FILE NO. 2-34100
FIDELITY SYSTEMATIC INVESTMENT PLANS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 67
TO
FORM S-6
For registration under the Securities Act of 1933 of Securities of
Unit Investment Trusts Registered on Form N-8B-2.
A. EXACT NAME OF TRUST:
FIDELITY SYSTEMATIC INVESTMENT PLANS:
Destiny Plans I: New and Destiny Plans II: New
B. NAME OF DEPOSITOR:
FIDELITY DISTRIBUTORS CORPORATION
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
82 Devonshire Street
Boston, Massachusetts 02109
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICES:
Eric D. Roiter
Fidelity Distributors Corporation
82 Devonshire Street
Boston, Massachusetts 02109
It is proposed that this filing will become effective (check
appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] On ( ) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on ( ) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on ( ) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[x] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
CONTENTS OF REGISTRATION STATEMENT FILE NO. 2-34100
PAGE
Facing Sheet 1
Table of Contents 2
Cross-Reference Sheet 3
Prospectus 7
Signature Page 82
Exhibits 84
RECONCILIATION AND TIE OF INFORMATION SHOWN IN
INVESTMENT PLANS PROSPECTUS WITH THAT REQUIRED BY FORM N-8B-2
FORM N-8B-2 CAPTION
ITEM NUMBER REFERENCE
1(a) Front Cover
(b) Fidelity Systematic Investment Plans; General
2 The Sponsor; Back Cover
3 The Custodian; The Sponsor; Back Cover
4 Back Cover
5 General
6(a) General; The Custodian
(b) General; The Custodian
7 Not applicable
8 September 30
9 Not applicable
10(a) How Fidelity Systematic Investment Plans Can Help You Meet
Your Objectives; General
(b) Distributions
(c) Partial Liquidation of Your Plan; Systematic Withdrawal
Program; Your Cancellation and Refund Rights; Terminating
Your Plan
(d) Partial Liquidation of Your Plan; Systematic Withdrawal
Program; Transferring or Assigning Your Rights in a Plan;
Your Cancellation and Refund Rights; Terminating Your
Plan; Plan Reinstatement; Completed Plans and Exchanges
(e) Termination of Your Plan by the Sponsor or Custodian;
Partial Liquidation of Your Plan; Plan Reinstatement
(f) Your Voting Rights
(g)(1)(2) Substitution of the Underlying Investment
FORM N-8B-2 CAPTION
ITEM NUMBER REFERENCE
(3)(4) The Custodian
(h)(1)(2) Substitution of the Underlying Investment
(3)(4) The Custodian
(i) Fees and Expenses
11 Investment Objective of the Funds
12(a) Investment Objective of the Funds
(b)-(d) Not applicable
(e) Not applicable
13(a)(A)(B) How Fidelity Systematic Investment Plans Can Help You Meet
Your Objectives; Fees and Expenses; Rights of
Accumulation ; Changing the Face Amount of Your
Plan; Extended Investment Option; Your Cancellation and
Refund Rights; Terminating Your Plan; Plan
Reinstatement; The Custodian; The Sponsor
(C) The Sponsor; The Custodian; General
(D) How Fidelity Systematic Investment Plans Can Help You Meet
Your Objectives; Fees and Expenses; Rights of
Accumulation ; Changing the Face Amount of Your
Plan; Extended Investment Option; Your Cancellation and
Refund Rights; Terminating Your Plan; Plan Reinstatement;
The Custodian; The Sponsor
(b) Fees and Expenses
(c) Fidelity Systematic Investment Plans ; How Fidelity
Systematic Investment Plans Can Help You Meet Your
Objectives
(d) Rights of Accumulation ; General
(e);(f) Not applicable
(g) Fees and Expenses; Financial Statements
14 How to Start a Destiny Plan
15 How to Start a Destiny Plan; The Custodian; The Sponsor
16 Investment Objectives of the Funds; The Custodian; The
Sponsor
17 Partial Liquidation of Your Plan; Systematic Withdrawal
Program; Your Cancellation and Refund Rights; Terminating
Your Plan; Plan Reinstatement; Completed Plans and
Exchanges
18(a);(b) Distributions; The Custodian; The Sponsor
(c) Not applicable
(d) Not applicable
19 The Custodian
FORM N-8B-2 CAPTION
ITEM NUMBER REFERENCE
20(a-c) Termination of Your Plan by the Sponsor or Custodian;
General; The Custodian; Reference is made to the
statements in Exhibit A(1) filed herewith.
(d-f) Not applicable
21 Not applicable
22 Reference is made to the statements in Exhibit A(1) filed
herewith.
23 The Sponsor
24 Not applicable
25 The Sponsor
26(a) Financial Statements
(b) Not applicable
27 The Sponsor
28 The Sponsor
29 The Sponsor
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35(a)(b) General
(c) Not applicable
36 Not applicable
37 Not applicable
38 Fidelity Systematic Investment Plans; General; The Sponsor
39 The Sponsor
40 Financial Statements
41(a) The Sponsor
FORM N-8B-2 CAPTION
ITEM NUMBER REFERENCE
(b) (c) Not applicable
42 The Sponsor
43 Not applicable
44(a) Financial Statements
(b) Fees and Expenses; Financial Statements
45 Not applicable
46(a);(b) Partial Liquidation of Your Plan; Systematic Withdrawal
Plan; Your Cancellation and Refund Rights; Terminating
Your Plan; Completed Plans and Exchanges; The Custodian
47 Investment Objective of the Funds; Substitution of the
Underlying Investment; The Custodian; The Sponsor
48 The Custodian; The Sponsor
49 Fees and Expenses The Custodian; The Sponsor; Statement of
Operations
50 Not applicable
51 Not applicable
52(a) Not applicable
(b) Not applicable
(c) Substitution of the Underlying Investment
(d) Not applicable
53 Taxes
54 Not applicable
55 Fees and Expenses
56-59 Not applicable
Fidelity
Systematic
Investment Plans:
Destiny Plans I: New
Destiny Plans II: New
PROSPECTUS
APRIL 2 6 , 1999
DESTINY
FIDELITY SYSTEMATIC INVESTMENT PLANS:
DESTINY PLANS I: NEW AND DESTINY PLANS II : NEW
The Destiny Plans are systematic investment plans that allow
you to build equity over a period of years by investing regularly each
month in mutual fund shares. This prospectus describes the two Destiny
Plans: Destiny Plans I : New and Destiny Plans II : New
("Plans") . You may make fixed monthly investments in a Plan for a
term of either 10 or 15 years. You may continue to make investments
for as long as 25 years. You may invest in one of several monthly
investment plan amounts and may make investments of as little as $50
per month. Investments in your Plan are applied to the purchase of
shares of Class N of one of the Fidelity Destiny Portfolios.
Destiny Plans I: New purchases Class N shares of Fidelity
Destiny Portfolios I , and Destiny Plans II : New
purchases Class N shares of Fidelity Destiny Portfolios II
("Funds") . The Plans charge Creation and Sales Charges equal to
as much as 50% of each of your first twelve monthly
investments. The Creation and Sales Charges are deducted from your
Plan investment, and the balance is invested in Class N shares
of the Funds. Your Plan purchases Class N shares of the
appropriate Fund at the Class' net asset value (NAV), without the
deduction of a sales charge. Class N shares of the Funds are
subject to certain annual expenses, including management
fees, 12b-1 fees and transfer agent fees . The Creation and Sales
Charges and the other fees and expenses that either you or your Plan
will pay are described in the "Fees and Expenses" section, beginning
on page 11 .
YOUR PLAN AND YOUR PLAN'S INVESTMENT IN FUND SHARES IS INTENDED TO BE
A LONG-TERM INVESTMENT. YOU SHOULD NOT PURCHASE A PLAN IF YOU ARE
SEEKING QUICK PROFITS OR IF YOU MIGHT BE UNABLE TO COMPLETE THE PLAN.
If you terminate or withdraw from your Plan in the early years of your
Plan, you may incur a loss because the full amount of the Creation and
Sales Charges are deducted from your first twelve investments. Your
Plan does not eliminate the risk involved in the ownership of
individual securities, and your Plan's value will increase or decrease
over time as the result of increases or decreases in the price of the
securities owned by the Fund. You will incur a loss if you terminate
your Plan at a time when the value of your Plan's shares is less than
their cost. Advance investment of any of your monthly
investments increases the possibility that a loss may result from
early termination. You have the right to a refund of the current
value of your investment in Class N shares and the full amount of
Creation and Sales charges you have paid within 45 days of the
purchase of a Plan. You also have a right to a refund of some or all
of your Plan investment within 18 months of the purchase of a Plan.
These rights are subject to the conditions described in the "Your
Cancellation and Refund Rights" section on page 31 .
Class N shares of the Funds are available to the public only
through the Plans described in this prospectus . A separate
prospectus describes two other Fidelity Systematic Investment Plans:
Destiny Plans I : Original and Destiny Plans II :
Original . This prospectus is available from your investment
professional or Fidelity Distributors Corporation, the Sponsor of the
Plans. The fee arrangements of these other Plans are different than
those described here . You should consider the information
contained in the section called "General" on page 32 and
consult with your investment professional when deciding which Plan's
fee arrangements are most appropriate for you. You do not have to
purchase a Plan to make monthly investments in mutual funds. Other
mutual funds managed by the Funds' investment adviser have investment
objectives similar in many respects to those of the Funds. Your
investment in shares of these other funds may not be subject to any
sales charges or other charges that may apply to an investment in the
Plans.
Plans established while this Prospectus is effective are governed by
the terms of this Prospectus, including all the rules, rights,
privileges and benefits it describes. THEREFORE IT IS IMPORTANT THAT
YOU READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE. No
salesman, dealer, or other person is authorized by the Sponsor,
Fidelity Systematic Investment Plans, or Fidelity Destiny Portfolios
to give any information or make any representation that is not
contained in either the Prospectus of the Plans, the Prospectus of
Fidelity Destiny Portfolios, or in other printed or written material
issued by the Sponsor, the Plans, or Fidelity Destiny Portfolios. You
should only rely upon the information contained in these prospectuses.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS AGAINST THE LAW.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUS FOR FIDELITY DESTINY PORTFOLIOS.
TABLE OF CONTENTS
PAGE
FIDELITY SYSTEMATIC 7
INVESTMENT PLANS
TABLE OF CONTENTS 10
HOW FIDELITY SYSTEMATIC 11
INVESTMENT PLANS CAN HELP
YOU MEET YOUR OBJECTIVES
INVESTMENT OBJECTIVE OF THE 11
FUNDS
HOW TO START A DESTINY PLAN 12
1. Tax-Advantaged Retirement 12
Plans
FEES AND EXPENSES 13
1. Creation and Sales Charges 13
2. Account Fees 25
ILLUSTRATION OF TWO 27
HYPOTHETICAL DESTINY PLANS
KEEPING YOUR PLAN CURRENT 31
DOLLAR-COST AVERAGING AND 31
DIVERSIFICATION
PLAN FEATURES AND YOUR RIGHTS 31
AND PRIVILEGES
1. Automatic Investment Program 31
and Government Allotment
Program
2. Rights of Accumulation 31
3. Distributions 31
4. Federal Income Tax Withholding 31
5. Your Voting Rights 32
6. Making Advance Investments 32
7. Changing the Face Amount of 32
Your Plan
8. Extended Investment Option 32
9. Partial Liquidation of Your 32
Plan
10. Systematic Withdrawal Program 32
11. Transferring or Assigning 33
Your Rights in a Plan
12. Transfer of Broker 33
13. Your Cancellation and Refund 33
Rights
14. Terminating Your Plan 33
15. Completed Plans and Exchanges 33
16. Plan Reinstatement 34
17. Taxes 34
18. Termination of Your Plan by 34
the Sponsor or Custodian
SUBSTITUTION OF THE 34
UNDERLYING INVESTMENT
GENERAL 34
THE CUSTODIAN 35
THE SPONSOR 35
GLOSSARY 37
FIDELITY DESTINY PORTFOLIOS F-1
PROSPECTUS
HOW FIDELITY SYSTEMATIC INVESTMENT PLANS CAN HELP YOU MEET YOUR
OBJECTIVES
Many people who want to build an investment portfolio find it
difficult to save the money necessary to make periodic stock
purchases. The Destiny Plans are designed to help. The Plans make it
possible for you to build equity over a period of years by investing a
modest sum each month in mutual fund shares.
The value of each Fidelity Destiny Portfolio's shares is
subject to fluctuations in the values of its underlying securities. A
Plan calls for monthly investments at regular intervals regardless of
the value of the Fund's shares. A Plan offers no assurance against
loss in a declining market and does not eliminate the risk inherent in
the ownership of any security. Terminating the Plan at a time when the
value of the Fund shares you own is less than their cost will result
in a loss. You should therefore consider your financial ability to
continue and complete a Plan.
Before opening a Plan you should consider the following:
1. A Plan represents an agreement between you (the Planholder),
Fidelity Distributors Corporation ( the Sponsor ) and
State Street Bank and Trust Company (the Custodian) under which
amounts invested, after the deduction of Creation and Sales Charges,
are used to purchase shares of the Funds at net asset value.
2. Investments made through the Plans will not result in direct
ownership of the shares of either of the F unds, but rather will
represent an interest in a series of a unit investment trust, which
will have direct ownership of the shares of a class of the Funds. You
will have a beneficial interest in the underlying Fund's shares.
3. Unlike most other plans of this type, the Funds do not sell their
shares directly to the public. Initial investments in the Funds may be
made only through the trust arrangements provided by the Plans.
4. The Plans contain Creation and Sales Charges, sometimes called a
" front-end load". I f you were to terminate your Plan
between 2 months and 18 months, the amount of Creation and Sales
Charges that would not be refunded to you could be as much as
15 % of your total investments made up to the time you terminate
your Plan. If you terminate your Plan after 18 months, the amount
of Creation and Sales Charges that would not be refunded to you could
be as much as 33.3 % of your total investments. However, if
you complete a 15-year Plan, the maximum Creation and Sales Charge
would be 3.33% of your total investments. Accordingly, a Plan is not
suited for short-term investments. See the subsection called "Creation
and Sales Charges" in the section called "Fees and Expenses" on page
11 .
INVESTMENT OBJECTIVE OF THE FUNDS
Fidelity Destiny Portfolios, an open-end investment management
company, is a series fund consisting of two separate funds, Destiny I
and Destiny II. The Funds are diversified mutual funds: an investment
vehicle that pools shareholders' money and invests it in a number of
different securities. Each Fund's objective is to seek growth of
capital, primarily from investment in equity securities. Each Fund
will tend to be fully invested in common stocks and securities
convertible into common stocks, but may also buy other types of
securities such as preferred stocks and bonds. The Funds have the
flexibility to invest in the securities of issuers with large or small
market capitalizations, as well as the securities of both domestic and
foreign issuers. The investment objective, policies and restrictions
of the Funds are described in the accompanying Fidelity Destiny
Portfolios prospectus, which begins on page 54 .
The Funds' investments are selected and supervised by Fidelity
Management & Research Company (FMR). For more information about the
business experience of FMR, see "FMR and its Affiliates" on page
62 of the Funds' prospectus.
HOW TO START A DESTINY PLAN
To start a Plan, you should complete a Plan Application and mail it
to the address specified on the application. Your application asks you
to choose either a 10-year or a 15-year Plan, and the amount of your
monthly investment. You should include a check in the amount of the
first monthly investment, made payable to Destiny Plans I : New
or Destiny Plans II : New , as the case may be, when you return
the completed application to the address on the application.
Alternatively, you may establish an Automatic Investment Program or,
if you are a member of the military, a government allotment, so
that your monthly investments are automatically sent from your
checking account to the Plans. (See "Automatic Investment Program and
Government Allotment Program " on page 28 .) After your
Plan Application and initial investment is received in proper form by
the Sponsor, the applicable Creation and Sales Charges will be
deducted. The balance of your investment will be invested in shares of
Class N of the Funds, and you will receive a confirmation
statement showing the number of whole and fractional shares purchased
for your Plan account.
If you do not establish an Automatic Investment Program or a
government allotment, you may send subsequent monthly investments,
made payable to Destiny Plans I : New or Destiny Plans II :
New, directly to the Custodian, Boston Financial Data Services,
Inc. (Boston Financial), at P.O. Box 8300, Boston, Massachusetts
02266-8300. Your subsequent investments in your Plan will also be
applied toward the purchase of Class N shares of the Funds at
the current NAV of Class N after the deduction of any
applicable Creation and Sales Charges.
1. TAX-ADVANTAGED RETIREMENT PLANS
The Plans may serve as the investment vehicle for tax-advantaged
retirement plans, including individual retirement accounts (IRAs) and
qualified money purchase pension and profit sharing plans. However,
the only retirement plan made available by Fidelity Destiny Portfolios
is the Fidelity Destiny IRA (which includes SEP IRAs, traditional IRAs
and Roth IRAs). IRA plans can be established through contributions,
through a rollover, or through a trustee-to-trustee transfer of IRA
assets from another financial institution. These rollovers or
transfers may contain assets that originated from an
employer-sponsored retirement plan or annual IRA contributions.
Detailed information concerning the Fidelity Destiny IRA is available
from the Sponsor. This information should be read carefully. The
information describes the additional service fees charged for IRAs and
describes the federal income tax consequences of establishing an IRA.
You may wish to consult with an attorney or tax adviser before
establishing a Fidelity Destiny IRA.
Under the Fidelity Destiny IRA, dividends and distributions will be
reinvested automatically in additional Fund shares. You may not
establish a new Destiny tax-advantaged retirement plan by changing the
registration of an existing Destiny Plan account. The annual
maintenance fee charged by the Custodian to each Fidelity
Destiny IRA account is $10. This $10 fee will be deducted from
Fund shares unless it is paid in advance.
FEES AND EXPENSES
Your Plan pays two kinds of fees: Creation and Sales Charges and
Account Fees. You will pay Creation and Sales Charges equal to as
much as 50% of each of the first twelve investments in your Plan.
Your Plan may also pay certain Account Fees for services provided by
the Custodian. Each of these fees is described in more detail below.
Your Plan also indirectly pays the fees imposed on Class N shares
of the funds, including management fees, 12b-1 fees and transfer agent
fees. Your Plan indirectly pays these fees because it invests in
shares of Class N of the Funds. For more information about the
fees payable by the Funds, see " Expenses " on page 56 of
the Funds' prospectus.
1. CREATION AND SALES CHARGES
You will pay Creation and Sales Charges equal to as much as
50% of your first twelve investments in your Plan. When you have
completed a 10-year Plan (120 monthly investments), the Creation and
Sales Charges you paid on your first twelve investments will amount to
as much as 5.00% of your total Plan investments, assuming that
you invest in a Plan with the smallest monthly investment of $50 a
month ($6,000 Face Amount). The percentage of Creation and Sales
Charges for each invested dollar decreases proportionately as Face
Amount increases. The Creation and Sales Charges on the largest
10-year plan size , $10,000 a month ($1,200,000 Face Amount),
amount to 1.5 % of your total Plan investments.
When you have completed a 15-year Plan (180 monthly investments), the
Creation and Sales Charges you paid on your first twelve investments
will amount to as much as 3.33% of your total Plan investments,
assuming a monthly investment amount of $50 a month ($9,000 Face
Amount). The Creation and Sales Charges on the largest 15-year plan
size , $10,000 a month ($1,800,000 Face Amount), amount to
1.00 % of your total Plan investments.
You have certain refund and cancellation rights, described on page
31 . However, these rights are limited, and early termination of
your Plan or your inability to complete your Plan may result in your
having paid Creation and Sales Charges that represent a substantial
percentage of your total investments in your Plan. For example, if you
terminate your Plan between 45 days and 18 months after you start your
Plan, the Creation and Sales Charges that would not be refunded to you
could be as much as 15 % of your total investments made. If you
terminate your Plan after 18 months, the Creation and Sales Charges
that would not be refunded to you could be as much as 33.33 % of
your total investments made.
The following tables illustrate the effect of the Creation and Sales
Charges on Plans with different monthly investment amounts and
different Plan lengths.
CREATION AND SALES CHARGE S
10-YEAR PLANS
(120 INVESTMENTS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MONTHLY INVESTMENT TOTAL FACE AMOUNT OF PLAN CREATION AND SALES CHARGES TOTAL CREATION AND SALES PERCENTAGE OF TOTAL
PER FIRST 12 INVESTMENTS CHARGES INVESTMENT IN PLAN*
$ 50.00 $6,000.00 $25.00 $300.00 5.00%
75.00 $9,000.00 37.50 $450.00 5.00%
100.00 $12,000.00 50.00 $600.00 5.00%
125.00 $15,000.00 62.50 $750.00 5.00%
150.00 $18,000.00 75.00 $900.00 5.00%
166.66 $19,999.20 83.33 $999.96 5.00%
200.00 $24,000.00 100.00 $1,200.00 5.00%
250.00 $30,000.00 125.00 $1,500.00 5.00%
300.00 $36,000.00 150.00 $1,800.00 5.00%
350.00 $42,000.00 175.00 $2,100.00 5.00%
400.00 $48,000.00 200.00 $2,400.00 5.00%
450.00 $54,000.00 225.00 $2,700.00 5.00%
500.00 $60,000.00 250.00 $3,000.00 5.00%
600.00 $72,000.00 300.00 $3,600.00 5.00%
700.00 $84,000.00 350.00 $4,200.00 5.00%
800.00 $96,000.00 400.00 $4,800.00 5.00%
900.00 $108,000.00 450.00 $5,400.00 5.00%
1,000.00 $120,000.00 500.00 $6,000.00 5.00%
1,250.00 $150,000.00 625.00 $7,500.00 5.00%
1,500.00 $180,000.00 675.00 $8,100.00 4.50%
1,750.00 $210,000.00 700.00 $8,400.00 4.00%
2,000.00 $240,000.00 750.00 $9,000.00 3.75%
2,500.00 $300,000.00 812.50 $9,750.00 3.25%
5,000.00 $600,000.00 1,250.00 $15,000.00 2.50%
10,000.00 $1,200,000.00 1,500.00 $18,000.00 1.50%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
MONTHLY INVESTMENT PERCENTAGE OF NET INVESTMENT
IN PLAN*
$ 50.00 5.26%
75.00 5.26%
100.00 5.26%
125.00 5.26%
150.00 5.26%
166.66 5.26%
200.00 5.26%
250.00 5.26%
300.00 5.26%
350.00 5.26%
400.00 5.26%
450.00 5.26%
500.00 5.26%
600.00 5.26%
700.00 5.26%
800.00 5.26%
900.00 5.26%
1,000.00 5.26%
1,250.00 5.26%
1,500.00 4.71%
1,750.00 4.17%
2,000.00 3.90%
2,500.00 3.36%
5,000.00 2.56%
10,000.00 1.52%
</TABLE>
* Assuming completion of your Plan.
"Investment" means only your monthly Plan investments and does not
include any re-investment of capital gain or dividend distributions.
CREATION AND SALES CHARGE S
15-YEAR PLANS
(180 INVESTMENTS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MONTHLY INVESTMENT TOTAL FACE AMOUNT OF PLAN CREATION AND SALES CHARGES TOTAL CREATION AND SALES PERCENTAGE OF TOTAL
PER FIRST 12 INVESTMENTS CHARGES INVESTMENT IN PLAN*
$50.00 $9,000.00 $25.00 $300.00 3.33%
75.00 $13,500.00 37.50 $450.00 3.33%
100.00 $18,000.00 50.00 $600.00 3.33%
125.00 $22,500.00 62.50 $750.00 3.33%
150.00 $27,000.00 75.00 $900.00 3.33%
166.66 $29,998.80 83.33 $999.96 3.33%
200.00 $36,000.00 100.00 $1,200.00 3.33%
250.00 $45,000.00 125.00 $1,500.00 3.33%
300.00 $54,000.00 150.00 $1,800.00 3.33%
350.00 $63,000.00 175.00 $2,100.00 3.33%
400.00 $72,000.00 200.00 $2,400.00 3.33%
450.00 $81,000.00 225.00 $2,700.00 3.33%
500.00 $90,000.00 250.00 $3,000.00 3.33%
600.00 $108,000.00 300.00 $3,600.00 3.33%
700.00 $126,000.00 350.00 $4,200.00 3.33%
800.00 $144,000.00 400.00 $4,800.00 3.33%
900.00 $162,000.00 450.00 $5,400.00 3.33%
1,000.00 $180,000.00 500.00 $6,000.00 3.33%
1,250.00 $225,000.00 625.00 $7,500.00 3.33%
1,500.00 $270,000.00 675.00 $8,100.00 3.00%
1,750.00 $315,000.00 700.00 $8,400.00 2.67%
2,000.00 $360,000.00 750.00 $9,000.00 2.50%
2,500.00 $450,000.00 812.50 $9,750.00 2.17%
5,000.00 $900,000.00 1,250.00 $15,000.00 1.67%
10,000.00 $1,800,000.00 1,500.00 $18,000.00 1.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
MONTHLY INVESTMENT PERCENTAGE OF NET INVESTMENT
IN NEW PLAN*
$50.00 3.45%
75.00 3.45%
100.00 3.45%
125.00 3.45%
150.00 3.45%
166.66 3.45%
200.00 3.45%
250.00 3.45%
300.00 3.45%
350.00 3.45%
400.00 3.45%
450.00 3.45%
500.00 3.45%
600.00 3.45%
700.00 3.45%
800.00 3.45%
900.00 3.45%
1,000.00 3.45%
1,250.00 3.45%
1,500.00 3.09%
1,750.00 2.74%
2,000.00 2.56%
2,500.00 2.21%
5,000.00 1.69%
10,000.00 1.01%
</TABLE>
* Assuming completion of your Plan.
"Investment" means only your monthly Plan investments and does not
include any re-investment of capital gain or dividend distributions.
CREATION AND SALES CHARGE S
EXTENDED INVESTMENT OPTION *
(300 INVESTMENTS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MONTHLY INVESTMENT TOTAL FACE AMOUNT OF PLAN CREATION AND SALES CHARGES TOTAL CREATION AND SALES PERCENTAGE OF TOTAL
PER FIRST 12 INVESTMENTS CHARGES INVESTMENT IN PLAN**
$ 50.00 $15,000.00 $25.00 $300.00 2.00%
75.00 $22,500.00 37.50 $450.00 2.00%
100.00 $30,000.00 50.00 $600.00 2.00%
125.00 $37,500.00 62.50 $750.00 2.00%
150.00 $45,000.00 75.00 $900.00 2.00%
166.66 $49,998.00 83.33 $999.96 2.00%
200.00 $60,000.00 100.00 $1,200.00 2.00%
250.00 $75,000.00 125.00 $1,500.00 2.00%
300.00 $90,000.00 150.00 $1,800.00 2.00%
350.00 $105,000.00 175.00 $2,100.00 2.00%
400.00 $120,000.00 200.00 $2,400.00 2.00%
450.00 $135,000.00 225.00 $2,700.00 2.00%
500.00 $150,000.00 250.00 $3,000.00 2.00%
600.00 $180,000.00 300.00 $3,600.00 2.00%
700.00 $210,000.00 350.00 $4,200.00 2.00%
800.00 $240,000.00 400.00 $4,800.00 2.00%
900.00 $270,000.00 450.00 $5,400.00 2.00%
1,000.00 $300,000.00 500.00 $6,000.00 2.00%
1,250.00 $375,000.00 625.00 $7,500.00 2.00%
1,500.00 $450,000.00 675.00 $8,100.00 1.80%
1,750.00 $525,000.00 700.00 $8,400.00 1.60%
2,000.00 $600,000.00 750.00 $9,000.00 1.50%
2,500.00 $750,000.00 812.50 $9,750.00 1.30%
5,000.00 $1,500,000.00 1,250.00 $15,000.00 1.00%
10,000.00 $3,000,000.00 1,500.00 $18,000.00 0.60%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
MONTHLY INVESTMENT PERCENTAGE OF NET INVESTMENT
IN PLAN**
$ 50.00 2.04%
75.00 2.04%
100.00 2.04%
125.00 2.04%
150.00 2.04%
166.66 2.04%
200.00 2.04%
250.00 2.04%
300.00 2.04%
350.00 2.04%
400.00 2.04%
450.00 2.04%
500.00 2.04%
600.00 2.04%
700.00 2.04%
800.00 2.04%
900.00 2.04%
1,000.00 2.04%
1,250.00 2.04%
1,500.00 1.83%
1,750.00 1.63%
2,000.00 1.52%
2,500.00 1.32%
5,000.00 1.01%
10,000.00 0.60%
</TABLE>
* For a description of the Extended Investment Option, see page
29 .
** Assuming completion of your Plan.
"Investment" means only your monthly Plan investments and does not
include any re-investment of capital gain or dividend distributions.
ILLUSTRATION OF A $50 MONTHLY INVESTMENT IN A PLAN
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AT THE END OF YOUR 10-YEAR AT THE END OF 6 MONTHS (6
PLAN (120 INVESTMENTS)* INVESTMENTS)
AMOUNT % OF TOTAL INVESTMENTS AMOUNT % OF TOTAL INVESTMENTS
10 YEARS (120 INVESTMENTS)
Total Investments $ 6,000.00 100.00% $ 300.00 100.00%
Less: Creation and Sales 300.00 5.00 150.00 50.00
Charges
Net Amount Invested in Plan 5,700.00 95.00 150.00 50.00
15 YEARS (180 INVESTMENTS)
Total Investments $ 9,000.00 100.00% $ 300.00 100.00
Less: Creation and Sales 300.00 3.33 150.00 50.00
Charges
Net Amount Invested in Plan 8,700.00 97.67 150.00 50.00
25 YEARS (300 INVESTMENTS)**
Total Investments $ 15,000.00 100.00% $ 300.00 100.00
Less: Creation and Sales 300.00 2.00 150.00 50.00
Charges
Net Amount Invested in Plan 14,700.00 98.00 150.00 50.00
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AT THE END OF 1 YEAR (12 AT THE END OF 2 YEARS (24
INVESTMENTS) INVESTMENTS)
AMOUNT % OF TOTAL INVESTMENTS AMOUNT % OF TOTAL INVESTMENTS
10 YEARS (120 INVESTMENTS)
Total Investments $ 600.00 100.00% $ 1,200.00 100.00%
Less: Creation and Sales 300.00 50.00 300.00 25.00
Charges
Net Amount Invested in Plan 300.00 500.00 900.00 75.00
15 YEARS (180 INVESTMENTS)
Total Investments $ 600.00 100.00% $ 1,200.00 100.00%
Less: Creation and Sales 300.00 50.00 300.00 25.00
Charges
Net Amount Invested in Plan 300.00 500.00 900.00 75.00
25 YEARS (300 INVESTMENTS)**
Total Investments $ 600.00 100.00% $ 1,200.00 100.00%
Less: Creation and Sales 300.00 50.00 300.00 25.00
Charges
Net Amount Invested in Plan 300.00 500.00 900.00 75.00
</TABLE>
* Assuming completion of your Plan.
* * The 25-years (300 investments) schedule reflects the charges
applicable to a 15-year Plan which is continued under the Extended
Investment Option. For a description of the Extended Investment
Option, see page 29 .
"Investments" means only your monthly Plan investments and does not
include any re-investment of capital gain or dividend distributions.
2. ACCOUNT FEES
You may also pay additional Account Fees to the Custodian for certain
services provided by the Custodian. These fees are described below.
COMPLETED PLAN FEE: An annual fee of $12 or 2/10ths of 1% of the Face
Amount of the Plan, whichever is less, will be charged if you have
completed your Plan but have elected not to hold shares of Class
N of the Fund directly. (See "Completed Plans" on page 30 .)
INACTIVE ACCOUNT FEE: An annual $12 fee will also be charged to your
Plan if you have not completed your Plan and your Plan is not current.
(See "Keeping Your Plan Current" on page 28 .)
TERMINATION FEE: A fee of $2.50 will be charged to your Plan if you
make a complete withdrawal or you terminate your Plan prior to
completion. (See "Terminating Your Plan" on page 30 .)
RETURNED CHECK FEE: A fee of $2.50 will be charged to your Plan for
any check or preauthorized check which is not honored by the bank on
which it is drawn.
FIDELITY DESTINY IRA MAINTENANCE FEE: If you have a Fidelity Destiny
IRA, you will be charged an annual $10 maintenance fee. (See
"Tax-Advantaged Retirement Plans" on page .)
You may avoid these Account Fees by terminating your Plan and
receiving shares of the Fund. However, if you terminate your
Plan before completing all the scheduled investments, the percentage
of your total investments that will have been paid as Creation and
Sales Charges will be higher than if you had completed your Plan.
If you hold fund shares directly, other fees may apply to your
account or your IRA. If you choose to own shares of the Fund
directly, you will not be able to replace any partial
liquidations at NAV. (See "Partial Liquidation of Your Plan" on page
29 .)
These services are provided by the Custodian, State Street Bank and
Trust Company, or its affiliated bookkeeping and administrative
service agent, Boston Financial (see "The Custodian" on page
32 ). The Custodian deducts the fees described above, and any
other charges that may be provided for in the Custodian Agreement or
in the Plans, from your Plan account. These fees are paid first from
dividends and distributions and then, if necessary, from principal.
The Custodian has certain rights to charge your Plan account, either
on a pro rata basis or by retaining shares on a pro rata basis, to pay
fees, taxes or expenses in connection with the Plans or to set up
reserves. The Custodian has a lien upon your shares to the extent of
these rights.
Except as described in this "Fees and Expenses" section, there are
currently no other deductions made against Planholder accounts, or
deducted from Fund dividends or distributions, to compensate the
Sponsor or the Custodian for their services. Any of the Account
Fees, Custodian Fees and Other Fees and Charges provided for in this
prospectus or the Custodian Agreement and its schedules which
would otherwise be charged to the Plan or Planholders, or deducted
from Fund dividends or distributions, may be paid by the Fund or the
Sponsor. Although there is no current intention to do so, the Funds
and the Sponsor each reserve the right to stop paying the charges for
any or all of the services provided by the Custodian under the
Custodian Agreement or in this Prospectus and to cause these charges
to be paid by the Plans, individual Plan accounts, Planholders and
Fund dividends and distributions. These charges shall include, without
limitation, the Account Fees, Custodian Fees and Other Fees and
Charges provided for in the Custodian Agreement or its schedules.
ILLUSTRATION OF TWO HYPOTHETICAL DESTINY PLANS
ILLUSTRATION OF AN HYPOTHETICAL $50 MONTHLY DESTINY PLANS I :
NEW
The table below assumes an initial investment of $50 and subsequent
investments of $50 per month in a Plan with income, dividends and
capital gain distributions reinvested in additional shares. The
illustration includes the effect of expenses paid by Class N .
No adjustments have been made for any income taxes payable by
investors on capital gain distributions and dividends reinvested. The
table covers the period from October 1983 through September 1998, with
all investments made at the end of each month.
This period was one of widely fluctuating common stock prices. The
results shown are based on historical performance and should not be
considered a representation of the investment results you would obtain
if you started a Plan today. Your Plan does not assure a profit or
protect against a loss. When you sell your shares they may be worth
more or less than you paid for them.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT NO. FISCAL YEAR ENDED CUMULATIVE INVESTMENTS CREATION AND SALES CHARGES TOTAL VALUE OF PLAN(A)
1 - 12 Sept-84 $ 600.00 $ 300.00 $ 314.20
13 - 24 Sept-85 1,200.00 0.00 $ 956.51
25 - 36 Sept-86 1,800.00 0.00 $ 1,902.80
37 - 48 Sept-87 2,400.00 0.00 $ 3,455.88
49 - 60 Sept-88 3,000.00 0.00 $ 3,702.25
61 - 72 Sept-89 3,600.00 0.00 $ 5,547.45
73 - 84 Sept-90 4,200.00 0.00 $ 5,066.11
85 - 96 Sept-91 4,800.00 0.00 $ 8,175.70
97 - 108 Sept-92 5,400.00 0.00 $ 9,821.72
109 - 120 Sept-93 6,000.00 0.00 $ 13,016.07
121 - 132 Sept-94 6,600.00 0.00 $ 15,104.89
133 - 144 Sept-95 7,200.00 0.00 $ 19,783.07
145 - 156 Sept-96 7,800.00 0.00 $ 23,394.09
157 - 168 Sept-97 8,400.00 0.00 $ 32,300.00
169 - 180 Sept-98 9,000.00 0.00 $ 35,407.28
$ 9,000.00 $ 300.00 TOTAL $ 35,407.28
</TABLE>
(A) The initial offering of the Plans took place April 26, 1999.
Total returns prior to that date are based on historical results for
Class O of the Funds, restated to reflect the higher 12b-1 and
transfer agent expenses applicable to Class N of the Funds. Total
is determined by Destiny I's fiscal year-end NAV.
ILLUSTRATION OF AN HYPOTHETICAL $166.66 MONTHLY DESTINY PLANS I :
NEW
The table below assumes an initial investment of $166.66 and
subsequent investments of $166.66 per month in a Plan with income,
dividends and capital gain distributions reinvested in additional
shares. The illustration includes the effect of expenses paid by
Class N . No adjustments have been made for any income taxes
payable by investors on capital gain distributions and dividends
reinvested. The table covers the period from October 1983 through
September 1998, with all investments made at the end of each month.
This period was one of widely fluctuating common stock prices. The
results shown are based on historical performance and should not be
considered a representation of the investment results you would obtain
if you started a New Plan today. Your Plan does not assure a profit or
protect against a loss. When you sell your shares they may be worth
more or less than you paid for them.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT NO. FISCAL YEAR ENDED CUMULATIVE INVESTMENTS CREATION AND SALES CHARGES TOTAL VALUE OF PLAN(A)
1 - 12 Sept-84 $ 1,999.92 $ 999.96 $ 1,047.28
13 - 24 Sept-85 3,999.84 0.00 $ 3,188.25
25 - 36 Sept-86 5,999.76 0.00 $ 6,342.42
37 - 48 Sept-87 7,999.68 0.00 $ 11,519.14
49 - 60 Sept-88 9,999.60 0.00 $ 12,340.32
61 - 72 Sept-89 11,999.52 0.00 $ 18,490.76
73 - 84 Sept-90 13,999.44 0.00 $ 16,886.34
85 - 96 Sept-91 15,999.36 0.00 $ 27,251.25
97 - 108 Sept-92 17,999.28 0.00 $ 32,737.76
109 - 120 Sept-93 19,999.20 0.00 $ 43,385.14
121 - 132 Sept-94 21,999.12 0.00 $ 50,346.94
133 - 144 Sept-95 23,999.04 0.00 $ 68,940.91
145 - 156 Sept-96 25,998.96 0.00 $ 77,977.19
157 - 168 Sept-97 27,998.88 0.00 $ 107,662.34
169 - 180 Sept-98 29,998.80 0.00 $ 118,019.54
$ 29,998.80 $ 300.00 TOTAL $ 118,019.54
</TABLE>
(A) The initial offering of the Plans took place April 26, 1999.
Total returns prior to that date are based on historical results for
Class O of the Funds, restated to reflect the higher 12b-1 and
transfer agent expenses applicable to Class N of the Funds. Total
is determined by Destiny I's fiscal year-end NAV.
KEEPING YOUR PLAN CURRENT
Your Plan calls for monthly investments for a period of either 10 or
15 years, with the option of extending a 15-year Plan for another 10
years. You are not likely to realize the full benefit of your Plan
unless you complete your Plan. You should carefully consider your
ability to make monthly investments for the length of time required to
complete your Plan before you start a Plan. The Plans offer an
Automatic Investment Program to assist you in making your monthly
investments. (See "Automatic Investment Program and Government
Allotment Program" below )
If you stop making monthly investments, your ability to benefit from
dollar-cost averaging will be reduced. (See "Dollar-Cost Averaging
and Diversification " below .) If you stop making monthly
investments and have not made any of your monthly investments in
advance of their due date, your Plan will no longer be current. An
inactive account fee of $12 is charged annually if you have not
completed your Plan and no investment has been made for a 12-month
period, after giving credit for any prepayment of monthly investments
that you may have made. This fee is deducted from dividends and
distributions or, if these are not sufficient, the Custodian has the
right to obtain the amount needed to pay its fee by selling Fund
shares from your Plan account.
Under current policy, one investment is required during each 6-month
period of the calendar year to prevent the Plan from being in default.
Your Plan may be terminated by the Sponsor or the Custodian if it is
in default. (See "Termination of Your Plan" on page 29 .)
DOLLAR-COST AVERAGING AND DIVERSIFICATION
The Destiny Plans were created to utilize the investing method of
dollar-cost averaging. Dollar-cost averaging is a system of buying
fixed dollar amounts of securities at regular intervals, regardless of
the price of the shares. In the Destiny Plans, you invest a fixed
amount on a monthly basis. Your monthly investment of a fixed dollar
amount buys more shares when the share price is low and fewer shares
when the share price is high. The benefit of this method is that, over
time, the average cost of your shares will be lower than the average
price of those shares. Dollar-cost averaging does not assure a profit
or guard against a loss. If you sell your Fund shares when their value
is less than their cost, you will incur a loss.
Diversification can help you manage the investment risk by decreasing
the volatility of a portfolio of securities. The Destiny Funds are
diversified funds, which means that the Funds invest in a number of
different securities.
PLAN FEATURES AND YOUR RIGHTS AND PRIVILEGES
1. AUTOMATIC INVESTMENT PROGRAM AND GOVERNMENT ALLOTMENT
PROGRAM
To encourage and assist you in making monthly investments and to
eliminate the burden of writing a check every month, you may establish
an Automatic Investment Program. Under an Automatic Investment
Program, your monthly investments are automatically debited from your
bank account. If you are a member of the military, you may
establish a government allotment program so that your monthly
investments will be made automatically.
To initiate an Automatic Investment Program, you should complete a
Preauthorized Check Transaction Form, attach a voided blank check, and
send it to Boston Financial. Boston Financial will then draft your
bank account each month in the amount of the monthly Plan investment
amount. The proceeds of the draft, less any applicable Creation and
Sales Charges and other applicable Account Fees, will be invested in
your Plan account. M embers of the m ilitary may initiate a
government allotment program by completing a government allotment
form.
You may begin or change these programs at any time by written notice
to Boston Financial, provided the notice is received by Boston
Financial at least 15 days before the date the program or the change
is to go into effect. You may terminate these programs at any time by
written notice to Boston Financial, provided the notice is received by
Boston Financial at least five business days before the date of the
next scheduled draft or government allotment.
2. RIGHTS OF ACCUMULATION
You may qualify to pay lower Creation and Sales Charges on all
Plans that you own by aggregating the Face Amounts of two or more
Fidelity Destiny Plans when you purchase one or more new Plans or when
you increase the Face Amount of a Plan. 10-year and 15-year Plans may
not be combined.
To use this privilege, you or your investment professional must
notify the Sponsor in writing that you wish to aggregate the Face
Amounts of each of the Plans that qualify for the rights of
accumulation for the purpose of determining the applicable Creation
and Sales Charges. The applications for each new Plan that you are
purchasing must be submitted at the same time that you send your
notice.
Each Plan that you already own must be current at the time you send
your notice. Qualified retirement plans are always considered current
for the purpose of rights of accumulation. If one or more of the
Plans, other than a qualified retirement plan, that are combined to
take advantage of this privilege subsequently stops making monthly
investments and is no longer a Current Plan, the remaining Creation
and Sales Charges will be recalculated to reflect the charges
applicable to the Plan or Plans that remain current.
You may only combine Plans that are registered to you, your spouse,
your children under the age of 21, or a trustee or other fiduciary of
a single trust estate or single fiduciary account. You may also
combine any Fidelity Destiny IRA Plan registered to you, your spouse
or your children under the age of 21, as long as the monthly
investment in that Plan is equal to $166.66 per month. For the purpose
of this privilege, a single fiduciary account includes a pension,
profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code, and a
trust estate or fiduciary account may have more than one beneficiary.
This privilege is not available to any group of individuals whose
funds are combined, directly or indirectly, for the purchase of
redeemable securities of a registered investment company whether
jointly or through a trustee, agent, custodian or other representative
for that group of individuals.
3. DISTRIBUTIONS
Unless you direct otherwise, all dividends and other distributions,
after applicable deductions, are automatically used to purchase
additional Fund shares at NAV as of the record date for the
distribution. No sales charge is made on any reinvestment of dividends
or other distributions.
You must instruct Boston Financial in writing if you wish to receive
the dividends and other distributions in cash rather than additional
shares. Your instructions must be received at least seven days before
the record date of a dividend or distribution. You may change these
instructions at any time. Distributions on Fidelity Destiny IRAs are
automatically reinvested unless the Planholder is age 59 1/2 or older.
Dividends and other distributions are made on a per-share basis.
After every distribution, the value of a share drops by the amount of
the distribution. If you make an investment shortly before the
ex-dividend date of the dividend or distribution, you will pay a price
for the shares that includes the amount of the dividend or
distribution. This is called "buying a dividend". Dividends and
distributions, if declared, are normally paid annually by each Fund,
and may be taxable to you. (See "Taxes" on page 31. )
4. FEDERAL INCOME TAX WITHHOLDING
Boston Financial can withhold 28% of any dividend or other
distribution paid by the Funds and send that amount to the Internal
Revenue Service as a credit against your tax liability, if any. The
amount withheld may or may not be equal to the additional taxes you
may owe on the dividend or distribution. If you choose to authorize
this withholding, the number of Fund shares purchased with the
remainder of the dividend or distribution will be less than would
otherwise have been the case.
Withholding is available only if your Plan reinvests dividends and
other distributions. It is not available for tax-advantaged retirement
plans, including Fidelity Destiny IRAs. The withholding option can be
started by submitting a Tax Withholding Form, which is included with
your Plan Application, to Boston Financial at least 30 days before the
option is to take effect. Once started, the withholding option will
remain in effect until you notify Boston Financial in writing to end
the withholding.
5. YOUR VOTING RIGHTS
You will receive a notice at least 15 days before any matter is
submitted to a vote of the shareholders of Fidelity Destiny
Portfolios: Destiny I and Destiny II. The Custodian will vote on these
matters according to your instructions. In the absence of instructions
on how you wish to vote, the Custodian will vote all the votes of the
Plans in the same proportion as it votes the votes for which it has
received instructions from other Planholders in your Plan. The number
of votes you are entitled to is based upon the dollar value of your
investment. If you wish to attend a meeting at which shares may be
voted, you may request Boston Financial to furnish a proxy or
otherwise make arrangements for exercising your voting rights.
6. MAKING ADVANCE INVESTMENTS
You may make your monthly investments in advance of their due dates,
and you may complete your Plan ahead of schedule, but you may not make
more than 24 investments, including any monthly investments, in any
single calendar year. In addition to investments that you make in
advance of their due date, you may make an additional advance
investment in a single lump sum equal in amount to not more than 24
investments. This advance investment option may be exercised only
once, either initially, or at any one time during the term of your
Plan. You may not make advance investments if doing so would cause
your Plan to be more than 48 investments ahead of schedule. These
advance investment provisions may be waived only to make a Plan that
is in arrears current, for a transfer of assets from a tax-advantaged
retirement plan to a Destiny tax-advantaged retirement plan, or in the
event of your death, to allow the Plan to be completed at one time by
your estate or beneficiary. Your Creation and Sales Charges will not
be reduced if you make your monthly investments in advance.
7. CHANGING THE FACE AMOUNT OF YOUR PLAN
You may increase the Face Amount of your Plan at any time. This is
called making a Face Change to your Plan. You may choose a new Face
Amount that is one of the Monthly Investment amounts shown on page s
, and . Within 12 months of the time you open a new Plan,
your may decrease your Face Amount by as much as 50%. Within 12
months of the time you increase the Face Amount of your Plan, you may
decrease your Face Amount back to an amount not lower than the
Plan's previous Face Amount. You must send your request for a change
in the Face Amount of a Plan to Boston Financial along with a
completed Plan Application for the new Face Amount.
Whether you increase or decrease your Face Amount, a change in the
Face Amount does not create new cancellation and refund rights.
However, your Plan will be subject to the fees and deductions
applicable to Plans of the same Face Amount opened at the time that
you change the Face Amount of your Plan, as described in the then
currently effective prospectus. The Creation and Sales Charges you
have already paid on your existing Plan will be recomputed and applied
as a credit to the Creation and Sales Charges due on your Plan, if
any, at the time you change the Face Amount of your Plan. Any
additional Creation and Sales Charges due on your Plan will be paid by
liquidating Fund shares held by your Plan.
8. EXTENDED INVESTMENT OPTION
If you purchase a 15-year Plan, you may continue making monthly
investments into your Plan after you complete all scheduled
investments, automatically activating the Extended Investment option.
If you purchase a 10-year Plan, you must first change the Face Amount
of your Plan to that of a 15-year Plan and complete that Plan before
activating the Extended Investment option. You may make as many as 120
additional monthly investments. Your additional investments are
subject to the same deductions as your last scheduled investment. Your
Extended Investment option will end after your 300th monthly Plan
investment.
If you make investments under the Extended Investment option and your
Plan is not current for six consecutive months, the Sponsor or the
Custodian may terminate your Plan. If the Extended Investment option
expires because your Plan is not current, because written notice of
termination is given to Boston Financial, or for any other reason, the
Custodian has the right to increase or impose Account Fees at the rate
currently being charged for new Plans of the same Face Amount.
9. PARTIAL LIQUIDATION OF YOUR PLAN
Normally, if you redeem all of your Plan shares, your Plan will
terminate. However, you may sell less than all of your Plan shares
without terminating your Plan. If you have owned your Plan for at
least 45 days, you may direct the Custodian, as agent, to sell up to
90% of the value of your Plan shares, expressed in dollars, and to pay
you the proceeds. You may make partial liquidations as often as you
desire. Any partial sale of shares and cash withdrawal must involve at
least $100.
If your partial liquidation results in a cash withdrawal of more than
$100,000, if the proceeds are to be sent to an address other than the
address of record , or if the proceeds are to be paid to someone
other than the record owner of the account , a signature guarantee
is required. A signature guarantee is also required if you have
changed your address within 30 days of your partial liquidation
request. A signature guarantee is a widely accepted way to protect you
and Fidelity by guaranteeing the signature that appears on your
request. A signature guarantee may not be provided by a notary public.
The Custodian will accept signature guarantees 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. Your partial liquidation request should be sent to
Boston Financial Data Services, Inc., P.O. Box 8300, Boston,
Massachusetts 02266-8300. Your request must be signed and any required
signature guarantee must be received in proper order before any
withdrawals or liquidations can be executed.
You may also make partial liquidations by telephone by calling
1-800-225-5270, as long as you are not withdrawing more than $100,000
from your Plan and your request does not require a signature
guarantee. You may not make a partial liquidation by telephone from a
Destiny tax-advantaged retirement plan.
The redemption price for the partial liquidation will be the next
determined NAV after your request is accepted. Partial liquidation
requests must be made by 4:00 p.m. Eastern time to receive that day's
NAV. You will receive proceeds by check made payable as the
account is registered and mailed to the address of record. Ordinarily,
you will be sent the proceeds of a partial liquidation within seven
calendar days from the time Boston Financial accepts the request.
However, Boston Financial will not mail redemption proceeds until
checks received for the shares purchased have cleared (which may take
up to 7 calendar days).
You may realize a capital gain or loss for federal income tax
purposes on partial liquidations. If assets from a Fidelity
Destiny IRA are distributed directly to you, you will be
responsible for any income taxes due on the distribution and, if you
are under the age of 59 1/2, you may be subject to an early
distribution penalty if those assets are not reinvested into another
IRA within 60 days of receipt of the distribution.
If you make a partial liquidation of some of your Plan shares, you
may, but are not obligated to, replace those shares by repurchasing
them, up to the dollar amount of the original sale, at any time after
90 days from the date of the original sale. If you own a Fidelity
Destiny IRA, you may replace those shares by repurchasing them, up
to the dollar amount of the original sale, at any time after 45 days
from the date of the original sale.
You may replace Plan shares at any time, and the replacement need not
be made in one transaction. However, the amount of any repurchase of
shares following a partial liquidation must be at least 25% of the
amount liquidated or $2,000, whichever is less. Replacements of
partial liquidations should be clearly identified clearly to
distinguish them from additional investments. The Custodian or Boston
Financial may require additional documentation. Your replacement will
be applied to the purchase of Fund shares at the next determined NAV.
Partial liquidations and replacements do not affect the total number
of monthly investments to be made or the unpaid balance of monthly
investments.
The partial liquidation and replacement privileges are intended to
facilitate the temporary use of funds invested in your Plan for
emergency purposes. The Sponsor reserves the right to limit the number
of transactions you may use to replace a partial liquidation and to
impose such additional restrictions as, in its judgment, are conform
with the requirements of Rule 2830 of the Rules of the Association of
the National Association of Securities Dealers, Inc. (NASD). You will
be liable for any transfer taxes that may be incurred on any partial
liquidation or replacement.
10. SYSTEMATIC WITHDRAWAL PROGRAM
When you have completed your Plan, you may choose to start a
Systematic Withdrawal Program. If you have a Fidelity Destiny IRA and
are 59 1/2 years old or older, you do not have to complete your Plan
before you start a Systematic Withdrawal Program. To start this
program, you direct the Custodian, as your agent, to withdraw the
necessary shares from your Plan account so that the Custodian may make
regular cash withdrawals on the first day of every month or every
quarter. You may authorize cash withdrawals of any amount, subject to
a $50 minimum. The Sponsor has established the $50 minimum for
administrative convenience: it should not be considered a recommended
Systematic Withdrawal amount. You may change the dollar amount of the
withdrawal or stop the Systematic Withdrawal Program at any time.
Your Plan will remain in full force and effect with all rights and
privileges until all shares have been withdrawn from your account.
While the Systematic Withdrawal Program is in force, you may not elect
to receive dividends and distributions in cash. You should realize
that withdrawals in excess of the dividends and distributions paid on
your Plan shares will be made from principal and eventually may
exhaust your Plan account. Therefore, these withdrawals cannot be
considered as income on your investment. You may also realize a
capital gain or loss for federal income tax purposes upon payment of
each withdrawal. If you purchase two or more Plans, it is ordinarily
disadvantageous to participate in the Systematic Withdrawal Program on
a completed Plan while still making monthly investments on the
uncompleted Plan.
The Sponsor reserves the right to stop offering the Systematic
Withdrawal Program at any time after giving 90-days' notice to all
Planholders who have not elected to participate in the program. If you
are currently participating in the program at that time, you will be
allowed to continue your program. The Sponsor is not currently
contemplating ending the program.
11. TRANSFERRING OR ASSIGNING YOUR RIGHTS IN A PLAN
To secure a loan, you may assign your right, title and interest in
your entire Plan to a bank or other lending institution. You may not
assign your Plan if it is a Fidelity Destiny IRA, a UTMA Plan, or an
UGMA Plan. You may not make a partial assignment of your Plan. The
bank or other lending institution will not be entitled to exercise the
right of partial withdrawal or partial redemption.
You may also transfer your right, title, and interest to another
person whose only right shall be the privilege of complete withdrawal
from the Plan, or transfer your right, title, and interest to another
person, trustee, or custodian acceptable to the Sponsor, who has
applied to the Sponsor for a similar Plan. Additional documentation
may be required. Boston Financial will provide you with the
appropriate assignment forms. You will be liable for any transfer
taxes that may be incurred.
12. TRANSFER OF BROKER
The dealer firm of record has proprietary rights to all commissions
and 12b-1 fees earned during the duration of your Plan. It is also
under no obligation to transfer your Plan to another dealer firm as
long as its dealer agreement with Fidelity Destiny Plans remains
active. If the dealer firm of record chooses to release your Plan and,
therefore, subsequent commissions and 12b-1 fees to a new dealer firm,
it must first complete and sign an Assignment of Amounts Due form.
This form must be returned to the Custodian, State Street Bank and
Trust Company.
13. YOUR CANCELLATION AND REFUND RIGHTS
You have certain cancellation rights. Within 60 days after your
initial investment in a new Plan, the Sponsor will send you a notice
about these rights. If you elect to cancel your Plan within 45 days of
the date of the mailing of that notice, you will receive a cash refund
equal to the sum of (1) the total net asset value of the Fund shares
credited to your Plan account on the date that the cancellation
request is received by Boston Financial and (2) an amount equal to the
difference between the total investments made under the Plan and the
net amount invested in Fund shares.
In addition, you may cancel your Plan at any time within 18 months of
your initial investment by sending written instructions to Boston
Financial. If you cancel your Plan after the 45-day cancellation
period described above has expired but before the 18 month
cancellation period expires, you will receive a cash refund equal to
the sum of (1) the total net asset value of the Fund shares credited
to your Plan account on the date that the cancellation request is
received by Boston Financial and (2) the amount by which the Creation
and Sales Charges deducted from your total investments exceed 15% of
the investments made up to the date of redemption.
In order to receive the above refunds, you must send a written
cancellation request to Boston Financial Data Services, Inc., P.O. Box
8300, Boston, Massachusetts 02266-8300. For your protection, if the
amount of your refund will be more than $100,000, or if the proceeds
are to be sent to an address other than the address of record, your
request must be signed by all the registered owners and you must
include a signature guarantee on your cancellation request.
If you exercise your Cancellation and Refund Rights and redeem your
Plan, you may not reinstate the proceeds from such a cancellation or
refund at NAV, except as described under "Plan Reinstatement
Privilege" on page 34 . You may realize a capital gain or loss
for federal income tax purposes at the time of redemption.
The Sponsor will send you a written notice of the 18-month right of
cancellation if, during the first 15 months after the issuance of your
Plan, you have missed three or more investments, or if, after the
first 15 months but prior to the end of 18 months from the issuance of
your Plan, you have missed one investment or more. If the Sponsor has
previously sent you a notice during the first 15 months after the
issuance of your Plan, a second notice will not be sent even if
additional investments are missed. These notices will inform you of
your Plan cancellation rights, and will include the value of your Plan
and the amount you would be entitled to receive upon cancellation, as
of the date of the notice.
14. TERMINATING YOUR PLAN
You may terminate your Plan completely at any time by redeeming all
your shares. However, if you terminate your Plan before completing all
the scheduled investments, the percentage of your total investments
that will have been paid as Creation and Sales Charge will be higher
than if you had completed your Plan. You may also partially liquidate
your Plan. (See "Partial Liquidations of Your Plan " on page
.) If you terminate your Plan more than 60 days from the date
of issuance of your Plan, you may avoid paying any commission that a
security dealer may charge for terminating your Plan by sending
written notice of termination to Boston Financial. If your Plan is not
complete, a charge of $2.50 will be made for terminating your Plan.
When you terminate your Plan, you may choose to hold Fund shares
directly by directing the Custodian to deliver any or
all of the Fund shares that have accumulated in your Plan for
at least 60 days, properly registered in your name, to Fidelity
Service Company, Inc. (Service), the transfer agent of the Funds.
You may exchange your Fund shares for shares of any of the Fidelity
Advisor Funds. Y ou may also receive a check for the
proceeds by directing the Custodian, as your agent, to withdraw the
shares, redeem them, and send the proceeds to you. For more
information, see "Completed Plans and Exchanges" on page 20 and
"Exchange Restrictions" on page 71 of the Funds' prospectus.
For your protection, if the amount of your proceeds from termination
will be more than $100,000, if the proceeds are to be sent to an
address other than the address of record, or if the proceeds are to
be paid to someone other than the record owner of the account,
your request must be signed by all the registered owners and you
must include a signature guarantee on your cancellation request. Your
termination request and any necessary signature guarantees must be
received in proper order before any withdrawals or liquidations can be
executed. Termination requests should be sent to Boston Financial Data
Services, Inc., P.O. Box 8300, Boston, Massachusetts 02266-8300.
The redemption price of your Fund shares will be the next determined
NAV after your request is accepted. Termination requests must be
received by 4:00 p.m. Eastern time to receive that day's NAV. You
will receive proceeds by check made payable as the account is
registered and mailed to the address of record. Ordinarily, you will
be sent the proceeds within seven calendar days from the time Boston
Financial accepts your termination request. The right of redemption of
shares of the Funds may be suspended at times when the New York Stock
Exchange is closed or if the Securities and Exchange Commission have
determined that certain other emergencies exist. If the right of
redemption of shares is suspended, Fund shares may not be redeemed,
and therefore, cash withdrawals may not be made.
15. COMPLETED PLANS AND EXCHANGES
Shares of completed or terminated Plans may be converted into shares
of the related Fund. Thereafter, Fund shares may be exchanged at NAV
for shares of any of the Fidelity Advisor Funds, subject to minimum
initial investment requirements. To exchange into a Fidelity Advisor
Fund, you will need to complete a Fidelity Advisor Fund application.
FMR is the investment adviser of the Fidelity Advisor Funds. For more
information, see "Exchange Restrictions" on page 72 of the Funds'
prospectus.
Exchanges between the two Plans are not permitted, nor may exchanges
be made between these Plans and Destiny Plans I: Original or Destiny
Plans II: Original offered by means of a separate prospectus. Shares
of any class of Destiny I held by a Plan may not be exchanged for
shares of any class of Destiny II, nor may shares of any class of
Destiny II held by a Plan be exchanged for shares of Destiny I.
1 6 . PLAN REINSTATEMENT
You may reinstate a terminated Plan without any Creation and Sales
Charges on the reinstated amount once during the original term of your
former Plan under the same account registration as your former Plan.
You must make your reinstatement within 90 days after the date you
terminated your former Plan. You need not reinstate all of the
proceeds which you received upon termination, but you must reinstate
at least 10% of the gross proceeds from the termination of your former
Plan. When you reinstate your Plan, your new Plan will invest in the
same Class of the Fund as your former Plan, at the NAV of that Class
next determined after your reinstatement request is accepted in good
order by Boston Financial.
You may terminate tax-advantaged retirement Plan accounts and
reinstate the assets in another tax-advantaged retirement account
without any sales charge as often as you wish as long as the only
difference between the account registration of the former Plan account
and the new Plan account is the name of the type of tax-advantaged
retirement account. You may wish to consult with a tax adviser before
terminating a tax-advantaged retirement account.
If you terminated your former Plan and redeemed your shares under the
Cancellation and Refund Rights described on page , you may not
reinstate the proceeds from such a cancellation or refund at NAV until
all refunded Creation and Sales Charges that were refunded in the
cancellation have been deducted from the amount being replaced. The
Plan Reinstatement privilege is separate from the Partial Liquidation
privilege described on page .
When you reinstate your Plan, your new Plan will resume at the same
monthly investment number that would have been due if you had not
terminated your former Plan. Your Plan will be credited for all
monthly investments made to your former Plan. If your Plan was not
current when it was terminated and you had an unpaid balance on your
monthly investments under your former Plan, you will be responsible
for any monthly investments due on your former Plan. However, you will
not need to make up any monthly investment that would have been made
while your Plan was terminated. The total number of monthly
investments to be made on your Plan will remain the same.
The Sponsor may, from time to time, extend the Plan Reinstatement
privilege beyond the 90-day period on the terms described above. The
extended reinstatement period will not be available unless the Sponsor
has specified a time period during which the 90-day reinstatement
period has been extended.
You should recognize that if you terminate your Plan you may realize
a gain or loss for federal income tax purposes, but if you reinvest
some or all of the proceeds in your Destiny New Plan within 30 days of
that termination date, you may not recognize a loss for federal income
tax purposes.
17. TAXES
For tax purposes, you are treated as directly owning Fund shares. The
Fidelity Destiny Portfolios prospectus more fully describes how the
dividends and distributions that are paid to you or reinvested for you
may be taxable to you. You bear the responsibility for any taxes
payable with respect to any of the profits realized on sales or
transfers by the Custodian or Sponsor of Fund shares or other property
credited to your account in accordance with the provisions of your
Plan and for any taxes levied or assessed with respect to Fund shares
or the income from Fund shares, not the Custodian or Sponsor. For more
information, see "Taxes" on page 72 of Funds' prospectus.
Appropriate notices about taxable distributions will be sent to you as
necessary.
The cost basis of your shares is the amount you paid for those
shares, including the Creation and Sales Charges and the cost of any
reinvested distributions. If you own a Fidelity Destiny IRA and
itemize your deductions, you may be able to claim a miscellaneous
itemized deduction for any administrative or trustee fees incurred in
connection with that IRA if those fees are billed separately or paid
separately.
18. TERMINATION OF YOUR PLAN BY THE SPONSOR OR CUSTODIAN
Although a Plan may call for regular investments over a 10-year or
15-year period, neither the Sponsor nor the Custodian can terminate
your Plan until 300 investments have been made unless the Plan is in
default or unless shares of the Fund are not obtainable and a
substitution is not made. (See "Substitution of the Underlying
Investment" on page 37 .) Normally, a Plan is in default if no
investments have been made for six consecutive months. However, under
the current policy, a Plan is not in default if one investment has
been made during each six-month period of the calendar year. Although
the Sponsor does not currently intend to do so, the Sponsor reserves
the right to change the current default policy in the future. The
default period will not start until you have been given full credit
for the amount of any preinvestments you have made.
After 300 investments, or if other events justify termination, the
Sponsor or the Custodian may terminate your Plan with 60 days written
notice by mailing you notice of termination at the address shown on
your Plan account registration. The notice will request that you
choose to have the Plan distributed either in cash or in Fund shares
(together with the cash value of any fractional shares) after
deduction for all authorized charges, fees and expenses. Upon
termination, the Custodian, acting as your agent, may surrender for
liquidation either all of the Fund shares credited to your Plan or
sufficient Fund shares to pay all authorized deductions and leave no
fractional shares. The Fund shares and any cash remaining after paying
all authorized deductions will be held by the Custodian for delivery
to you.
No interest will be paid by the Custodian on any cash balances. If
you do not respond within 60 days after the notice of termination is
mailed to you, the Custodian, at its discretion, may at any time
thereafter fully discharge its obligations by mailing a check for the
liquidated value of the Fund shares to you. You will then have no
further rights under the Plan except that if the check is returned to
the Custodian undelivered, the Custodian will continue to hold these
assets for your benefit, subject only to any applicable
escheat ment laws. The Custodian has no obligation to pay
interest on or to reinvest checks returned to it.
SUBSTITUTION OF THE UNDERLYING INVESTMENT
The Sponsor may substitute the shares of another investment medium as
the underlying investment if it deems the substitution to be in the
best interest of Planholders. The substituted shares shall be
generally comparable in character and quality to the present Fund
shares, and shall be registered with the SEC under the Securities Act
of 1933. Before any substitution can be effected, the Sponsor must:
(a) obtain an order from the SEC approving the substitution;
(b) give written notice of the proposed substitution to the Custodian;
(c) give a written notice of the proposed substitution to each
Planholder that includes a reasonable description of the new fund
shares, with the advice that, unless the Plan is surrendered within 30
days of the date of the mailing of the notice, you will be considered
to have consented to the substitution and to have agreed to bear the
pro rata share of expenses and taxes in connection with it; and
(d) provide the Custodian with a signed certificate stating that
proper notice under these provisions has been given to each
Planholder.
If your Plan is not surrendered within 30 days from the date the
notice was sent to you, the Custodian shall purchase the new shares
for your Plan with any dividends or distributions which may be
reinvested for your Plan. If the new shares are also to be substituted
for the shares your Plan already holds, the Sponsor must arrange to
have the Custodian furnished, without payment of a sales charge or
fees of any kind, with new shares having an aggregate value equal to
the value of the shares for which they are to be exchanged.
If Fund shares are not available for purchase for a period of 120
days or longer, and the Sponsor fails to substitute other shares, the
Custodian may, but is not required to, either select another
underlying investment or terminate the Plan. If the Custodian selects
a substitute investment, it shall first obtain an order from the SEC
approving the substitution, as specified above, and then shall notify
each Planholder. If, within 30 days after mailing the required notice
to you, you give your written approval of the substitution and agree
to bear the pro rata share of actual expenses, including tax liability
sustained by the Custodian, the Custodian may thereafter purchase the
substituted shares. Your failure to give written approval of the
substitution within the 30-day period shall give the Custodian the
authority to terminate your Plan.
GENERAL
The terms of the Plans are set out in a Custodian Agreement which is
governed by the laws of the Commonwealth of Massachusetts. The Plans
are a unit investment trust under the Investment Company Act of 1940,
and are registered with the SEC. Registration with the SEC does not
imply supervision of management or investment practices or policies by
the SEC. No Plan certificates are available. Fidelity Destiny
Portfolios does not sell shares of Class N directly to the
public . Fidelity Systematic Investment Plans are currently
offered for sale in all states. Ohio salesmen must be registered under
the Ohio Bond Debenture Act.
In addition to the two Plans offered in this prospectus there
are currently two other series of Fidelity Systematic Investment
Plans : Destiny Plans I : Original and Destiny Plans
II : Original (the "Original Plans") . The fee arrangements for
the Original Plans are different from and could be more appropriate
for you than those of the Plans. In general, investors in the
Original Plans pay a fixed percentage of each investment in
Creation and Sales Charges and also pay directly for certain Custodian
Fees and other administrative expenses. In contrast, investors in
the Plans do not pay Creation and Sales Charges after the first
twelve investments and do not pay directly for the Custodian Fees and
other administrative expenses paid by the Original Plans.
However, investors in the Plans indirectly pay certain 12b-1 fees and
transfer agent fees that are charged to the class of the underlying
Fund's shares in which the New Plan invests. A copy of a separate
prospectus describing the two Original Plans in detail is
available from your investment professional or from Fidelity
Distributors Corporation.
In determining which Plan is appropriate for you, you should
consider, among other factors, the size and term of the Plan in which
you plan to invest and your ability to qualify for lower creation and
sales charges. In general, the larger the amount of each monthly
payment in your Plan and the longer the term of your Plan, the more
likely it is that the total expenses you would pay under the
Original Plan will be less than the total expenses you would
pay under the New Plan. The actual amount that you pay under the New
Plan, however, will depend on a number of factors, including the
performance of the underlying Fund and whether you continue to hold
your investment in the underlying Fund after you have completed or
terminated your Plan. You should consult with your investment
professional as to which Plan is the most appropriate for you.
The organization, management and investment policies of Fidelity
Destiny Portfolios are fully described in the Funds' prospectus
beginning on page 67 . Generally, shares of the Funds are
purchased at NAV within two business days of the date the Custodian
receives Plan investments. Dividends and distributions received on
Fund shares will be reinvested by the Custodian, after making
authorized deductions, in additional shares of the Fund at the
then-current NAV unless otherwise directed by the Sponsor or unless
you direct Boston Financial to remit them to you in cash.
Commissions ranging from 41.7% to 92.4% of the total Creation and
Sales Charges will be paid to authorized investment broker-dealer
firms and mutual fund dealers that are members of the NASD and have
executed a Destiny Selling Dealer Agreement with the Sponsor. From
time to time the Sponsor may increase the commissions paid to
broker-dealer firms to 100%. 12b-1 fees may also be paid to these
broker-dealers. Also, the Sponsor may, at its expense, provide
promotional incentives such as sales contests and luxury trips to
investment professionals who support the sale and service of the Plans
without reimbursement from the Fidelity Destiny Portfolios. In some
instances, these incentives may be offered only to certain investment
professionals whose representatives provide services in connection
with the sale or expected sale of significant amounts of the
Plans. These broker-dealers are independent contractors. Nothing in
this prospectus or in other literature or confirmations issued by the
Sponsor, the Custodian or Boston Financial including the words
"representative" or "commission," makes any broker-dealer, a partner,
employee or agent of the Sponsor, the Custodian or Boston Financial.
Neither the Sponsor, the Custodian nor Boston Financial shall be
liable for any acts or obligations of any dealer or investment broker.
THE CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts, is the Custodian for the Plans under a Custodian
Agreement with the Sponsor and maintains custody of the Plans. Plan
services are provided by the Custodian or its affiliated bookkeeping
and administrative service agent, Boston Financial Data Services, Inc.
(Boston Financial). Acting as your agent, the Custodian assumes the
responsibility for the many administrative details of your Plan.
All correspondence should be directed to Boston Financial Data
Services, Inc., P.O. Box 8300, Boston, Massachusetts 02266-8300.
The Custodian has delegated certain administrative functions to
Boston Financial, an affiliate of the Custodian. Under the delegation
arrangement, the Custodian pays to Boston Financial all or a portion
of the fees and charges made in the course of performing the
administrative functions. Boston Financial mails to each Planholder a
receipt for each investment, a statement of the number of shares held
in the Plan, notices, including distribution notices and tax
statements, reports to shareholders, prospectuses and proxy material.
You send your investments into the Plans to Boston Financial. After
making authorized deductions, Boston Financial applies the money to
the purchase of Fund shares. Investments in Destiny Plans I :
New purchase shares of Class N of Destiny I.
Investments in Destiny Plans II : New purchase shares of
Class N of Destiny II. The Custodian holds these Fund shares in
its custody, receiving dividends and distributions that, at your
option, may be remitted either to you or reinvested in additional Fund
shares.
The Custodian causes periodic audits to be taken of the records it
maintains relating to the Plans, unless those audits are arranged for
by the Sponsor, and prepares certain other reports required by law.
The Custodian has assumed only those obligations specifically imposed
on it under the Custodian Agreement with the Sponsor. These
obligations do not include the duties of investment ordinarily imposed
upon a trustee. The Custodian has no responsibility for the choice of
the underlying investment, for the investment policies and practices
of the manager of the Fund or for the acts or omissions of the
Sponsor.
The Custodian Agreement cannot be amended to affect your rights and
privileges without your written consent, nor may the Custodian resign
unless a successor has been designated and has accepted the
Custodianship. That successor must be a bank or trust company that has
capital, surplus and undivided profits totaling at least $2,000,000.
The Custodian may be changed without notice to you or your approval.
The Custodian may terminate its obligation to accept new Plans for
custodianship if the Sponsor fails to perform certain activities it is
required to perform under the Custodian Agreement or if the Custodian
terminates its custodianship on 90 days' notice after the third year
of the term of the Custodian Agreement, or on 30 days' notice after
the expiration of any further two-year period.
THE SPONSOR
Fidelity Distributors Corporation (Distributors or Sponsor), 82
Devonshire Street, Boston, Massachusetts 02109, is a Massachusetts
corporation organized on July 18, 1960. It is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of
the NASD. The Sponsor's Directors and Executive Officers are listed
below.
Edward C. Johnson 3d, Director, is Chairman, Chief Executive Officer
and a Director of FMR Corp., a Director and Chairman of the Board and
of the Executive Committee of FMR; Chairman and a Director of Fidelity
Investments Money Management, Inc. (19 9 8 - present), Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research
(Far East) Inc. He is Trustee and President of Fidelity's mutual
funds. Abigail Johnson, Vice President of certain Fidelity equity
funds, is Mr. Johnson's daughter.
James C. Curvey, Director (1997), is President of FMR Corp. (1998 -
present).
Martha B. Willis, President and Director (1997 - present).
Kevin J. Kelly, Vice President (1997 - present).
Eric D. Roiter, Vice President and Clerk, is Vice President, General
Counsel and Clerk of FMR (1998 - present).
Caron Ketchum, Treasurer and Controller (1995 - present).
Gary Greenstein, Assistant Treasurer (1995 - present).
Jay Freedman, Assistant Clerk (1996 - present).
Linda Capps Holland, Compliance Officer (1995 - present).
During the twelve months ended September 30, 1998, officers of the
Sponsor received no compensation from the Sponsor for their services
to the Sponsor. All officers and employees of the Sponsor are
currently covered by a broker's blanket bond in the amount of
$220,000,000.
The Sponsor is an affiliate of FMR, which is a wholly owned
subsidiary of FMR Corp. The Sponsor is principal underwriter for other
Fidelity funds whose shares are offered for sale to the public and is
sponsor for other unit investment trusts for accumulation of shares of
certain other Fidelity funds. FMR is adviser to the funds in the
Fidelity family of funds.
GLOSSARY
COMPLETED PLAN: A Plan is complete once the Face Amount of the Plan
has been invested.
CONTRACTUAL PLAN: A type of capital accumulation plan in which the
investor makes a firm commitment to invest a specific amount of money
in a fund during a specified time period.
CURRENT PLAN: A plan in which there are at least as many investments
recorded as there are months elapsed since establishment of the plan.
A Completed Plan that has not been redeemed is a Current Plan.
Tax-advantaged retirement plans are Current Plans.
DOLLAR-COST AVERAGING: A system of buying fixed dollar amounts of
securities at regular intervals, regardless of the price of the
shares. This method may result in an average cost that is lower than
the average price at which the securities were purchased because an
investment of a fixed dollar amount buys more shares when the share
price is low and fewer shares when the share price is high.
FACE AMOUNT: The total dollar amount of investments needed to complete
a particular plan. For example, a $300 per month, 15-year plan would
have a Face Amount of $54,000.
FACE CHANGE: Increasing or decreasing the dollar amount needed to
complete a particular plan is known as a Face Change.
MUTUAL FUND: An investment company that pools capital from
shareholders and invests in stocks, bonds, options, or other
securities. Mutual funds offer investors the advantages of
diversification and professional management.
RIGHTS OF ACCUMULATION: The right to reduce the Creation and Sales
Charges paid on two or more Plans based on the total Face Amount of
the Plans.
SYSTEMATIC INVESTMENT PLAN OR PERIODIC PAYMENT PLAN: An investment
program in which an investor invests a specified amount of money in a
fund at regular intervals. A Contractual Plan is a special type of
systematic investment plan.
UNIT INVESTMENT TRUST (UIT): An investment company that has its own
portfolio of securities in which it invests. It sells interests in
this portfolio in the form of redeemable securities. Unit investment
trusts are organized under a trust indenture, not a corporate charter.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors of Fidelity Distributors Corporation and Investors
under Fidelity Systematic Investment Plans: Destiny Plans I and
Destiny Plans II:
In our opinion, the accompanying statements of assets and
liabilities and the related statements of operations and of changes in
net assets invested in shares of Fidelity Systematic Investment Plans:
Destiny Plans I and Destiny Plans II (the "Plans") present fairly, in
all material respects, the financial position of the Plans at
September 30, 1998, the results of their operations for each of the
three years in the period then ended and the changes in their net
assets for each of the three years in the period then ended, in
conformity with general accepted accounting principles. These
financial statements are the responsibility of the Plan's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 12, 1998
FIDELITY SYSTEMATIC INVESTMENT PLANS: DESTINY PLANS I
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 1998
ASSETS:
Securities of investment company: 241,669,303
shares of Destiny I held for investors, valued at net
asset value of $24.58 per share (Note 1)
(average cost $3,851,390,103) $ 5,940,231,473
Cash 222,414
Receivable for Destiny I shares sold 190,478
Total assets 5,940,644,365
LIABILITIES:
Payable for Destiny I shares purchased $ 331,469
Payable to custodian, sponsor and
broker/dealer (Note 4) 1,058,184
Total liabilities 1,389,653
NET ASSETS (Note 2) $ 5,939,254,712
Statements of Operations
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
1998 1997 1996
INVESTMENT INCOME:
Distributions received on
shares of Destiny I from:
Net investment income $ 106,844,269 $ 96,561,988 $ 89,281,971
EXPENSES (Note 4):
Custodian Fees 415,994 394,357 367,960
Administrative expenses 571,646 601,473 585,608
Net expenses 987,640 995,830 953,568
Net investment income 105,856,629 95,566,158 88,328,403
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Complete and partial liquidations,
including Destiny I shares
delivered to investors at
market value:
Proceeds received 391,959,152 311,271,265 239,729,317
Cost of Destiny I shares (243,294,998)(211,499,168) (176,894,004)
Net realized gain on Plan
liquidations 148,664,154 99,772,097 62,835,313
Net (decrease)/increase
in unrealized appreciation (210,974,989) 993,262,758 300,213,194
Net realized and unrealized
gain/(loss) on Plan shares (62,310,835) 1,093,034,855 363,048,507
Distributions received on
shares of Destiny I from
net realized gains on
investments 461,476,309 371,227,198 168,182,318
Net increase in net
assets resulting from
operations $ 505,022,103 $ 1,559,828,211 $ 619,559,228
DESTINY PLANS I - FINANCIAL STATEMENTS - CONTINUED
Statements of Changes in Net Assets Invested in Shares of Destiny I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
September 30, 1998 September 30, 1997 September 30, 1996
Amount Shares Amount Shares Amount Shares
Net assets at
beginning of
period $ 5,726,389,970 228,364,289 $ 4,391,840,146 215,228,493 $ 3,908,031,571 208,146,062
Additions
during period:
From investor
payments 164,550,079 119,944,885 123,968,130
Less: creation and
sales charges
(Note 4) (5,911,794) (4,415,669) (4,613,942)
Custodian Fees
and insurance
premiums
(Note 4) (816,861) (832,079) (879,688)
Balance invested
in Destiny I
shares 157,821,424 6,409,698 114,697,137 5,401,996 118,474,500 6,323,547
Net investment
income and net
realized gains on
investments 567,332,938 466,793,356 256,510,721
Less: Cash
distributions
to investors (58,019,633) (28,704,259) (14,495,836)
Balance reinvested
in Destiny I
shares 509,313,305 22,269,509 438,089,097 21,927,033 242,014,885 13,211,616
Net realized
gain on Plan
liquidations 148,664,154 99,772,097 62,835,313
Net increase/
(decrease) in
unrealized
appreciation (210,974,989) 993,262,758 300,213,194
Total 6,331,213,864 257,043,496 6,037,661,235 242,557,522 4,631,569,463 227,681,225
Deductions
during period:
Redemptions and
cancellations of
Destiny I
shares (391,959,152) (15,374,193) (311,271,265)(14,193,233) (239,729,317) (12,452,732)
Net assets at end
of period $ 5,939,254,712 241,669,303 $5,726,389,970 228,364,289 $ 4,391,840,146 215,228,493
FIDELITY SYSTEMATIC INVESTMENT PLANS: DESTINY PLANS Ii
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 1998
ASSETS:
Securities of investment company: 274,615,300
shares of Destiny II held for investors,
valued at net asset value of $14.07 per
share (Note 1)
(average cost $2,768,491,216) $ 3,863,837,271
Cash 3,035,690
Receivable for Destiny II shares sold 3,087
Total assets 3,866,876,048
LIABILITIES:
Payable for Destiny II shares purchased $ 2,692,311
Payable to custodian, sponsor and
broker/dealer (Note 4) 2,161,133
Total liabilities 4,853,444
NET ASSETS (Note 2) $ 3,862,022,604
Statements of Operations
Year Ended Year Ended Year Ended
September 30, September 30, September 30,
1998 1997 1996
INVESTMENT INCOME:
Distributions received
on shares of Destiny
II from:
Net investment income $ 61,646,651 $ 161,931,472 $ 42,663,716
EXPENSES (Note 4):
Custodian Fees 526,319 446,865 367,638
Administrative expenses 1,359,835 1,219,410 1,204,257
Net expenses 1,886,154 1,666,275 1,571,895
Net investment income 59,760,497 160,265,197 41,091,821
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Complete and partial liquidations, including Destiny II shares
delivered to investors at market value:
Proceeds received 357,872,401 150,705,546 115,283,136
Cost of Destiny II
shares (236,739,289) (106,291,151) (82,011,653)
Net realized gain on
Plan liquidations 121,133,112 44,414,395 33,271,483
Net (decrease)/increase
in unrealized
appreciation (188,590,035) 625,457,740 185,902,326
Net realized and
unrealized gain/(loss)
on Plan shares (67,456,923) 669,872,135 219,173,809
Distributions received
on shares of Destiny
II from net realized
gains on investments 239,189,005 53,977,157 59,856,556
Net increase in net
assets resulting
from operations $ 231,492,579 $ 884,114,489 $ 320,122,186
DESTINY PLANS II - FINANCIAL STATEMENTS - CONTINUED
Statements of Changes in Net Assets Invested in Shares of Destiny II
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended
September 30, 1998 September 30, 1997 September 30, 1996
Amount Shares Amount Shares Amount Shares
Net assets at
beginning of
period $ 3,505,991,367 243,583,375 $ 2,465,355,584 212,482,392 $ 1,978,480,817 187,243,794
Additions
during
period:
From
investor
payments 516,456,857 338,228,567 311,357,075
Less:
creation
and sales
charges
(Note 4) (27,033,563) (27,036,368) (26,843,231)
Custodian Fees
(Note 4) (2,160,566) (2,062,876) (1,961,326)
Balance
invested in
Destiny II
shares 487,262,728 32,903,678 309,129,323 24,641,643 282,552,518 26,251,535
Net investment
income and
net realized
gains on
investments 298,949,502 214,242,354 100,948,377
Less: Cash
distributions
to
investors (4,851,669) (1,902,483) (516,801)
Balance
reinvested in
Destiny II
shares 294,097,833 22,061,716 212,339,871 18,308,982 100,431,576 9,616,656
Net realized gain
on Plan
liquidations 121,133,112 44,414,395 33,271,483
Net increase/
(decrease) in
unrealized
appreciat
ion (188,590,035) 625,457,740 185,902,326
Total 4,219,895,005 298,548,769 3,656,696,913 255,433,017 2,580,638,720 223,111,985
Deductions
during period:
Redemptions and
cancellations of
Destiny II
shares (357,872,401) (23,933,469) (150,705,546) (11,849,642) (115,283,136) (10,629,593)
Net assets
at end of
period $ 3,862,022,604 274,615,300 $ 3,505,991,367 243,583,375 $ 2,465,355,584 212,482,392
Shares have been adjusted for a 3 - for - 1 split (see note 3).
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES: The Plans are a unit investment
trust registered under the Investment Company Act of 1940, as amended,
with the Securities and Exchange Commission, investing only in shares
of Fidelity Destiny Portfolios: Destiny I and Destiny II (the
"Funds"). Destiny Plans I is for the accumulation of shares of
Fidelity Destiny Portfolios: Destiny I; Destiny Plans II is for the
accumulation of shares of Fidelity Destiny Portfolios: Destiny II.
The financial statements have been prepared in conformity with
generally accepted accounting principles for unit investment trusts
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 Plans:
SECURITY VALUATION. The investments in shares of Fidelity Destiny
Portfolios: Destiny I and Destiny II are valued at each of the Fund's
respective bid market price which is equal to the net asset value per
share of each Fund at period end.
FEDERAL INCOME TAXES. No provisions are made for federal income
taxes. All income dividends and capital gain distributions received by
investors are treated as if received directly from the underlying
Fund. A Planholder will not realize any gain or loss upon withdrawal
from the Plans when transferring to an account for direct ownership of
the underlying Fund shares. Any liquidation by a Planholder of a Fund
will be treated as if the underlying Fund shares were sold.
TRANSACTION DATES. Share transactions are recorded on the trade
date. Dividend income and capital gain distributions are recorded on
the ex-dividend date.
COST METHOD. The investment in shares of each Fund at cost is based
on average cost, which represents the amount available for investment
(including reinvested distributions of net investment income and
realized gains) in such shares after deduction of sales charges,
custodian fees, and insurance fees, if applicable.
RECLASSIFICATIONS. To conform to the 1998 presentation, net
realized gains on investments have been reclassified from investment
income to realized and unrealized gain on investments. This
reclassification had no effect on net increase in net assets resulting
from operations or distributions for any period.
2. PLAN ASSETS
Destiny Plans I assets consisted of the following at September 30,
1998:
Systematic
Systematic Investment
Investment Plans with Total of
Plans Insurance All Plans
Payments received from
investors on outstanding
Plans $ 1,495,713,703 $ 923,564 $1,496,637,267
Deduct:
Sponsor fees 75,003,857 48,953 75,052,810
Custodian Fees 10,915,815 9,882 10,925,697
Insurance premiums 0 27,500 27,500
Total deductions 85,919,672 86,335 86,006,007
Net payments invested in shares
of Destiny I 1,409,794,031 837,229 1,410,631,260
Add:
Distributions from investment
income reinvested 391,449,488 990,364 392,439,852
Distributions from realized
gains reinvested 2,043,478,817 4,840,174 2,048,318,991
Unrealized appreciation in
Destiny I shares held at
September 30, 1998 2,084,927,677 3,913,693 2,088,841,370
Deduct:
Fees payable (976,742) (19) (976,761)
Net assets $ 5,928,673,271 $ 10,581,441 $ 5,939,254,712
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. PLAN ASSETS - CONTINUED
Destiny Plans II assets consisted of the following at September
30, 1998:
Systematic
Investment
Plans
Payments received from investors on
outstanding Plans $ 2,131,977,046
Deduct:
Sponsor fees 195,056,353
Custodian Fees 14,838,053
Total deductions 209,894,406
Net payments invested in shares of Destiny II 1,922,082,640
Add:
Distributions from investment income
reinvested 146,403,007
Distributions from realized gains reinvested 700,005,569
Unrealized appreciation in Destiny II shares
held at September 30, 1998 1,095,346,055
Deduct:
Fees payable (1,814,667)
Net assets $ 3,862,022,604
3. CAPITAL SHARES: On January 18, 1997, the Trustees of Destiny II
approved a three-for-one stock split of the capital shares of Destiny
II for shareholders of record as of June 21, 1997. A total of
139,172,552 capital shares of Destiny II were issued to Destiny Plans
II in connection with the split. Share amounts in the accompanying
financial statements have been restated to reflect the aforementioned
split.
4. EXPENSES AND DEDUCTIONS: For information regarding Creation and
Sales Charges, Custodian Fees, and Administrative expenses see page
of this Prospectus.
Fidelity Distributors Corporation, a wholly owned subsidiary of FMR
Corp. and sponsor of Fidelity Systematic Investment Plans, received
approximately $1,152,000, $1,427,000, and $812,000 as its portion of
the Creation and Sales Charges on sales of Plans I during the years
ended September 30, 1998, 1997, and 1996, respectively and $2,126,000,
$2,908,000, and $3,285,000 on sales of Plans II during the years ended
September 30, 1998, 1997, and 1996, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Fidelity Distributors
Corporation
(A Wholly-Owned Subsidiary of FMR Corp.):
In our opinion, the accompanying statement of financial condition
present s fairly, in all material respects, the financial
position of Fidelity Distributors Corporation at December 31, 1998, in
conformity with generally accepted accounting principles. Th is
financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on th is
financial statement based on our audit. We conducted our audit of
th is statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether th is financial statement
is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
January 27, 1999
FIDELITY DISTRIBUTORS CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
STATEMENT OF FINANCIAL CONDITION
December 31, 1998
(Dollars in thousands)
ASSETS
Cash $ 51
Receivables:
Brokers, dealers and customers 43,526
Mutual funds 44,924
Investments, at market (cost $18,766) 18,877
Property and equipment, net 3,431
Deferred dealers concessions, net 136,532
Other assets 848
Total Assets $ 248,189
LIABILITIES
Liabilities:
Payable to broker/dealers $ 20,090
Payable to mutual funds 43,451
Other liabilities 377
Total Liabilities $ 63,918
STOCKHOLDER'S EQUITY
Preferred stock, 5% noncumulative, $100 par
value; authorized 5,000 shares; issued and
outstanding 4,750 shares $ 475
Common stock, $1 par value; authorized 1,000,000
shares; issued and outstanding 1,061 shares 1
Additional paid-in capital 48,494
Retained earnings 140,192
189,162
Less: Receivable from FMR Corp. (4,891)
Total Stockholder's Equity 184,271
Total Liabilities and Stockholder's Equity $ 248,189
The accompanying notes are an integral part of th is financial
statement.
FIDELITY DISTRIBUTORS CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO FINANCIAL STATEMENT
A. PRINCIPAL BUSINESS ACTIVITIES:
Fidelity Distributors Corporation (the "Company") is a registered
broker/dealer under the Securities Exchange Act of 1934. The Company's
parent is FMR Corp. The Company is the principal underwriter and
distributor of mutual funds under agreements with funds managed by an
affiliate and is the sponsor of Fidelity Destiny P lans. A
division of Fidelity Distributors Corporation provides mutual fund
transfer agent services and other administrative services on behalf of
affiliated companies.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and
liabilities as of December 31, 1998 . Actual results could
differ from the estimates included in the financial statements.
INVESTMENTS
Investments consist of shares held in Fidelity mutual funds and are
stated at market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method
based on estimated useful lives as follows: computer equipment, three
years; and furniture and equipment, five to ten years. Renewals and
betterments of a nature considered to materially extend the useful
lives of the assets are capitalized.
FIDELITY DISTRIBUTORS CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO FINANCIAL STATEMENT (continued)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DEFERRED DEALERS CONCESSIONS
Deferred dealers concessions of $136,531,634 is net of accumulated
amortization of $41,011,333 as of December 31, 1998. These deferred
charges represent sales commissions paid to financial intermediaries
in connection with the sale of certain mutual funds' shares that pay
the Company an asset-based trailer fee and are subject to a contingent
deferred sales charge. The charges are amortized over five years and
are borne by an affiliate.
INCOME TAXES
The Company is included in the consolidated federal and certain state
income tax returns of FMR Corp. Deferred income taxes result from
differences in the recognition of revenue and expense for tax and
financial reporting purposes. The Company's deferred tax asset at
December 31, 1998 approximated $5,471,000 and is included in
Receivable from FMR Corp. The principal sources of temporary
differences related to deferred compensation, pension expense and
depreciation.
C. TRANSACTIONS WITH FMR CORP. AND AFFILIATED COMPANIES:
The Company is party to several arrangements with affiliated
companies. Under these arrangements, the Company charged these
affiliates for shareholder services, marketing and distribution
expenses and other administrative services and was charged for
promotional expenses, systems processing and development and occupancy
expenses. In addition, certain direct and indirect expenses incurred
in connection with underwriting and distribution of Fidelity mutual
fund shares are borne by affiliated companies.
FIDELITY DISTRIBUTORS CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO FINANCIAL STATEMENT (continued)
C. TRANSACTIONS WITH AFFILIATED COMPANIES, CONTINUED:
The Company participates in FMR Corp.'s noncontributory defined
benefit pension plan covering all of its eligible employees.
The Company also participates in FMR Corp.'s defined contribution
profit-sharing and retirement plans covering substantially all
employees. Annual contributions to the plans are based on stated
percentages of eligible employee compensation and employee
contribution participation.
The Company participates in various FMR Corp. stock-based compensatory
plans. Compensation is based on the change in the net asset value of
FMR Corp. stock, as defined.
All intercompany transactions are charged or credited through an
intercompany account with FMR Corp. and may not be the same as those
which would otherwise exist or result from agreements and transactions
among unaffiliated third parties. The Company generally receives
credit for the collection of its receivables and is charged for the
settlement of its liabilities through its intercompany account with
FMR Corp. Under an agreement with FMR Corp., the Company may offset
liabilities which will ultimately be settled by FMR Corp. on behalf of
the Company against its receivable from FMR Corp. In accordance
with the agreement, certain liabilities of approximately $28,575,000
have been offset against the receivable from FMR Corp.
D. PROPERTY AND EQUIPMENT:
At December 31, 1998, property and equipment, at cost, consists of the
following (in thousands):
Equipment $ 28,594
Furniture and fixtures 1,491
30,085
Less: Accumulated depreciation 26,654
$ 3,431
FIDELITY DISTRIBUTORS CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO FINANCIAL STATEMENT (continued)
E . NET CAPITAL REQUIREMENT:
The Company is subject to the Securities and Exchange Commission's
Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance
of minimum net capital and requires that the ratio of aggregate
indebtedness to net capital, both as defined, shall not exceed 15 to
1. At December 31, 1998, the Company had net capital of $16,257,000 in
excess of its required net capital of $113,000. Additionally, the
ratio of aggregate indebtedness to net capital at December 31, 1998
was 0.10 to 1.
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Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a
copy of a fund's most recent financial report and portfolio listing or
a copy of the Statement of Additional Information (SAI) dated April
26, 1999 . The SAI has been filed with the Securities and Exchange
Commission (SEC) and is available along with other related materials
on the SEC's Internet Web site (http://www.sec.gov). The SAI is
incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity
Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA 02109
at the appropriate number listed below or your investment
professional.
FIDELITY DISTRIBUTORS CORPORATION
FIDELITY INVESTMENTS INSTITUTIONAL SERVICES COMPANY, INC.,
BROKER/DEALER SERVICES DIVISION
Nationwide (toll-free) 1-800-433-0734
In Alaska or Overseas (call collect) 1-617-328-5000
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION.
SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DES-pro-0499
FIDELITY
DESTINY PORTFOLIOS:
Destiny I : Class N (fund number 395)
Destiny II : Class N (fund number 396)
Each fund seeks capital growth. Although many of the securities in
each fund's portfolio at any given time may be income-producing,
income generally will not be a consideration in the selection of
securities.
Shares of Class N of each fund may be purchased only through
Fidelity Systematic Investment Plans: Destiny Plans I :
New and Destiny Plans II : New (the " Plans " or
a " Plan " ), a unit investment trust. Details of the
Plans, including the Creation and Sales Charges, are discussed in the
Prospectus for the Plans. The Creation and Sales C harges 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.
PROSPECTUS
APRIL 26, 1999
(FIDELITY_LOGO_GRAPHIC)(registered trademark)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
PROSPECTUS
KEY FACTS 2 WHO MAY WANT TO INVEST
3 EXPENSES Each class's yearly
operating expenses.
4 PERFORMANCE
THE FUNDS IN DETAIL 8 CHARTER How each fund is
organized.
8 INVESTMENT PRINCIPLES AND
RISKS Each fund's overall
approach to investing.
11 BREAKDOWN OF EXPENSES How
operating costs are
calculated and what they
include.
YOUR ACCOUNT 12 HOW TO BUY SHARES
12 HOW TO SELL SHARES Taking
money out and closing your
account.
14 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND ACCOUNT 14 DIVIDENDS, CAPITAL GAINS, AND
POLICIES TAXES
15 TRANSACTION DETAILS Share
price calculations and the
timing of purchases and
redemptions.
15 EXCHANGE RESTRICTIONS
KEY FACTS
WHO MAY WANT TO INVEST
Each fund is designed for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns
and who want to be invested in the stock market for its long-term
growth potential. Each fund invests for growth and does not pursue
income.
Shares of Class N of each fund may be acquired only through the
purchase of an interest in Fidelity Systematic Investment Plans:
Destiny Plans I : New or Destiny Plans II : New (the "Plans"
or a "Plan"). 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 Plan's initial Creation and Sales
Charges, you will incur a loss. Investments in a systematic investment
plan do not eliminate market risk. While Fidelity Management &
Research Company (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.
The value of each fund's investments varies from day to day, generally
reflecting changes in market conditions and other company, political,
and economic news. In the short term, stock prices can fluctuate
dramatically in response to these factors. Over time, however, stocks
have shown greater growth potential than other types of securities.
Each fund is not in itself a balanced investment plan. You should
consider your investment objective and tolerance for risk when making
an investment decision. When you sell your fund shares, they may be
worth more or less than what you paid for them.
Each fund is composed of multiple classes of shares. All classes of
a fund have a common investment objective and investment portfolio.
Class N shares of each fund are subject to 12b-1 fees, while Class O
shares (the original class of shares for each fund) are not. In
addition Class N shares are subject to higher transfer agent fees than
Class O shares. The Class O shares are only available through other
systematic investment plans, and are not offered through this
prospectus. You may obtain more information about Class O shares and
the Fidelity Systematic Investment Plans through which the Class O
shares are offered, by calling FDC at 1-800-433-0734, or your
investment professional.
The performance of one class of shares of a fund may be different from
the performance of another class of shares of the same fund because of
different sales charges and class expenses. Contact FDC or your
investment professional to discuss which class is appropriate for you.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you
buy or sell Class N shares of a fund. Neither fund will offer its
Class N shares publicly except through the Plans, which impose
separate Creation and Sales Charges. Creation and Sales Charges vary
according to the monthly investment size and duration of each Plan.
Please refer to the Plans' Prospectus for details.
Destiny I: Class N Destiny II: Class N
Sales charge on purchases and None None
reinvested distributions
Deferred sales charge on None None
redemptions
ANNUAL OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR that varies based on its
performance. Each fund also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements
and financial reports.
12b-1 fees for Class N of each fund include a shareholder service
fee paid by Class N to FDC for services and expenses in connection
with providing personal service and/or maintenance of Class N
shareholder accounts. Long-term shareholders may pay more than the
economic equivalent of the maximum sales charges permitted by the
National Association of Securities Dealers, Inc., due to 12b-1
fees.
Management fees , 12b-1 fees and other expenses (including
transfer agent fees) are reflected in Class N's share price
and are not charged directly to individual shareholder accounts.
Please refer to the section "Breakdown of Expenses," beginning on page
12 for further information.
The following figures are based on estimated expenses of Class N of
each fund and are calculated as a percentage of average net assets of
Class N of each fund.
Destiny I: Class N Destiny II: Class N
Management fee 0.31% 0.45%
12b-1 fee (Service Fee) 0.25% 0.25%
Other expenses 0.65% 0.66%
TOTAL OPERATING EXPENSES 1.21% 1.36%
EXPENSE TABLE EXAMPLE: You would pay the following amount in total
expenses on a $1,000 investment in Class N shares of a fund,
assuming a 5% annual return and full redemption at the end of each
time period. Total expenses shown below include any shareholder
transaction expenses and Class N's annual operating expenses.
Destiny I: Class N 1 Year $ 12
3 Years $ 38
5 Years $ 67
10 Years $ 147
Destiny II: Class N 1 Year $ 14
3 Years $ 43
5 Years $ 74
10 Years $ 164
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED EXPENSES OR RETURNS, ALL OF WHICH MAY VARY.
As stated above, Creation and Sales Charges vary for each Plan.
Generally, however, these charges are all incurred within the first
year of the life of a Plan. For a detailed explanation of applicable
rate structure, please refer to the Plans' Prospectus.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical results fo r Class
O, restated to reflect the higher 12b-1 and transfer agent fees
applicable to Class N, as set forth in "Breakdown of Expenses - Other
Expenses" on page 13. The total returns that follow do not reflect the
effect of taxes.
The following tables show Destiny Plans I: New and Destiny Plans II:
New average annual total returns calculated for the one, five, ten,
and fifteen years or Life of Plan ended September 30, 1998 for a
$50/month, 15 year Plan. Past 15 years or Life of Plan figures are for
the periods October 1, 1983 to September 30, 1998 for Destiny New
Plans I and Commencement of Operations (December 30, 1985) through
September 30, 1998 for Destiny New 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 assessed through the Plans.
The total returns for the Plan s are based on historical results
for the Original Plan s , restated to reflect the higher 12b-1
and transfer agent fees applicable to Class N, as set forth in
" Breakdown of Expenses - Other Expenses" on page
13 . The illustrations assume an initial $600 lump sum investment
at the beginning of each period shown with no subsequent Plan
investments. Because the illustrations assume lump sum investments,
they do not reflect what investors would have earned had they made
only regular monthly investments over the period. Consult the Plans'
Prospectus for more complete information on applicable charges and
fees.
AVERAGE ANNUAL TOTAL RETURNS - DESTINY NEW PLANS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fiscal periods ended Past 1 year Past 5 years Past 10 years Past 15 years/ Life of Plan
September 30, 1998
Destiny Plans I: New -46.11% 16.23% 17.52% 16.51%A
Destiny Plans II: New -47.14% 15.38% 17.31% 20.12%B
</TABLE>
A FROM OCTOBER 1, 1983 TO SEPTEMBER 30, 1998 BASED ON HISTORICAL
RESULTS FOR THE ORIGINAL PLANS, RESTATED TO REFLECT THE HIGHER 12B-1
AND TRANSFER AGENT FEES APPLICABLE TO CLASS N, AS SET FORTH IN
"BREAKDOWN OF EXPENSES - OTHER EXPENSES" ON PAGE 13.
B FROM DECEMBER 30, 1985 (COMMENCEMENT OF OPERATIONS OF CLASS O) TO
SEPTEMBER 30, 1998 BASED ON HISTORICAL RESULTS FOR THE ORIGINAL PLAN,
RESTATED TO REFLECT THE HIGHER 12B-1 AND TRANSFER AGENT FEES
APPLICABLE TO CLASS N, AS SET FORTH IN "BREAKDOWN OF EXPENSES - OTHER
EXPENSES" ON PAGE 13.
All total returns quoted below do not include the effect of paying
the separate Creation and Sales Charges associated with the purchase
of Class N shares of the funds through the Plans. Total returns would
be lower if Creation and Sales Charges were taken into account. Since
Class N shares of the funds may be acquired only through the Plans,
Investors should consult the Plans' Prospectus for complete
information regarding Creation and Sales Charges.
Each fund's fiscal year runs from October 1 through
September 30 . Class N of each fund is expected to commence
operations on or about April 30, 1999. The tables below show each
fund's performance over past fiscal years. The charts on page 8
present calendar year performance for each fund compared to different
measures, including the Standard and Poor's 500 Index.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fiscal periods ended Past 1 year Past 5 years Past 10 years Life of fund
September 30, 1998
Destiny I: Class N 7.77% 18.71% 18.13% 17.61%A
Destiny II: Class N 5.71% 17.84% 17.91% 20.50%B
</TABLE>
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fiscal periods ended Past 1 year Past 5 years Past 10 years Life of fund
September 30, 1998
Destiny I: Class N 7.77% 135.70% 429.05% 9,672.51%A
Destiny II: Class N 5.71% 127.20% 419.35% 979.47%B
</TABLE>
A FROM JULY 10, 1970 (COMMENCEMENT OF OPERATIONS OF CLASS 0) TO
SEPTEMBER 30, 1998 BASED ON HISTORICAL RESULTS FOR CLASS O, RESTATED
TO REFLECT THE HIGHER 12B-1 AND TRANSFER AGENT FEES APPLICABLE TO
CLASS N, AS SET FORTH IN "BREAKDOWN OF EXPENSES - OTHER EXPENSES" ON
PAGE 14.
B FROM DECEMBER 30, 1985 (COMMENCEMENT OF OPERATIONS OF CLASS O) TO
SEPTEMBER 30, 1998 BASED ON HISTORICAL RESULTS FOR CLASS O, RESTATED
TO REFLECT THE HIGHER 12B-1 AND TRANSFER AGENT FEES APPLICABLE TO
CLASS N, AS SET FORTH IN "BREAKDOWN OF EXPENSES - OTHER EXPENSES" ON
PAGE 14.
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar years 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
DESTINY I 24.46% -4.00% 37.73% 14.15% 25.33% 3.52% 35.78% 17.52% 29.80% 24.55%
Standard & Poor's 500 Index 31.69% -3.10% 30.47% 7.62% 10.08% 1.32% 37.58% 22.96% 33.36% 28.58%
Lipper Growth Funds Average 27.70% -4.72% 37.08% 7.86% 10.61% -2.17% 30.79% 19.24% 25.30% 22.86%
Consumer Price Index 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70% 1.61%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 24.46
Row: 2, Col: 1, Value: -4.0
Row: 3, Col: 1, Value: 37.73
Row: 4, Col: 1, Value: 14.15
Row: 5, Col: 1, Value: 25.33
Row: 6, Col: 1, Value: 3.52
Row: 7, Col: 1, Value: 35.78
Row: 8, Col: 1, Value: 17.52
Row: 9, Col: 1, Value: 29.8
Row: 10, Col: 1, Value: 24.55
(LARGE SOLID BOX) DESTINY I
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar years 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
DESTINY II 25.33% -3.38% 40.22% 14.48% 25.72% 3.56% 34.80% 16.84% 28.53% 27.01%
Standard & Poor's 500 Index 31.69% -3.10% 30.47% 7.62% 10.08% 1.32% 37.58% 22.96% 33.36% 28.58%
Lipper Growth Funds Average 27.70% -4.72% 37.08% 7.86% 10.61% -2.17% 30.79% 19.24% 25.30% 22.86%
Consumer Price Index 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70% 1.61%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 25.33
Row: 2, Col: 1, Value: -3.38
Row: 3, Col: 1, Value: 40.22
Row: 4, Col: 1, Value: 14.48
Row: 5, Col: 1, Value: 25.72
Row: 6, Col: 1, Value: 3.56
Row: 7, Col: 1, Value: 34.8
Row: 8, Col: 1, Value: 16.84
Row: 9, Col: 1, Value: 28.53
Row: 10, Col: 1, Value: 27.01
(LARGE SOLID BOX) DESTINY II
DATA IS BASED ON HISTORICAL RESULTS FOR CLASS O, RESTATED TO
REFLECT THE HIGHER 12B-1 AND TRANSFER AGENT FEES APPLICABLE TO CLASS
N, AS SET FORTH IN "BREAKDOWN OF EXPENSES - OTHER EXPENSES" ON PAGE
13.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
Average annual total returns covering periods of less than one year
assume that performance will remain constant for the rest of the year.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Growth Funds
Average for Destiny I and Destiny II. As of December 31, 1998, the
average reflected the performance of 980 mutual funds with similar
investment objectives. This average, published by Lipper Inc.,
excludes the effect of sales loads.
STANDARD & POOR'S 500 INDEX (S&P 500(registered trademark))
a market capitalization-weighted index of common stocks.
Unlike each fund's returns, the total returns of the comparative index
do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of
inflation calculated by the U.S. Government.
Other illustrations of fund performance may show moving averages over
specified periods.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
TOTAL RETURNS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Each fund is a
diversified fund of Fidelity Destiny Portfolios, an open-end
management investment company originally organized as a Massachusetts
corporation on January 7, 1969 and reorganized as a Massachusetts
business trust on June 20, 1984.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. The transfer agent or the Plans'
custodian, as applicable, will mail proxy materials in advance,
including a voting card and information about the proposals to be
voted on. The number of votes you are entitled to is based upon the
dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust,
respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business
address at 82 Devonshire Street, Boston, Massachusetts 02109. It
includes a number of different subsidiaries and divisions which
provide a variety of financial services and products. The funds employ
various Fidelity companies to perform activities required for their
operation.
The funds are managed by FMR, which chooses the funds' investments and
handles their business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for each fund.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for each fund.
As of January 31, 1999 , FMR advised funds having approximately
40 million shareholder accounts with a total value of more than
$ 686 billion.
George A. Vanderheiden is Vice President and manager of Destiny I,
which he has managed since 1980. He also manages several other
Fidelity Advisor Funds. Mr. Vanderheiden is a member of the
Board of Directors for FMR Corp. Mr. Vanderheiden joined Fidelity in
1971.
Beth Terrana is Vice President and manager of Destiny II, which she
has managed since June 1998. She also manages other Fidelity funds.
Since joining Fidelity in 1983, Ms. Terrana has worked as an analyst,
portfolio assistant and manager.
Fidelity's investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for Class N of each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K. and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant
owners of a class of shares of common stock representing approximately
49% of the voting power of FMR Corp. Under the Investment Company Act
of 1940 (the 1940 Act), control of a company is presumed where one
individual or group of individuals owns more than 25% of the voting
stock of that company; therefore, the Johnson family may be deemed
under the 1940 Act to form a controlling group with respect to FMR
Corp.
FMR may allocate brokerage transactions to its broker-dealer
affiliates and in a manner that takes into account the sale of shares
of the Destiny Portfolios, provided that the funds receive brokerage
services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EACH FUND seeks capital growth. Although many of the securities in
each fund's portfolio at any given time may be income-producing,
income generally will not be a consideration in the selection of
securities.
Each fund seeks capital growth primarily from equity securities. Each
fund will tend to be fully invested in common stocks and securities
convertible into common stocks, but may also buy other types of
securities such as preferred stocks or bonds. The funds have the
flexibility to invest in large or small, domestic or foreign issuers.
The value of the funds' investments varies in response to many
factors. Stock values fluctuate in response to the activities of
individual companies and general market and economic conditions.
FMR may use various investment techniques to hedge a portion of a
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. As a mutual fund, each fund seeks to spread
investment risk by diversifying its holdings among many companies and
industries. When you sell your shares of a fund, they may be worth
more or less than what you paid for them.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
the appropriate number listed on the front cover, or your investment
professional.
EQUITY SECURITIES may include common stocks, preferred stocks,
convertible securities, and warrants. Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's
financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest in more than 10% of the outstanding voting securities of a
single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes
due to changes in the issuer's creditworthiness, or they may already
be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general or regional economic difficulty.
The following tables provide a summary of ratings assigned to debt
holdings (not including money market instruments) in the funds'
portfolios. These figures are dollar-weighted averages of month-end
portfolio holdings during the fiscal year ended September 1998, and
are presented as a percentage of total security investments. These
percentages are historical and do not necessarily indicate a fund's
current or future debt holdings.
DESTINY I
FISCAL YEAR ENDED SEPTEMBER 199 8
DEBT HOLDINGS, MOODY'S
BY RATING INVESTORS SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
AVERAGE AVERAGE
RATING OF TOTAL RATING OF TOTAL
INVESTMENTS INVESTMENTS
INVESTMENT GRADE
Highest quality Aaa 11.8% AAA 11.8%
High quality Aa 0.0% AA 0.0%
Upper-medium grade A 0.0% A 0.0%
Medium grade Baa 0.0% BBB 0.0%
LOWER QUALITY
Moderately speculative Ba 0.0% BB 0.0%
Speculative B 0.0% B 0.0%
Highly speculative Caa 0.0% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C 0.0% C 0.0%
In default, in arrears -- D 0.0%
REFER TO THE FUND'S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
THE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY. SECURITIES NOT
RATED BY MOODY'S OR S&P AMOUNTED TO 0.0% OF THE FUND'S INVESTMENTS.
THIS PERCENTAGE MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS, AS WELL AS UNRATED
SECURITIES. UNRATED LOWER-QUALITY SECURITIES AMOUNTED TO
0.0 %
OF THE FUND'S INVESTMENTS.
DESTINY II
FISCAL YEAR ENDED SEPTEMBER 1998
DEBT HOLDINGS, MOODY'S
BY RATING INVESTORS SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
AVERAGE AVERAGE
RATING OF TOTAL RATING OF TOTAL
INVESTMENTS INVESTMENTS
INVESTMENT GRADE
Highest quality Aaa 6.2% AAA 6.2%
High quality Aa 0.0% AA 0.0%
Upper-medium grade A 0.0% A 0.0%
Medium grade Baa 0.0% BBB 0.0%
LOWER QUALITY
Moderately speculative Ba 0.0% BB 0.0%
Speculative B 0.1% B 0.0%
Highly speculative Caa 0.0% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C 0.0% C 0.0%
In default, in arrears -- D 0.0%
REFER TO THE FUND'S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
THE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY. SECURITIES NOT
RATED BY MOODY'S OR S&P AMOUNTED TO 0.0 % OF THE FUND'S
INVESTMENTS. THIS PERCENTAGE MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS, AS WELL AS
UNRATED SECURITIES. UNRATED LOWER-QUALITY SECURITIES AMOUNTED TO
0.0 % OF THE FUND'S INVESTMENTS.
RESTRICTIONS: Purchase of a debt security is consistent with each
fund's debt quality policy if it is rated at or above the stated level
by Moody's Investors Service (Moody's), Standard & Poor's (S&P), or is
unrated but judged to be of equivalent quality by FMR. Each fund
currently intends to limit its investments in lower than Baa-quality
debt securities (sometimes called "junk bonds") to 10% of its assets.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, economic, or regulatory
conditions in foreign countries; fluctuations in foreign currencies;
withholding or other taxes; trading, settlement, custodial, and other
operational risks; and the potentially less stringent investor
protection and disclosure standards of foreign markets. In addition,
governmental issuers of foreign debt securities may be unwilling to
pay interest and repay principal when due and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S. investments.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, purchasing indexed securities, and selling securities
short.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other
borrower. They have additional risks beyond conventional debt
securities because they may entail less legal protection for a fund,
or there may be a requirement that the fund supply additional cash to
a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not invest more than 10% of its assets in
illiquid securities.
OTHER INSTRUMENTS may include real estate-related instruments.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest more than 5% in the securities of any one issuer. This
limitation does not apply to U.S. Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
a fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
DESTINY I AND DESTINY II seek capital growth. Although many of the
securities in each fund's portfolio at any given time may be
income-producing, income generally will not be a consideration in the
selection of securities.
With respect to 75% of total assets, each fund may not invest more
than 5% in the securities of any one issuer and may not invest in more
than 10% of the outstanding voting securities of a single issuer.
These limitations do not apply to U.S. Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, each fund pays fees related to its daily
operations. Expenses paid out of each class's assets are reflected in
that class's share price or dividends; they are neither billed
directly to shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. Each fund also pays OTHER EXPENSES,
which are explained on page 16 .
FMR may, from time to time, agree to reimburse the funds or a class
for management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a fund if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which may be terminated at any time without notice, can
decrease the funds' or a class's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee
is determined by calculating a BASIC FEE and then applying a
PERFORMANCE ADJUSTMENT. The performance adjustment either increases or
decreases the management fee, depending on how well a fund has
performed relative to the S&P 500.
Management fee = Basic fee +/- Performance adjustment
THE BASIC FEE is calculated by adding a group fee rate to an
individual fund fee rate, dividing by twelve, and multiplying the
result by a fund's average net assets throughout the month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52%, and it
drops as total assets under management increase.
For September 1998, the group fee rate was 0.2911% for Destiny I and
Destiny II. The individual fund fee rate is 0.17% for Destiny I and
0.30% for Destiny II.
The basic fee for Destiny I and Destiny II for the fiscal year ended
September 1998, was 0.46% and 0.59%, respectively, of the fund's
average net assets.
THE PERFORMANCE ADJUSTMENT rate is calculated monthly by comparing the
performance of each fund's Class O to that of the S&P 500 over
the performance period.
The performance period is the most recent 36-month period.
The performance adjustment rate is divided by twelve and multiplied by
the fund's average net assets throughout the month, and the resulting
dollar amount is then added to or subtracted from the basic fee. The
maximum annualized performance adjustment rate is +0.24% of the fund's
average net assets up to and including $100,000,000 and +0.20% of the
fund's average net assets in excess of $100,000,000 over the
performance period.
The total management fee for the fiscal year ended September 30, 1998
was 0.31% of the fund's average net assets for Destiny I and 0.45% of
the fund's average net assets for Destiny II.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
A fund could be adversely affected if the computer systems used by FMR
and other service providers do not properly process and calculate
date-related information from and after January 1, 2000. FMR has
advised each fund that it is actively working on necessary changes to
its computer systems and expects that its systems, and those of other
major service providers, will be modified prior to January 1, 2000.
However, there can be no assurance that there will be no adverse
impact on a fund.
OTHER EXPENSES
While the management fee is a significant component of each fund's
annual operating costs, the funds have other expenses as well.
FSC performs transfer agency, dividend disbursing, and shareholder
servicing functions for the Class N of each fund. Class N will pay
FSC a transfer agent fee for such services that may not exceed an
annual rate of 0.63% of the fund's average net a ssets. FSC also
calculates the net asset value per share (NAV) and dividends for
Class N of each fund, maintains the funds' general accounting
records, and administers each fund's securities lending program. For
the fiscal year ended September 1998, Destiny I and Destiny II paid
fees equal to 0.01% and 0.02%, respectively, of each fund's average
net assets for pricing and bookkeeping services. These amounts are
before expense reductions, if any.
Each fund also pays other expenses, such as legal, audit, and
custodian fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by a fund to
reduce that fund's custodian or transfer agent fees.
Class N shares of each fund have adopted a DISTRIBUTION AND SERVICE
PLAN. Under the plans, Class N of each fund is authorized to pay FDC a
monthly distribution fee as compensation for its services and expenses
in connection with the distribution of Class N shares. Class N may pay
FDC a distribution fee at an annual rate of 0.50% of its average net
assets, or such lesser amount as the Trustees may determine from time
to time. Class N of each fund currently pays FDC a monthly service fee
at an annual rate of 0.25% of its average net assets throughout the
month. Class N distribution fee rates may be increased only when the
Trustees believe that it is in the best interests of Class N
shareholders to do so.
For the fiscal year ended September 30, 1998, the portfolio
turnover rates for Destiny I and Destiny II were 27% and 106%,
respectively. These rates vary from year to year. High turnover rates
increase transaction costs and may increase taxable capital gains. FMR
considers these effects when evaluating the anticipated benefits of
short-term investing.
YOUR ACCOUNT
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of Class N is the class's
NAV.
Each fund has an agreement with FDC under which each fund issues
shares at NAV to State Street Bank and Trust Company (State Street) as
Custodian for the Plans. EACH FUND WILL NOT OFFER ITS SHARES PUBLICLY
EXCEPT THROUGH THE PLANS. Generally, State Street 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
Prospectus of Fidelity Systematic Investment Plans: Destiny Plans
I : New and Destiny Plans II : New (the Plans or a Plan) .
Your shares will be purchased at the next NAV calculated after your
order is received in proper form. Class N's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
Each fund reserves the right to reject any specific purchase order,
including certain purchases by exchange. See "Exchange
Restrictions" on page 21. Purchase orders may be refused if, in FMR's
opinion, they would disrupt management of a fun d.
Share certificates are not available for Class N shares.
If you are investing through a tax-advantaged retirement plan, such as
an IRA, for the first time, you will need a special application.
Contact your investment professional for more information and a
retirement account application.
HOW TO SELL SHARES
THE FOLLOWING DISCUSSION RELATES ONLY TO THOSE SHAREHOLDERS WHO HAVE
COMPLETED OR TERMINATED A PLAN AND HOLD SHARES OF A FUND DIRECTLY.
PLANHOLDERS SHOULD CONSULT THE SECTION ENTITLED "CANCELLATION AND
REFUND RIGHTS" OF THEIR PLAN'S PROSPECTUS FOR A DISCUSSION OF THE
REQUIREMENTS FOR REDEMPTION OF SHARES FROM A PLAN.
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of Class N is the class 's
NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Class N 's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
If you have certificates for your shares, you must submit them to FSC
in order to sell your shares, and you should call the appropriate
number listed on the front cover for specific instructions. Share
Certificates are no longer provided.
For more information, see "Systematic Withdrawal Program" on page
of the Plans' prospectus.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. A signature
guarantee is designed to protect you and Fidelity from fraud. Your
request must be made in writing and include a signature guarantee if
any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union (if authorized under state law),
securities exchange or association, clearing agency, or savings
association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, signed certificates (if applicable), and
(small solid bullet) Any other applicable requirements listed in the
following table.
Mail your letter to the following address:
Fidelity Investments
P. O. Box 770002
Cincinnati, OH 45277-0086
Unless otherwise instructed, Fidelity will send a check to the record
address.
<TABLE>
<CAPTION>
<S> <C> <C>
TYPE OF REGISTRATION* SPECIAL REQUIREMENTS
PHONE(phone graphic) All accounts (small solid bullet) Maximum
check request: $100,000.
(small solid bullet) You may
exchange to other Fidelity
funds if both accounts are
registered with the same
name(s), address, and
taxpayer ID number.
(small solid bullet) Call FDC
at the appropriate number
listed on the front cover.
Mail or in Person (mail_graphic) Individual, Joint Tenants, (small solid bullet) The
Sole Proprietorship, letter of instruction must
Custodial (Uniform be signed by all person(s)
Gifts/Transfers to Minors required to sign for the
Act), General Partners account exactly as it is
Corporations, Associations registered, accompanied by
Trusts signature guarantee(s).
(small solid bullet) The
letter of instruction and a
corporate resolution must be
signed by all person(s)
required to sign for the
account, accompanied by
signature guarantee(s).
(small solid bullet) The
letter of instruction must
be signed by the Trustee(s),
accompanied by signature
guarantee(s). (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.)
</TABLE>
* IF YOU DO NOT FALL INTO ANY OF THE ABOVE REGISTRATION CATEGORIES
(E.G., EXECUTORS, ADMINISTRATORS, CONSERVATORS OR GUARDIANS), PLEASE
CALL THE APPROPRIATE NUMBER LISTED ON THE FRONT COVER FOR FURTHER
INSTRUCTIONS.
INVESTOR SERVICES
THE FOLLOWING SHAREHOLDER SERVICES ARE APPLICABLE ONLY TO THOSE
SHAREHOLDERS WHO HAVE COMPLETED OR TERMINATED A PLAN AND HOLD
C LASS N SHARES OF A FUND DIRECTLY. Planholders should
consult the sections titled " Plan Features and Your Rights and
Privileges " on page in their Plan's Prospectus for a
discussion of distribution options and other pertinent data.
For accounts not associated with the Plan s, Fidelity provides a
variety of services to help you manage your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except a reinvestment, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses may be mailed, even if you have more than one account in
a fund. Call FDC at the appropriate number listed on the front cover,
or your investment professional if you need additional copies of
financial reports and prospectuses.
FSC 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.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Class N shares and buy
Class A or Class T shares of other Fidelity Advisor Funds by telephone
or in writing. The shares you exchange will carry credit for any
front-end sales charge you previously paid in connection with the
purchase of Plan shares.
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see "Exchange Restrictions," page 22.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Normally, dividends and
capital gains are distributed in December.
DISTRIBUTION OPTIONS
THE FOLLOWING DISTRIBUTION OPTIONS ARE APPLICABLE ONLY TO THOSE
SHAREHOLDERS WHO HAVE COMPLETED OR TERMINATED A PLAN AND HOLD CLASS
N SHARES OF THE FUNDS DIRECTLY. Planholders should consult the
section titled "Plan Features and your Rights and Privileges,
Distributions" on page of the Plans' Prospectus for a
discussion of distribution options and other pertinent information.
You can choose from three distribution options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the same
class of the fund. If you do not indicate a choice on your
application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
When a class deducts a distribution from its NAV, the reinvestment
price is the class's NAV at the close of business that day.
Distribution checks will be mailed within seven days.
TAXES
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax-advantaged retirement
account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains.
Every January, Fidelity will send you and the IRS a statement showing
the tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges - are
subject to capital gains tax. A capital gain or loss is the difference
between the cost of your shares and the price you receive when you
sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price.
You will also receive a transaction statement at least quarterly.
However, it is up to you or your tax preparer to determine whether
this sale resulted in a capital gain and, if so, the amount of tax to
be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount
of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a class has realized but
not yet distributed income or capital gains, you will pay the full
price for the shares and then receive a portion of the price back in
the form of a taxable distribution.
CURRENCY CONSIDERATIONS. If a fund's dividends exceed its taxable
income in any year, which is sometimes the result of currency-related
losses, all or a portion of the fund's dividends may be treated as a
return of capital to shareholders for tax purposes. To minimize the
risk of a return of capital, each fund may adjust its dividends to
take currency fluctuations into account, which may cause the dividends
to vary. Any return of capital will reduce the cost basis of your
shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. The statement you
receive in January will specify if any distributions included a return
of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a
fund and its investments, and these taxes generally will reduce a
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting credit
or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
a fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates Class N 's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the
applicable fund's investments, cash, and other assets, subtracting
that class's pro rata share of the value of the applicable fund's
liabilities, subtracting the liabilities allocated to that class, and
dividing the result by the number of shares of that class outstanding.
Each fund's assets are valued primarily on the basis of market
quotations. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
on the basis of amortized cost. This method minimizes the effect of
changes in a security's market value. Foreign securities are valued on
the basis of 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. In addition, if quotations are not
readily available, or if the values have been materially affected by
events occurring after the closing of a foreign market, assets may be
valued by another method that the Board of Trustees believes
accurately reflects fair value.
New Planholders who have redeemed shares under "Cancellation and
Refund Rights" (discussed in the Plans' Prospectus), 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, refer to the section entitled "Plan Features and
your Rights and Privileges, Distributions" in your Plan's Prospectus,
or contact your investment professional.
WHEN YOU SIGN YOUR PLAN'S 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 a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity will not be
responsible for any losses resulting from unauthorized transactions if
it follows reasonable security procedures designed to verify the
identity of the investor. 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 at the appropriate number listed
on the front cover for instructions. Additional documentation may be
required from corporations, associations, and certain fiduciaries.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper form.
Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging C lass N
shares of a fund for Class A or Class T shares of other Fidelity
Advisor Funds. The exchange privilege is available only to those who
have completed or terminated a Plan and received Class N sh ares of
the fund directly. The Fidelity Advisor 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 you should
note the following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of a fund per calendar
year. Accounts under common ownership or control, including accounts
with the same taxpayer identification number, will be counted together
for purposes of the four exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify these
exchange privileges in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related SAI,
in connection with the offer contained in this Prospectus. If given or
made, such other information or representations must not be relied
upon as having been authorized by the funds or FDC. This Prospectus
and the related SAI do not constitute an offer by the funds or by FDC
to sell or to buy shares of the funds to any person to whom it is
unlawful to make such offer.
Fidelity, Fidelity Investments & (Pyramid) Design, and Fidelity
Investments are registered trademarks of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
Page 1 of application*************************************************
. APPLICATION FOR
. FIDELITY DESTINY PLANS I: NEW AND
. FIDELITY DESTINY PLANS II: NEW
.
A GENERAL INSTRUCTIONS
P
P 1. Please print clearly with a ballpoint pen.
L
I IMPORTANT: Application must be signed by both the Applicant(s)
C and Dealer.
A
T 2. DETACH AND MAIL WITH THE INITIAL INVESTMENT TO:
I
O Boston Financial Data Services, Inc.
N P.O. Box 8300
. Boston, MA 02266-8300
. Note: (small solid bullet) If you have completed the
. Preauthorized Check Transaction Form a voided check MUST BE
. ATTACHED.
. (small solid bullet) If you would like BFDS to automatically
. withhold 28% from all distributions the Federal Income Tax
. Withholding form must be attached.
.
. 3. If registering an account under the Uniform Gifts/Transfers to
. Minors Act, only one Custodian and one minor are allowed per
. account.
.
. 4. If registering an account as: individual, joint tenants, or
. custodial account under the Uniform Gifts/Transfers to Minors
. Act; then supply the Social Security Number of the registered
. account owner who is to be taxed. If registering as a Uniform
. Gifts/Transfers to Minors, the child is the registered account
. owner. If registering an account as a trust, a corporation,
. partnership, organization, etc.; then supply the Employer
. Identification Number of the legal entity or organization that
. will report income and/or gains.
(Complete and sign reverse side)
Page 2 of application************************************************
.
DESTINY PLANS APPLICATION .
.
PLEASE CHECK ONE .
DESTINY PLANS I: NEW __ OR DESTINY PLANS II: NEW __ .
.
Monthly My objective in adopting a .
Investment Unit: $_________ long-term PLAN of this .
nature is to .
Total Plan accumulate FUND SHARES for ___________ .
Amount: $_________ .
Special Pricing .
Initial applicable? YES __ NO __ .
investment .
submitted If yes, associated account names and/or .
herewith: $_________ numbers and monthly investment unit .
_________________________ $_____________ .
No. of _________________________ $_____________ .
Investments: __120 __180 _________________________ $_____________ .
(10-yr. (15-yr. .
Plan) Plan) .
.
Register Plan as follows: _______________ Special Pricing Breakpoint .
(Please Print or Type) Registrant's __________________________ .
Taxpayer (Dealer-Use) .
Itentification .
Number or .
Social Security .
Number .
.
Individual__________________________________________________________ .
(First) (Middle Initial) (Last)
.
.
Joint Tennant_______________________________________________________ .
(Please Print (First) (Middle Initial) (Last) .
Name of Joint .
Registrant, .
if desired)(dagger) .
.
Gifts/Transfers to Minors_______________ as Custodian for___________ .
(Custodian) (Minor) .
.
under the_______Uniform Gifts/Transfers to Minors Act. .
State .
.
Mailing Address_____________________________________________________ .
Street City State Zip .
.
.
SIGNATURE: I (We) am (are) of legal age, have received and read T
Prospectuses for the Plans and the Portfolios and agree to E
their terms. As required by federal law, I (we) certify under A
penalties of perju ry (1) th at the Social Security or Taxpayer R
Identification Number provided above is correct and (2) that the IRS
has never notified me (us) that I (we) am (are) subject to 31% O
backup withholding, OR has notified me (us) that I (we) am (are) no N
longer subject to such backup withholding. (Note: If part (2) is not
true in your case, please strike it out before signing.) I D
(we) understand that you will comply with instructions given by one O
registrant on joint accounts. Furthermore, I (we) hereby ratify T
any instructions, including telephone instructions or, for joint T
accounts, written instructions signed by one registrant , given E
on this account and agree that the Plans, the Portfolios D
and the Custodian will not be liable for any loss, cost,
or expense for acting upon such instructions (by telephone or in L
writing) believed by one or more of them to be genuine and in I
accordance with reasonable procedures designed to prevent N
unauthorized transactions. Mutual fund shares are not deposits or E
obligations of, or guaranteed by, any depository institution. Shares .
are not insured by the FDIC, Federal Reserve Board or any other .
agency, and are subject to investment risks, including possible loss .
of principal amount invested. __I do not want the Telephone .
Redemption Privilege. .
.
Must Date___________19______At_________________________________ .
Complete: City State .
.
X________________________ X_______________________________ .
Signature of Signature of Joint .
Registrant/Custodian Registrant (if any)(dagger) .
.
A Preauthorized Check (dagger)If Joint Registration, .
Form is attached Yes__ No__ both the Registrant and Joint .
Registrant must sign, and .
Monthly Investment joint tenancy with rights of .
Date: 1st__ 15th__ survivorship will be created .
unless another form of .
A Federal Tax ownership is clearly .
Withholding Form is indicated. .
attached: Yes__ No__ .
Preassigned account number, .
Check box for if applicable_________________ .
Government Allotment: __ .
.
MAKE ALL CHECKS PAYABLE TO DESTINY PLANS I: NEW OR DESTINY .
PLANS II: NEW .
____________________________________________________________________ .
.
DEALER ONLY SECTION IF DOCUMENTATION IS TO BE MAILED TO .
REPRESENTATIVE, PLEASE CHECK AND PROVIDE .
ADDRESS BELOW. __ .
.
Dealer's No.________________ Representative's No.___________ .
.
________________________________ ___________________________________ .
Firm Name (Print) Representative's Name (Print) .
.
________________________________ ___________________________________ .
Home Office Address (Print) Branch Address (Print) .
________________________________ ___________________________________ .
.
X_______________________________ X__________________________________ .
Authorized Signature of Dealer Representative's Signature .
.
Mail Application and initial investment to Boston Financial Data .
Services,Inc., P.O. Box 8300, Boston, MA 02266-8300 .
Page 3 of application************************************************
. PREAUTHORIZED CHECK TRANSACTION FORM
. FOR STATE STREET BANK AND TRUST COMPANY
.
. FIDELITY SYSTEMATIC INVESTMENT PLANS
.
. (Please print clearly with ballpoint pen)
. _________________________________________________________________
.
. Monthly Account
. Plan Name: Please Check Account Number Amount Registrantion
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Monthly Investment Date:( ) 1st or ( ) 15th (Should coinside with
. Plans Application)
.
. Month to Begin:____(Please note: Authorization to begin or change
. draft must be received no later than FIFTEEN BUSINESS DAYS prior to
. date of requested change. Authorization to cancel a draft must be
. received no later than FIVE BUSINESS DAYS prior to date of requested
. cancellation.)
.
T A VOIDED CHECK MUST BE ATTACHED.
E
A I (We) hereby request that the State Street Bank and Trust
R Company collect deposits of funds to be made by me (us)
monthly, pursuant to my (our) investment plan(s) described
O below by drawing checks to its own order on my (our)
N account(s).
D X______________________________________ ____________________
O
T X______________________________________ ____________________
T Signature of Depositor(s) Date
E
D AUTHORIZATION TO HONOR CHECKS DRAWN BY STATE STREET BANK AND
TRUST COMPANY
L ____________________________________________________________________
I
N Please Print clearly As a convenience to me, I (we) hereby request
E with a ballpoint pen; and authorize you to pay and charge my (our)
. it will be used as a account with checks drawn on my (our) account
. mailing label to by, and payable to, the order of the State
. notify your bank. Street Bank and Trust Company. I (we) agree
. that your rights in regard to each such check
. _____________________ shall be the same as if the check were drawn
. Bank Name on you and personally by me (us). This
. _____________________ authority is to remain in effect until
. Street/P.O. Box revoked in writing, and until you actually
. _____________________ receive such notice, I (we) agree that
. City,State,Zip you shall be fully protected on honoring
. _____________________ any such check.
. Bank Acct. #
. X____________________ I (We) further agree that if any such check
. X____________________ be dishonored, whether with or without cause,
. Name of Depositor(s) and whether unintentionally or inadvertently
. you shall be under no liablility whatsoever.
.
. X___________________________________________
.
. X___________________________________________
. Signature of Depositor(s)
.
. MAIL TO BOSTON FINANCIAL DATA SERVICES, INC., P.O. BOX 8300, BOSTON,
. MA 02266-8300
. BFDS COPY
Page 4 of application************************************************
. PREAUTHORIZED CHECK TRANSACTION FORM
. FOR STATE STREET BANK AND TRUST COMPANY
.
. FIDELITY SYSTEMATIC INVESTMENT PLANS
.
. (Please print clearly with ballpoint pen)
. _________________________________________________________________
.
. Monthly Account
. Plan Name: Please Check Account Number Amount Registrantion
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Destiny Destiny
. Plans I: New__ Plans II: New__ ______________ _______ _____________
.
. Monthly Investment Date:( ) 1st or ( ) 15th (Should coinside with
. Plans Application)
.
. Month to Begin:____(Please note: Authorization to begin or change
. draft must be received no later than FIFTEEN BUSINESS DAYS prior to
. date of requested change. Authorization to cancel a draft must be
. received no later than FIVE BUSINESS DAYS prior to date of requested
. cancellation.)
.
T A VOIDED CHECK MUST BE ATTACHED.
E
A I (We) hereby request that the State Street Bank and Trust
R Company collect deposits of funds to be made by me (us)
monthly, pursuant to my (our) investment plan(s) described
O below by drawing checks to its own order on my (our)
N account(s).
D X______________________________________ ____________________
O
T X______________________________________ ____________________
T Signature of Depositor(s) Date
E
D AUTHORIZATION TO HONOR CHECKS DRAWN BY STATE STREET BANK AND
TRUST COMPANY
L ____________________________________________________________________
I
N Please Print clearly As a convenience to me, I (we) hereby request
E with a ballpoint pen; and authorize you to pay and charge my (our)
. it will be used as a account with checks drawn on my (our) account
. mailing label to by, and payable to, the order of the State
. notify your bank. Street Bank and Trust Company. I (we) agree
. that your rights in regard to each such check
. _____________________ shall be the same as if the check were drawn
. Bank Name on you and personally by me (us). This
. _____________________ authority is to remain in effect until
. Street/P.O. Box revoked in writing, and until you actually
. _____________________ receive such notice, I (we) agree that
. City,State,Zip you shall be fully protected on honoring
. _____________________ any such check.
. Bank Acct. #
. X____________________ I (We) further agree that if any such check
. X____________________ be dishonored, whether with or without cause,
. Name of Depositor(s) and whether unintentionally or inadvertently
. you shall be under no liablility whatsoever.
.
. X___________________________________________
.
. X___________________________________________
. Signature of Depositor(s)
.
. MAIL TO BOSTON FINANCIAL DATA SERVICES, INC., P.O. BOX 8300, BOSTON,
. MA 02266-8300
. BANK COPY
Page 5 of application************************************************
. I hereby authorize and direct Boston Financial Data Services, Inc.
. (Boston Financial, administrative service agent for the Fidelity
. Systematic Investment Plans) to withhold at the rate of 28
. percent on dividend and capital gains distributions paid by
. the Fidelity Destiny Portfolios to my Fidelity Destiny Plan
. account(s). I understand that all amounts withheld shall be
. submitted to the IRS as backup withholding on capital gains and
. dividend income and as a credit against my Federal income tax
. liability. Withholding will not apply to withdrawals. I will
. not be entitled to obtain a refund or credit of such amount or
. assert any other amounts withheld with respect to my Fidelity
. Destiny Plan account(s). I understand that the amount
. withheld may be less than, equal to, or greater than the amount of
. corresponding Federal income tax liability. I shall hold harmless
. and indemnify Boston Financial, State Street Bank and Trust Company,
. Fidelity Systematic Investment Plans, Fidelity Destiny Portfolios:
. Destiny I and Destiny II, Fidelity Distributors Corporation (and its
. affiliates), and their respective agents against any and all loss,
. costs, damages, expenses, liabilities, and claims, including,
. without limitation, IRS claims, for such amounts.
.
. I understand that written authorization and direction to begin or
. cancel withholding shall be implemented within 30 days of receipt in
. good order of the requested change by Boston Financial. I further
. understand that this authorization shall not be implemented if, in
. Boston Financial's sole judgement, any information necessary to do
. so has not been provided to or verified by BFDS. This service is
. available only to Fidelity Destiny Plans that reinvest their
. dividends and other distributions but is not available for
. tax-sheltered retirement plans, including IRAs.
.
. _________________________________ __________________________________
. Name of Planholder(Please Print) Name of Joint Tenant(Please Print)
.
. ____________________________________________
. Social Security or Tax Itentification Number
.
. PLAN NAME: PLEASE CHECK ACCOUNT NUMBER(S)
.
. DESTINY PLANS I: NEW__ DESTINY PLANS II: NEW__ _____________________
. DESTINY PLANS I: NEW__ DESTINY PLANS II: NEW__ _____________________
. DESTINY PLANS I: NEW__ DESTINY PLANS II: NEW__ _____________________
. DESTINY PLANS I: NEW__ DESTINY PLANS II: NEW__ _____________________
.
. X_________________________________________ __________________
. SIGNATURE OF PLANHOLDER DATE
.
. X_________________________________________ __________________
. SIGNATURE OF JOINT TENANT DATE
.
. MAIL TO BOSTON FINANCIAL DATA SERVICES, INC., P.O. BOX 8300,
. BOSTON, MA 02266-8300
End of application****************************************************
SPONSOR
FIDELITY DISTRIBUTORS CORPORATION
82 Devonshire Street
Boston, Massachusetts 02109
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
Boston, Massachusetts
TRANSFER AND SHAREHOLDERS'
SERVICING AGENT
BOSTON FINANCIAL DATA SERVICES, INC.
P.O. Box 8300
Boston, Massachusetts 02266-8300
FOR ACTIVE PLANS CALL:
Nationwide: 1-800-225-5270
FIDELITY SERVICE COMPANY, INC.
P.O. Box 770002
Cincinnati, OH 45277-0002
Nationwide: 1-800-433-0734
AUDITORS
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
I.DES N-PRO-0499
1.717178.100
(Recycle logo)Printed on recycled paper
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 67 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts, on this 26nd day of April, 1999.
FIDELITY DISTRIBUTORS CORPORATION
By /s/ Martha Willis
Martha Willis, President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
(Signature) (Title) (Date)
/s/Martha Willis President and Director April 26, 1999
Martha Willis
/s/Edward C. Johnson 3d Director April 26, 1999
Edward C. Johnson 3d
/s/James C. Curvey Director April 26, 1999
James C. Curvey
/s/Caron Ketchum Treasurer April 26, 1999
Caron Ketchum
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Directors of Fidelity Distributors Corporation and Investors
under Fidelity Systematic Investment Plans: Destiny Plans I and
Destiny Plans II:
We hereby consent to the inclusion in this Post-Effective Amendment
No. 67 to Registration Statement No. 2-34100 on Form S-6 of our report
dated November 12, 1998, on our audit of the financial statements of
Fidelity Systematic Investment Plans: Destiny Plans I and Destiny
Plans II.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 22, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Fidelity Distributors
Corporation:
We hereby consent to the inclusion in this Post-Effective Amendment
No. 67 to Registration Statement No. 2-34100 on Form S-6 of our report
dated January 27, 1999, on our audit of the statement of financial
condition of Fidelity Distributors Corporation as of December 31,
1998.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 22, 1999
KIRKPATRICK & LOCKHART
1800 MASSACHUSETTS AVENUE, NW
2ND FLOOR
WASHINGTON, D.C. 20036-1800
April 26, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Michael Shaffer
Room 10125, Mail Stop 10-6
Re: Fidelity Systematic Investment Plans:
Destiny Plans I: New and Destiny Plans II: New (the Plans)
File Nos. 2-34100
Post-Effective Amendment No. 67
Dear Mr. Shaffer:
We serve as special counsel to the above-referenced funds with
respect to certain matters which arise from time to time under the
federal securities laws. In that capacity, we have reviewed a draft
of the amendment to the Plans' Registration Statement on Form S-6
which accompanies this letter ("Amendment"). The Amendment was
prepared and finalized by Fidelity Management & Research Company
("FMR"), the funds' investment adviser, which has represented to us
that no material changes have been made between the version reviewed
by us and the version being filed electronically. The Amendment is
being filed for the purpose of changing the name of the new plans and
making certain changes in the disclosures contained in the funds' most
recent post-effective amendment, including amendments in response to
Staff comments. We understand that it is the Commission Staff's
position that any changes made in response to Staff comments on the
fund's most recent post-effective amendment properly may be
incorporated in a filing pursuant to Rule 485(b) under the Securities
Act of 1933. Pursuant to paragraph (b)(4) of Rule 485, we represent
that, to the best of our knowledge based upon our review of the draft
Amendment and the Staff's position referred to above, the Amendment
does not contain disclosures which would render it ineligible to
become effective pursuant to Rule 485(b).
Sincerely,
/s/Kirkpatrick & Lockhart LLP
Kirkpatrick & Lockhart LLP
EXHIBITS
A. (1) Custodian Agreement, as amended and restated, dated as of
April 26, 1999, between Fidelity Distributors Corporation
and State Street Bank and Trust Company is electronically
filed herein as Exhibit A(1).
(2) None.
(3) (a) Not applicable.
(b) Fidelity Systematic Investment Plans (Destiny) Selling
Dealer Agreement is electronically filed herein as Exhibit
A(3)(b).
(c) Schedule B to Fidelity Systematic Investment Plans
(Destiny) Selling Dealer Agreement is electronically
filed herein as Exhibit A(3)(b).
(4) None.
(5) (a) Not applicable.
(b) Not applicable.
(6) Articles of Incorporation and By-laws of Fidelity
Distributors Corporation are incorporated herein by
reference to Exhibit 1.A.(6) of Post-Effective Amendment
No. 50.
(7) The Undertaking required by Rule 27d-2(a)(2) and the
Consolidated Financial Statements of Federal Insurance
Company, for the fiscal year ended December 31, 1997, are
electronically filed herein as Exhibit A(7).
(8) Franchise Agreement dated as of April 26, 1999, between
Fidelity Distributors Corporation and Fidelity Destiny
Portfolios, on behalf of Destiny I, is electronically
filed herein as Exhibit A(8).
Franchise Agreement dated as of April 26, 1999, between
Fidelity Distributors Corporation and Fidelity Destiny
Portfolios, on behalf of Destiny II, is electronically
filed herein as Exhibit A(8).
(9) None.
(10) Not applicable.
B. (1) Not applicable.
(2) Audited Financial Statements, for the fiscal year ended
September 30, 1998, are filed herein as part of the
Prospectus.
C. Not applicable.
Exhibit A(1)
FIDELITY SYSTEMATIC INVESTMENT PLANS
AMENDED AND RESTATED
CUSTODIAN AGREEMENT
MADE AS OF APRIL 26, 1999
This AGREEMENT ("Agreement") made as of April 26, 1999 between
FIDELITY DISTRIBUTORS CORPORATION, a Massachusetts corporation with an
office at 82 Devonshire Street, Boston, Massachusetts (hereinafter
called the "Sponsor") and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts corporation with an office at 225 Franklin Street,
Boston Massachusetts 02110 (hereinafter called the "Custodian"),
amends and restates the original custodian agreement between Crosby
Plans Corporation (whose name has been changed to Fidelity
Distributors Corporation) and State Street Bank and Trust Company
dated July 15, 1969 and subsequently amended on March 15, 1972, June
30, 1975, November 1, 1982, and by a 1985 memorandum, and as
subsequently amended and restated on September 16, 1994 (the original
custodian agreement and the original custodian agreement as amended
from time to time prior to the date of this Agreement each hereinafter
referred to as a "Predecessor Custodian Agreement" and collectively as
the "Predecessor Custodian Agreements"), all relating to FIDELITY
SYSTEMATIC INVESTMENT PLANS ("Fidelity Plans"), for the purposes of:
(1) updating administrative procedures applicable to all periodic
payment plans of Fidelity Plans issued pursuant to any of the
Predecessor Custodian Agreements, provided that such updating of
procedures does not affect adversely any such plan issued and
outstanding prior to the date of this Agreement, and (2) setting forth
the terms, conditions and procedures that shall govern such plans
issued hereafter, including Destiny Plans I: New and Destiny Plans II:
New.
WITNESSETH
WHEREAS, the Sponsor was formed to develop financial planning programs
and to sell shares of mutual funds and other securities, and desires
to obtain the services of the Custodian in connection with the
administration of certain plans providing for investment in shares of
Fidelity Destiny Portfolios, a Massachusetts business trust registered
as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), the shares of
beneficial interest of which are divided into series and classes
consisting of Destiny I: Class O and Class N and Destiny II: Class O
and Class N (collectively hereinafter called the "Fund") or shares of
other open-end management investment companies as herein provided.
Such plans include plans that are issued and outstanding prior to the
date of this Agreement, as well as plans that the Sponsor proposes to
sell and distribute to the public on or after the date of this
Agreement; and
WHEREAS, Fidelity Plans is a unit investment trust consisting of four
series of periodic payment plans (defined more specifically below and
referred to collectively in this preamble as the "Plans"), providing
for the accumulation of shares of the Fund; and
WHEREAS, Plans of one series of Plans ("Destiny Plans I: Original")
accumulate shares of Destiny I: Class O of the Fund, Plans of a second
series of Plans ("Destiny Plans I: New") accumulate shares of Destiny
I: Class N of the Fund, Plans of a third series of Plans ("Destiny
Plans II") accumulate shares of Destiny II: Class O of the Fund, and
Plans of a fourth series of Plans ("Destiny Plans II: New") accumulate
shares of Destiny II: Class N of the Fund; and
WHEREAS, in accordance with the terms of Destiny Plans I: Original and
Destiny Plans II: Original, administrative procedures applicable to
such Plans under the terms of a Predecessor Custodian Agreement may be
updated, provided that such updating of procedures does not affect
adversely Plans issued and outstanding at the time such updated
procedures are implemented; and
WHEREAS, the Sponsor and the Custodian have determined that the
updated procedures contemplated by this Agreement would not affect
adversely Plans issued and outstanding at the time such updated
procedures are proposed to be implemented; and
WHEREAS, it is the intent of the Sponsor and the Custodian that the
updated procedures contemplated by this Agreement be applicable to all
Plans issued prior to, and on or after the effective date of this
Agreement; and
WHEREAS, under each of the Predecessor Custodian Agreements, the
Sponsor and the Custodian have the right to make changes in the
administration of Destiny Plans I: Original and Destiny Plans II:
Original, respectively, issued and outstanding, provided that such
changes will not adversely affect the rights and privileges of the
planholders thereof; and
WHEREAS, the Sponsor and the Custodian believe that it is in the best
interests of holders of Destiny Plans I: Original and Destiny Plans
II: Original to administer the Destiny Plans I: Original and Destiny
Plans II: Original under this Agreement as plans of an existing series
of Fidelity Plans and to treat such Destiny Plans I: Original and
Destiny Plans II: Original as having been issued under and governed by
this Agreement; and
WHEREAS, the Sponsor and the Custodian, by virtue of an amendment
dated as of March 23, 1993 to a Plan Custodian and Administration
Agreement dated as of November 6, 1981, and as subsequently amended,
among Security Distributors, Inc., a Kansas corporation, Security
Management Company, Inc., a Kansas corporation, and The First National
Bank of Topeka, Kansas (the original custodian and administration
agreement, and each amendment thereof made from time to time prior to
the date of this Agreement, are each hereinafter referred to as a
"Security Agreement" and collectively as the "Security Agreements"),
have assumed the responsibilities of Underwriter and Custodian (as
defined therein), respectively, under such Security Agreements; and
WHEREAS, the Security Agreements provided for the issuance of
systematic investment plans contemplating investment in shares of
Security Action Fund, a mutual investment fund, or any other shares
substituted therefor under the terms of such plans; and
WHEREAS, pursuant to Section 16 of the Security Agreements and the
terms of systematic investment plans issued pursuant to the applicable
Security Agreement ("Destiny Plans II-A"), shares of the Destiny II
series of the Fund have been substituted for shares of Security Action
Fund held by the custodian under such Security Agreements, as a result
of the transfer of assets of Security Action Fund to the Destiny II
series of the Fund; and
WHEREAS, the Sponsor and the Custodian believe that this action will
not adversely affect the rights and privileges of any holder of an
outstanding Plan; and
WHEREAS, the Sponsor and the Custodian intend to effect this action on
April 26, 1999; and
WHEREAS, the Custodian is willing to render the services specified in
this Agreement, but only on the terms and conditions set forth herein
and in the Plans:
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the parties hereto agree as follows:
1. PLANS AND CUSTODIANSHIP.
(a) The Sponsor offers four types of periodic payment plans:
"Fidelity Systematic Investment Plans: Destiny Plans I: Original, for
the Accumulation of Shares of Fidelity Destiny Portfolios: Destiny I:
Class O" (referred to hereinafter as "Destiny Plans I: Original"),
"Fidelity Systematic Investment Plans: Destiny Plans I: New, for the
Accumulation of Shares of Fidelity Destiny Portfolios: Destiny I:
Class N" (referred to hereinafter as "Destiny Plans I: New"),
"Fidelity Systematic Investment Plans: Destiny Plans II: Original, for
the Accumulation of Shares of Fidelity Destiny Portfolios: Destiny II:
Class O" (referred to hereinafter as "Destiny Plans II: Original"),
and "Fidelity Systematic Investment Plans: Destiny Plans II: New, for
the Accumulation of Shares of Fidelity Destiny Portfolios: Destiny
II: Class N" (referred to hereinafter as "Destiny Plans II: New")
(collectively, the "Plans"). The Plans provide for the purchase of
shares of a specified series and class of the Fund, or of shares of
any other open-end management investment company substituted therefor
under the terms of the Plans (all such shares and any fractional
interests therein are hereinafter referred to as "Fund Shares"). In
the event of a conflict between an applicable Plan Document in effect
at the time of establishment of an account in connection with such
Plan, the Custodian shall administer the applicable Plan according to
this Agreement unless instructed otherwise by the Sponsor.
Plans may, but need not, be issued in certificate form. Plans that
have been issued in certificate form (a "Certificate") under a
Predecessor Custodian Agreement or a Security Agreement, respectively,
are substantially in one of the forms attached hereto at Exhibit A and
Exhibit B. If a Certificate has been issued in connection with a
Plan, then such Plan shall be governed by the terms and conditions set
forth in the Certificate. In addition, each Plan, including Plans
issued in Certificate form and Plans not issued in Certificate form,
shall be governed by the terms and conditions set forth in the
prospectus for such Plan as in effect at the time such Plan was issued
("Prospectus"). The terms and conditions set forth in the respective
Certificates and Prospectuses (together, the "Plan Documents") are
incorporated herein and made a part of this Agreement. Each Plan
shall be administered under this Agreement in accordance with
applicable Plan Documents in effect at the time of the establishment
of an account in connection with such Plan.
The Plan Documents are subject to such changes in form and content as
the Sponsor may effect from time to time and, with respect to changes
in form and content of any issued and outstanding Plans, in accordance
with the terms of applicable Plan Documents. In addition, the Sponsor
may elect to apply such changes to Plans already issued only if such
changes do not adversely affect the rights and privileges of the
Planholders thereof. Any such changes in Plan Documents affecting
implementation of the provisions of this Agreement shall be
acknowledged by the Sponsor and the Custodian.
(b) The Custodian accepts the custodianship hereunder with respect to
Plans issued pursuant to the terms of each of the Predecessor
Custodian Agreements that are outstanding on the date of this
Agreement, on the terms and conditions set forth in the Plan Documents
applicable to such Plans.
(c) The Custodian accepts the custodianship hereunder with respect to
Plans issued after the date of this Agreement on the terms and
conditions set forth in this Agreement and in the Plan Documents
applicable to such Plans; provided that the Custodian may, as a
condition to accepting custodianship with respect to a Plan, require
the Sponsor to furnish to the Custodian:
(i) Evidence satisfactory to the Custodian that the Sponsor has
taken all necessary action to satisfy the requirements of the
Investment Company Act of 1940, as amended (the "1940 Act"), in
connection with the issuance of the Plans; that a registration
statement under the Securities Act of 1933, as amended (the "1933
Act"), covering Plans to be offered after the date of this Agreement
is effective; that the Fund shares are the subject of a currently
effective registration statement under the 1933 Act; that the
registration of the Sponsor as a broker-dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act") is effective; that
the Sponsor is a member in good standing of the National Association
of Securities Dealers, Inc.; and that all other necessary approvals of
the Plans and the issuance and sale thereof by governmental
authorities having jurisdiction with respect thereto has been duly
obtained.
(ii) Such additional documents, certificates and opinions as the
Custodian may reasonably require.
2. CUSTODIAN'S FUNCTIONS.
(a) Issuance of New Plans. Upon receipt by the Custodian or its agent
of an application for a Plan, and of funds, check or other order for
the payment of money representing the initial payment for a Plan by
the purchaser thereof (hereinafter called the "Planholder"), and any
Designation of Beneficiary that may be required by the Sponsor or
pursuant to applicable Plan Documents, the Custodian will then:
(i) establish an account for such Planholder that reflects the face
amount of the new Plan;
(ii) forward for collection such check or other order for the payment
of money as hereinafter provided in section 2(b)(i) hereof; and
(iii) forward to the Planholder by first-class mail the Custodian's
letter of transmittal and a notice conforming to the requirements of
Section 27(f) of the 1940 Act, Rule 27f-1 thereunder (or any successor
rule) and as described in the Plan Documents for such Plan, and such
other explanatory information or communication to the Planholders as
may be furnished by the Sponsor, including, but only if so directed by
the Sponsor, a Plan Certificate. Such form of notice shall be
approved by the Sponsor.
(b) Application of Payments Under Issued and Outstanding Plans. Upon
receipt by the Custodian or its agent of any payment identified by the
Custodian as being for the account of a Planholder and that is made in
accordance with applicable Plan Documents, including any payment being
made pursuant to an extended investment option, the Custodian will:
(i) Forward for collection any check or other order for the payment
of money representing such payment. In the event any check or other
order for the payment of money forwarded by the Custodian for
collection is returned unpaid for any reason, the Custodian may, in
its discretion or as from time to time instructed by the Sponsor,
redeposit such check for collection. If such item is returned a
second time as unpaid, any Fund Shares acquired with said check shall
be redeemed and to the extent there is a deficiency the Custodian
shall charge any deficiency (including applicable custodian fees) to
the Sponsor. The Custodian shall promptly notify the Planholder of
any such returned item and send a copy of such notice to the Sponsor
or selling broker-dealer.
(ii) Deduct from the payment the amount of any applicable original
issue, stock transfer, sales or other taxes and apply such amounts to
the purchase of the necessary tax stamps or to payments to the proper
taxing authorities, as the case may be.
(iii) Deduct therefrom the applicable fees of the Sponsor and the
Custodian as set forth in Schedules 1 and 2 to this Agreement
applicable to such Plan. Such deductions shall be credited to the
Sponsor or the Custodian, as the case may be.
(iv) Apply, within two business days unless impracticable, the
balance of the payment to the purchase of Fund Shares, and credit the
account of the Planholder (computed to three decimal places) with the
number of Fund Shares so purchased.
(v) Prepare and mail to the Planholder a receipt in a form to be
approved by the Sponsor, which receipt shall be substantially in the
form attached hereto as Exhibit C and comply as to form and delivery
with the requirements of Rule 10b-10 of the 1934 Act (or any successor
rule), and which receipt shall show the Plan number, the amount of the
payment received, the price paid per Fund Share, the sales charges
deducted, the custodian charge deducted, the number of such Fund
Shares purchased after the deductions and the total Fund Shares then
held by the Custodian for the Planholder. Such receipts shall be
mailed by the Custodian to Planholders, and at the same time a copy of
the receipt shall be sent to the selling broker-dealer, both to be
mailed within two business days (within seven business days for
receipts issued in connection with the purchase of Fund Shares for the
establishment of new accounts) from the date the Custodian purchases
Fund Shares with the payment for which a receipt is being prepared and
mailed (or as soon thereafter as possible).
(c) Additional Notices.
(i) Reminder Notices. The Custodian shall mail to each Planholder
prior to the Planholder's payment date a remittance form and, unless
otherwise agreed to, a return envelope to be used with the
Planholder's next payment. Such form of notice shall be approved by
the Sponsor and shall be substantially in the form attached hereto as
Exhibit D.
(ii) Past Due Payment Notices. On a periodic basis as agreed upon
from time to time by the Sponsor and the Custodian, the Custodian
shall prepare and mail to the Planholder a notice of past due payment
in accordance with applicable Plan Documents and applicable law. Such
form of notice shall be approved by the Sponsor and shall be
substantially in the form attached hereto as Exhibit E. The Custodian
shall provide the selling broker-dealer, or in the absence of such,
the Sponsor, with a duplicate of each such notice sent to any
Planholder.
(iii) Refund Notices. The Custodian also shall mail to each
Planholder any notice(s) required by Section 27(e) of the 1940 Act and
Rule 27e-1 thereunder (or any successor rule). Such notice(s) shall
comply with Section 27(e) and Rule 27e-1 thereunder (or any successor
rule) and shall be in accordance with applicable Plan Documents. Such
form of notice shall be approved by the Sponsor and shall be
substantially in the form attached hereto as Exhibit F.
(iv) Termination Notices. In the event that a Plan is being
terminated by the Sponsor or the Custodian in accordance with the
terms of applicable Plan Documents and Section 7 of this Agreement,
the Custodian shall also mail or deliver to the affected Planholder a
notice of termination as described in applicable Plan Documents and in
Section 7(c) of this Agreement. The Custodian will provide the
selling broker-dealer or, in the absence of such, the Sponsor with a
duplicate of each such notice sent to any Planholder. Such form of
notice shall be approved by the Sponsor and shall be substantially in
the form attached hereto as Exhibit G.
(v) Other Notices. The Custodian shall also mail or deliver to
each Planholder any other notices required by any applicable federal
or state law, rule, or regulation, in such form and by such means as
are required by such law, rule, or regulation. The form of any such
notice shall be approved by the Sponsor.
(d) Refund Procedures. In the event that the Custodian is required
under applicable provisions of Plan Documents to accept the return of
the Plan and to reimburse to the Planholder all or a portion of the
Planholder's payments made as specified in the Plan Documents for such
Plan, the Custodian shall charge against the deposit account of the
Sponsor in the banking department of the Custodian the amount of any
such reimbursed payment in excess of the net asset value of Fund
Shares purchased under such Plan; and, unless such return is elected
within 45 days of the mailing of the notice described in Section
2(a)(iii) above, less the amount of any Custodian fees. In the event
that such refund procedures are initiated with respect to the account
of a Planholder, the Custodian shall inform the selling broker-dealer
or in the absence of such, the Sponsor.
(e) Prepayments. A Planholder will be permitted to complete a Plan
ahead of schedule, but only in accordance with the terms and
conditions of applicable Plan Documents. Any such prepayments
received by the Custodian shall be applied, to the extent of the
balance thereof after authorized deductions, to the next succeeding
payments due and payable under the Plan in the order in which they
become due. In computing the commencement of any period of default,
the Planholder shall first be given full credit for a period equal to
that covered by any and all payments made ahead of schedule by the
Planholder.
(f) Changes in Plan Face Amount. A Planholder may change the face
amount of a Plan, but only in accordance with the terms and conditions
of applicable Plan Documents. If such change in face amount is
approved by the Sponsor, the Custodian shall make appropriate changes
in the Planholder's account, and if so requested by the Sponsor,
prepare and countersign a Certificate for a Plan in the changed
denomination and forward it by first class mail to the Planholder with
such communications as may be furnished to the Custodian by the
Sponsor. Changes in the face amount of a Plan shall be implemented by
the Custodian only upon receipt of:
(i) written instructions from the Planholder, Sponsor or selling
broker-dealer, as applicable, as to the increase or decrease in Plan
face amount, which instructions shall set forth the Plan account
number, the face amount of the new Plan, the amount of each monthly
payment on the new Plan, the number of Plan payments which are to be
credited to the new Plan, and the amount, if any, of the adjustment in
sales charges and custodian fees resulting from the change in face
amount and such other information as may be reasonably requested from
time to time by the Custodian. Such adjustment shall be in accordance
with the terms of applicable Plan Documents and shall be effective
concurrently with the change in face amount; i.e., at the time a new
Plan is established that reflects the new face amount;
(ii) in the case of a face amount increase, payment by check in the
amount of the first payment to be made under the Plan as increased in
face amount, as specified in applicable Plan Documents, unless such
payment is reduced or waived by the Sponsor;
(iii) if the total payments made on the Plan surrendered are not an
integral multiple of the monthly payments required on the new Plan, a
check in the sum that is required by the Sponsor to enable the
remaining monthly payments (after giving credit for payments already
made) to equal the face amount of the new Plan; and
(iv) the Plan Certificate for the Plan being surrendered, if
applicable.
(g) Partial Liquidations and Replacement. A Planholder may make a
partial liquidation from the Planholder's account, but only in
accordance with the terms and conditions of applicable Plan Documents.
Any such request for a partial liquidation received by the Custodian
or its agent shall be processed by the Custodian, and proceeds shall
be payable by the Custodian to such Planholder, in accordance with the
terms and conditions of applicable Plan Documents and with the 1940
Act. Following a partial liquidation, a Planholder is permitted to
exercise a replacement privilege with respect to such partial
liquidation if and to the extent such replacement is provided for in
applicable Plan Documents. Upon receipt by the Custodian or its agent
of any payment identified by the Custodian as being a replacement of a
partial liquidation for the account of a Planholder and that is made
in accordance with applicable Plan Documents, the Custodian will
process and credit such payment for the account of the Planholder in
accordance with the provisions of section 2(b) of this Agreement,
applicable Plan Documents, and the 1940 Act.
(h) Transfers or Assignments of Plans. A Planholder may make a
transfer or assignment of the Planholder's right, title, and interest
in the entire plan, but only in accordance with the terms and
conditions of applicable Plan Documents. Any such request for a
transfer or assignment received by the Custodian or its agent shall be
recorded by the Custodian in accordance with the terms and conditions
of applicable Plan Documents until the assignee shall have notified
the Custodian that the transfer or assignment has terminated. The
terms of any such transfer or assignment shall be subject to
applicable Plan Documents. During the term of the transfer or
assignment, such Planholder shall retain those rights specified in
applicable Plan Documents.
(i) Termination on Default. If the Planholder defaults in making Plan
payments for the period of time specified in applicable Plan Documents
as the default period, or if Fund Shares are not obtainable and a
substitution is not made, the Plan shall be considered in a state of
default, and the Plan may be terminated in accordance with applicable
Plan Documents in the manner and with the effect set forth therein.
Such termination may only be effected after mailing by the Custodian
of written notice of the termination to the Planholder in accordance
with the terms of applicable Plan Documents; a copy of such written
notice of termination shall also be mailed to the selling
broker-dealer or in the absence of such, the Sponsor.
(j) Plan Reinstatement or Replacement Following Termination. A
Planholder that has terminated a Plan may exercise a Plan
reinstatement provision, which provides for reinvestment of a
specified amount in a Plan, but only in accordance with and pursuant
to the terms and conditions of applicable Plan Documents. Any such
reinstatement order and investment received by the Custodian or its
agent shall be processed by the Custodian and credited for the account
of such Planholder in accordance with the terms and conditions of
applicable Plan Documents, section 2(b) of this Agreement, and the
1940 Act.
(k) Records.
(i) The Custodian will prepare and maintain complete up-to-date
records of the performance of its duties hereunder, on magnetic tape
or otherwise, including records showing a separate account for each
Planholder, and the name and address of the Planholder; the number,
date and amount of each payment made by the Planholder; the date and
amount of all dividends and distributions received by the Custodian on
Fund Shares held for the account of the Planholder; any amounts
withheld from withdrawals under a Plan in accordance with the Internal
Revenue Code of 1986, as amended, and any regulations thereunder (or
successor regulations); and all deductions made and the number of Fund
Shares acquired and held by the Custodian for the account of the
Planholder. These records shall be maintained and preserved in
accordance with applicable requirements of Section 31 of the 1940 Act
and rules thereunder (or any successor rule) applicable to records
kept with regard to the Plans. Such records shall be made available
to the Sponsor for inspection or audit via magnetic tape or at the
office of the Custodian at all reasonable times.
(ii) The Custodian shall maintain a separate account for each
Planholder showing the number of Fund Shares (to three decimal places)
and the amount of cash, if any, to the credit of each account. The
records of such accounts shall be maintained separate and apart from
the Custodian's corporate records.
(l) Statements Furnished to Sponsor and Selling Broker-Dealer. The
Custodian will render statements to the Sponsor at such time and in
such form as may be agreed upon by the parties hereto, showing for
each account in which transactions were recorded during the specified
period the number of the account, the amount of the payment(s)
received, the number of such payment(s), the deductions made, the
balance applied to the purchase of Fund Shares, and the number of
Shares purchased.
(m) Application of Dividends and Distributions. The Custodian will
receive all dividends and distributions on the Fund Shares held by it
as Custodian for each Planholder and, after deduction therefrom of (i)
any applicable charges and deductions set forth in Schedules 1 or 2 or
otherwise specified in the Plan Documents, and (ii) applicable taxes
required by law or elected by a Planholder to be withheld therefrom,
will with respect to each account for a Planholder, either apply the
balance to the purchase of Fund Shares, or distribute the balance to
the Planholder as he shall have elected in accordance with applicable
Plan Documents. Any dividend or distribution payable optionally in
cash or in Fund Shares, may, at the discretion of the Custodian, be
accepted by the Custodian in cash or in Fund Shares in such proportion
as may be determined by the Custodian and the Fund.
(n) Custodian Fees and Charges. The Custodian will perform the
functions required of it by the terms of this Agreement and will be
entitled to deduct the charges set forth in Schedule 2 applicable to
the Plans and as specified in the applicable Plan Documents which
charges shall be deducted from payments or the Planholders' accounts,
as specified in applicable Plan Documents, unless the Custodian is
otherwise reimbursed by the Sponsor. In connection with the
foregoing:
(i) With respect only to Plan accounts established after October
31, 1982, for the calendar year commencing January 1, 1982 and each
calendar year thereafter, the Custodian shall reimburse the Sponsor
for any amounts paid to it by the Sponsor in prior fiscal years
pursuant to Schedule 2 of this Agreement to the extent that the actual
expenses of the Custodian covered by the Service Charge (as specified
in Schedule 2) for that fiscal year are less than $10.00 per Plan
account, and will charge each Plan account the amount of such
reimbursement in an amount not to exceed the difference between $10.00
and the actual expenses to be charged to a Plan account for that
fiscal year.
(ii) If the amount of deductions from the accounts of Planholders as
provided in Schedule 2 are not sufficient to reimburse the Custodian
for the charges, fees, and expenses specified in Schedule 2, the
Sponsor shall pay to the Custodian the difference between the total
amount of all such charges, fees, and expenses, and the amounts which
the Custodian deducted.
(iii) In case of default by the Sponsor in the performance of any
administrative service relating to the custodianship described in this
Agreement required of it under the provisions of Section 3(c) below,
or at the election of the Custodian, the Custodian will perform such
service for a consideration payable by or from the account of the
Planholders. Such consideration shall not be in excess of the amount
provided for in this Agreement, including schedules hereto.
(iv) Any deductions under the terms of this provision shall be made
in accordance with the terms of Section 26(a)(2) of the 1940 Act and
any rules thereunder (or any successor rules).
(o) Purchases of Fund Shares. All purchases of Fund Shares by the
Custodian pursuant to the provisions of this Agreement shall be made
from the Fund, or its issuing agent (or any underwriter of Fund Shares
with which the Sponsor may contract for such purpose) at the net asset
value of the Fund at the time of purchase as calculated by Fidelity
Service Company ("FSC") (or any successor thereto) in accordance with
the terms of the Fund's then current prospectus. The Custodian shall
be entitled to presume conclusively that the price set by FSC (or any
successor thereto) with respect to any Fund Shares purchased by the
Custodian is said net asset value. Funds received by the Custodian to
be applied to the purchase of Fund Shares shall, unless impracticable,
be applied to such purchase within two business days after the receipt
by the Custodian of said payments, dividends or distributions.
(p) Sales of Fund Shares. All sales of Fund Shares by the Custodian,
as agent, pursuant to the provisions of this Agreement, shall be made
by deposit of the shares with the Fund or its duly authorized agent
together with a request that the shares be repurchased at the net
asset value of the Fund at the time of sale as calculated by FSC (or
any successor thereto) in accordance with the terms of the Fund's then
current prospectus, so long as the privilege of redemption at net
asset value is available to holders of Fund Shares as set forth in the
Fund's then current prospectus. Whenever pursuant to the provisions
of this Agreement Fund Shares are to be sold or redeemed, the
Custodian shall first withdraw the Fund Shares from the custodianship
hereunder and, as agent for the Planholder, shall sell or redeem said
shares by depositing them for repurchase as set forth above. Anything
herein to the contrary notwithstanding, (i) the Custodian, as agent
for the Planholders, is authorized to offset sales and purchases for
all of the Planholders on a business day and, accordingly, to place
with the Fund or its agent a net purchase order for the excess of
purchases over sales, or a net sale order for the excess of sales over
purchases; and (ii) any such sales of Fund Shares in connection with a
Plan termination, a withdrawal of shares by a Planholder, or an
exercise of an exchange privilege by a Planholder, shall be effected
by the Custodian in accordance with the terms and conditions of
applicable Plan Documents.
(q) Holding Fund Shares. The Custodian shall have possession of, and
shall segregate and hold all of the securities and other properties in
which the funds of the Planholders of each Series are invested, all
funds held for such investment, any redemption or other special funds
to the Planholders, and all income upon and accretion to and proceeds
of such properties and funds subject only to the deductions specified
in this Agreement or in the Plan Documents, unless and until
distributed to the Planholders in accordance with the terms of
applicable Plan Documents. The Custodian is authorized to commingle
all cash or other property and all Fund Shares held by it hereunder
for a Series, but only with other cash, property or Fund Shares held
by it hereunder for such Series, and to cause any certificates for
Fund shares to be registered in its name as Custodian or in the name
of its nominees. Except as provided below with respect to bank
accounts, nothing herein shall be construed as permitting the
Custodian to commingle the Fund Shares, securities or other properties
of Plans of one Series with plans other than the Plans of the same
Series. All monies deposited with or received by the Custodian
hereunder shall be held by it without interest as part of the
custodianship until required to be disbursed in accordance with the
provisions of this Agreement or of the Plans. The Custodian shall
open and maintain separate bank accounts in the banking department of
the Custodian in the name and for the benefit of each Series of the
Plans, subject only to the draft order of the Custodian or order of
the Custodian acting pursuant to the terms of this Agreement, and
shall hold in such bank accounts all monies received by the Custodian
from and for the account of each Series of the Plans. The Custodian
may aggregate or commingle the bank accounts of each Series as
instructed by the Sponsor.
(r) Reports and Other Mailings to Planholders. The Custodian will:
(i) Upon the instructions of the Sponsor or the Fund, mail to all
Planholders such prospectuses, annual reports, semi-annual reports,
quarterly reports and/or other periodic financial reports, dividend or
other account statements, tax notices, notices of meetings and proxy
soliciting material as are available and the mailing of which is
required by applicable law or regulation. The cost of the above,
including postage, shall be reimbursed to the Custodian by the
Sponsor. It is understood and agreed that the services performed by
the Custodian hereunder are separate and apart from the services
performed under Section 2(n) above and Section 2(s) below.
(ii) Prepare and file such reports and returns as are required by
law or regulation to be prepared and filed by the Custodian to permit
its custodianship under the Agreement to continue in operation.
(s) IRS Reporting. The Custodian shall furnish to the Internal
Revenue Service and to each Planholder all required returns relating
to dividends or other distributions to such Planholder's account(s)
for federal income tax reporting purposes.
(t) Court Orders and Levies. The Custodian is empowered to make a
distribution absent the Sponsor's direction if instructed to do so
pursuant to a court order of any kind, or a levy issued by the
Internal Revenue Service.
(u) Delegation of Duties. The Custodian assumes primary
responsibility for the preparation and filing of all such reports or
documents as are required of it as Custodian by law or regulation, but
may delegate the performance of such duties to the Sponsor. Upon the
written request of the Sponsor, the Custodian will delegate any of its
functions described in this Section 2 or in Section 3 of this
Agreement, provided that such delegation is not inconsistent with
Sections 26 or 27 of the 1940 Act. In addition, the Custodian may
delegate its duties under this Agreement to its affiliate, Boston
Financial Data Services, Inc. ("BFDS") or any other affiliate of the
Custodian, provided that (i) each such delegatee shall be a transfer
agent registered under Section 17A(c)(2) of the 1934 Act, (ii) such
delegation is not inconsistent with Sections 26 or 27 of the 1940 Act,
(iii) the Custodian shall provide the Sponsor with 30 days' notice of
the Custodian's intention to delegate its duties to such other
affiliate and (iv) the Sponsor shall not have objected to such
delegation within such 30-day time period. In the event that the
Custodian delegates one or more of its duties hereunder to BFDS or
another affiliate, the Custodian shall remain responsible for the acts
and omissions of BFDS as it is for its own acts and omissions
hereunder.
3. SPONSOR'S FUNCTIONS.
(a) General Functions. The Sponsor agrees to perform the functions
required of it by the terms hereof and of the Plan Documents. The
Sponsor will use its best efforts to distribute Plans, maintain
adequate office facilities and management staff, and keep current
records. The Sponsor assumes full responsibility for the preparation,
contents, and distribution of the current Plan prospectus and the
current Fund prospectus, for complying with all applicable
requirements of the 1933 Act, the 1940 Act, and any other applicable
laws, rules and regulations of governmental authorities having
jurisdiction. With respect to any duties for which the Custodian
assumes primary responsibility but which it delegates to the Sponsor,
the Sponsor covenants and agrees to take all action, and not to omit
any action, necessary to carry out such duties, and agrees to furnish
to the Custodian, upon request, evidence thereof satisfactory to the
Custodian and its counsel. The Sponsor will use its best efforts to
make shares of the Fund available for purchase by the Custodian at net
asset value.
(b) Issuance of New Plans. The Sponsor will require each selling
broker-dealer to agree to forward to the Custodian upon the sale of
each Plan the application for such Plan, the check, funds (by wire or
Automatic Clearinghouse (ACH) transfer) or order for the payment of
money representing the initial payment under such Plan, and any
required Designation of Beneficiary.
(c) Statements Furnished to Custodian. The Sponsor will furnish to
the Custodian and file to the extent required by law on behalf of the
Custodian:
(i) As soon as available, a copy of each audit report and other
financial statements relating to the custodianship of the Plans and
sufficient reports and other documents required to be mailed to
Planholders under Section 2(r)(i) and (ii) above.
(ii) Not less than 20 calendar days prior to the due date thereof,
all Federal and State income tax returns, and all other tax returns,
if any, required by law to be filed by the Custodian with respect to
its custodianships hereunder, prepared in form for execution and
filing, together with advice concerning the proper allocation of
expenses and other items among the Planholders. Such tax returns
shall be filed by the Sponsor on behalf of the Custodian.
(iii) Any instructions received by the Sponsor from Planholders as a
result of the distribution of proxy soliciting material or otherwise
in connection with the voting of Fund Shares held by the Custodian.
The Custodian will vote those Fund Shares for which instructions have
been received from Planholders only in accordance with such
instructions. The Custodian will vote Fund Shares for which
instructions have not been received such that the total votes cast by
the Custodian in favor, abstaining, or opposed on any matter submitted
to Fund shareholders, including the election of Directors, will be in
the same proportion as the votes in favor, abstaining, or opposed cast
by the Custodian with respect to the Fund Shares for which
instructions have been received.
(iv) Draft copies of all literature, plans, prospectuses, printed
matter and other material which contain any reference to the
Custodian, except material which is merely circulated among or sent to
employees, stockholders, or representatives of the Sponsor and except
for correspondence in the ordinary course of business which refers in
accurate terms to the Custodian's functions under the Plans. The
Sponsor agrees that none of the documents specified in this clause
shall be reproduced in final form or distributed without the
Custodian's approval (which in each instance must be given or denied
within fifteen business days and which will not in any instance be
unreasonably withheld) of the Custodian.
(v) As soon as possible after January first of each year, printed
forms for reporting distributions to Planholders for income tax
purposes, unless the Custodian furnishes its own form.
(vi) As promptly as possible after receiving notice of the
declaration of dividends and distributions or the fixing of any record
date, notice thereof.
(d) Plans in Default. Upon receipt from the Custodian of a monthly
statement of Planholders specifying those Plans in current default on
payments, the Sponsor will require the selling broker-dealer to
promptly endeavor to have said Planholders remedy their defaults.
(e) Planholder Inquiries. The Sponsor and the Custodian will respond
promptly to each Planholder inquiry received by the Sponsor and
Custodian, respectively, to the extent that the Sponsor or Custodian,
as applicable, can respond to such inquiry. In the event that any
such inquiry cannot be responded to, the party receiving such inquiry
will promptly refer the inquiry to the other party to this Agreement.
(f) Plan Cancellations. In the event that the Sponsor receives from
the Custodian a notice of Plan cancellation by a Planholder, and such
cancellation is subject under applicable law and Plan Documents to a
refund of a portion of the Creation and Sales Charge previously
imposed under the Plan, the Sponsor shall transmit funds to the order
of the Custodian in an amount equal to the refundable amount
calculated in accordance with applicable law and Plan Documents.
4. SUBSTITUTION.
(a) Procedures and Expenses. In the event that the Sponsor
substitutes shares of another investment medium for shares of the Fund
in accordance with the procedures set forth in applicable Plan
Documents, all required notices shall be prepared and mailed by the
Sponsor. In connection with such substitution, the Custodian is
authorized to charge against the account of a Planholder such
Planholder's pro rata share of the expenses (including tax liability)
incurred by the Custodian, BFDS as the agent of the Custodian, or the
Sponsor, and to pay over to BFDS or to the Sponsor, as applicable, the
amount of such charge attributable to expenses incurred by BFDS or the
Sponsor, respectively, in connection with the substitution. The
Sponsor and the Custodian shall furnish to one another, and make
available to Planholders upon request, a detailed statement itemizing
their respective expenses.
(b) Purchases of Fund Shares. In the event of a substitution of
shares as described in Section 4(a) above, any purchases of fund
shares associated with such substitution shall be made at the net
asset value or at the liquidation value of such fund shares (whichever
term the issuer of such fund shares uses) as determined by the issuer
or the issuer's agent thereof as of the date such substitution is
effected.
(c) Effect of Substitution. In the event of any substitution of
shares as described in Section 4(a) above, the term "Fund" as used
throughout this Agreement shall be deemed to include the open-end
management investment company the shares of which have been thereby
substituted for Fund Shares; and the term "Fund Shares" as used
throughout this Agreement shall be deemed to include the shares (or
comparable interests) in the open-end management company the shares of
which have been substituted for Fund Shares.
5. INDEMNIFICATION.
The Sponsor, its successors and assigns, shall at all times fully
indemnify and hold harmless the Custodian, its successors and assigns,
from any and all liability, claims, demands, actions, suits, cost or
expense of any nature as the same may arise or be made against or be
incurred by the Custodian from the failure of the Sponsor to comply
with any law, rule, regulation or order of the United States, any
State or any other jurisdiction, governmental authority, body or board
having jurisdiction, relating to the sale, registration or
qualification of the Plans or any of them, or the securities sold in
connection therewith. The Sponsor also agrees to indemnify the
Custodian for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on the part of the
Custodian, arising out of or in connection with the acceptance hereof
or the performance of its duties hereunder, as well as the costs and
expenses of defending against any claim or liability in the premises,
provided that no claim against the Custodian which might be subject to
the foregoing indemnification provisions shall be confessed, settled
or compromised by the Custodian without the Custodian first having
given fifteen days notice in writing to the Sponsor of the material
facts, and provided further that the Sponsor shall have the right upon
written demand delivered to the Custodian within fifteen days
following the date of such notice to contest or defend such claim in
the name of the Custodian.
6. QUALIFICATIONS AND RESIGNATION OF CUSTODIAN.
(a) Capital. The Custodian and any successor Custodian shall be a
bank or trust company having at all times an aggregate capital,
surplus and undivided profits in excess of $2,000,000. The Custodian
certifies that it is now, and agrees that so long as it acts as
Custodian under any Plan will continue to be, so qualified.
(b) Holding of Monies. All monies received by the Custodian under or
pursuant to any provision of this Agreement or any Plan or other
instrument referred to herein shall be held by the Custodian as a
deposit for the purposes for which they were paid or are held, and the
Custodian shall not be under any liability for interest on any such
monies, except such as it may agree to pay thereon.
(c) Duties of the Custodian. The Custodian shall be obligated to
perform such duties and only such duties as are specifically set forth
in this Agreement and Plan Documents, and no implied obligations shall
be read into this Agreement or Plan Documents against the Custodian,
and in the absence of bad faith on its part the Custodian may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any instruments,
certificates, opinions or other writings furnished to the Custodian
and conforming to the requirements hereof. The Custodian shall not be
responsible in any manner whatsoever for the correctness of the
recitals (as distinguished from particular covenants) of the Custodian
herein, or recitals in Plan Documents made solely by the Sponsor. The
Custodian makes no representations as to Plan Documents or the
securities issued in connection therewith, or the validity thereof,
and the Custodian shall incur no liability or responsibility with
respect to any such matters. The Custodian shall not be responsible
for any actions or inactions of, and may rely on information, records,
documents or services (including functions performed by the Sponsor
under Section 2(t) of this Agreement) that have been taken or have
failed to be taken, prepared, maintained or performed by, the Sponsor
or any other person authorized by the Sponsor on behalf of the
Custodian, the Sponsor or the Plans, including but not limited to any
previous Sponsor or Custodian of the Plans.
(d) Additional Capacities. The Custodian may, at the same time it
acts hereunder, act in any one or more of the following capacities:
as registrar, transfer agent and custodian for the issuer of Fund
Shares, as agent for the parties or for the Planholders or the
Sponsor, or the issuer of Fund Shares, and in other capacities
customary for banks on behalf of these persons and of others dealing
with them.
(e) Advice of Counsel; Liabilities. The Custodian may consult with
legal counsel to be selected with reasonable care by the Custodian
(who may be counsel to the Sponsor) and the Custodian shall not be
liable for any action taken, omitted or suffered by it in good faith
in accordance with the advice of such counsel. Whenever in the
performance of its duties hereunder the Custodian shall deem it
necessary or desirable, a matter may be proved or established by a
certificate signed by any two officers of the Sponsor and delivered to
the Custodian, and such certificate shall be full warrant what is this
to the Custodian for any action taken, suffered or omitted by or in
reliance thereon. The Custodian may, in the absence of bad faith on
its part, rely and shall be protected in acting upon any request,
letter or transmittal, certificate, opinion of counsel, statement,
instrument, report, notice, consent, order, Plan or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Custodian shall be
liable only for its wilful misconduct or gross negligence.
(f) Resignation. The Custodian may resign at any time if, but only
if, either (I) the securities and other property in which the funds of
the Planholders are invested have been completely liquidated and the
proceeds of such liquidation distributed to the Planholders, or (II) a
successor Custodian meeting with the reasonable approval of the
Sponsor and having the qualifications specified in Section 6(a) above
has been designated by the resigning Custodian or the Sponsor and has
accepted such custodianship.
7. TERMINATIONS.
(a) Termination of Plan by Planholder. A Plan may be terminated by
the Planholder in accordance with the provisions of applicable Plan
Documents.
(b) Termination of Plan by Sponsor or Custodian. Neither the Sponsor
nor the Custodian may terminate a Plan until such time as is specified
in applicable Plan Documents, unless and to the extent that conditions
specified in Plan Documents applicable to such Plan and permitting
such termination have been satisfied. If a Plan is in a state of
default or delinquency, as defined in applicable Plan Documents,
either the Sponsor or the Custodian may terminate such Plan in the
manner provided in such Plan Documents.
(c) Plan Termination Procedures. In connection with the termination
of any Plan in accordance with the provisions of applicable Plan
Documents and this Section 7, the Custodian will furnish the
Planholder and the Sponsor with a notice of termination showing all
changes in such Planholder's account since the date of the last
previous statement issued by the Custodian, and the Planholder shall
thereafter have no further claim against the Custodian, except as may
be set forth in such statement, and shall not be entitled to any
further accounting. In the event of termination of a Plan,
liquidation of the Planholder's account and final payment to said
Planholder shall be effected by the Custodian in accordance with
applicable Plan Documents.
(d) Return of Certificate Upon Termination of Plan. If a Certificate
was issued in connection with such terminated Plan and the Planholder
fails to surrender the Planholder's Certificate within a period of
sixty days after the mailing of the notice of termination referred to
above, the Custodian may in its discretion mail to such Planholder at
the Planholder's address noted upon its records, its check for all
cash standing to the Planholder's credit and such Fund Shares, if any,
which have been transferred to the Planholder's name; and such
Planholder shall have no further rights hereunder and such Certificate
shall be null and void and shall convey no rights whatsoever except
that if such check or Fund Shares are returned to the Custodian
undelivered, the Custodian shall continue to hold the assets for the
benefit of the Planholder subject only to escheat laws.
(e) Termination by Custodian of Custodian's Obligation.
(i) The obligation of the Custodian to accept any new Plan for
custodianship hereunder shall terminate if the Sponsor (I) fails to
maintain an effective registration statement under the Securities Act
of 1933, as amended, in connection with the issuance of the Plans;
(II) fails to cause the requirements of the 1940 Act to remain
satisfied in connection with the issuance of the Plans; (III) has
either its membership in the National Association of Securities
Dealers, Inc., or its registration as a broker-dealer under the
Securities Exchange Act of 1934, as amended, cancelled or revoked, or
suspended for more than 120 days for any cause involving failure on
the part of an executive officer or director to follow ethical
standards or serious neglect of that person's duty to require
representatives to follow such standards; (IV) defaults in the
performance of any other duty, covenant or agreement contained in this
Agreement, and such default shall remain unremedied for 30 days after
written notice thereof shall have been given to the Sponsor by the
Custodian (except with respect to item III, for which such remedy
period shall be 120 days), or (V) shall without the approval of the
Custodian change the form or content of the Plans in any way
materially affecting the rights or duties of the Custodian.
(ii) Notwithstanding the provisions of Section 7(e)(i) above, the
Custodian may terminate its obligation to accept any new Plans for
custodianship hereunder by giving written notice to the Sponsor at
least 90 days prior to the expiration of the third year from the date
of this Agreement, or at least 30 days prior to the expiration of any
further two-year period. In the event that the Custodian does not so
terminate its obligation to accept any new Plans for custodianship
hereunder as of the expiration of three years from the date of this
Agreement, then this Agreement shall be automatically renewed for
further periods of two years each with the right on the part of the
Custodian to terminate its obligations under the Agreement by giving
written notice at least 30 days prior to the expiration of any further
two-year period.
(f) Replacement of Custodian by Sponsor; Assumption of Administrative
Functions by Sponsor. The Sponsor shall have the right, by giving
written notice to the Custodian at least 90 days prior to the
expiration of this three-year Agreement, or at least 90 days prior to
the expiration of any two year extension period described in Section
7(e)(ii) above, to replace the Custodian with any other bank or trust
company having the requisite qualifications as the Custodian, both
with respect to any Plans issued and outstanding at the time of such
replacement, and under any Plans issued after such time, whether such
Plans are otherwise identical with those issued under this Agreement
or not. The Sponsor shall further have the right, by giving written
notice to the Custodian 90 days prior to the event, to assume such
administrative functions with respect to Plans as may be mutually
agreed upon by it and the Custodian.
(g) Upon such termination the Sponsor shall bear the cost of all
reasonable out-of-pocket expenses associated with the movement of
materials and records. Additionally, the Custodian reserves the right
to charge for any other reasonable expenses associated with such
termination, provided that the Custodian advises the Sponsor of such
additional charges in advance.
8. MISCELLANEOUS.
(a) This Agreement shall not be assigned by either of the parties
hereto without the prior consent in writing of the other party.
Notwithstanding the foregoing, (I) the Custodian shall delegate
responsibilities under this Agreement to the extent so directed by the
Sponsor in accordance with Section 2(t) of this Agreement; and (II)
each party to this Agreement may enter into such agreements with third
parties as are deemed necessary by such party to perform such party's
obligations under this Agreement or under the Plans, provided that
written acknowledgement of such third party agreements is obtained
from the other party to this Agreement.
(b) All communications provided hereunder shall be in writing sent by
first-class mail or delivered to the respective parties as follows:
Fidelity Distributors Corporation State Street Bank and Trust Company
82 Devonshire Street 225 Franklin Street
Boston, MA 02109 Boston, MA 02110
provided that either party may by notice given in accordance herewith
specify a different address for the purpose hereof.
(c) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and all of which shall be deemed
one and the same instrument.
(d) An executed copy of this Agreement and all amendments thereto
shall be kept on file by the Custodian and shall be open to inspection
by any Planholder at any time during the business hours of the
Custodian.
(e) This Agreement, including but not limited to Schedules 1 and 2
hereto, may be amended from time to time as mutually agreed by the
parties hereto in writing. Notwithstanding the foregoing, this
Agreement shall not be amended in such a manner as to affect adversely
the rights and privileges of any Planholder without first obtaining
the Planholder's written consent.
(f) All references herein to Schedules 1 and 2 hereto shall be deemed
to refer to Schedules 1 and 2 attached to this Agreement which are
hereby expressly made a part thereof; provided, however, that in the
case of Plans issued prior to the effective date of this Agreement of
which the Custodian has notice, references to Schedules 1 and 2 shall
be deemed to refer to such schedules as in effect at the time of such
issuance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year above written.
FIDELITY DISTRIBUTORS CORPORATION
By_________________________________
ATTEST: Date: ____________________________
___________________________
Date: ____________________ STATE STREET BANK AND TRUST COMPANY
By_________________________________
ATTEST: Date: ____________________________
___________________________
Date: ____________________
EXHIBIT A
PLAN CERTIFICATE
EXHIBIT B
PLAN CERTIFICATE
EXHIBIT C
FORM OF CONFIRMATION
EXHIBIT D
FORM OF REMINDER NOTICE
EXHIBIT E
FORM OF PAST DUE PAYMENT NOTICE
EXHIBIT F
FORM OF REFUND NOTICE
EXHIBIT G
FORM OF TERMINATION NOTICE
SCHEDULE 1
FEES TO BE PAID TO FIDELITY DISTRIBUTORS CORPORATION BY THE CUSTODIAN
FROM PLANHOLDER FEE PROCEEDS
A. With respect to each Destiny Plans I and each Destiny Plans II for
which an account was established prior to the effective date of this
Agreement, fees paid to Fidelity Distributors Corporation by the
Custodian shall be such fees as specified in the Predecessor Custodian
Agreement in effect at the time that the account for such Destiny
Plans I or Destiny Plans II, as applicable, was established.
B. With respect to each Destiny Plans I: Original and each Destiny
Plans II: Original for which an account is established on or after the
effective date of this Agreement, fees paid to Fidelity Distributors
Corporation by the Custodian shall be the fees specified below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Monthly Plan Fee for each of the First Fee for each Succeeding Fee for each Succeeding Payment
Payment 12 Plan Payments Payment under 10-Year Plan under 15-Year Plan and
Extended Investment Period
$ 50.00 $ 25.00 $ 1.80 $ 2.86
75.00 37.50 2.70 4.06
93.75 46.88 3.38 5.07
100.00 50.00 3.60 5.41
125.00 62.50 4.50 6.76
150.00 75.00 5.40 5.70
166.66 83.33 5.00 6.33
200.00 100.00 4.02 7.43
250.00 125.00 5.00 9.29
300.00 150.00 5.00 5.04
350.00 175.00 4.50 5.31
400.00 200.00 4.00 3.80
500.00 225.00 2.78 5.36
750.00 300.00 2.50 8.70
1,000.00 300.00 5.00 15.54
1,500.00 315.00 6.00 17.52
2,000.00 325.00 7.00 18.57
2,500.00 350.00 8.00 20.26
5,000.00 400.00 11.00 25.00
10,000.00 500.00 15.56 29.64
</TABLE>
C. With respect to each Destiny Plans I: New and each Destiny Plans
II: New for which an account is established on or after the effective
date of this Agreement, fees paid to Fidelity Distributors Corporation
by the Custodian shall be the fees specified below:
Monthly Plan Fee for each of the First 12 Fee for each Succeeding
Payment Plan Payments Payment under
10-Year Plan, 15-Year
Plan and
Extended Investment
Period
$ 50.00 $ 25.00 Not Applicable
75.00 37.50
100.00 50.00
125.00 62.50
150.00 75.00
166.66 83.33
200.00 100.00
250.00 125.00
300.00 150.00
350.00 175.00
400.00 200.00
450.00 225.00
500.00 250.00
600.00 300.00
700.00 350.00
750.00 375.00
800.00 400.00
900.00 450.00
1,000.00 500.00
1,200.00 600.00
1,500.00 675.00
1,750.00 700.00
2,000.00 750.00
2,500.00 812.50
5,000.00 1,250.00
10,000.00 1,500.00
D. With respect to each Destiny Plans II-A for which an account was
established prior to the effective date of this Agreement, fees paid
to Fidelity Distributors Corporation by the Custodian shall be such
fees to be paid by the custodian to the plan sponsor as are specified
in the custodian agreement in effect for such plan at the time that
the account for such plan was established.
SCHEDULE 2
CUSTODIAN FEE AND ADDITIONAL FEES AND CHARGES
I. CUSTODIAN FEE
A. With respect to each Destiny Plans I and each Destiny Plans II for
which an account was established prior to the effective date of this
Agreement, the Custodian Fee under each such Plan shall be such fees
as specified in the Predecessor Custodian Agreement in effect at the
time that the account for such Destiny Plans I or Destiny Plans II, as
applicable, was established.
B. With respect to each Destiny Plans I: Original, each Destiny Plans
I: New, each Destiny Plans II: Original and each Destiny Plans II: New
for which an account is established on or after the effective date of
this Agreement, the Custodian Fee shall be as specified below:
Monthly Fee for
Plan Each Plan
Payment Payment
$ 50.00 $ 1.10
75.00 1.25
100.00 1.50
125.00 1.50
150.00 1.50
166.66 1.50
200.00 1.50
250.00 1.50
300.00 1.50
350.00 1.50
400.00 1.50
450.00 1.50
500.00 1.50
600.00 1.50
700.00 1.50
750.00 1.50
800.00 1.50
900.00 1.50
1,000.00 1.50
1,250.00 1.50
1,500.00 1.50
1,750.00 1.50
2,000.00 1.50
2,500.00 1.50
5,000.00 1.50
10,000.00 1.50
For new accounts established on or after August 29, 1993 that use an
"automated" method of payment (I.E., PAC, ACH, or allotment), a "flat
fee" of $0.75 per payment will be paid to the Custodian. This flat
fee is available only with respect to new accounts established on or
after August 29, 1993 and will not be applied to any
previously-established accounts, unless otherwise directed by the
Sponsor and agreed upon by the Custodian.
1. In the event that a Planholder elects the Extended Investment
Option, the amount of the Custodian Fee to be charged for each Plan
payment during the extended period will be the same as the Fee
indicated in the above schedule for such Plan, provided that the
Custodian may increase its fee to the rate charged for new Plans of
the same denomination at the time of the first payment under the
Extended Investment Option, but not more than 75% in excess of the fee
set forth in the above schedule for each such Plan.
2. The Custodian Fee assessed on multiple payments will be computed
on the basis of one Custodian Fee for each payment unit included in
such multiple payment except that the Custodian Fee may not exceed
$5.00 for each multiple payment.
C. 1. After the completion of all the Plan payments, or if payments
have been made in advance, after the end of 10 years from the date of
issuance of a 10-Year Plan and 15 years from the date of a 15-Year
Plan (and the Extended Investment Option is not exercised), or if
during any such period the Planholder shall have failed to make any
payment for a period of six months after the same has become due, the
Custodian shall receive in payment for its services an annual charge
at the rate of 2/10 of 1% of the face amount of the Plan, but not more
than $12.00 annually.
2. In the event that a Planholder has elected the Extended Investment
Option and has completed payments under said Option by either written
notice to the Custodian that he intends to stop all future payments or
by failure to make regularly scheduled investments for a period of six
consecutive months his Plan will be deemed a completed Plan. On such
Plans the Custodian shall receive an annual charge at the rate of 2/10
of 1% of the face amount of the Plan but not more than $12.00
annually.
3. On such Plans the Custodian reserves the right to increase its fee
applicable during the remaining period of the Plan to the rate then
charged for new Plans of the same denomination, but not more than 75%
in excess of the annual rate of 2/10 of 1% of the face amount of the
Plan, limited to $12.00 annually.
D. With respect to each Destiny Plans II-A for which an account was
established prior to the effective date of this Agreement, the
Custodian Fee shall be such custodian fee as is specified in the
custodian agreement in effect for such plan at the time that the
account for such plan was established.
II. ADDITIONAL FEES AND CHARGES
A. With respect to each Destiny Plans I and each Destiny Plans II for
which an account was established prior to the effective date of this
Agreement, the Additional Fees and Charges under each such Plan shall
be such additional fees and charges as are specified in the
Predecessor Custodian Agreement in effect at the time that the account
for such Destiny Plans I or Destiny Plans II, as applicable, was
established.
B. With respect to each Destiny Plans I: Original, each Destiny Plans
I: New, each Destiny Plans II: Original and each Destiny Plans II: New
for which an account is established on or after the effective date of
this Agreement, Additional Fees and Charges shall be paid as specified
below:
1. From the Planholder's account or from the proceeds of the sale by
the Custodian, as agent for the Planholder, of Fund Shares,
a. A charge of $2.50, in addition to any transfer or other taxes, if
such amounts shall not have been paid directly to the Custodian by the
Planholder at the time of the transaction, in the case of (1) each
transfer of title, (2) each partial or complete withdrawal of Fund
Shares, (3) each change of Plan denomination, (4) each recording of an
assignment, (5) each redeposit of cash or Fund Shares withdrawn, (6)
each payment check returned unpaid, and (7) each distribution option
change.
b. A charge of $3.00 per year in connection with the preparation of a
transcript of the Planholder's account.
c. A charge of $2.50 in connection with the issuance of any type of
Plan in exchange for a different type of Plan.
d. A charge of $1.00 per check for each monthly or quarterly payment
to a Planholder in connection with his participation in the Automatic
Withdrawal Program, as more fully described in the applicable Plan
Documents. With respect to any payment made after 120 investments
into the establishment of such Planholder's account, such charge may
be increased to the amount then charged for making such payments on
newly issued Plans, but in no event may such charge be increased more
than 75%.
2. A Service Charge deducted annually against the accounts of the
Planholders of Destiny Plans I: Original and Destiny Plans II:
Original and, for the Planholders of Destiny Plans I: New and Destiny
Plans II: New, against the Class N shares of Fidelity Destiny
Portfolios: Destiny I and Destiny II, respectively, first out of
dividends and distributions payable in respect thereof, and then, if
necessary, from principal. The annual Service Charge will be
determined by dividing the total administrative costs for a calendar
year by the total number of Plans. The annual Service Charge is
intended to compensate the Custodian for (i) charges and expenses
incurred in the performance of the functions referred to in Sections
2(k) and 2(l) of the Agreement, (ii) printing, mailing and postage
costs related to account receipts, dividend reinvestment notices,
record forms and other forms used in connection with the Plans, (iii)
reasonable counsel fees incurred by the Custodian arising out of or in
connection with the administration of the custodianship hereunder
(other than counsel fees and expenses incurred by the Custodian in the
defense of any claim occasioned by its own negligence, bad faith or
wilful misconduct) and (iv) the auditing, not less often than
annually, of the books of the Custodian relating to the custodianship
described in the Agreement by independent certified public accountants
selected by the Sponsor.
Notwithstanding the above, the annual Service Charge amount charged
to the account of a Planholder shall not in any fiscal year exceed any
maximum annual Service Charge amount specified in the Plan Documents
applicable to such Planholder's Plan.
3. With respect to each Destiny Plans II-A for which an account was
established prior to the effective date of this Agreement, Custodian
Fees shall be such custodian fees as are specified in the custodian
agreement in effect for such plan at the time that the account for
such plan was established.
III. FEES PAID BY THE SPONSOR
A. The Sponsor will pay to the Custodian the following communications
costs and out-of-pocket expenses for services related to the
performance of the functions specified in the Agreement:
1. A charge of $3.00 for each New Account Kit,
2. A charge of $3.00 for each Telephone Call received or placed by
the Custodian,
3. A charge of $3.00 for each piece of correspondence sent to
Planholders,
4. Such out-of-pocket expenses as may be incurred by the Custodian,
including but not limited to, confirmation production, postage, forms,
telephone, microfilm, microfiche, and expenses incurred at the
specific direction of the Sponsor. Postage for mass mailings is due
seven days in advance of the mailing date.
B. The Sponsor may, in its sole discretion, waive any or all
additional fees and charges listed in Sections I or II of this
Schedule 2. In the event of such waiver, the Sponsor shall pay the
Custodian such fees and charges on behalf of the Planholders and the
Sponsor may, in its sole discretion and at any time, reimpose such
additional fees and charges on Planholder accounts.
Exhibit A(3)(b)
Fidelity Systematic Investment Plans
(Destiny)
___________________________________________
Selling Dealer Agreement
FIDELITY SYSTEMATIC INVESTMENT PLANS
SELLING DEALER AGREEMENT
____________________________________________________________________
Dear Prospective Destiny Dealer:
As sponsor and principal underwriter, we invite you to join a Selling
Group to distribute Fidelity Systematic Investment Plans, a registered
unit investment trust consisting of the multiple periodic payment
plans (each a "Plan and, collectively, the "Plans") listed on Schedule
A attached to this Agreement, in accordance with the following terms
and conditions. The Plans accumulate shares of Fidelity Destiny
Portfolios, a registered investment company consisting of the multiple
series portfolios (each a "Fund" and, collectively, the "Funds")
issuing the multiple share classes (each a "Class" and collectively
the "Classes") listed on Schedule A attached to this Agreement. We may
periodically change the list of Plans, Funds or Classes covered by
this Agreement by giving you written notice of the change.
1. Certain Defined Terms. As used in this Agreement, the term
"Prospectus" means the applicable Plan's prospectus and the applicable
Fund's prospectus and related statement of additional information,
whether in paper format or electronic format, included in the Plan's
or the Fund's then currently effective registration statement (or
post-effective amendment thereto), and any information that we, the
Plans or the Funds may issue to you as a supplement to such
Prospectuses (a "sticker"), all as filed with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of
1933, as amended.
2. Distribution of Plans to Customers.
(a) In all sales of Fund shares to the public through the Plans,
you shall act as a dealer for your own account or as agent for your
customers, and in no transaction shall you have any authority to act
or hold yourself out as agent for us, the Plans, the Funds, or any
other member of the Selling Group. Nothing in this Agreement shall
cause you to be our partner, employee, or agent, or give you authority
to act for us or for any Plan or Fund. Neither we, the Plans, nor the
Funds shall be liable for any of your acts or obligations as a dealer
under this Agreement.
(b) All purchases of Fund shares through the Plans shall be
governed by the terms and conditions set forth in the Plans' and the
Funds' current Prospectus. Plans shall be offered and sold in such
face-amount denominations and periodic investment amounts as we shall
from time to time determine and as is set forth in the Plans'
Prospectus. If your customer qualifies for a reduced sales charge
pursuant to a special purchase plan (for example, a quantity discount
or right of accumulation) as described in the Prospectus, you agree to
offer and sell shares of the Plans to your customer at the applicable
reduced sales charge. We reserve the right in our sole discretion,
with 30 days' written notice, to suspend, restrict, alter or modify in
any way the sale of any of the Plans or to withdraw the offering of
the Plans entirely.
(c) All applications for the Plans shall be made on application
forms supplied or approved by us. All investments collected shall be
remitted in full, without deduction of any Creation and Sales Charge,
sales load or discounts on the sale of Plans ("Commissions") in
accordance with the procedures set forth in the Prospectus and any
instructions that we may from time to time issue to you.
(d) You will accept Plan applications only from persons who, to the
best of your knowledge and belief, can and will complete all
investments specified in the person's application. If any Planholder
becomes delinquent in making the scheduled investments, it shall be
your responsibility to contact the Planholder for the purpose of
reinstating the investment schedule. You agree to maintain a
persistency rate, as defined in Schedule C attached to this Agreement
("Persistency Rate"), of not less than 75%. If your Persistency Rate
falls below 75% for a twelve-month period, we reserve the right to
terminate this Agreement.
(e) We reserve the right in our sole discretion to reject any Plan
application and return any investment made in connection therewith.
We reserve the right in our sole discretion to give any Planholder the
privilege of canceling their Plan in accordance with any rights
described in the Prospectus effective at the time of purchase of the
Plan. We reserve the right to refund all or part of any investment or
investments made by any Planholder in the event that we, in our sole
discretion, believe that the solicitation and/or sale associated
therewith was effected in violation of any applicable State or Federal
law or rule or regulation of the National Association of Securities
Dealers, Inc. ("NASD"). To the extent that any such refund or refunds
are made, you shall not be entitled to any Commissions or 12b-1
Payments (as defined below) and, if such Commissions or 12b-1 Payments
have been paid, you shall promptly refund them to us, or we may, at
our option, deduct them from the Commission Reserve Account provided
for in Paragraph 3(d) or charge those Commissions and 12b-1 Payments
against future Commissions and 12b-1 Payments receivable by you. To
this end you hereby grant us a lien on any such Commissions and 12b-1
Payments.
(f) Certificates evidencing shares of the Plans and the Funds are
not available. Any transaction in shares of the Plans will be effected
and evidenced by book-entry on the records maintained by the Plans'
custodian (the "Plan Custodian"), and any transaction in shares of the
Funds will be effected and evidenced by book-entry on the records
maintained by the Funds' transfer agent (the "Fund Transfer Agent").
A confirmation statement evidencing transactions in shares of the
Funds will be transmitted to you.
(g) You may designate the Plan Custodian to execute your customers'
transactions in shares of the Plans, and the Fund Transfer Agent to
execute your customers' transactions in shares of the Funds, in
accordance with the terms of any account, program, plan, or service
established or used by your customers, and to confirm each transaction
to your customers on your behalf. At the time of the transaction, you
guarantee the legal capacity of your customers and any co-owners of
such shares so transacting in such shares.
3. Compensation.
(a) On all approved sales of Plans made by you, we shall pay you
Commissions in accordance with the terms of this Agreement and
Schedule B attached hereto. Upon written notice to you, we or any Plan
or Fund may change or discontinue any schedule of Commissions or issue
a new schedule. Your rights to Commissions on Plans sold during the
term of this Agreement shall survive termination of this Agreement
only as outlined in Paragraph 3(f) below.
(b) If a Class has adopted a 12b-1 plan under the Investment Company
Act of 1940 (a "12b-1 Plan"), we may make distribution or service
payments to you under the 12b-1 Plan ("12b-1 Payments"). If a Class
does not have a currently effective 12b-1 Plan, we, or an affiliate of
ours, may make distribution or service payments to you from our or its
own funds. Any 12b-1 Payments will be made in the amount and manner
set forth in the applicable Prospectus, 12b-1 Plan and Schedule B then
in effect. Upon written notice to you, we or any Class may change or
discontinue any schedule of 12b-1 Payments, or issue a new schedule. A
schedule of 12b-1 Payments will be in effect with respect to a Class
that has a 12b-1 Plan only so long as that Class' 12b-1 Plan remains
in effect.
(c) After the effective date of any change in or discontinuance of
any Commission or 12b-1 Payment schedule, or the termination of a
12b-1 Plan, any Commission or 12b-1 Payments will be allowable or
payable to you only in accordance with such change, discontinuance, or
termination, provided that no such changes shall affect amounts
payable to you as Commissions on a Plan accepted by us prior to such
change. You agree that you will have no claim against us, or any Fund
by virtue of any such change, discontinuance, or termination. In the
event of any overpayment by us of any Commission or 12b-1 Payment, you
will remit such overpayment.
(d) In the event a Planholder exercises the right under Section 27
of the Investment Company Act of 1940, as amended, to surrender the
Plan within the first 18 months following its issuance, and to receive
the value of the account plus an amount equal to that part of the
excess paid for Commissions which exceeds 15% of the gross investment
made for that Plan, you shall promptly refund to us that part of the
excess paid for Commissions which exceeds 15% of the gross investment
made for that Plan, or we may, at our option, charge that amount
against future Commissions or 12b-1 Payments receivable by you. To
this end you hereby grant us a lien on any such Commissions or 12b-1
Payments. To assure us that you will have sufficient assets to make
such repayment, we shall establish and maintain for the duration of
this Agreement a Commission Reserve Account in your name to which
shall be credited 10% of the Commissions and 12b-1 Payments due and
payable to you, and we shall retain such portion of those Commissions
and 12b-1 Payments, up to a maximum of $5,000, as a reserve from which
any claims for refunds with respect to Plans sold by you can be paid
in the event that you shall fail to honor any request of ours for such
repayment. No interest shall accrue or be paid on the monies held in
any Commission Reserve Account. We shall have the right in our sole
discretion to reduce or waive such reserve requirements on the basis
of your refund experience, level of business or any other
circumstances that we may deem relevant.
(e) After the expiration of 18 months from the date on which a Plan
has been issued, if any investment on a Plan is due, and no investment
has been made by the Planholder for 6 months, we reserve the right to
revert the Plan account back to us for collection, and in such event
no further Commissions or 12b-1 Payments with respect to such account
shall be due or payable to you.
(f) Your Commissions and 12b-1 Payments shall vest, subject to the
limitations set forth in Paragraph 2(e) and this Section 3, as
follows:
(i) Commissions and 12b-1 Payments will be paid to you so long as
this Agreement remains in force and effect and you continue membership
in the NASD.
(ii) In the event this Agreement is terminated by its terms or
otherwise, we reserve the right to assign Plan accounts as to which
you are the Dealer of record and the right to receive Commissions or
12b-1 Payments with respect to such Plan accounts to one of our active
dealers.
(iii) If you should voluntarily terminate your membership in the
NASD, we reserve the right to assign Plan accounts as to which you are
the Dealer of record and the right to receive Commissions or 12b-1
Payments with respect to such Plan accounts to one of our active
dealers. Nevertheless, we may, in our sole discretion, pay you
Commissions or 12b-1 Payments on Plan investments made with respect to
such Plan accounts subsequent to such voluntary termination.
(iv) In the event your membership in the NASD is discontinued or
suspended because of disciplinary proceedings by the NASD, the
Securities and Exchange Commission, or other regulatory bodies, we
reserve the right to assign Plan accounts as to which you are the
Dealer of record and the right to receive Commissions or 12b-1
Payments with respect to such Plan accounts to one of our active
dealers. If we do not assign Plan accounts as to which you are the
Dealer of record and the right to receive Commissions or 12b-1
Payments with respect to such Plan accounts to one of our active
dealers, no Commissions or 12b-1 Payments will be paid to you on any
Planholder's investments received during the period of a suspension or
after the effective date of an expulsion or revocation of a
membership; provided, however, that in the event your NASD membership
is thereafter reinstated in good standing, or if such disciplinary
action by another regulatory body is thereafter terminated by same,
payment of such Commissions or 12b-1 Payments to you shall then
resume, without any retroactive payments, if such payment is allowable
under applicable laws, rules or regulations.
(v) Subject to the foregoing, if you otherwise comply with all of
the terms of this Agreement you are under no obligation to transfer
Plans or Commissions or 12b-1 Payments earned on Plans sold by you to
another dealer firm. If you choose to release Plans sold by you and
subsequent Commissions and 12b-1 Payments to another firm, you must
complete and sign an Assignment of Amounts Due form and return it to
the Plan Custodian.
4. Information Regarding the Plans and the Funds.
(a) You agree to deliver or cause to be delivered to each customer,
at or prior to the time of any purchase of shares, a copy of the then
current Prospectus (including any stickers thereto), unless such
Prospectus has already been delivered to the customer, and to each
customer who so requests, a copy of the then current statement of
additional information (including any stickers thereto). Upon your
request, we will furnish you with a reasonable number of copies of the
Plan's and the Fund's current Prospectuses or statements of additional
information (including any stickers thereto).
(b) No person is authorized or permitted to give any information or
make any representations concerning the Plans or the Funds other than
those that are contained in the current Prospectus, any sticker to
such Prospectus, unless approved by us in writing for use in
connection with the Prospectus. In buying shares of the Plans from us
under this Agreement, you will rely only on the representations
contained in the Prospectus.
(c) Any printed or electronic information that we furnish you
(other than the Plans' and the Funds' Prospectuses and periodic
reports) is our sole responsibility and not the responsibility of the
respective Plans or Funds. You agree that neither the Plans nor the
Funds will have any liability or responsibility to you with respect to
any such printed or electronic information. We, or the respective
Plans or Funds, will bear the expense of qualifying its shares under
the state securities laws.
(d) You may not use any sales literature or advertising material,
including material disseminated through radio, television, or other
electronic media, concerning "Fidelity," "Destiny," the Plans or the
Funds, other than the printed or electronic information referred to in
paragraph (c) above, in connection with the offer or sale of Fund
shares through the Plans without obtaining our prior written approval.
You may not distribute or make available to investors any information
that we furnish you marked "FOR DEALER USE ONLY" or that otherwise
indicates that it is confidential or not intended to be distributed to
investors.
5. Status as a Registered Broker/Dealer.
(a) You represent that you are and will remain (i) registered as a
broker/dealer under the 1934 Act, (ii) qualified to act as a
broker/dealer in the states where you transact business, and (iii) a
member in good standing of the NASD. You agree to maintain your
broker/dealer registration and qualifications and your NASD membership
in good standing throughout the term of this Agreement.
(b) You represent and agree to abide by all NASD rules and
regulations, including its Rules of Fair Practice. Reference is hereby
specifically made to Rule 2830 of the rules of Fair Practice of the
NASD, which is incorporated herein as if set forth in full. Any breach
of Rule 2830 will immediately and automatically terminate this
Agreement. You further agree to comply with all applicable State and
Federal laws and rules and regulations of regulatory agencies having
jurisdiction. You will not offer Plans for sale unless such Plans are
duly registered under applicable State and Federal statutes and the
rules and regulations thereunder.
(c) In the event that (i) an application for a protective decree
under the provisions of the Securities Investor Protection Act of 1970
is filed against you, (ii) you file a petition in bankruptcy or a
petition seeking similar relief under any bankruptcy, insolvency, or
similar law, or a proceeding is commenced against you seeking such
relief, (iii) you are found by the SEC, the NASD, or any other federal
or state regulatory agency or authority to have violated any
applicable federal or state law, rule or regulation arising out of
your activities as a broker/dealer or in connection with this
Agreement, or (iv) you cease to be a member in good standing of the
NASD, this Agreement will terminate effective immediately upon our
giving notice of termination to you. You agree to notify us promptly
and to immediately suspend sales of shares of the Plans in the event
of any such filing or violation, or in the event that you cease to be
a member in good standing of the NASD.
6. Customers Lists. We hereby agree that we shall not use any list of
your customers which may be obtained in connection with this Agreement
for the purpose of solicitation of any product or service without your
express written consent. However, nothing in this paragraph or
otherwise shall be deemed to prohibit or restrict us or our affiliates
in any way from solicitations of any product or service directed at,
without limitation, the general public, any segment thereof, or any
specific individual, provided such solicitation is not based upon such
list.
7. Indemnification.
(a) We will indemnify and hold you harmless from any claim, demand,
loss, expense, or cause of action resulting from the misconduct or
negligence, as measured by industry standards, of us, our agents and
employees, in carrying out our obligations under this Agreement. Such
indemnification will survive the termination of this Agreement.
(b) You will indemnify and hold us harmless from any claim, demand,
loss, expense, or cause of action resulting from the misconduct or
negligence, as measured by industry standards, of you, your agents and
employees, in carrying out your obligations under this Agreement. Such
indemnification will survive the termination of this Agreement.
8. Arbitration. In the event of a dispute, such dispute will be
settled by arbitration before arbitrators sitting in Boston,
Massachusetts, in accordance with the NASD's Code of Arbitration
Procedure in effect at the time of the dispute. The arbitrators will
act by majority decision and their award may allocate attorneys' fees
and arbitration costs between us. Their award will be final and
binding between us, and such award may be entered as a judgment in any
court of competent jurisdiction.
9. Term and Termination.
(a) This Agreement, with respect to any 12b-1 Plan, will continue
in effect for one year from its effective date, and thereafter will
continue automatically for successive annual periods; provided,
however, that such continuance is subject to termination at any time
without penalty if a majority of a Fund's Trustees who are not
interested persons of the Fund (as defined in the Investment Company
Act of 1940), or a majority of the outstanding shares of the Fund,
vote to terminate or not to continue the 12b-1 Plan.
(b) This Agreement, other than with respect to a 12b-1 Plan, will
continue in effect from year to year after its effective date, unless
terminated as provided below:
(i) Either party to this Agreement may terminate the Agreement without
cause by giving the other party at least thirty (30) days' written
notice of its intention to terminate.
(ii) This Agreement may be terminated in accordance with the
provisions of paragraphs 2(d), 5(c) or 10(a) hereof.
(c) Your or our failure to terminate this Agreement for a
particular cause will not constitute a waiver of the right to
terminate this Agreement at a later date for the same or another
cause. The Termination of this Agreement with respect to any one Plan
or Fund will not cause its termination with respect to any other Plan
or Fund.
10. Assignment and Amendment.
a) This Agreement or any money due or to become due under this
Agreement shall not be assigned by you without prior written approval
by us. Any request for an assignment shall be on a form approved by
us, which may be obtained from the Plan Custodian. Absent our prior
written approval, this Agreement will terminate automatically in the
event of its assignment (as defined in the Investment Company Act of
1940).
b) We may amend any provision of the Agreement by giving you written
notice of the amendment.
11. Notices. All notices required or permitted to be given under this
Agreement shall be given in writing and delivered by personal
delivery, by postage prepaid mail, or by facsimile machine or a
similar means of same day delivery with a confirming copy by mail. All
notices to us shall be given or sent to us at our offices located at
82 Devonshire Street, Boston, Massachusetts 02109, Attention: Destiny
- - Broker Dealer Services Group. All notices to you shall be given or
sent to you at the address specified by you below. Each of us may
change the address to which notices shall be sent by giving notice to
the other party in accordance with this paragraph.
12. Miscellaneous.
(a) The singular shall include the plural, and vice-versa. The
captions in this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions of this
Agreement or otherwise affect their construction or effect.
(b) This Agreement, as it may be amended from time to time, shall
become effective as of the date when it is accepted and dated below by
us. This Agreement is to be construed in accordance with the laws of
the Commonwealth of Massachusetts. This Agreement supersedes and
cancels any prior agreement between us, whether oral or written,
relating to the sale of shares of the Plans or any other subject
covered by this Agreement.
Very truly yours,
Fidelity Distributors Corporation
82 Devonshire St.
Boston, Massachusetts 02109
By:________________________
The undersigned hereby accepts your invitation to become a member of
the Selling Group referred to herein and agrees to abide by all the
foregoing terms and conditions.
Dated as of______________, ____.
Firm:_____________________
Address:__________________
__________________
By:_______________________
(Authorized Signature)
_______________________
(Printed Signature)
Title:____________________
SCHEDULE A
LIST OF THE SEPARATE SERIES OF FIDELITY SYSTEMATIC INVESTMENT PLANS
Fidelity Destiny Plans I: Original
Fidelity Destiny Plans I: New
Fidelity Destiny Plans II: Original
Fidelity Destiny Plans II: New
LIST OF THE SEPARATE SERIES AND CLASSES OF FIDELITY DESTINY PORTFOLIOS
Fidelity Destiny Portfolios I: Class O
Fidelity Destiny Portfolios I: Class N
Fidelity Destiny Portfolios II: Class O
Fidelity Destiny Portfolios II: Class N
SCHEDULE B
DEALER COMMISSION AND 12B-1 PAYMENT SCHEDULE
This Schedule B sets forth the Commissions and 12b-1 Payments payable
to the selling dealer pursuant to Section 3 of the Selling Dealer
Agreement between the selling dealer and Fidelity Distributors
Corporation ("FDC"). Capitalized terms not otherwise defined herein
shall have the meanings specified in the Selling Dealer Agreement.
As nearly as practicable, Commission and 12b-1 Payments due you will
be paid monthly as they are received by FDC from the Plan Custodian or
the Funds' Custodian, as the case may be.
a. Commissions
The production levels for Commission payments outlined in this
Schedule B that you qualify for shall be determined by the reference
to the aggregate face amount of the Plans sold by you in the previous
calendar year. All Commissions and 12b-1 Payments shall be paid at the
highest rate for which you qualify. The qualification criteria for the
various production levels can be expected to be amended from time to
time.
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PRODUCTION CALENDAR YEAR PERCENTAGE OF COMMISSIONS PAID TO DEALER
LEVEL FACE AMOUNT FIRST TWELVE INVESTMENTS SUBSEQUENT INVESTMENTS
All Plans Original Plans New Plans
I Up to $2,000,000 80.0% 41.7% n/a
II $2,000,001 to $30,000,000 85.0 50.0 n/a
III $30,000,001 to $182,000,000 89.4 60.0 n/a
IV $182,000,001 and above 92.4 92.4 n/a
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b. 12b-1 Payments
For Plans that invest in Classes of the Funds with a 12b-1 fee:
(i) You agree to cooperate as requested with programs that the
Plans, the Funds, FDC or their affiliates provide to enhance service
provided to Planholders (i.e. shareholders who own Fund shares
directly or indirectly through the Plans) and to take an active role
in providing such shareholder services, including, but not limited to
providing certain information and assistance with respect to
Planholder accounts, responding to Planholder inquiries or advising us
of such inquiries where appropriate.
(ii) You agree to assign an active registered representative to each
Planholder account on your and our records and to reassign accounts
when registered representatives leave your firm. You also agree to
instruct your representatives to maintain regular contact with
Planholders whose Plan accounts are assigned to them. With respect to
Planholder accounts which are held in nominee or "street" name, you
agree to provide such documentation and verification that active
representatives are assigned to all such Planholder accounts as FDC
may require from time to time.
(iii) Subject to the terms and conditions set forth in the Fund's
Prospectus and applicable 12b-1 Plan, and further subject to your
maintaining satisfactory service to Planholders under the above
paragraphs (i) and (ii), as determined in FDC's sole discretion, you
will be entitled to an annual service fee of up to 0.25% of the assets
of your clients in accounts of the Plans and the Funds, provided, such
assets have been in such accounts for a minimum of twelve months.
Service fees will not be paid on clients' assets resulting from Plan
investments subject to Creation and Sales Charges, even if such
payments have been accelerated, until the assets resulting from each
investment have been in the Plan account for twelve months. Assets in
employer-sponsored retirement plans for the benefit of your employees
or affiliates are not eligible for service fees, nor are accounts not
assigned to an active registered representative.
(iv) FDC, in its sole discretion, reserves the right to withhold
making 12b-1 Payments to you in respect of any assets invested in a
Class during such time as the aggregate "Custodian Fees" and annual
"Service Charges" payable by FDC to the Plan Custodian on behalf of
the shareholders of such Class exceed the transfer agent fees payable
in respect of such Class to the Fund's Transfer Agent.
SCHEDULE C
PERSISTENCY RATE
Your Persistency Rate is defined as:
(1) (a) the total number of plans you have opened within the last 60
months, but not within the past 12 months
(b) less the number of accounts
(i) closed pursuant to a refund or cancellation privilege,
(ii) closed without reaching the face amount of the Plan,
(iii) closed as a result of a face change or transfer of
account registration, and
(iv) that are not current, divided by
(2) (a) the total number of plans you have opened within the last 60
months, but not within the past 12 months,
(b) less the number of accounts
(i) closed pursuant to the 45-day refund privilege and
(ii) closed as a result of a face change or transfer of
account registration.
A current account, for purposes of calculating the Persistency Rate,
is an open account that:
(i) is less than 7 regular monthly investments in arrears,
(ii) for which an investment has been made within the last
six months, or
(iii) for which the Commissions are equal to or less than
nine percent of total investments made.
DESTINY
FIDELITY INVESTMENTS
FIDELITY SYSTEMATIC INVESTMENT PLANS
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
NATIONWIDE: 1 800 752-2347
IN ALASKA OR OVERSEAS (CALL COLLECT): 617 439-0547
Fidelity Distributors Corporation
Exhibit A(7)
Securities and Exchange Commission
Washington, DC 20549
To Whom It May Concern:
This letter will confirm that Federal Insurance Company has met the
requirements of Proviso (1) under Rule 27d-2 of the Investment Company
Act of 1940 on a monthly basis throughout our fiscal year in
connection with the undertaking executed on behalf of Fidelity
Distributors Corporation.
Very truly yours,
FEDERAL INSURANCE COMPANY
Gerardo G. Mauriz
Vice President
GGM/dms
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FEDERAL INSURANCE COMPANY
BALANCE SHEET - STATUTORY BASIS
DECEMBER 31, 1997 AND 1996
(dollars in thousands except
per share amounts)
1997 1996
ADMITTED ASSETS
Invested Assets:
Short Term Investments, at $ 714,065 $ 682,368
Amortized Cost
Tax Exempt Bonds, at 5,221,481 3,969,560
Amortized Cost
Taxable Bonds, at Amortized 1,922,965 1,419,181
Cost
Equity Securities, at Market 465,563 208,469
Investments in Consolidated 1,042,295 1,226,495
Subsidiaries
Investments in 220,182 478,651
Unconsolidated Subsidiaries
Receivable for Securities 29,838 25,038
Other Invested Assets 237,340 209,976
Total Invested Assets 9,853,729 8,219,738
(Note 2)
Cash 5,310 5,538
Premiums Receivable 625,601 590,599
Interest and Dividends Due 126,395 112,004
and Accrued
Reinsurance Recoverable on 49,763 49,222
Paid Losses
Equities and Deposits in 66,276 73,213
Pools and Associations
Amounts Due from Associated 51,388 -
Companies
Other Assets 174,057 179,287
10,952,519 9,229,601
Deduct: Non-Admitted Assets 127,261 109,840
Total Admitted Assets $10,825,258 $9,119,761
LIABILITIES AND SURPLUS TO
POLICYHOLDERS
Outstanding Losses and Loss
Expenses (Notes 7 and 8) $ 6,065,735 $4,893,548
Unearned Premiums 1,683,472 1,252,261
Working Funds Due to Manager 136,598 136,747
Amounts Due to Associated - 51,293
Companies
Federal and Foreign Income - 6,899
Tax (Note 4)
Provision for Reinsurance 45,454 33,093
Accrued Expenses and Other 338,883 282,435
Liabilities
Total Liabilities 8,270,142 6,656,276
Commitments and Contingent
Liabilities (Notes 6 and 8)
Common Capital Stock 13,987 13,987
Paid-In Surplus 378,890 472,986
Unassigned Funds 1,972,505 1,649,830
Unrealized Appreciation of 189,734 326,682
Investments
Total Surplus To 2,555,116 2,463,485
Policyholders (Note 9)
Total Liabilities and
Surplus to $10,825,258 $9,119,761
Policyholders
Common Capital Stock:
Shares Authorized 3,499,971 3,499,971
Shares Issued and 3,496,678 3,496,678
Outstanding
Par Value Per Share $ 4 $ 4
FEDERAL INSURANCE COMPANY
STATEMENT OF INCOME -
STATUTORY BASIS
YEAR ENDED DECEMBER 31, 1997,
1996 AND 1995
(in thousands)
1997 1996 1995
Net Premiums Written $ 3,676,579 $2,582,131 $2,247,891
Increase in Unearned Premiums
Net of Accrued Retrospective 428,188 137,785 59,804
Premiums
Premiums Earned (Note 7) 3,248,391 2,444,346 2,188,087
Losses and Loss Expenses 2,139,189 1,697,816 1,498,753
(Note 7)
Underwriting Expenses 1,120,121 790,017 694,096
Dividends to Policyholders 23,089 14,581 11,983
3,282,399 2,502,414 2,204,832
Underwriting Loss (34,008) (58,068) (16,745)
Investment Income Before 977,002 559,686 488,374
Expenses
Realized Capital Gains 53,132 34,693 54,207
Investment Expenses 7,540 5,325 4,772
Investment Income 1,022,594 589,054 537,809
Other Income (Loss)
(including gain
or loss on foreign exchange) 1,786 (9,617) (6,973)
Income Before Federal and 990,372 521,369 514,091
Foreign Income Tax
Federal and Foreign Income 164,440 83,186 81,143
Tax (Note 4)
Net Income $ 825,932 $ 438,183 $ 432,948
FEDERAL INSURANCE COMPANY
STATEMENT OF SURPLUS TO
POLICYHOLDERS - STATUTORY
BASIS
YEAR ENDED DECEMBER 31, 1997,
1996 AND 1995
(in thousands)
1997 1996 1995
Common Stock
$ 13,987 $ 13,987 $ 13,987
Balance, Beginning and End
of Year
Paid-In Surplus
Balance, Beginning of Year 472,986 472,986 472,986
Distribution of Bellemead
Development Corporation
to Parent (94,096) - -
Balance, End of Year 378,890 472,986 472,986
Unassigned Funds
Balance, Beginning of Year 1,649,830 1,347,361 1,030,157
Net Income 825,932 438,183 432,948
Dividends Declared to Parent (280,000) (250,000) (240,000)
Decrease (Increase) in
Provision
for Reinsurance (12,361) 9,505 7,142
Increase (Decrease) in (17,421) 71 23,583
Non-Admitted Assets
Increase (Decrease) in
Unassigned Funds of
Consolidated Subsidiaries (193,261) 89,809 104,309
Other, Net (214) 14,901 (10,778)
Balance, End of Year 1,972,505 1,649,830 1,347,361
Unrealized Appreciation of
Investments
Balance, Beginning of Year 326,682 433,116 359,800
Distribution of Bellemead
Development
Corporation to Parent (175,664) - -
Change During the Year 38,716 (106,434) 73,316
Balance, End of Year 189,734 326,682 433,116
Total Surplus to $ 2,555,116 $2,463,485 $2,267,450
Policyholders
FEDERAL INSURANCE COMPANY
STATEMENT OF CASH FLOWS -
STATUTORY BASIS
YEAR ENDED DECEMBER 31, 1997,
1996 AND 1995
(in thousands)
1997 1996 1995
Cash From Operations
Premiums Collected Net of $ 3,644,597 $2,527,854 $2,208,727
Reinsurance
Losses and Loss Expenses Paid
(net of
salvage and subrogation) 967,543 1,717,314 1,174,235
Underwriting Expenses Paid 1,079,486 787,594 675,171
Other Underwriting Income (97,527) 163,458 50,852
(Expenses)
Cash from Underwriting 1,500,041 186,404 410,173
Investment Income (net of 959,457 542,767 467,142
investment expense)
Other Income (Expenses) 2,275 11,223 (18,511)
Dividends to Policyholders Paid (8,862) (10,912) (10,105)
Federal Income Taxes Paid (181,083) (72,964) (99,528)
Net Cash from Operations 2,271,828 656,518 749,171
Cash From Investments
Proceeds from Investments
Sold or Matured:
Bonds 1,826,979 2,378,073 2,425,520
Equity Securities 77,626 155,359 47,286
Other Invested Assets 72,019 33,972 53,119
Miscellaneous Proceeds 2,894 15,801 19,386
Total Investment Proceeds 1,979,518 2,583,205 2,545,311
Cost of Investments Acquired:
(Long Term Only)
Bonds 3,591,204 2,806,024 3,026,615
Equity Securities 304,742 196,520 82,286
Other Invested Assets 55,568 47,323 10,669
Miscellaneous Applications 314 389 3,765
Total Investments Acquired 3,951,828 3,050,256 3,123,335
Net Cash from Investments (1,972,310) (467,051) (578,024)
Cash From Financing and
Miscellaneous Sources
Other Cash Provided 14,458 639 12,834
Cash Applied:
Dividends to Stockholders 280,000 250,000 240,000
Paid
Other Applications 2,507 11,963 23,319
Total Cash Applied 282,507 261,963 263,319
Net Cash from Financing
and
Miscellaneous Sources (268,049) (261,324) (250,485)
Net Change in Cash and Short 31,469 (71,857) (79,338)
Term Investments
Cash and Short Term
Investments:
Beginning of Year 687,906 759,763 839,101
End of Year $ 719,375 $ 687,906 $ 759,763
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FEDERAL INSURANCE COMPANY
BALANCE SHEETS - STATUTORY
BASIS
DECEMBER 31, 1997 AND 1996
(dollars in thousands except
per share amounts)
1997 1996
ADMITTED ASSETS
Invested Assets:
Short Term Investments, at $ 714,065 $ 682,368
Amortized Cost
Tax Exempt Bonds, at 5,221,481 3,969,560
Amortized Cost
Taxable Bonds, at Amortized 1,922,965 1,419,181
Cost
Equity Securities, at Market 465,563 208,469
Investments in Consolidated 1,042,295 1,226,495
Subsidiaries
Investments in 220,182 478,651
Unconsolidated Subsidiaries
Receivable for Securities 29,838 25,038
Other Invested Assets 237,340 209,976
Total Invested Assets 9,853,729 8,219,738
(Note 2)
Cash 5,310 5,538
Premiums Receivable 625,601 590,599
Interest and Dividends Due 126,395 112,004
and Accrued
Reinsurance Recoverable on 49,763 49,222
Paid Losses
Equities and Deposits in 66,276 73,213
Pools and Associations
Amounts Due from Associated 51,388
Companies -
Other Assets 174,057 179,287
10,952,519 9,229,601
Deduct: Non-Admitted Assets 127,261 109,840
Total Admitted Assets $ 10,825,258 $ 9,119,761
LIABILITIES AND SURPLUS TO
POLICYHOLDERS
Outstanding Losses and Loss
Expenses (Notes 7 and 8) $ 6,065,735 $ 4,893,548
Unearned Premiums 1,683,472 1,252,261
Working Funds Due to Manager 136,598 136,747
Amounts Due to Associated 51,293
Companies -
Federal and Foreign Income 6,899
Tax (Note 4) -
Provision for Reinsurance 45,454 33,093
Accrued Expenses and Other 338,883 282,435
Liabilities
Total Liabilities 8,270,142 6,656,276
Commitments and Contingent
Liabilities (Notes 6 and 8)
Common Capital Stock 13,987 13,987
Paid-In Surplus 378,890 472,986
Unassigned Funds 1,972,505 1,649,830
Unrealized Appreciation of 189,734 326,682
Investments
Total Surplus To 2,555,116 2,463,485
Policyholders (Note 9)
Total Liabilities and
Surplus to $ 10,825,258 $ 9,119,761
Policyholders
Common Capital Stock:
Shares Authorized 3,499,971 3,499,971
Shares Issued and 3,496,678 3,496,678
Outstanding
Par Value Per Share $ $
4 4
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FEDERAL INSURANCE COMPANY
STATEMENTS OF INCOME -
STATUTORY BASIS
YEARS ENDED DECEMBER 31,
1997, 1996 AND 1995
(in thousands)
1997 1996 1995
Net Premiums Written $3,676,579 $2,582,131 $2,247,891
Increase in Unearned Premiums
Net of Accrued Retrospective 428,188 137,785 59,804
Premiums
Premiums Earned (Note 7) 3,248,391 2,444,346 2,188,087
Losses and Loss Expenses 2,139,189 1,697,816 1,498,753
(Note 7)
Underwriting Expenses 1,120,121 790,017 694,096
Dividends to Policyholders 23,089 14,581 11,983
3,282,399 2,502,414 2,204,832
Underwriting Loss (34,008) (58,068) (16,745)
Investment Income Before 977,002 559,686 488,374
Expenses
Realized Capital Gains 53,132 34,693 54,207
Investment Expenses 7,540 5,325 4,772
Investment Income 1,022,594 589,054 537,809
Other Income (Loss)
(including gain
or loss on foreign exchange) 1,786 (9,617) (6,973)
Income Before Federal and 990,372 521,369 514,091
Foreign Income Tax
Federal and Foreign Income 164,440 83,186 81,143
Tax (Note 4)
Net Income $ 825,932 $ 438,183 $ 432,948
FEDERAL INSURANCE COMPANY
STATEMENTS OF SURPLUS TO
POLICYHOLDERS - STATUTORY
BASIS
YEARS ENDED DECEMBER 31,
1997, 1996 AND 1995
(in thousands)
1997 1996 1995
Common Stock
Balance, Beginning and End $ 13,987 $ 13,987 $ 13,987
of Year
Paid-In Surplus
Balance, Beginning of Year 472,986 472,986 472,986
Distribution of Bellemead
Development
Corporation to Parent (94,096) - -
Balance, End of Year 378,890 472,986 472,986
Unassigned Funds
Balance, Beginning of Year 1,649,830 1,347,361 1,030,157
Net Income 825,932 438,183 432,948
Dividends Declared to Parent (280,000) (250,000) (240,000)
Decrease (Increase) in
Provision
for Reinsurance (12,361) 9,505 7,142
Decrease (Increase) in (17,421) 71 23,583
Non-Admitted Assets
Increase (Decrease) in
Unassigned Funds of
Consolidated Subsidiaries (193,261) 89,809 104,309
Other, Net (214) 14,901 (10,778)
Balance, End of Year 1,972,505 1,649,830 1,347,361
Unrealized Appreciation of
Investments
Balance, Beginning of Year 326,682 433,116 359,800
Distribution of Bellemead
Development
Corporation to Parent (175,664) - -
Change During the Year 38,716 (106,434) 73,316
Balance, End of Year 189,734 326,682 433,116
Total Surplus to $2,555,116 $2,463,485 $2,267,450
Policyholders
FEDERAL INSURANCE COMPANY
STATEMENTS OF CASH FLOWS -
STATUTORY BASIS
YEARS ENDED DECEMBER 31,
1997, 1996 AND 1995
(in thousands)
1997 1996 1995
Cash From Operations
Premiums Collected Net of $3,644,597 $2,527,854 $2,208,727
Reinsurance
Losses and Loss Expenses Paid
(net of
salvage and subrogation) 967,543 1,717,314 1,174,235
Underwriting Expenses Paid 1,079,486 787,594 675,171
Other Underwriting Income (97,527) 163,458 50,852
(Expenses)
Cash from Underwriting 1,500,041 186,404 410,173
Investment Income (net of 959,457 542,767 467,142
investment expense)
Other Income (Expenses) 2,275 11,223 (18,511)
Dividends to Policyholders Paid (8,862) (10,912) (10,105)
Federal Income Taxes Paid (181,083) (72,964) (99,528)
Net Cash from Operations 2,271,828 656,518 749,171
Cash From Investments
Proceeds from Investments
Sold or Matured:
Bonds 1,826,979 2,378,073 2,425,520
Equity Securities 77,626 155,359 47,286
Other Invested Assets 72,019 33,972 53,119
Miscellaneous Proceeds 2,894 15,801 19,386
Total Investment Proceeds 1,979,518 2,583,205 2,545,311
Cost of Investments Acquired:
(Long Term Only)
Bonds 3,591,204 2,806,024 3,026,615
Equity Securities 304,742 196,520 82,286
Other Invested Assets 55,568 47,323 10,669
Miscellaneous Applications 314 389 3,765
Total Investments Acquired 3,951,828 3,050,256 3,123,335
Net Cash from Investments (1,972,310) (467,051) (578,024)
Cash From Financing and
Miscellaneous Sources
Other Cash Provided 14,458 639 12,834
Cash Applied:
Dividends to Stockholders 280,000 250,000 240,000
Paid
Other Applications 2,507 11,963 23,319
Total Cash Applied 282,507 261,963 263,319
Net Cash from Financing
and
Miscellaneous Sources (268,049) (261,324) (250,485)
Net Change in Cash and Short 31,469 (71,857) (79,338)
Term Investments
Cash and Short Term
Investments:
Beginning of Year 687,906 759,763 839,101
End of Year $ 719,375 $ 687,906 $ 759,763
</TABLE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
FEDERAL INSURANCE COMPANY
WE HAVE AUDITED THE ACCOMPANYING STATUTORY-BASIS BALANCE SHEETS OF
FEDERAL
INSURANCE COMPANY (COMPANY) AS OF DECEMBER 31, 1997 AND 1996, AND THE
RELATED STATUTORY-BASIS STATEMENTS OF INCOME, SURPLUS TO
POLICYHOLDERS, AND CASH FLOWS FOR EACH OF THE THREE YEARS IN THE
PERIOD ENDED DECEMBER 31, 1997. THESE FINANCIAL STATEMENTS ARE THE
RESPONSIBILITY OF THE COMPANY'S MANAGEMENT. OUR RESPONSIBILITY IS TO
EXPRESS AN OPINION ON THESE FINANCIAL STATEMENTS 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 ARE FREE OF MATERIAL MISSTATEMENT. AN AUDIT INCLUDES
EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING THE AMOUNTS AND
DISCLOSURES IN THE FINANCIAL STATEMENTS. 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.
AS DESCRIBED IN NOTE 1, THESE FINANCIAL STATEMENTS HAVE BEEN PREPARED
IN CONFORMITY WITH ACCOUNTING PRACTICES PRESCRIBED OR PERMITTED BY THE
INDIANA INSURANCE DEPARTMENT, THE JURISDICTION OF DOMICILE OF THE
COMPANY, WHICH PRACTICES DIFFER FROM GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES. THE VARIANCES FROM SUCH PRACTICES AND GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES ARE ALSO DESCRIBED IN NOTE 1. THE
EFFECTS ON THE FINANCIAL STATEMENTS OF THESE VARIANCES ARE NOT
REASONABLY DETERMINABLE BUT ARE PRESUMED TO BE MATERIAL.
IN OUR OPINION, BECAUSE OF THE EFFECTS OF THE MATTER DESCRIBED IN THE
PRECEDING PARAGRAPH, THE FINANCIAL STATEMENTS REFERRED TO ABOVE DO NOT
PRESENT FAIRLY, IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, THE FINANCIAL POSITION OF FEDERAL INSURANCE COMPANY AT
DECEMBER 31, 1997 AND 1996 OR THE RESULTS OF ITS OPERATIONS OR ITS
CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER
31, 1997.
HOWEVER, IN OUR OPINION, THE FINANCIAL STATEMENTS REFERRED TO ABOVE
PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE FINANCIAL POSITION OF
FEDERAL INSURANCE COMPANY AT DECEMBER 31, 1997 AND 1996 AND THE
RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED DECEMBER 31, 1997, IN CONFORMITY WITH
ACCOUNTING PRACTICES PRESCRIBED OR PERMITTED BY THE INDIANA INSURANCE
DEPARTMENT.
ERNST & YOUNG LLP
NEW YORK, NEW YORK
FEBRUARY 20, 1998
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) FEDERAL INSURANCE COMPANY (COMPANY) IS A WHOLLY-OWNED PROPERTY
AND CASUALTY INSURANCE SUBSIDIARY OF THE CHUBB CORPORATION (CHUBB).
THE COMPANY IS DOMICILED IN THE STATE OF INDIANA AND UNDERWRITES MOST
FORMS OF PROPERTY AND CASUALTY INSURANCE, PRINCIPALLY IN THE UNITED
STATES. THE GEOGRAPHIC DISTRIBUTION OF BUSINESS IN THE UNITED STATES
IS BROAD WITH A PARTICULARLY STRONG MARKET PRESENCE IN THE NORTHEAST.
THE COMPANY IS A MEMBER OF AN AFFILIATED GROUP OF U.S. BASED PROPERTY
AND CASUALTY INSURANCE COMPANIES, INCLUDING SEVERAL WHOLLY-OWNED
SUBSIDIARIES. FOR PURPOSES OF THIS REPORT, THE AFFILIATED GROUP OF
COMPANIES, INCLUDING FEDERAL INSURANCE COMPANY, IS COLLECTIVELY
REFERRED TO AS THE COMPANIES.
THE FINANCIAL STATEMENTS REFLECT ESTIMATES AND JUDGMENTS MADE BY
MANAGEMENT THAT AFFECT THE REPORTED AMOUNTS OF ASSETS AND LIABILITIES
AND DISCLOSURE OF CONTINGENT ASSETS AND LIABILITIES AT THE DATE OF THE
FINANCIAL STATEMENTS AND THE REPORTED AMOUNTS OF INCOME AND EXPENSES
DURING THE REPORTING PERIOD. ACTUAL RESULTS COULD DIFFER FROM THOSE
ESTIMATES.
CERTAIN AMOUNTS IN THE PRIOR YEAR FINANCIAL STATEMENTS HAVE BEEN
RECLASSIFIED TO CONFORM WITH THE 1997 PRESENTATION.
THESE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN CONFORMITY WITH
ACCOUNTING PRACTICES PRESCRIBED OR PERMITTED BY THE INDIANA INSURANCE
DEPARTMENT. SUCH ACCOUNTING PRACTICES VARY IN CERTAIN RESPECTS FROM
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), INCLUDING:
(I) INVESTMENTS IN BONDS ARE REPORTED AT AMORTIZED COST AND ARE NOT
CLASSIFIED AS HELD-TO-MATURITY OR AVAILABLE FOR SALE; UNDER GAAP,
THOSE BONDS CLASSIFIED AS AVAILABLE FOR SALE ARE CARRIED AT MARKET
VALUE,
(II) THE COSTS OF ACQUIRING NEW BUSINESS ARE CHARGED TO OPERATIONS
AS INCURRED RATHER THAN BEING DEFERRED AND AMORTIZED OVER THE PERIOD
IN WHICH THE RELATED PREMIUMS ARE EARNED,
(III) CERTAIN ASSETS DESIGNATED "NON-ADMITTED" ARE EXCLUDED,
(IV) OUTSTANDING LOSSES AND LOSS EXPENSES ARE REPORTED NET OF
AMOUNTS RECOVERABLE FROM REINSURERS; UNEARNED PREMIUMS ARE REPORTED
NET OF THE UNEARNED PORTION OF PREMIUMS CEDED,
(V) A PROVISION IS MADE FOR STATUTORY LIABILITIES WITH RESPECT TO
UNEARNED PREMIUMS AND LOSSES REINSURED WITH NON-ADMITTED REINSURERS
AND FOR CERTAIN OVERDUE AMOUNTS FROM ADMITTED REINSURERS TO THE EXTENT
FUNDS ARE NOT HELD,
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
(VI) NO PROVISION IS MADE FOR DEFERRED FEDERAL INCOME TAX, AND
(VII) INVESTMENTS IN WHOLLY-OWNED U.S. AND FOREIGN PROPERTY AND
CASUALTY INSURANCE SUBSIDIARIES, VARIOUS OTHER SUBSIDIARIES WHICH ARE
NOT MATERIAL AND, IN 1996 AND 1995, A WHOLLY-OWNED NON-PROPERTY AND
CASUALTY INSURANCE SUBSIDIARY (SEE NOTE 1(F)) ARE INCLUDED AT
STATUTORY NET ASSET VALUE AND ARE NOT CONSOLIDATED; DIVIDENDS DECLARED
BY SUCH SUBSIDIARIES ARE INCLUDED IN INVESTMENT INCOME. NET INCOME OF
THE U.S. PROPERTY AND CASUALTY INSURANCE SUBSIDIARIES IS INCLUDED AS A
CHANGE IN UNASSIGNED FUNDS. NET INCOME OF THE OTHER SUBSIDIARIES IS
INCLUDED AS A CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS.
THE EFFECTS OF THE FOREGOING VARIANCES FROM GAAP ON THE STATUTORY
BASIS
FINANCIAL STATEMENTS HAVE NOT BEEN DETERMINED, BUT ARE PRESUMED TO BE
MATERIAL.
(B) INVESTED ASSETS ARE CARRIED AT VALUES PRESCRIBED BY THE NATIONAL
ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC). SHORT TERM
INVESTMENTS, WHICH HAVE AN ORIGINAL MATURITY OF ONE YEAR OR LESS, ARE
CARRIED AT AMORTIZED COST. BONDS ARE GENERALLY CARRIED AT AMORTIZED
COST. PREMIUMS AND DISCOUNTS ARISING FROM THE PURCHASE OF
MORTGAGE-BACKED SECURITIES ARE AMORTIZED USING THE INTEREST METHOD
OVER THE ESTIMATED REMAINING TERM OF THE SECURITIES, ADJUSTED FOR
ANTICIPATED PREPAYMENTS. EQUITY SECURITIES ARE CARRIED AT MARKET
VALUE. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND OTHER INVESTED
ASSETS ARE ACCOUNTED FOR ON THE EQUITY BASIS.
REALIZED GAINS AND LOSSES ON THE SALE OF INVESTMENTS ARE DETERMINED
ON THE BASIS OF THE COST OF THE SPECIFIC INVESTMENTS SOLD AND ARE
CREDITED OR CHARGED TO INCOME. UNREALIZED APPRECIATION OR
DEPRECIATION OF EQUITY SECURITIES, UNCONSOLIDATED SUBSIDIARIES AND
OTHER INVESTED ASSETS ARE EXCLUDED FROM INCOME AND CREDITED OR CHARGED
DIRECTLY TO SURPLUS TO POLICYHOLDERS.
(C) PREMIUMS ARE EARNED ON A MONTHLY PRO RATA BASIS OVER THE TERMS OF
THE POLICIES. UNEARNED PREMIUMS REPRESENT THE PORTION OF PREMIUMS
WRITTEN APPLICABLE TO THE UNEXPIRED TERMS OF POLICIES IN FORCE.
(D) LIABILITIES FOR OUTSTANDING LOSSES AND LOSS EXPENSES INCLUDE THE
ACCUMULATION OF INDIVIDUAL CASE ESTIMATES FOR CLAIMS REPORTED AS WELL
AS ESTIMATES OF UNREPORTED CLAIMS AND CLAIM SETTLEMENT EXPENSES, LESS
ESTIMATES OF ANTICIPATED SALVAGE AND SUBROGATION RECOVERIES.
ESTIMATES ARE BASED UPON PAST CLAIM EXPERIENCE MODIFIED FOR CURRENT
TRENDS AS WELL AS PREVAILING ECONOMIC, LEGAL AND SOCIAL CONDITIONS.
SUCH ESTIMATES ARE CONTINUALLY REVIEWED AND UPDATED. ANY RESULTING
ADJUSTMENTS ARE REFLECTED IN CURRENT OPERATING RESULTS.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
(E) THE METHODS AND ASSUMPTIONS USED TO ESTIMATE THE FAIR VALUE OF
FINANCIAL INSTRUMENTS ARE AS FOLLOWS:
(I) THE CARRYING VALUE OF SHORT TERM INVESTMENTS APPROXIMATES FAIR
VALUE DUE TO THE SHORT MATURITIES OF THESE INVESTMENTS.
(II) FAIR VALUES OF BONDS WITH ACTIVE MARKETS ARE BASED ON QUOTED
MARKET PRICES. FOR BONDS THAT TRADE IN LESS ACTIVE MARKETS, FAIR
VALUES ARE OBTAINED FROM INDEPENDENT PRICING SERVICES. FAIR VALUES OF
BONDS ARE PRINCIPALLY A FUNCTION OF CURRENT INTEREST RATES. CARE
SHOULD BE USED IN EVALUATING THE SIGNIFICANCE OF THESE ESTIMATED
MARKET VALUES WHICH CAN FLUCTUATE BASED ON SUCH FACTORS AS INTEREST
RATES, INFLATION, MONETARY POLICY AND GENERAL ECONOMIC CONDITIONS.
(III) FAIR VALUES OF EQUITY SECURITIES ARE BASED ON QUOTED MARKET
PRICES.
(F) IN 1997, THE COMPANY DISTRIBUTED ITS INVESTMENT IN BELLEMEAD
DEVELOPMENT CORPORATION TO CHUBB; IN CONNECTION WITH THE DISTRIBUTION,
PAID-IN SURPLUS WAS REDUCED BY $94,096,000 REPRESENTING THE COST OF
THE INVESTMENT, AND
UNREALIZED APPRECIATION OF INVESTMENTS WAS REDUCED BY $175,664,000
REPRESENTING THE INCREASE IN THE STATUTORY NET ASSET VALUE OF
BELLEMEAD DEVELOPMENT CORPORATION FROM THE DATE OF ACQUISITION THROUGH
THE DATE OF TRANSFER. THIS NON-CASH TRANSACTION HAS BEEN EXCLUDED
FROM THE STATEMENT OF CASH FLOWS.
2. INVESTED ASSETS
(A) THE COST OF EQUITY SECURITIES, INVESTMENTS IN UNCONSOLIDATED
SUBSIDIARIES AND OTHER INVESTED ASSETS AT DECEMBER 31, 1997 AND 1996
WERE AS FOLLOWS (IN THOUSANDS):
1997 1996
EQUITY SECURITIES $410,001 $183,461
UNCONSOLIDATED SUBSIDIARIES 173,362 256,557
OTHER INVESTED ASSETS 191,791 171,857
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. INVESTED ASSETS (CONT'D)
(B) THE COMPONENTS OF UNREALIZED APPRECIATION OF INVESTMENTS AT
DECEMBER 31, 1997 AND 1996 WERE AS FOLLOWS (IN THOUSANDS):
1997 1996
GROSS UNREALIZED APPRECIATION $256,947 $378,349
GROSS UNREALIZED DEPRECIATION 67,213 51,667
$189,734 $326,682
(C) THE AMORTIZED COST AND ESTIMATED MARKET VALUE OF BONDS WERE
AS FOLLOWS (IN THOUSANDS):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DECEMBER 31,
1997
GROSS GROSS ESTIMATED
AMORTIZED COST UNREALIZED UNREALIZED MARKET
GAINS LOSSES VALUE
TAX EXEMPT BONDS $5,221,481 $326,053 $ 148 $5,547,386
TAXABLE FOREIGN BONDS 150,320 5,524 1,864 153,980
MORTGAGE-BACKED SECURITIES 896,007 22,843 1,510 917,340
TAXABLE U.S. GOVERNMENT BONDS 286,812 4,470 97 291,185
TAXABLE CORPORATE BONDS 589,826 21,129 1,998 608,957
TOTAL BONDS $7,144,446 $380,019 $5,617 $7,518,848
</TABLE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. INVESTED ASSETS (CONT'D)
(D) THE AMORTIZED COST AND ESTIMATED MARKET VALUE OF BONDS AT
DECEMBER 31, 1997 BY CONTRACTUAL MATURITY WERE AS FOLLOWS (IN
THOUSANDS):
ESTIMATED
AMORTIZED MARKET
COST VALUE
DUE IN ONE YEAR OR LESS $ 123,395 $ 124,380
DUE AFTER ONE YEAR THROUGH 962,548 988,779
FIVE YEARS
DUE AFTER FIVE YEARS THROUGH 2,277,937 2,409,492
TEN YEARS
DUE AFTER TEN YEARS 2,884,559 3,078,857
MORTGAGE-BACKED SECURITIES 896,007 917,340
TOTAL BONDS $7,144,446 $7,518,848
ACTUAL MATURITIES COULD DIFFER FROM CONTRACTUAL MATURITIES BECAUSE
BORROWERS MAY HAVE THE RIGHT TO CALL OR PREPAY OBLIGATIONS.
3. RELATED PARTY TRANSACTIONS
DURING 1997, 1996 AND 1995, CHUBB & SON INC. (C&S), A SUBSIDIARY OF
CHUBB, HAD AGREEMENTS WITH THE COMPANIES PURSUANT TO WHICH THE
COMPANIES PARTICIPATED IN THE U.S. INSURANCE BUSINESS WRITTEN THROUGH
C&S. C&S ARRANGED FOR THE EXCHANGE OF REINSURANCE BETWEEN THE
COMPANIES (SEE NOTE 7).
THE TERMS OF THE AGREEMENTS INCLUDED THAT C&S BE REIMBURSED FOR ALL
EXPENSES INCURRED ON BEHALF OF THE COMPANIES. SUCH EXPENSES ARE
INCLUDED PRIMARILY IN UNDERWRITING EXPENSES.
ON DECEMBER 31, 1997, THE AGREEMENTS WITH C&S WERE TERMINATED.
EFFECTIVE JANUARY 1, 1998, NEW AGREEMENTS WERE ENTERED INTO
SUBSTITUTING FEDERAL, THROUGH ITS CHUBB & SON DIVISION, IN PLACE OF
C&S.
INVESTMENT INCOME INCLUDES DIVIDENDS FROM SUBSIDIARIES OF
$507,370,000, $177,225,000 AND $122,000,000 IN 1997, 1996, AND 1995,
RESPECTIVELY.
4. FEDERAL AND FOREIGN INCOME TAX
THE COMPANY IS A MEMBER OF AN AFFILIATED GROUP WHICH FILES A
CONSOLIDATED FEDERAL INCOME TAX RETURN. INTERCOMPANY TAX TRANSACTIONS
AND ALLOCATIONS ARE GOVERNED BY AN INTERCOMPANY TAX ALLOCATION
AGREEMENT BETWEEN CHUBB AND THE COMPANIES. UNDER THE WRITTEN
AGREEMENT, WHICH IS IN ACCORDANCE WITH
SECTION 1552(A)(1) OF THE INTERNAL REVENUE CODE, EACH OF THE COMPANIES
WITH TAXABLE INCOME IS ALLOCATED A CURRENT TAX PROVISION BASED ON THE
RATIO OF ITS TAXABLE INCOME TO THE TOTAL TAXABLE INCOME OF THOSE
COMPANIES HAVING TAXABLE INCOME.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
4. FEDERAL AND FOREIGN INCOME TAX (CONT'D)
THE PROVISION FOR FEDERAL AND FOREIGN INCOME TAX GIVES EFFECT TO
DIFFERENCES BETWEEN INCOME FOR STATUTORY REPORTING PURPOSES AND
TAXABLE INCOME. THE PRINCIPAL DIFFERENCES ARE (I) INTEREST INCOME ON
TAX EXEMPT BONDS AND
(II) THE ACCELERATED RECOGNITION OF TAXABLE INCOME THROUGH THE
DISCOUNTING OF OUTSTANDING LOSSES AND LOSS EXPENSES AND THE REDUCTION
OF UNEARNED PREMIUM RESERVES FOR TAX PURPOSES.
5. EMPLOYEE BENEFITS
THE EMPLOYEES OF C&S ARE AFFORDED BENEFITS UNDER RETIREMENT AND OTHER
POSTRETIREMENT BENEFIT PROGRAMS. THE COMPANY CONTRIBUTES ITS
PROPORTIONATE SHARE TOWARDS THE COST OF THESE PROGRAMS.
THE COMPANY PARTICIPATES IN A NON-CONTRIBUTORY, DEFINED BENEFIT
PENSION AND RETIREMENT PLAN COVERING EMPLOYEES OF C&S. THE BENEFITS
ARE GENERALLY BASED ON AN EMPLOYEE'S YEARS OF SERVICE AND AVERAGE
COMPENSATION DURING THE LAST FIVE YEARS OF EMPLOYMENT.
VESTED BENEFITS ARE FULLY FUNDED. THE EMPLOYERS' POLICY IS TO MAKE
ANNUAL CONTRIBUTIONS THAT MEET THE MINIMUM FUNDING REQUIREMENTS OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. EACH PARTICIPATING
AFFILIATE IS CHARGED FOR ITS ALLOCABLE SHARE OF SUCH CONTRIBUTIONS.
NO PENSION EXPENSE WAS ALLOCATED TO THE COMPANY IN 1997. PENSION
COSTS ALLOCATED TO THE COMPANY IN 1996 AND 1995 WERE $4,077,000 AND
$7,886,000, RESPECTIVELY.
AS OF JANUARY 1, 1997, THE MOST RECENT ACTUARIAL VALUATION DATE, THE
PLAN'S TOTAL ACCUMULATED BENEFIT OBLIGATION WAS $281,561,798, BASED ON
AN ASSUMED INTEREST RATE OF 7.75%, INCLUDING VESTED BENEFITS OF
$262,361,598; THE FAIR VALUE OF PLAN ASSETS WAS $410,535,285.
C&S PROVIDES CERTAIN OTHER POSTRETIREMENT BENEFITS, PRINCIPALLY
HEALTH CARE AND LIFE INSURANCE, TO RETIRED EMPLOYEES AND THEIR
BENEFICIARIES AND COVERED DEPENDENTS. SUBSTANTIALLY ALL EMPLOYEES MAY
BECOME ELIGIBLE FOR THESE BENEFITS UPON RETIREMENT IF THEY MEET
MINIMUM AGE AND YEARS OF SERVICE REQUIREMENTS.
THESE BENEFITS ARE NOT FUNDED IN ADVANCE. BENEFITS ARE PAID AS
COVERED EXPENSES ARE INCURRED. HEALTH CARE COVERAGE IS CONTRIBUTORY.
RETIREE CONTRIBUTIONS VARY BASED UPON A RETIREE'S AGE, TYPE OF
COVERAGE AND YEARS OF SERVICE. LIFE INSURANCE COVERAGE IS
NON-CONTRIBUTORY.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
5. EMPLOYEE BENEFITS (CONT'D)
THE COMPANY ACCRUES THE EXPECTED COST OF PROVIDING POSTRETIREMENT
BENEFITS TO RETIREES AND OTHER FULLY ELIGIBLE OR VESTED PLAN
PARTICIPANTS AND THEIR BENEFICIARIES AND COVERED DEPENDENTS. THE
COMPANIES ELECTED TO AMORTIZE THE TRANSITION OBLIGATION, WHICH
REPRESENTS THEIR UNFUNDED AND UNRECOGNIZED
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION AS OF JANUARY 1, 1993,
OVER 20 YEARS. THE UNAMORTIZED TRANSITION OBLIGATION OF C&S WAS
$32,086,000 AND $34,225,000 AT DECEMBER 31, 1997 AND 1996,
RESPECTIVELY. NET POSTRETIREMENT BENEFIT COSTS INCLUDE THE EXPECTED
COST OF SUCH BENEFITS FOR NEWLY VESTED
EMPLOYEES, INTEREST COST, GAINS AND LOSSES ARISING FROM DIFFERENCES IN
ACTUARIAL ASSUMPTIONS AND ACTUAL EXPERIENCE AND AMORTIZATION OF THE
TRANSITION OBLIGATION. NET POSTRETIREMENT BENEFIT COSTS ALLOCATED TO
THE COMPANY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND
THE POSTRETIREMENT BENEFIT LIABILITY AT DECEMBER 31, 1997 AND 1996
WERE NOT SIGNIFICANT.
THE ESTIMATED AMOUNT OF THE POSTRETIREMENT BENEFIT OBLIGATION OF C&S
FOR ACTIVE NONVESTED EMPLOYEES AS OF DECEMBER 31, 1997 AND 1996 WAS
$53,950,000 AND $53,349,000, RESPECTIVELY.
THE WEIGHTED AVERAGE DISCOUNT RATE USED IN DETERMINING THE ACTUARIAL
PRESENT VALUE OF THE ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION AT
DECEMBER 31, 1997 AND 1996 WAS 7.5% AND 7.75%, RESPECTIVELY. AT
DECEMBER 31, 1997, THE WEIGHTED AVERAGE HEALTH CARE COST TREND RATE
USED TO MEASURE THE ACCUMULATED POSTRETIREMENT COST FOR MEDICAL
BENEFITS WAS 11.3% FOR 1998 AND WAS ASSUMED TO DECREASE GRADUALLY TO
6.0% FOR THE YEAR 2005 AND REMAIN AT THAT LEVEL THEREAFTER.
6. LEASES
THE COMPANIES OCCUPY OFFICE FACILITIES UNDER LEASE AGREEMENTS WHICH
EXPIRE AT VARIOUS DATES THROUGH 2019; SUCH LEASES ARE GENERALLY
RENEWED OR REPLACED BY OTHER LEASES. IN ADDITION, THE COMPANIES LEASE
DATA PROCESSING, OFFICE AND TRANSPORTATION EQUIPMENT. LEASES ARE THE
OBLIGATION OF THE COMPANY. THE COMPANY CONTRIBUTES ITS PROPORTIONATE
SHARE OF THE RENTAL COST UNDER SUCH LEASES.
MOST LEASES CONTAIN RENEWAL OPTIONS FOR INCREMENTS RANGING FROM THREE
TO FIVE YEARS; CERTAIN LEASE AGREEMENTS PROVIDE FOR RENT INCREASES
BASED ON PRICE-LEVEL FACTORS. ALL LEASES ARE OPERATING LEASES.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
6. LEASES (CONT'D)
AT DECEMBER 31, 1997, FUTURE MINIMUM RENTAL PAYMENTS REQUIRED UNDER
NON-CANCELLABLE OPERATING LEASES WERE AS FOLLOWS (IN THOUSANDS):
YEARS ENDING DECEMBER 31:
1998 $ 55,769
L999 58,245
2000 58,872
2001 51,583
2002 45,211
AFTER 2002 315,731
$585,411
7. REINSURANCE
THE COMPANY PARTICIPATES IN POOLING ARRANGEMENTS WITH AFFILIATED
INSURERS WHEREBY THESE COMPANIES ASSUME AND CEDE REINSURANCE WITH EACH
OTHER. THESE ARRANGEMENTS VARY AS A FUNCTION OF THE LINE OF BUSINESS
AND LOCATION OF THE RISK. A SUBSTANTIAL AMOUNT OF THE REINSURANCE OF
THE COMPANY IS EFFECTED UNDER THESE POOLING ARRANGEMENTS. EFFECTIVE
JANUARY 1, 1997, THE COMPANY'S PRO RATA PARTICIPATION IN THE POOLED
PROPERTY AND CASUALTY BUSINESS INCREASED.
IN THE ORDINARY COURSE OF BUSINESS, THE COMPANY ASSUMES AND CEDES
REINSURANCE WITH OTHER INSURANCE COMPANIES AND IS A MEMBER OF VARIOUS
POOLS AND ASSOCIATIONS. THESE ARRANGEMENTS PROVIDE GREATER
DIVERSIFICATION OF BUSINESS AND MINIMIZE THE MAXIMUM NET LOSS
POTENTIAL ARISING FROM LARGE RISKS. A LARGE
PORTION OF THE REINSURANCE IS EFFECTED UNDER CONTRACTS KNOWN AS
TREATIES AND IN SOME INSTANCES BY NEGOTIATION ON INDIVIDUAL RISKS.
CERTAIN OF THESE ARRANGEMENTS CONSIST OF EXCESS OF LOSS AND
CATASTROPHE CONTRACTS WHICH PROTECT
AGAINST LOSSES OVER STIPULATED AMOUNTS ARISING FROM ANY ONE OCCURRENCE
OR EVENT. CEDED REINSURANCE CONTRACTS DO NOT RELIEVE THE COMPANY OF
ITS OBLIGATION TO THE POLICYHOLDERS.
THE EFFECT OF REINSURANCE ON PREMIUMS EARNED FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995 WAS AS FOLLOWS (IN THOUSANDS):
1997 1996 1995
DIRECT $2,932,452 $2,868,065 $2,846,006
ASSUMED 1,436,560 1,158,882 1,078,779
CEDED (1,120,621) (1,582,601) (1,736,698)
NET $3,248,391 $2,444,346 $2,188,087
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
7. REINSURANCE (CONT'D)
FOR MANY YEARS, A PORTION OF THE U. S. INSURANCE BUSINESS WRITTEN BY
THE COMPANY WAS REINSURED ON A QUOTA SHARE BASIS WITH A SUBSIDIARY OF
ROYAL & SUN ALLIANCE INSURANCE GROUP PLC. EFFECTIVE JANUARY 1, 1997,
THE REINSURANCE AGREEMENT WITH ROYAL & SUN ALLIANCE WAS TERMINATED.
THE CEDED REINSURANCE PREMIUMS EARNED OF THE COMPANY INCLUDED
$266,796,000 AND $366,066,000 IN 1996 AND 1995, RESPECTIVELY, FROM
SUCH REINSURANCE.
REINSURANCE RECOVERIES WHICH HAVE BEEN DEDUCTED FROM LOSSES AND LOSS
EXPENSES WERE $711,805,000, $1,048,760,000 AND $1,118,230,000 IN 1997,
1996 AND 1995, RESPECTIVELY.
8. OUTSTANDING LOSSES AND LOSS EXPENSES
THE PROCESS OF ESTABLISHING LOSS RESERVES IS AN IMPRECISE SCIENCE AND
REFLECTS SIGNIFICANT JUDGMENTAL FACTORS. IN MANY LIABILITY CASES,
SIGNIFICANT PERIODS OF TIME, RANGING UP TO SEVERAL YEARS OR MORE, MAY
ELAPSE BETWEEN THE OCCURRENCE OF AN INSURED LOSS, THE REPORTING OF THE
LOSS AND THE SETTLEMENT OF THE LOSS.
JUDICIAL DECISIONS AND LEGISLATIVE ACTIONS CONTINUE TO BROADEN
LIABILITY AND POLICY DEFINITIONS AND TO INCREASE THE SEVERITY OF CLAIM
PAYMENTS. AS A RESULT OF THIS AND OTHER SOCIETAL AND ECONOMIC
DEVELOPMENTS, THE UNCERTAINTIES INHERENT IN ESTIMATING ULTIMATE CLAIM
COSTS ON THE BASIS OF PAST EXPERIENCE HAVE INCREASED SIGNIFICANTLY,
FURTHER COMPLICATING THE ALREADY COMPLEX LOSS RESERVING PROCESS.
THE UNCERTAINTIES RELATING TO ASBESTOS AND TOXIC WASTE CLAIMS ON
INSURANCE POLICIES WRITTEN MANY YEARS AGO ARE EXACERBATED BY JUDICIAL
AND LEGISLATIVE INTERPRETATIONS OF COVERAGE THAT IN SOME CASES HAVE
TENDED TO ERODE THE CLEAR AND EXPRESS INTENT OF SUCH POLICIES AND IN
OTHER CASES HAVE EXPANDED THEORIES OF LIABILITY. THE INDUSTRY IS
ENGAGED IN EXTENSIVE LITIGATION OVER THESE COVERAGE AND LIABILITY
ISSUES AND IS THUS CONFRONTED WITH A CONTINUING UNCERTAINTY IN ITS
EFFORTS TO QUANTIFY THESE EXPOSURES.
IN 1993, PACIFIC INDEMNITY COMPANY (PACIFIC INDEMNITY), A
WHOLLY-OWNED PROPERTY AND CASUALTY INSURANCE SUBSIDIARY OF THE
COMPANY, ENTERED INTO A GLOBAL SETTLEMENT AGREEMENT WITH CONTINENTAL
CASUALTY COMPANY (A SUBSIDIARY OF CNA FINANCIAL CORPORATION),
FIBREBOARD CORPORATION, AND ATTORNEYS REPRESENTING CLAIMANTS AGAINST
FIBREBOARD FOR ALL FUTURE ASBESTOS-RELATED BODILY INJURY CLAIMS
AGAINST FIBREBOARD. THIS AGREEMENT IS SUBJECT TO FINAL APPELLATE
COURT
APPROVAL. THE SETTLEMENT RELATES TO AN INSURANCE POLICY ISSUED TO
FIBREBOARD CORPORATION BY PACIFIC INDEMNITY. THE PACIFIC INDEMNITY
POLICY WAS 100% REINSURED BY THE COMPANY. PURSUANT TO THE GLOBAL
SETTLEMENT AGREEMENT, A $1,525,000,000 TRUST FUND WILL BE ESTABLISHED
TO PAY FUTURE CLAIMS, WHICH ARE CLAIMS THAT WERE NOT FILED IN COURT
BEFORE AUGUST 27, 1993. THE COMPANY, AS
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
8. OUTSTANDING LOSSES AND LOSS EXPENSES (CONT'D)
REINSURER OF THE PACIFIC INDEMNITY POLICY, WILL CONTRIBUTE
$538,172,000 TO THE TRUST FUND AND CONTINENTAL CASUALTY WILL
CONTRIBUTE THE REMAINING AMOUNT. IN DECEMBER 1993, UPON EXECUTION OF
THE GLOBAL SETTLEMENT AGREEMENT, THE COMPANY AND CONTINENTAL CASUALTY
PAID THEIR RESPECTIVE SHARES INTO AN ESCROW ACCOUNT. THE COMPANY'S
SHARE IS INCLUDED IN ITS SHORT TERM INVESTMENTS. UPON FINAL COURT
APPROVAL OF THE SETTLEMENT, THE AMOUNT IN THE ESCROW ACCOUNT,
INCLUDING INTEREST EARNED THEREON, WILL BE TRANSFERRED TO THE TRUST
FUND. ALL OF THE PARTIES HAVE AGREED TO USE THEIR BEST EFFORTS TO
SEEK FINAL COURT APPROVAL OF THE GLOBAL SETTLEMENT AGREEMENT.
PACIFIC INDEMNITY AND CONTINENTAL CASUALTY REACHED A SEPARATE
AGREEMENT FOR THE HANDLING OF ALL ASBESTOS-RELATED BODILY INJURY
CLAIMS PENDING ON AUGUST 26,
1993 AGAINST FIBREBOARD. AS REINSURER OF PACIFIC INDEMNITY, THE
COMPANY'S OBLIGATION UNDER THIS AGREEMENT WITH RESPECT TO SUCH PENDING
CLAIMS IS
APPROXIMATELY $635,000,000, ALL OF WHICH HAS BEEN PAID. THE AGREEMENT
FURTHER PROVIDES THAT THE TOTAL RESPONSIBILITY OF PACIFIC INDEMNITY
AND CONTINENTAL CASUALTY WITH RESPECT TO PENDING AND FUTURE
ASBESTOS-RELATED BODILY INJURY CLAIMS AGAINST FIBREBOARD WILL BE
SHARED ON AN APPROXIMATE 35% AND 65% BASIS, RESPECTIVELY.
PACIFIC INDEMNITY, CONTINENTAL CASUALTY AND FIBREBOARD ENTERED INTO A
TRILATERAL AGREEMENT TO SETTLE ALL PRESENT AND FUTURE ASBESTOS-RELATED
BODILY INJURY CLAIMS RESULTING FROM INSURANCE POLICIES THAT WERE, OR
MAY HAVE BEEN, ISSUED TO FIBREBOARD BY THE TWO INSURERS. THE
TRILATERAL AGREEMENT WILL BE TRIGGERED IF THE GLOBAL SETTLEMENT
AGREEMENT IS ULTIMATELY DISAPPROVED. THE COMPANY'S OBLIGATION, AS
REINSURER OF PACIFIC INDEMNITY, UNDER THE TRILATERAL AGREEMENT IS
THEREFORE SIMILAR TO, AND NOT DUPLICATIVE OF, THAT UNDER THOSE
AGREEMENTS DESCRIBED ABOVE.
THE TRILATERAL AGREEMENT REAFFIRMS PORTIONS OF AN AGREEMENT REACHED
IN MARCH 1992 BETWEEN PACIFIC INDEMNITY AND FIBREBOARD. AMONG OTHER
MATTERS, THAT 1992 AGREEMENT ELIMINATES ANY PACIFIC INDEMNITY
LIABILITY TO FIBREBOARD FOR ASBESTOS-RELATED PROPERTY DAMAGE CLAIMS.
IN JULY 1995, THE UNITED STATES DISTRICT COURT OF THE EASTERN
DISTRICT OF TEXAS APPROVED THE GLOBAL SETTLEMENT AGREEMENT AND THE
TRILATERAL AGREEMENT. THE JUDGMENTS APPROVING THESE AGREEMENTS WERE
APPEALED TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.
IN JULY 1996, THE FIFTH CIRCUIT COURT AFFIRMED THE 1995 JUDGMENTS OF
THE DISTRICT COURT. THE OBJECTORS TO THE GLOBAL AGREEMENT APPEALED TO
THE UNITED STATES SUPREME COURT. IN JUNE 1997, THE UNITED STATES
SUPREME COURT SET ASIDE THE RULING BY THE FIFTH CIRCUIT COURT THAT HAD
APPROVED THE GLOBAL AGREEMENT AND ORDERED THE FIFTH CIRCUIT COURT TO
RECONSIDER ITS APPROVAL IN LIGHT OF A JUNE 1997 RULING BY THE SUPREME
COURT REJECTING AN UNRELATED SETTLEMENT THAT INCLUDED SEVERAL FORMER
ASBESTOS MANUFACTURERS.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
8. OUTSTANDING LOSSES AND LOSS EXPENSES (CONT'D)
IN JANUARY 1998, THE FIFTH CIRCUIT COURT AGAIN AFFIRMED THE GLOBAL
SETTLEMENT AGREEMENT, RULING THAT IT WAS LEGALLY DISTINCT FROM THE
OTHER SETTLEMENT. IT IS EXPECTED THAT OBJECTORS TO THE SETTLEMENT
WILL PETITION THE SUPREME COURT TO REVIEW THE DECISION. THE SUPREME
COURT WOULD THEN HAVE TO DECIDE WHETHER TO TAKE THE APPEAL.
THE TRILATERAL AGREEMENT, HOWEVER, WAS NEVER APPEALED TO THE UNITED
STATES SUPREME COURT AND IS NOW FINAL. AS A RESULT, MANAGEMENT
CONTINUES TO BELIEVE THAT THE UNCERTAINTY OF THE COMPANY'S EXPOSURE,
AS REINSURER OF PACIFIC INDEMNITY, WITH RESPECT TO ASBESTOS-RELATED
BODILY INJURY CLAIMS AGAINST FIBREBOARD HAS BEEN ELIMINATED.
SINCE 1993, A CALIFORNIA COURT OF APPEAL HAS AGREED, IN RESPONSE TO A
REQUEST BY PACIFIC INDEMNITY, CONTINENTAL CASUALTY AND FIBREBOARD, TO
DELAY ITS DECISIONS REGARDING ASBESTOS-RELATED INSURANCE COVERAGE
ISSUES THAT ARE CURRENTLY BEFORE IT AND INVOLVE THE THREE PARTIES
EXCLUSIVELY, WHILE THE APPROVAL OF THE GLOBAL SETTLEMENT IS PENDING IN
COURT. CONTINENTAL CASUALTY AND PACIFIC INDEMNITY HAVE DISMISSED
DISPUTES AGAINST EACH OTHER WHICH INVOLVED FIBREBOARD AND WERE IN
LITIGATION.
THE COMPANY HAS ADDITIONAL POTENTIAL ASBESTOS EXPOSURE, PRIMARILY ON
INSUREDS FOR WHICH EXCESS LIABILITY COVERAGES WERE WRITTEN. SUCH
EXPOSURE HAS INCREASED DUE TO THE EROSION OF MUCH OF THE UNDERLYING
LIMITS. THE NUMBER OF CLAIMS AGAINST SUCH INSUREDS AND THE VALUE OF
SUCH CLAIMS HAVE INCREASED IN RECENT YEARS DUE IN PART TO THE
NON-VIABILITY OF OTHER DEFENDANTS.
THE REMAINING ASBESTOS EXPOSURES ARE MOSTLY PERIPHERAL DEFENDANTS,
INCLUDING A MIX OF MANUFACTURERS AND DISTRIBUTORS OF CERTAIN PRODUCTS
THAT CONTAIN ASBESTOS AS WELL AS PREMISES OWNERS. GENERALLY, THESE
INSUREDS ARE NAMED DEFENDANTS ON A REGIONAL RATHER THAN A NATIONWIDE
BASIS. NOTICES OF NEW ASBESTOS CLAIMS AND NEW EXPOSURES ON EXISTING
CLAIMS CONTINUE TO BE RECEIVED AS MORE PERIPHERAL PARTIES ARE DRAWN
INTO LITIGATION TO REPLACE THE NOW DEFUNCT MINES AND BANKRUPT
MANUFACTURERS.
LEGAL GUIDELINES REGARDING COVERAGE FOR ASBESTOS CLAIMS HAVE BEGUN TO
ARTICULATE MORE CONSISTENT STANDARDS REGARDING THE EXTENT OF THE
INSURERS' COVERAGE OBLIGATION AND THE METHOD OF ALLOCATION OF COSTS
AMONG INSURERS. HOWEVER, THE UNIVERSE OF POTENTIAL CLAIMS IS STILL
UNKNOWN. THEREFORE, UNCERTAINTY REMAINS AS TO THE COMPANY'S ULTIMATE
LIABILITY FOR ASBESTOS-RELATED CLAIMS.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
8. OUTSTANDING LOSSES AND LOSS EXPENSES (CONT'D)
HAZARDOUS WASTE SITES ARE ANOTHER SIGNIFICANT POTENTIAL EXPOSURE.
UNDER THE FEDERAL "SUPERFUND" LAW AND SIMILAR STATE STATUTES, WHEN
POTENTIALLY RESPONSIBLE PARTIES (PRPS) FAIL TO HANDLE THE CLEAN-UP,
REGULATORS HAVE THE WORK DONE AND THEN ATTEMPT TO ESTABLISH LEGAL
LIABILITY AGAINST THE PRPS. THE PRPS DISPOSED OF TOXIC MATERIALS AT A
WASTE DUMP SITE OR TRANSPORTED THE MATERIALS TO THE SITE. INSURANCE
POLICIES ISSUED TO PRPS WERE NOT INTENDED TO COVER THE CLEAN-UP COSTS
OF POLLUTION AND, IN MANY CASES, DID NOT INTEND TO COVER THE POLLUTION
ITSELF. AS THE COSTS OF ENVIRONMENTAL CLEAN-UP HAVE BECOME
SUBSTANTIAL, PRPS AND OTHERS HAVE INCREASINGLY FILED CLAIMS WITH THEIR
INSURANCE CARRIERS. LITIGATION AGAINST INSURERS EXTENDS TO ISSUES OF
LIABILITY, COVERAGE AND OTHER POLICY PROVISIONS. THERE IS GREAT
UNCERTAINTY INVOLVED IN ESTIMATING THE COMPANY'S LIABILITIES RELATED
TO THESE CLAIMS. FIRST, THE UNDERLYING LIABILITIES OF THE CLAIMANTS
ARE EXTREMELY DIFFICULT TO ESTIMATE. AT ANY GIVEN CLEAN-UP SITE, THE
ALLOCATION OF REMEDIATION COSTS AMONG GOVERNMENTAL AUTHORITIES AND THE
PRPS VARIES GREATLY. SECOND, DIFFERENT COURTS HAVE ADDRESSED
LIABILITY AND COVERAGE ISSUES REGARDING POLLUTION CLAIMS AND HAVE
REACHED INCONSISTENT CONCLUSIONS IN THEIR INTERPRETATION OF SEVERAL
ISSUES. THESE SIGNIFICANT UNCERTAINTIES ARE NOT LIKELY TO BE RESOLVED
IN THE NEAR FUTURE.
UNCERTAINTIES ALSO REMAIN AS TO THE SUPERFUND LAW ITSELF.
SUPERFUND'S TAXING AUTHORITY EXPIRED ON DECEMBER 31, 1995. IT IS
CURRENTLY NOT POSSIBLE TO PREDICT THE DIRECTION THAT ANY REFORMS MAY
TAKE, WHEN THEY MAY OCCUR OR THE EFFECT THAT ANY CHANGES MAY HAVE ON
THE INSURANCE INDUSTRY.
RESERVES FOR ASBESTOS AND TOXIC WASTE CLAIMS CANNOT BE ESTIMATED WITH
TRADITIONAL LOSS RESERVING TECHNIQUES. CASE RESERVES AND EXPENSE
RESERVES FOR COSTS OF RELATED LITIGATION HAVE BEEN ESTABLISHED WHERE
SUFFICIENT INFORMATION HAS BEEN DEVELOPED TO INDICATE THE INVOLVEMENT
OF A SPECIFIC INSURANCE POLICY.
IN ADDITION, INCURRED BUT NOT REPORTED RESERVES HAVE BEEN ESTABLISHED
TO COVER ADDITIONAL EXPOSURES ON BOTH KNOWN AND UNASSERTED CLAIMS.
THESE RESERVES ARE CONTINUALLY REVIEWED AND UPDATED.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
8. OUTSTANDING LOSSES AND LOSS EXPENSES (CONT'D)
A RECONCILIATION OF THE BEGINNING AND ENDING LIABILITY FOR
OUTSTANDING LOSSES AND LOSS EXPENSES, NET OF REINSURANCE RECOVERABLE,
AND A RECONCILIATION OF THE NET LIABILITY TO THE CORRESPONDING
LIABILITY ON A GROSS BASIS IS AS FOLLOWS (IN THOUSANDS):
1997 1996 1995
GROSS LIABILITY, BEGINNING OF $8,020,224 $7,896,430 $7,483,942
YEAR
REINSURANCE RECOVERABLE, 3,126,676 2,992,274 2,908,174
BEGINNING OF YEAR 4,893,548 4,904,156 4,575,768
NET LIABILITY, BEGINNING OF
YEAR
NET INCURRED CLAIMS AND CLAIM
EXPENSES RELATED TO:
CURRENT YEAR 2,167,893 1,678,276 1,450,452
2,139,189 1,697,816 1,498,753
PRIOR YEARS (28,704) 19,540 48,301
NET PAYMENTS FOR CLAIMS AND
CLAIM EXPENSES RELATED TO:
CURRENT YEAR 640,581 489,074 375,139
PRIOR YEARS 326,421 1,219,350 795,226
967,002 1,708,424 1,170,365
NET LIABILITY, END OF YEAR 6,065,735 4,893,548 4,904,156
REINSURANCE RECOVERABLE,
END OF YEAR 2,578,451 3,126,676 2,992,274
GROSS LIABILITY, END OF YEAR $8,644,186 $8,020,224 $7,896,430
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
8. OUTSTANDING LOSSES AND LOSS EXPENSES (CONT'D)
A RECONCILIATION OF THE BEGINNING AND ENDING GROSS AND NET LIABILITY
FOR OUTSTANDING LOSSES AND LOSS EXPENSES RELATED TO ASBESTOS AND TOXIC
WASTE CLAIMS FOR 1997, 1996 AND 1995 IS AS FOLLOWS (IN THOUSANDS):
1997 1996 1995
GROSS OF REINSURANCE:
LIABILITY, BEGINNING OF YEAR $1,086,500 $1,437,764 $1,348,131
INCURRED LOSSES AND LOSS
ADJUSTMENT 159,562 219,231 263,919
EXPENSES
CALENDAR YEAR PAYMENTS FOR 73,311 570,495 174,286
LOSSES
AND LOSS ADJUSTMENT EXPENSES $1,172,751 $1,086,500 $1,437,764
LIABILITY, END OF YEAR
NET OF REINSURANCE:
LIABILITY, BEGINNING OF YEAR $ 908,189 $1,289,883 $1,225,501
INCURRED LOSSES AND LOSS
ADJUSTMENT 127,837 153,614 204,727
EXPENSES
CALENDAR YEAR PAYMENTS FOR (367) 535,308 140,345
LOSSES
AND LOSS ADJUSTMENT EXPENSES $1,036,393 $ 908,189 $1,289,883
LIABILITY, END OF YEAR
IN 1997, 1996 AND 1995, INCREASES IN OUTSTANDING LOSSES AND LOSS
EXPENSES RELATING TO ASBESTOS AND TOXIC WASTE CLAIMS WERE
SUBSTANTIALLY OFFSET BY FAVORABLE CLAIM SEVERITY TRENDS FOR CERTAIN
LIABILITY CLASSES.
MANAGEMENT BELIEVES THAT THE AGGREGATE OUTSTANDING LOSS AND LOSS
EXPENSE RESERVES OF THE COMPANY AT DECEMBER 31, 1997 WERE ADEQUATE TO
COVER CLAIMS FOR LOSSES WHICH HAD OCCURRED, INCLUDING BOTH THOSE KNOWN
AND THOSE YET TO BE REPORTED. IN ESTABLISHING SUCH RESERVES,
MANAGEMENT CONSIDERS FACTS CURRENTLY KNOWN AND THE PRESENT STATE OF
THE LAW AND COVERAGE LITIGATION. HOWEVER, GIVEN THE EXPANSION OF
COVERAGE AND LIABILITY BY THE COURTS AND THE LEGISLATURES IN THE PAST
AND THE POSSIBILITIES OF SIMILAR INTERPRETATIONS IN THE FUTURE,
PARTICULARLY AS THEY RELATE TO ASBESTOS AND TOXIC WASTE CLAIMS, AS
WELL AS THE UNCERTAINTY IN DETERMINING WHAT SCIENTIFIC STANDARDS WILL
BE DEEMED ACCEPTABLE FOR MEASURING HAZARDOUS WASTE SITE CLEAN-UP,
ADDITIONAL INCREASES IN LOSS RESERVES MAY EMERGE WHICH WOULD ADVERSELY
AFFECT RESULTS IN FUTURE PERIODS. THE AMOUNT CANNOT REASONABLY BE
ESTIMATED AT THE PRESENT TIME.
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
9. DIVIDEND RESTRICTIONS
INDIANA INSURANCE LAWS RESTRICT THE COMPANY AS TO THE AMOUNT OF
SHAREHOLDER DIVIDENDS IT MAY PAY WITHOUT PRIOR APPROVAL. THE
RESTRICTIONS ARE GENERALLY BASED ON NET INVESTMENT INCOME AND ON
STATUTORY SURPLUS. DIVIDENDS IN EXCESS OF SUCH THRESHOLDS ARE
CONSIDERED "EXTRAORDINARY" AND REQUIRE PRIOR APPROVAL.
A:97FEDNTF
Exhibit A(8)
FRANCHISE AGREEMENT
between
Fidelity Destiny Portfolios:
Destiny I Portfolio
and
Fidelity Distributors Corporation
THIS AGREEMENT made as of the 26th day of April, 1999 between
FIDELITY DESTINY PORTFOLIOS, a Massachusetts business trust having its
principal office in Boston, Massachusetts which may issue one or more
series of beneficial interest (hereinafter called the "Portfolio"), on
behalf of Destiny I Portfolio, (hereinafter called the "Portfolio"),
and FIDELITY DISTRIBUTORS CORPORATION, a Massachusetts corporation,
having its principal office in Boston, Massachusetts (hereinafter
called "Distributors").
WITNESSETH:
WHEREAS Distributors has been formed for the purpose, among other
things, of sponsoring Periodic Payment Plan Certificates based upon
open-end investment company shares and other securities, and is able
and desirous of sponsoring Periodic Payment Plan Certificates based
upon Portfolio the various classes of the Portfolio's shares as
hereinafter provided; and
WHEREAS Distributors desires to arrange for the acquisition of
Portfolio shares for deposit and use under Systematic Investment Plans
(hereinafter sometimes collectively referred to as the "Plans"), of
which the STATE STREET BANK AND TRUST COMPANY will be the Custodian;
and
WHEREAS Distributors represents it is a member in good standing of
the National Association of Securities Dealers, Inc.; and
WHEREAS the Portfolio is registered under the Investment Company Act
of 1940, as amended (hereinafter called the "1940 Act"), Portfolio
shares are registered under the Securities Act of 1933, as amended,
(hereinafter called the "1933 Act") and the Portfolio is willing to
take the necessary steps, subject to approval of its shareholders to
continue to register Portfolio shares under the 1933 Act to the end
that there will be available for sale such number of Portfolio shares
as Distributors may reasonably be expected to sell.
NOW, THEREFORE in consideration of the sum of one dollar and other
good and valuable considerations by each of the parties hereto to the
other in hand paid, the receipt whereof is hereby acknowledged, and
the mutual covenants herein set forth, the parties hereto agree as
follows:
1. The Franchise Agreement, for Destiny I Portfolio, previously in
effect is hereby terminated, effective as of the opening of business
this date, and relations between the Portfolio and Distributors
thereafter will be governed by the terms of this Agreement.
2. The Portfolio agrees to sell upon demand at the net asset value,
determined as provided by the then current prospectus (as determined
by Fidelity Service Co., Boston, Massachusetts, as agent for the
Portfolio), which is without imposition of any sales charge, to
Distributors, or any bank or banks acting as Custodian for the Plans
sponsored and issued by Distributors, a sufficient number of Portfolio
shares to meet the requirements of all such Plans as are sold,
distributed and/or issued by Distributors.
3. The Portfolio agrees that it will comply to the best of its
ability with the federal securities laws, and the Portfolio agrees it
will use its best efforts to maintain enough shares of each class of
the Portfolio registered under the 1933 Act to permit the continued
sale of Portfolio shares. The Portfolio further agrees to make
readily available to Distributors any data, information or material in
its possession that may be necessary to the registration or
qualification for the Plans for sale under the federal securities
laws, or the laws of any state.
4. The Portfolio agrees to supply to Distributors or the bank or
banks acting as Custodian for the Plans issued by Distributors a
sufficient number of copies of any and all general mailings, together
with the necessary envelopes, including without limitation, proxy
material, proxies, annual, semi-annual and quarterly reports, notices
and prospectuses, sent from time to time to the holders of Portfolio
shares so as to provide a single copy, together with the necessary
envelope and postage, to each Distributors' Planholder. The Portfolio
agrees to furnish all the above mentioned material at no cost to
Distributors. Additional copies of any current prospectus and any
printed information issued as supplemental to such prospectus of the
Portfolio will be supplied by the Portfolio at Distributors' expense
in sufficient quantities to accommodate Distributors in selling,
distributing and/or issuing the Plans. It is understood that
Distributors is an affiliate of Fidelity Management & Research Company
(hereinafter called "FMR"), investment adviser of the Portfolio and
that the Portfolio's agreement to supply information and printed
materials described in this agreement may be fulfilled by FMR.
Distributors agrees that it will furnish the Portfolio for its files
two copies of all material supplied to Planholders by Distributors.
It is recognized by the Portfolio that FMR may make payment to
Distributors with respect to any expenses incurred in the distribution
of shares of the Portfolio, such payments payable from the past
profits or other resources of FMR including management fees paid to it
by the Portfolio.
5. The Portfolio shall indemnify and hold harmless Distributors and
each person, if any, subjected to liability because of connection with
Distributors and their respective successors (all hereinafter in this
paragraph referred to as the "Defendants") against any liability,
claims, damage or expense (including, unless the Portfolio elects to
assume the defense, the reasonable cost of investigating and defending
any alleged liability, claim, damage, or expense and reasonable
counsel fees in connection therewith), joint or several, arising by
reason of any person acquiring any Plans for Portfolio shares on the
ground that the registration statement or prospectus for shares of the
Portfolio includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in
order to make statements therein not misleading, unless such statement
or omission occurred by reason of a variance in the prospectus
prepared by Distributors from the prospectus as contained in the
composition, etc., supplied by the Portfolio or was made in reliance
upon information furnished by Distributors for use therein. In no
case is the indemnity of the Portfolio in favor of Distributors or any
person indemnified to be deemed to protect Distributors or any such
person against any liability to the Portfolio or its security holders
to which Distributors or any controlling person would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties under this Agreement.
Upon the commencement of any suit against any Defendant in respect of
which indemnity may be sought as aforesaid, such Defendant shall
promptly notify the Portfolio, but failure so to notify the Portfolio
shall not relieve the Portfolio from any liability the Portfolio may
have to the Defendants otherwise than on account of said indemnity
agreement.
6. Distributors shall indemnify and hold harmless the Portfolio and
each person, if any, subjected to liability because of connection with
the Portfolio and their respective successors (all hereinafter in this
paragraph referred to as the "Defendants") against any liability,
claims, damages, or expense (including, unless Distributors elects to
assume the defense, the reasonable cost of investigating and defending
any alleged liability, claim, damages or expense and reasonable
counsel fees in connection therewith), joint or several, arising by
reason of the sponsorship or distribution by Distributors of Plans
based upon the Portfolio shares unless such liability, claim, damages
or expense arise by reason of an untrue statement of a material fact
or omission to state a material fact required to be stated in the
prospectus or registration statement of the Portfolio, or necessary in
order to make the statements therein not misleading. In no case is
the indemnity of Distributors in favor of the Portfolio or any person
indemnified to be deemed to protect the Portfolio or any such person
would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties under this
Agreement. Upon the commencement of any suit against any Defendant in
respect of which indemnity may be sought as aforesaid, such Defendant
shall promptly notify Distributors but failure to notify Distributors
shall not relieve Distributors from any liability Distributors may
have to the Defendants otherwise than on account of said indemnity
agreement.
7. The Agreement on the part of the Portfolio to sell Portfolio
shares upon demand, at net asset value set forth in paragraph 2
hereof, is subject to the following limitations:
(a) That the Plans are maintained in good standing as unit investment
trusts under the federal securities laws, provided, however, that
Distributors reserves the right to change the terms or conditions of,
or suspend or discontinue, any Plans at any time after notification
thereof to the Portfolio by letter or prepaid telegram; and
(b) That the membership of Distributors in the National Association of
Securities Dealers, Inc. and its registration as a broker-dealer under
the Securities Exchange Act of 1934, as amended, have not been
cancelled, revoked or suspended; and
(c) That Distributors is not in violation of any of the federal or
state laws and regulations relating to the registration and sale of
said Plans.
If Distributors shall, within thirty days after a default under any of
the provisions of this paragraph, cure such default to the reasonable
satisfaction of the Portfolio, then the agreement of the Portfolio to
sell at the net asset value Portfolio shares in accordance with
paragraph 2 hereof shall remain unimpaired, anything in this paragraph
7 to the contrary notwithstanding.
8. This Agreement shall have a term of two years from the effective
date of the registration of the Plans under the 1933 Act. Thereafter
this Agreement shall continue from year to year, unless either party
shall serve a notice upon the other by certified or registered mail,
return receipt requested, 120 days prior to the end of the year after
which termination is desired, canceling this Agreement, provided that
it shall be approved by the directors or shareholders of the Portfolio
as required by Section 15 of the 1940 Act. Notwithstanding to the
termination of this Agreement, the Portfolio agrees to sell sufficient
Portfolio shares to Distributors or any bank or banks acting as
Custodian for the Plans to permit completion of all Plans begun prior
to such termination. Distributors represents and agrees that it will
use its best efforts to sell Plans based upon Portfolio shares
throughout the term of this Agreement.
9. Distributors or any bank or banks acting as Custodian for the
Plans may from time to time substitute a new investment medium for the
Portfolio shares in accordance with the provisions of the Plan
certificate and prospectus in effect at the time.
10. All communications provided for hereunder shall be in writing and
shall be deemed to have been duly given if delivered or mailed by
first class mail prepaid (unless delivery by certified or registered
mail, return receipt requested, is provided for) to the respective
parties as follows:
Fidelity Destiny Portfolios: Destiny I Fidelity Distributors
Corporation
82 Devonshire Street 82 Devonshire Street
Boston, Massachusetts 02109 Boston, Massachusetts 02109
or to such other address as the Portfolio or Distributors designates
by written notice to that effect to the other.
11. This Agreement contains the entire understanding between the
parties and any modification, alteration, change or subsequent
agreement hereafter made shall be ineffective to change, modify or
discharge this Agreement in whole or in part unless such modification,
alteration, change or subsequent agreement is in writing and signed by
the party against whom enforcement of the change, modification,
discharge or alteration is sought.
12. This Agreement shall be construed in accordance with the laws of
Massachusetts.
13. This Agreement shall be binding upon and enforceable by and shall
bind and inures to the benefit of the Portfolio and Distributors and
their respective heirs, executors, administrators, successors and
assigns.
14. Distributors is expressly put on notice of the limitation of
shareholder liability as set forth in Article XI Section 3 of the
"Declaration of Trust" of the Portfolio and agrees that the
obligations assumed by the Portfolio under this contract shall be
limited in all cases to the Portfolio and its assets and Distributors
shall not seek satisfaction of any obligation from the shareholders or
any shareholder of the Portfolio. Nor shall Distributors seek
satisfaction of any obligations from the trustees or any individual
trustee of the Portfolio. IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed, all as of the day and year
first above written.
FIDELITY DESTINY PORTFOLIOS:
on behalf of Destiny I Portfolio
By /s/Robert C. Pozen
Senior Vice President
WITNESS:
/s/Eric D. Roiter FIDELITY DISTRIBUTORS CORPORATION
Secretary
By /s/Martha Willis
President
ATTEST:
/s/Eric D. Roiter
Clerk
FRANCHISE AGREEMENT
between
Fidelity Destiny Portfolios:
Destiny II Portfolio
and
Fidelity Distributors Corporation
THIS AGREEMENT made as of the 26th day of April, 1999 between FIDELITY
DESTINY PORTFOLIOS, a Massachusetts business trust having its
principal office in Boston, Massachusetts which may issue one or more
series of beneficial interest (hereinafter called the "Portfolio"), on
behalf of Destiny II Portfolio, (hereinafter called the "Portfolio"),
and FIDELITY DISTRIBUTORS CORPORATION, a Massachusetts corporation,
having its principal office in Boston, Massachusetts (hereinafter
called "Distributors").
WITNESSETH:
WHEREAS Distributors has been formed for the purpose, among other
things, of sponsoring Periodic Payment Plan Certificates based upon
open-end investment company shares and other securities, and is able
and desirous of sponsoring Periodic Payment Plan Certificates based
upon Portfolio shares as hereinafter provided; and
WHEREAS Distributors desires to arrange for the acquisition of
Portfolio shares for deposit and use under Systematic Investment Plans
(hereinafter sometimes collectively referred to as the "Plans"), of
which the STATE STREET BANK AND TRUST COMPANY will be the Custodian;
and
WHEREAS Distributors represents it is a member in good standing of
the National Association of Securities Dealers, Inc.; and
WHEREAS the Portfolio is registered under the Investment Company Act
of 1940, as amended (hereinafter called the "1940 Act"), Portfolio
shares are registered under the Securities Act of 1933, as amended,
(hereinafter called the "1933 Act") and the Portfolio is willing to
take the necessary steps, subject to approval of its shareholders to
continue to register Portfolio shares under the 1933 Act to the end
that there will be available for sale such number of Portfolio shares
as Distributors may reasonably be expected to sell.
NOW, THEREFORE in consideration of the sum of one dollar and other
good and valuable considerations by each of the parties hereto to the
other in hand paid, the receipt whereof is hereby acknowledged, and
the mutual covenants herein set forth, the parties hereto agree as
follows:
1. The Franchise Agreement, for Destiny II Portfolio, is hereby
effective as of the opening of business this date, and relations
between the Portfolio and Distributors thereafter will be governed by
the terms of this Agreement.
2. The Portfolio agrees to sell upon demand at the net asset value,
determined as provided by the then current prospectus (as determined
by Fidelity Service Co., Boston, Massachusetts, as agent for the
Portfolio), which is without imposition of any sales charge, to
Distributors, or any bank or banks acting as Custodian for the Plans
sponsored and issued by Distributors, a sufficient number of each
class of the Portfolio's shares to meet the requirements of all such
Plans as are sold, distributed and/or issued by Distributors.
3. The Portfolio agrees that it will comply to the best of its
ability with the federal securities laws, and the Portfolio agrees it
will use its best efforts to maintain enough shares registered under
the 1933 Act to permit the continued sale of Portfolio shares. The
Portfolio further agrees to make readily available to Distributors any
data, information or material in its possession that may be necessary
to the registration or qualification for the Plans for sale under the
federal securities laws, or the laws of any state.
4. The Portfolio agrees to supply to Distributors or the bank or
banks acting as Custodian for the Plans issued by Distributors a
sufficient number of copies of any and all general mailings, together
with the necessary envelopes, including without limitation, proxy
material, proxies, annual, semi-annual and quarterly reports, notices
and prospectuses, sent from time to time to the holders of Portfolio
shares so as to provide a single copy, together with the necessary
envelope and postage, to each Distributors' Planholder. The Portfolio
agrees to furnish all the above mentioned material at no cost to
Distributors. Additional copies of any current prospectus and any
printed information issued as supplemental to such prospectus of the
Portfolio will be supplied by the Portfolio at Distributors' expense
in sufficient quantities to accommodate Distributors in selling,
distributing and/or issuing the Plans. It is understood that
Distributors is an affiliate of Fidelity Management & Research Company
(hereinafter called "FMR"), investment adviser of the Portfolio and
that the Portfolio's agreement to supply information and printed
materials described in this agreement may be fulfilled by FMR.
Distributors agrees that it will furnish the Portfolio for its files
two copies of all material supplied to Planholders by Distributors.
It is recognized by the Portfolio that FMR may make payment to
Distributors with respect to any expenses incurred in the distribution
of shares of the Portfolio, such payments payable from the past
profits or other resources of FMR including management fees paid to it
by the Portfolio.
5. The Portfolio shall indemnify and hold harmless Distributors and
each person, if any, subjected to liability because of connection with
Distributors and their respective successors (all hereinafter in this
paragraph referred to as the "Defendants") against any liability,
claims, damage or expense (including, unless the Portfolio elects to
assume the defense, the reasonable cost of investigating and defending
any alleged liability, claim, damage, or expense and reasonable
counsel fees in connection therewith), joint or several, arising by
reason of any person acquiring any Plans for Portfolio shares on the
ground that the registration statement or prospectus for shares of the
Portfolio includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in
order to make statements therein not misleading, unless such statement
or omission occurred by reason of a variance in the prospectus
prepared by Distributors from the prospectus as contained in the
composition, etc., supplied by the Portfolio or was made in reliance
upon information furnished by Distributors for use therein. In no
case is the indemnity of the Portfolio in favor of Distributors or any
person indemnified to be deemed to protect Distributors or any such
person against any liability to the Portfolio or its security holders
to which Distributors or any controlling person would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties under this Agreement.
Upon the commencement of any suit against any Defendant in respect of
which indemnity may be sought as aforesaid, such Defendant shall
promptly notify the Portfolio, but failure so to notify the Portfolio
shall not relieve the Portfolio from any liability the Portfolio may
have to the Defendants otherwise than on account of said indemnity
agreement.
6. Distributors shall indemnify and hold harmless the Portfolio and
each person, if any, subjected to liability because of connection with
the Portfolio and their respective successors (all hereinafter in this
paragraph referred to as the "Defendants") against any liability,
claims, damages, or expense (including, unless Distributors elects to
assume the defense, the reasonable cost of investigating and defending
any alleged liability, claim, damages or expense and reasonable
counsel fees in connection therewith), joint or several, arising by
reason of the sponsorship or distribution by Distributors of Plans
based upon the Portfolio shares unless such liability, claim, damages
or expense arise by reason of an untrue statement of a material fact
or omission to state a material fact required to be stated in the
prospectus or registration statement of the Portfolio, or necessary in
order to make the statements therein not misleading. In no case is
the indemnity of Distributors in favor of the Portfolio or any person
indemnified to be deemed to protect the Portfolio or any such person
would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties under this
Agreement. Upon the commencement of any suit against any Defendant in
respect of which indemnity may be sought as aforesaid, such Defendant
shall promptly notify Distributors but failure to notify Distributors
shall not relieve Distributors from any liability Distributors may
have to the Defendants otherwise than on account of said indemnity
agreement.
7. The Agreement on the part of the Portfolio to sell Portfolio
shares upon demand, at net asset value set forth in paragraph 2
hereof, is subject to the following limitations:
(a) That the Plans are maintained in good standing as unit investment
trusts under the federal securities laws, provided, however, that
Distributors reserves the right to change the terms or conditions of,
or suspend or discontinue, any Plans at any time after notification
thereof to the Portfolio by letter or prepaid telegram; and
(b) That the membership of Distributors in the National Association of
Securities Dealers, Inc. and its registration as a broker-dealer under
the Securities Exchange Act of 1934, as amended, have not been
cancelled, revoked or suspended; and
(c) That Distributors is not in violation of any of the federal or
state laws and regulations relating to the registration and sale of
said Plans.
If Distributors shall, within thirty days after a default under any of
the provisions of this paragraph, cure such default to the reasonable
satisfaction of the Portfolio, then the agreement of the Portfolio to
sell at the net asset value Portfolio shares in accordance with
paragraph 2 hereof shall remain unimpaired, anything in this paragraph
7 to the contrary notwithstanding.
8. This Agreement shall have a term of two years from the effective
date of the registration of the Plans under the 1933 Act. Thereafter
this Agreement shall continue from year to year, unless either party
shall serve a notice upon the other by certified or registered mail,
return receipt requested, 120 days prior to the end of the year after
which termination is desired, canceling this Agreement, provided that
it shall be approved by the directors or shareholders of the Portfolio
as required by Section 15 of the 1940 Act. Notwithstanding to the
termination of this Agreement, the Portfolio agrees to sell sufficient
Portfolio shares to Distributors or any bank or banks acting as
Custodian for the Plans to permit completion of all Plans begun prior
to such termination. Distributors represents and agrees that it will
use its best efforts to sell Plans based upon Portfolio shares
throughout the term of this Agreement.
9. Distributors or any bank or banks acting as Custodian for the
Plans may from time to time substitute a new investment medium for the
Portfolio shares in accordance with the provisions of the Plan
certificate and prospectus in effect at the time.
10. All communications provided for hereunder shall be in writing and
shall be deemed to have been duly given if delivered or mailed by
first class mail prepaid (unless delivery by certified or registered
mail, return receipt requested, is provided for) to the respective
parties as follows:
Fidelity Destiny Portfolios: Destiny II Fidelity Distributors
Corporation
82 Devonshire Street 82 Devonshire Street
Boston, Massachusetts 02109 Boston, Massachusetts 02109
or to such other address as the Portfolio or Distributors designates
by written notice to that effect to the other.
11. This Agreement contains the entire understanding between the
parties and any modification, alteration, change or subsequent
agreement hereafter made shall be ineffective to change, modify or
discharge this Agreement in whole or in part unless such modification,
alteration, change or subsequent agreement is in writing and signed by
the party against whom enforcement of the change, modification,
discharge or alteration is sought.
12. This Agreement shall be construed in accordance with the laws of
Massachusetts.
13. This Agreement shall be binding upon and enforceable by and shall
bind and inures to the benefit of the Portfolio and Distributors and
their respective heirs, executors, administrators, successors and
assigns.
14. Distributors is expressly put on notice of the limitation of
shareholder liability as set forth in Article XI Section 3 of the
"Declaration of Trust" of the Portfolio and agrees that the
obligations assumed by the Portfolio under this contract shall be
limited in all cases to the Portfolio and its assets and Distributors
shall not seek satisfaction of any obligation from the shareholders or
any shareholder of the Portfolio. Nor shall Distributors seek
satisfaction of any obligations from the trustees or any individual
trustee of the Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
FIDELITY DESTINY PORTFOLIOS:
on behalf of Destiny II Portfolio
By /s/Robert C. Pozen
Senior Vice President
WITNESS:
/s/Eric D. Roiter FIDELITY DISTRIBUTORS CORPORATION
Secretary
By /s/Martha Willis
President
ATTEST:
/s/ Eric D. Roiter
Clerk
