3,818,000
Class B (non-vtg.) 573,700 33,274,600
59,144,766
PUBLISHING - 1.6%
Harcourt General, Inc. 269,200 13,022,550
McGraw-Hill Companies, Inc. 593,800 47,058,650
Tribune Co. 60,600 3,048,938
63,130,138
RESTAURANTS - 0.6%
McDonald's Corp. 387,600 23,134,875
TOTAL MEDIA & LEISURE 383,281,978
NONDURABLES - 5.5%
BEVERAGES - 0.2%
Coca-Cola Co. (The) 150,000 8,643,750
FOODS - 1.1%
Campbell Soup Co. 170,800 8,572,025
Dean Foods Co. 413,500 18,194,000
Heinz (H.J.) Co. 249,900 12,776,138
Nabisco Holdings Corp. Class A 14,400 517,500
40,059,663
HOUSEHOLD PRODUCTS - 2.5%
Avon Products, Inc. 1,057,600 29,678,900
Clorox Co. 80,000 6,600,000
SHARES VALUE (NOTE 1)
Colgate-Palmolive Co. 142,800 $ 9,781,800
Gillette Co. 59,600 2,279,700
Procter & Gamble Co. 321,900 22,834,781
Unilever NV (NY shares) 443,400 27,158,250
98,333,431
TOBACCO - 1.7%
Philip Morris Companies, Inc. 1,465,000 67,481,563
TOTAL NONDURABLES 214,518,407
RETAIL & WHOLESALE - 10.2%
APPAREL STORES - 1.8%
Abercrombie & Fitch Co. Class A (a) 220,200 9,688,800
Gap, Inc. 182,700 9,637,425
Payless ShoeSource, Inc. (a) 590,300 24,423,663
TJX Companies, Inc. 1,428,900 25,452,281
69,202,169
DRUG STORES - 1.7%
CVS Corp. 1,544,800 67,681,550
GENERAL MERCHANDISE STORES - 5.0%
Consolidated Stores Corp. (a) 414,275 8,130,147
Costco Companies, Inc. (a) 455,100 21,560,363
Dayton Hudson Corp. 684,600 24,474,450
Federated Department Stores, Inc. (a) 756,100 27,503,138
Nordstrom, Inc. 920,500 22,782,375
Saks Holdings, Inc. (a) 836,400 18,766,725
Wal-Mart Stores, Inc. 1,325,600 72,410,900
195,628,098
GROCERY STORES - 0.5%
Safeway, Inc. (a) 430,800 19,978,350
RETAIL & WHOLESALE, MISCELLANEOUS - 1.2%
Amazon.com, Inc. (a) 48,800 5,447,300
Home Depot, Inc. 815,900 32,228,050
Lowe's Companies, Inc. 327,600 10,421,775
48,097,125
TOTAL RETAIL & WHOLESALE 400,587,292
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 2.8%
ADVERTISING - 1.6%
Interpublic Group of Companies, Inc. 302,300 $ 16,305,306
Omnicom Group, Inc. 1,058,500 47,632,500
63,937,806
PRINTING - 0.4%
Donnelley (R.R.) & Sons Co. 432,900 15,232,669
SERVICES - 0.8%
AccuStaff, Inc. (a) 116,600 1,697,988
Ecolab, Inc. 692,200 19,684,438
Service Corp. International 138,400 4,411,500
ServiceMaster Co. 151,950 3,323,906
29,117,832
TOTAL SERVICES 108,288,307
TECHNOLOGY - 14.1%
COMMUNICATIONS EQUIPMENT - 2.2%
Ascend Communications, Inc. (a) 429,400 19,537,700
Cisco Systems, Inc. (a) 511,700 31,629,456
Lucent Technologies, Inc. 539,300 37,245,406
88,412,562
COMPUTER SERVICES & SOFTWARE - 3.9%
America Online, Inc. 179,800 20,002,750
Automatic Data Processing, Inc. 62,100 4,641,975
IMS Health, Inc. 207,600 12,858,225
Intuit, Inc. (a) 142,200 6,621,188
Microsoft Corp. (a) 865,000 95,204,063
Oracle Corp. (a) 343,575 10,006,622
Yahoo, Inc. (a) 14,200 1,838,900
151,173,723
COMPUTERS & OFFICE EQUIPMENT - 5.8%
Apple Computer, Inc. (a) 483,300 18,425,813
Compaq Computer Corp. 854,200 27,014,075
EMC Corp. (a) 291,600 16,675,875
International Business Machines Corp. 433,100 55,436,800
Pitney Bowes, Inc. 216,000 11,785,500
SCI Systems, Inc. (a) 773,100 20,825,381
Tech Data Corp. (a) 269,000 13,466,813
SHARES VALUE (NOTE 1)
Unisys Corp. (a) 300,000 $ 6,825,000
Xerox Corp. 657,500 55,723,125
226,178,382
ELECTRONIC INSTRUMENTS - 0.0%
Lam Research Corp. (a) 65,200 652,000
ELECTRONICS - 2.2%
Intel Corp. 302,700 25,956,525
Micron Technology, Inc. (a) 199,500 6,072,281
Motorola, Inc. 179,300 7,653,869
Solectron Corp. (a) 770,496 36,983,808
Texas Instruments, Inc. 198,100 10,449,775
87,116,258
TOTAL TECHNOLOGY 553,532,925
UTILITIES - 6.8%
CELLULAR - 0.9%
Vodafone Group PLC sponsored ADR 301,900 34,039,225
ELECTRIC UTILITY - 1.9%
DQE, Inc. 14,200 548,475
Duke Energy Corp. 368,200 24,370,238
Entergy Corp. 370,600 11,395,950
FPL Group, Inc. 158,400 11,038,500
Illinova Corp. 116,900 3,353,569
PacifiCorp 113,400 2,175,863
PG&E Corp. 475,142 15,174,848
Unicom Corp. 225,900 8,443,013
76,500,456
TELEPHONE SERVICES - 4.0%
ALLTEL Corp. 20,800 985,400
AT&T Corp. 752,200 43,956,688
Frontier Corp. 31,100 851,363
GTE Corp. 94,000 5,170,000
MCI WorldCom, Inc. (a) 1,547,403 75,629,322
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Qwest Communications International, Inc. (a) 254,300 $ 7,962,769
Sprint Corp. 324,500 23,364,000
157,919,542
TOTAL UTILITIES 268,459,223
TOTAL COMMON STOCKS 3,633,582,402
(Cost $3,213,238,406)
</TABLE>
CONVERTIBLE PREFERRED STOCKS - 0.3%
FINANCE - 0.3%
CREDIT & OTHER FINANCE - 0.3%
Federal Mogul Financing Trust $3.50 (c) 183,000 10,110,750
(Cost $13,760,670)
CONVERTIBLE BONDS - 0.3%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT
TECHNOLOGY - 0.3%
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Unisys Corp. 8.25% 3/15/06 B $ 3,235,000 10,881,731
(Cost $12,512,652)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 6.7%
SHARES
Taxable Central Cash Fund (b) 264,816,332 264,816,332
(Cost $264,816,332)
TOTAL INVESTMENT IN SECURITIES - 100% $ 3,919,391,215
(Cost $3,504,328,060)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.36%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(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
$10,110,750 or 0.3% of net assets.
INCOME TAX INFORMATION
At September 30, 1998, the aggregate cost of investment securities for
income tax purposes was $3,509,471,306. Net unrealized appreciation
aggregated $409,919,909, of which $761,873,584 related to appreciated
investment securities and $351,953,675 related to depreciated
investment securities.
The fund hereby designates approximately $236,337,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY DESTINY PORTFOLIOS: DESTINY II
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
ASSETS
Investment in securities, at value
(cost $3,504,328,060) - See accompanying schedule $ 3,919,391,215
Receivable for investments sold 83,899,595
Receivable for fund shares sold 1,812,238
Dividends receivable 4,122,472
Interest receivable 1,099,939
Other receivables 85,223
TOTAL ASSETS 4,010,410,682
LIABILITIES
Payable for investments purchased $ 38,220,182
Payable for fund shares redeemed 1,167,342
Accrued management fee 1,453,448
Other payables and accrued expenses 160,599
TOTAL LIABILITIES 41,001,571
NET ASSETS $ 3,969,409,111
Net Assets consist of:
Paid in capital $ 2,626,233,773
Undistributed net investment income 36,167,783
Accumulated undistributed net realized gain
(loss) on investments and foreign currency transactions 891,897,590
Net unrealized appreciation (depreciation) on investments
and assets and liabilities in foreign currencies 415,109,965
NET ASSETS, for 282,067,518 shares outstanding $ 3,969,409,111
NET ASSET VALUE, offering price and redemption price per
share ($3,969,409,111 (divided by) 282,067,518 shares) $14.07
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998
INVESTMENT INCOME $ 43,817,770
Dividends
Interest 25,571,934
TOTAL INCOME 69,389,704
EXPENSES
Management fee $ 23,966,180
Basic fee
Performance adjustment (5,588,522)
Transfer agent fees 211,292
Accounting fees and expenses 812,105
Non-interested trustees' compensation 20,068
Custodian fees and expenses 128,226
Registration fees 19,666
Audit 55,347
Legal 17,187
Interest 4,276
Miscellaneous 13,628
Total expenses before reductions 19,659,453
Expense reductions (140,504) 19,518,949
NET INVESTMENT INCOME 49,870,755
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 911,859,184
Foreign currency transactions 117,022 911,976,206
Change in net unrealized appreciation (depreciation) on:
Investment securities (723,777,160)
Assets and liabilities in foreign currencies 48,475 (723,728,685)
NET GAIN (LOSS) 188,247,521
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 238,118,276
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
Operations $ 49,870,755 $ 64,917,247
Net investment income
Net realized gain (loss) 911,976,206 238,687,694
Change in net unrealized appreciation (depreciation) (723,728,685) 606,544,012
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 238,118,276 910,148,953
Distributions to shareholders (63,384,584) (55,499,110)
From net investment income
From net realized gain (245,892,803) (166,474,990)
TOTAL DISTRIBUTIONS (309,277,387) (221,974,100)
Share transactions 501,235,130 326,984,358
Net proceeds from sales of shares
Reinvestment of distributions 302,744,998 218,448,216
Cost of shares redeemed (372,556,327) (162,870,326)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM SHARE TRANSACTIONS 431,423,801 382,562,248
TOTAL INCREASE (DECREASE) IN NET ASSETS 360,264,690 1,070,737,101
NET ASSETS
Beginning of period 3,609,144,421 2,538,407,320
End of period (including undistributed net investment
income of $36,167,783 and $50,768,400, respectively) $ 3,969,409,111 $ 3,609,144,421
OTHER INFORMATION
Shares
Sold 33,666,459 25,964,294
Issued in reinvestment of distributions 22,694,528 18,831,746
Redeemed (24,889,611) (12,796,917)
Net increase (decrease) 31,471,376 31,999,123
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30,
1998 1997 1996 E 1995 E 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 14.40 $ 11.61 $ 10.57 $ 9.52 $ 8.89
Income from Investment Operations
Net investment income .18 C .27 C .24 .22 .14
Net realized and unrealized gain (loss) .71 3.52 1.34 1.99 .96
Total from investment operations .89 3.79 1.58 2.21 1.10
Less Distributions
From net investment income (.25) (.25) (.22) (.17) (.04)
From net realized gain (.97) (.75) (.32) (.99) (.43)
Total distributions (1.22) (1.00) (.54) (1.16) (.47)
Net asset value, end of period $ 14.07 $ 14.40 $ 11.61 $ 10.57 $ 9.52
TOTAL RETURN B 6.64% 34.72%A 15.43% 26.98% 12.67%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 3,969 $ 3,609 $ 2,538 $ 2,032 $ 1,437
Ratio of expenses to average net assets .48% .54% .78% .80% .80%
Ratio of expenses to average net assets after expense reductions .48% .53% D .78% .80% .80%
Ratio of net investment income to average net assets 1.23% 2.11% 2.38% 2.33% 1.56%
Portfolio turnover rate 106% 35% 37% 52% 72%
</TABLE>
A THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF THE SEPARATE SALES
CHARGE AND CUSTODIAN FEES ASSESSED THROUGH FIDELITY SYSTEMATIC
INVESTMENT PLANS.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
E PER-SHARE DATA HAVE BEEN ADJUSTED FOR A 3-FOR-1 SHARE SPLIT PAID
JUNE 21, 1996.
NOTES TO FINANCIAL STATEMENTS
for the period ended September 30, 1998
SIGNIFICANT ACCOUNTING POLICIES.
Destiny I and Destiny II (the funds) are funds of Fidelity Destiny
Portfolios (the trust). The trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company organized as a Massachusetts business trust. Each fund is
authorized to issue an unlimited number of shares. Shares of each fund
are offered publicly through Fidelity Systematic Investment Plans:
Destiny Plans I and Destiny Plans II (the Plans), a unit investment
trust with two series. The financial statements have been prepared in
conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of
the financial statements. The following summarizes the significant
accounting policies of the 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 with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the 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.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign
currencies, the difference between the amount of net investment income
accrued and the U.S. dollar amount actually received, and gains and
losses between trade date and settlement on purchases and sales of
securities. The effects of changes in foreign currency exchange rates
on investments in securities are included with the net realized and
unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially 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. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan
non-interested Trustees must defer receipt of a portion of, and may
elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the funds or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
funds until distributed in accordance with the Deferred Trustee
Compensation Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions,
passive foreign investment companies (PFIC), partnerships and losses
deferred due to wash sales. The funds also utilized earnings and
profits distributed to shareholders on redemption of shares as a part
of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences that 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.
OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. Certain funds use foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the funds, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the funds, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the funds' investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the funds may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the funds are recorded
as interest income in the accompanying financial statements.
PURCHASES AND SALES OF INVESTMENTS.
Destiny I: Purchases and sales of securities, other than short-term
securities, aggregated $1,623,537,800 and $1,893,881,857,
respectively, of which U.S. government and government agency
obligations aggregated $0 and $50,212,500, respectively.
Destiny II: Purchases and sales of securities, other than short-term
securities, aggregated $4,091,172,149 and $4,047,854,322,
respectively, of which U.S. government and government agency
obligations aggregated $9,227,258 and $464,816,481, respectively.
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 .2500% to
.5200% for the period. The annual individual fund fee rates are .17%
and .30% for Destiny I and Destiny II, respectively. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. The basic fee is subject to a
performance adjustment (up to a maximum of (plus/minus).24% of each
fund's average net assets up to and including $100,000,000 and
(plus/minus)0.20% of each fund's average net assets in excess of
$100,000,000 over the performance period) 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 .31% and .45%, respectively of average
net assets after the performance adjustment for the Destiny I and
Destiny II funds, respectively.
Fidelity Distributors Corporation, an affiliate of FMR and sponsor of
the Plans, received $1,233,174 and $2,751,345 as its portion of the
Creation and Sales Charges on sales of Destiny Plans I and Destiny
Plans II, respectively, for the period.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the funds' transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .01%, and .01% of the average net
assets of Destiny I and Destiny II, respectively.
ACCOUNTING FEES. FSC maintains each fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. 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 $386,433 and $741,745, respectively for the period.
BANK BORROWINGS.
The funds are permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The funds have
established borrowing arrangements with certain banks. Under the most
restrictive arrangement, the funds 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 period for which loans were
outstanding amounted to $3,840,000. The weighted average interest rate
was 5.8%. Interest expense includes $1,247 paid under the bank
borrowing program. For Destiny II the maximum loan and the average
daily loan balances during the period for which loans were outstanding
amounted to $13,171,000. The weighted average interest rate was 5.8%.
Interest expense includes $4,276 paid under the bank borrowing
program.
EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of each fund's expenses. For the period, each fund's expenses
were reduced by $34,288 and $125,757 under this arrangement for
Destiny I and Destiny II, respectively.
In addition, each fund has entered into arrangements with its
custodian and transfer agent whereby credits realized on uninvested
cash balances were used to offset a portion of each fund's expenses.
During the period, the custodian and transfer agent fees were reduced
by $4,424 and $13,961 for Destiny I and $1,031 and $13,716, for
Destiny II under these arrangements, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and the Shareholders of
Fidelity Destiny Portfolios: Destiny I and Destiny II:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Destiny I and Destiny II (funds of Fidelity Destiny Portfolios) at
September 30, 1998, and the results of their operations, the changes
in their net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Destiny Portfolios' management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at September 30, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion
expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 12, 1998
DISTRIBUTIONS
The Board of Trustees of Destiny I and Destiny II voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from
capital gains realized from sales of portfolio securities, and
dividends derived from net investment income:
Destiny I Destiny II
PAY DATE 12/29/97 12/29/97
RECORD DATE 12/26/97 12/26/97
DIVIDENDS $ .47 $ .25
SHORT-TERM
CAPITAL GAINS $ .36 $ .20
LONG-TERM
CAPITAL GAINS $ 1.67 $ .77
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 60.50% 62.34%
20% rate 39.50% 37.66%
Totals of 32% and 21% 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 and Destiny II,
respectively.
Totals of 33% and 33% of the dividends distributed during the fiscal
year qualifies for the dividends-received deduction for corporate
shareholders for Destiny I and Destiny II, respectively.
The fund will notify shareholders in January 1999 of the applicable
percentages for use in preparing 1998 income tax returns.
