diff --git a/.idea/modules.xml b/.idea/modules.xml
index bb2762df12f..31cba86fb8f 100644
--- a/.idea/modules.xml
+++ b/.idea/modules.xml
@@ -4,6 +4,7 @@
     <modules>
       <module fileurl="file://$PROJECT_DIR$/Kotlin.iml" filepath="$PROJECT_DIR$/Kotlin.iml" />
       <module fileurl="file://$PROJECT_DIR$/compiler/android-tests/android-tests.iml" filepath="$PROJECT_DIR$/compiler/android-tests/android-tests.iml" />
+      <module fileurl="file://$PROJECT_DIR$/compiler/annotations-ext/annotations-ext.iml" filepath="$PROJECT_DIR$/compiler/annotations-ext/annotations-ext.iml" />
       <module fileurl="file://$PROJECT_DIR$/compiler/backend/backend.iml" filepath="$PROJECT_DIR$/compiler/backend/backend.iml" />
       <module fileurl="file://$PROJECT_DIR$/build-tools/build-tools.iml" filepath="$PROJECT_DIR$/build-tools/build-tools.iml" />
       <module fileurl="file://$PROJECT_DIR$/compiler/cli/cli.iml" filepath="$PROJECT_DIR$/compiler/cli/cli.iml" />
diff --git a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java
index d8bcec9079a..5c30676b45a 100644
--- a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java
+++ b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java
@@ -269,6 +269,7 @@ public class JavaTypeTransformer {
     }
 
     public static TypeUsage adjustTypeUsageWithMutabilityAnnotations(PsiModifierListOwner owner, TypeUsage originalTypeUsage) {
+        // Overrides type usage in method signature depending on mutability annotation present
         EnumSet<TypeUsage> signatureTypeUsages =
                 EnumSet.of(TypeUsage.MEMBER_SIGNATURE_COVARIANT, TypeUsage.MEMBER_SIGNATURE_CONTRAVARIANT, TypeUsage.MEMBER_SIGNATURE_INVARIANT);
         if (!signatureTypeUsages.contains(originalTypeUsage)) {
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.java b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.java
new file mode 100644
index 00000000000..cb095c5d42e
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.java
@@ -0,0 +1,11 @@
+package test;
+
+import org.jetbrains.annotations.*;
+
+public interface LoadIterable<T> {
+    public @Mutable Iterable<T> getIterable();
+    public void setIterable(@Mutable Iterable<T> Iterable);
+
+    public @ReadOnly Iterable<T> getReadOnlyIterable();
+    public void setReadOnlyIterable(@ReadOnly Iterable<T> Iterable);
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.kt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.kt
new file mode 100644
index 00000000000..88d32c0a381
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.kt
@@ -0,0 +1,9 @@
+package test
+
+public trait LoadIterable<T> : java.lang.Object {
+    public fun getIterable(): MutableIterable<T>?
+    public fun setIterable(p0: MutableIterable<T>?)
+
+    public fun getReadOnlyIterable(): Iterable<T>?
+    public fun setReadOnlyIterable(p0: Iterable<T>?)
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.txt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.txt
new file mode 100644
index 00000000000..52dc3f9f521
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.txt
@@ -0,0 +1,8 @@
+package test
+
+public trait LoadIterable</*0*/ T> : java.lang.Object {
+    public abstract fun getIterable() : jet.MutableIterable<T>?
+    public abstract fun getReadOnlyIterable() : jet.Iterable<T>?
+    public abstract fun setIterable(/*0*/ p0 : jet.MutableIterable<T>?) : jet.Unit
+    public abstract fun setReadOnlyIterable(/*0*/ p0 : jet.Iterable<T>?) : jet.Unit
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.java b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.java
new file mode 100644
index 00000000000..91f36b65687
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.java
@@ -0,0 +1,8 @@
+package test;
+
+import org.jetbrains.annotations.*;
+
+public interface LoadIterableWithConflict<T> {
+    public @ReadOnly @Mutable Iterable<T> getIterable();
+    public void setIterable(@ReadOnly @Mutable Iterable<T> Iterable);
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.kt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.kt
new file mode 100644
index 00000000000..4c8ef4e6521
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.kt
@@ -0,0 +1,6 @@
+package test
+
+public trait LoadIterableWithConflict<T> : java.lang.Object {
+    public fun getIterable(): MutableIterable<T>?
+    public fun setIterable(p0: MutableIterable<T>?)
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.txt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.txt
new file mode 100644
index 00000000000..d811dc6c20b
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.txt
@@ -0,0 +1,6 @@
+package test
+
+public trait LoadIterableWithConflict</*0*/ T> : java.lang.Object {
+    public abstract fun getIterable() : jet.MutableIterable<T>?
+    public abstract fun setIterable(/*0*/ p0 : jet.MutableIterable<T>?) : jet.Unit
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.java b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.java
new file mode 100644
index 00000000000..88b2f547e8d
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.java
@@ -0,0 +1,11 @@
+package test;
+
+import org.jetbrains.annotations.*;
+
+public interface LoadIterableWithNullability<T> {
+    public @NotNull @Mutable Iterable<T> getIterable();
+    public void setIterable(@Mutable @NotNull Iterable<T> Iterable);
+
+    public @NotNull @ReadOnly Iterable<T> getReadOnlyIterable();
+    public void setReadOnlyIterable(@ReadOnly @NotNull Iterable<T> Iterable);
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.kt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.kt
new file mode 100644
index 00000000000..4a3753195a7
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.kt
@@ -0,0 +1,9 @@
+package test
+
+public trait LoadIterableWithNullability<T> : java.lang.Object {
+    public fun getIterable(): MutableIterable<T>
+    public fun setIterable(p0: MutableIterable<T>)
+
+    public fun getReadOnlyIterable(): Iterable<T>
+    public fun setReadOnlyIterable(p0: Iterable<T>)
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.txt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.txt
new file mode 100644
index 00000000000..bef44ff87ff
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.txt
@@ -0,0 +1,8 @@
+package test
+
+public trait LoadIterableWithNullability</*0*/ T> : java.lang.Object {
+    public abstract fun getIterable() : jet.MutableIterable<T>
+    public abstract fun getReadOnlyIterable() : jet.Iterable<T>
+    public abstract fun setIterable(/*0*/ p0 : jet.MutableIterable<T>) : jet.Unit
+    public abstract fun setReadOnlyIterable(/*0*/ p0 : jet.Iterable<T>) : jet.Unit
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.java b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.java
new file mode 100644
index 00000000000..3cd88d66247
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.java
@@ -0,0 +1,22 @@
+package test;
+
+import org.jetbrains.annotations.*;
+import java.util.ArrayList;
+
+public interface LoadIterableWithPropagation {
+    public interface LoadIterable<T> {
+        public @Mutable Iterable<T> getIterable();
+        public void setIterable(@Mutable Iterable<T> Iterable);
+
+        public @ReadOnly Iterable<T> getReadOnlyIterable();
+        public void setReadOnlyIterable(@ReadOnly Iterable<T> Iterable);
+    }
+
+    public class LoadIterableImpl<T> implements LoadIterable<T> {
+        public Iterable<T> getIterable() {return new ArrayList<T>();}
+        public void setIterable(Iterable<T> Iterable) {}
+
+        public Iterable<T> getReadOnlyIterable() {return new ArrayList<T>();}
+        public void setReadOnlyIterable(Iterable<T> Iterable) {}
+    }
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.kt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.kt
new file mode 100644
index 00000000000..8f90e700924
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.kt
@@ -0,0 +1,21 @@
+package test
+
+import java.util.ArrayList
+
+public trait LoadIterableWithPropagation: java.lang.Object {
+    public trait LoadIterable<T> : java.lang.Object {
+        public fun getIterable(): MutableIterable<T>?
+        public fun setIterable(p0: MutableIterable<T>?)
+
+        public fun getReadOnlyIterable(): Iterable<T>?
+        public fun setReadOnlyIterable(p0: Iterable<T>?)
+    }
+
+    public open class LoadIterableImpl<T> : LoadIterable<T> {
+        public override fun getIterable(): MutableIterable<T>? = ArrayList<T>()
+        public override fun setIterable(p0: MutableIterable<T>?): Unit {}
+
+        public override fun getReadOnlyIterable(): Iterable<T>? = ArrayList<T>()
+        public override fun setReadOnlyIterable(p0: Iterable<T>?): Unit {}
+    }
+}
diff --git a/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.txt b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.txt
new file mode 100644
index 00000000000..271816b9b8c
--- /dev/null
+++ b/compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.txt
@@ -0,0 +1,19 @@
+package test
+
+public trait LoadIterableWithPropagation : java.lang.Object {
+    
+    public trait LoadIterable</*0*/ T> : java.lang.Object {
+        public abstract fun getIterable() : jet.MutableIterable<T>?
+        public abstract fun getReadOnlyIterable() : jet.Iterable<T>?
+        public abstract fun setIterable(/*0*/ p0 : jet.MutableIterable<T>?) : jet.Unit
+        public abstract fun setReadOnlyIterable(/*0*/ p0 : jet.Iterable<T>?) : jet.Unit
+    }
+    
+    public open class LoadIterableImpl</*0*/ T> : test.LoadIterableWithPropagation.LoadIterable<T> {
+        public constructor LoadIterableImpl</*0*/ T>()
+        public open override /*1*/ fun getIterable() : jet.MutableIterable<T>?
+        public open override /*1*/ fun getReadOnlyIterable() : jet.Iterable<T>?
+        public open override /*1*/ fun setIterable(/*0*/ p0 : jet.MutableIterable<T>?) : jet.Unit
+        public open override /*1*/ fun setReadOnlyIterable(/*0*/ p0 : jet.Iterable<T>?) : jet.Unit
+    }
+}
diff --git a/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java b/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java
index 4751df1feb5..177e669ed1a 100644
--- a/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java
@@ -33,7 +33,7 @@ import org.jetbrains.jet.jvm.compiler.AbstractLoadJavaTest;
 @InnerTestClasses({LoadJavaTestGenerated.CompiledJavaCompareWithKotlin.class, LoadJavaTestGenerated.CompiledJavaIncludeObjectMethods.class, LoadJavaTestGenerated.CompiledJava.class, LoadJavaTestGenerated.SourceJava.class, LoadJavaTestGenerated.JavaAgainstKotlin.class})
 public class LoadJavaTestGenerated extends AbstractLoadJavaTest {
     @TestMetadata("compiler/testData/loadJava/compiledJavaCompareWithKotlin")
-    @InnerTestClasses({CompiledJavaCompareWithKotlin.Annotation.class, CompiledJavaCompareWithKotlin.Constructor.class, CompiledJavaCompareWithKotlin.JavaBean.class, CompiledJavaCompareWithKotlin.KotlinSignature.class, CompiledJavaCompareWithKotlin.Library.class, CompiledJavaCompareWithKotlin.Modality.class, CompiledJavaCompareWithKotlin.NotNull.class, CompiledJavaCompareWithKotlin.Vararg.class})
+    @InnerTestClasses({CompiledJavaCompareWithKotlin.Annotation.class, CompiledJavaCompareWithKotlin.Constructor.class, CompiledJavaCompareWithKotlin.JavaBean.class, CompiledJavaCompareWithKotlin.KotlinSignature.class, CompiledJavaCompareWithKotlin.Library.class, CompiledJavaCompareWithKotlin.Modality.class, CompiledJavaCompareWithKotlin.Mutability.class, CompiledJavaCompareWithKotlin.NotNull.class, CompiledJavaCompareWithKotlin.Vararg.class})
     public static class CompiledJavaCompareWithKotlin extends AbstractLoadJavaTest {
         public void testAllFilesPresentInCompiledJavaCompareWithKotlin() throws Exception {
             JetTestUtils.assertAllTestsPresentByMetadata(this.getClass(), "org.jetbrains.jet.generators.tests.GenerateTests", new File("compiler/testData/loadJava/compiledJavaCompareWithKotlin"), Pattern.compile("^(.+)\\.java$"), true);
@@ -914,6 +914,34 @@ public class LoadJavaTestGenerated extends AbstractLoadJavaTest {
             
         }
         
+        @TestMetadata("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability")
+        public static class Mutability extends AbstractLoadJavaTest {
+            public void testAllFilesPresentInMutability() throws Exception {
+                JetTestUtils.assertAllTestsPresentByMetadata(this.getClass(), "org.jetbrains.jet.generators.tests.GenerateTests", new File("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability"), Pattern.compile("^(.+)\\.java$"), true);
+            }
+            
+            @TestMetadata("LoadIterable.java")
+            public void testLoadIterable() throws Exception {
+                doTest("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.java");
+            }
+            
+            @TestMetadata("LoadIterableWithConflict.java")
+            public void testLoadIterableWithConflict() throws Exception {
+                doTest("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.java");
+            }
+            
+            @TestMetadata("LoadIterableWithNullability.java")
+            public void testLoadIterableWithNullability() throws Exception {
+                doTest("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.java");
+            }
+            
+            @TestMetadata("LoadIterableWithPropagation.java")
+            public void testLoadIterableWithPropagation() throws Exception {
+                doTest("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.java");
+            }
+            
+        }
+        
         @TestMetadata("compiler/testData/loadJava/compiledJavaCompareWithKotlin/notNull")
         public static class NotNull extends AbstractLoadJavaTest {
             public void testAllFilesPresentInNotNull() throws Exception {
@@ -964,6 +992,7 @@ public class LoadJavaTestGenerated extends AbstractLoadJavaTest {
             suite.addTest(KotlinSignature.innerSuite());
             suite.addTestSuite(Library.class);
             suite.addTestSuite(Modality.class);
+            suite.addTestSuite(Mutability.class);
             suite.addTestSuite(NotNull.class);
             suite.addTestSuite(Vararg.class);
             return suite;
diff --git a/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java b/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java
index aa39f5c5a44..b6f7225a1dd 100644
--- a/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java
@@ -1075,7 +1075,7 @@ public class LazyResolveNamespaceComparingTestGenerated extends AbstractLazyReso
     }
     
     @TestMetadata("compiler/testData/loadJava/compiledJavaCompareWithKotlin")
-    @InnerTestClasses({CompiledJavaCompareWithKotlin.Annotation.class, CompiledJavaCompareWithKotlin.Constructor.class, CompiledJavaCompareWithKotlin.JavaBean.class, CompiledJavaCompareWithKotlin.KotlinSignature.class, CompiledJavaCompareWithKotlin.Library.class, CompiledJavaCompareWithKotlin.Modality.class, CompiledJavaCompareWithKotlin.NotNull.class, CompiledJavaCompareWithKotlin.Vararg.class})
+    @InnerTestClasses({CompiledJavaCompareWithKotlin.Annotation.class, CompiledJavaCompareWithKotlin.Constructor.class, CompiledJavaCompareWithKotlin.JavaBean.class, CompiledJavaCompareWithKotlin.KotlinSignature.class, CompiledJavaCompareWithKotlin.Library.class, CompiledJavaCompareWithKotlin.Modality.class, CompiledJavaCompareWithKotlin.Mutability.class, CompiledJavaCompareWithKotlin.NotNull.class, CompiledJavaCompareWithKotlin.Vararg.class})
     public static class CompiledJavaCompareWithKotlin extends AbstractLazyResolveNamespaceComparingTest {
         public void testAllFilesPresentInCompiledJavaCompareWithKotlin() throws Exception {
             JetTestUtils.assertAllTestsPresentByMetadata(this.getClass(), "org.jetbrains.jet.generators.tests.GenerateTests", new File("compiler/testData/loadJava/compiledJavaCompareWithKotlin"), Pattern.compile("^(.+)\\.kt$"), true);
@@ -1956,6 +1956,34 @@ public class LazyResolveNamespaceComparingTestGenerated extends AbstractLazyReso
             
         }
         
+        @TestMetadata("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability")
+        public static class Mutability extends AbstractLazyResolveNamespaceComparingTest {
+            public void testAllFilesPresentInMutability() throws Exception {
+                JetTestUtils.assertAllTestsPresentByMetadata(this.getClass(), "org.jetbrains.jet.generators.tests.GenerateTests", new File("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability"), Pattern.compile("^(.+)\\.kt$"), true);
+            }
+            
+            @TestMetadata("LoadIterable.kt")
+            public void testLoadIterable() throws Exception {
+                doTestNotCheckingPrimaryConstructors("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterable.kt");
+            }
+            
+            @TestMetadata("LoadIterableWithConflict.kt")
+            public void testLoadIterableWithConflict() throws Exception {
+                doTestNotCheckingPrimaryConstructors("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithConflict.kt");
+            }
+            
+            @TestMetadata("LoadIterableWithNullability.kt")
+            public void testLoadIterableWithNullability() throws Exception {
+                doTestNotCheckingPrimaryConstructors("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithNullability.kt");
+            }
+            
+            @TestMetadata("LoadIterableWithPropagation.kt")
+            public void testLoadIterableWithPropagation() throws Exception {
+                doTestNotCheckingPrimaryConstructors("compiler/testData/loadJava/compiledJavaCompareWithKotlin/mutability/LoadIterableWithPropagation.kt");
+            }
+            
+        }
+        
         @TestMetadata("compiler/testData/loadJava/compiledJavaCompareWithKotlin/notNull")
         public static class NotNull extends AbstractLazyResolveNamespaceComparingTest {
             public void testAllFilesPresentInNotNull() throws Exception {
@@ -2006,6 +2034,7 @@ public class LazyResolveNamespaceComparingTestGenerated extends AbstractLazyReso
             suite.addTest(KotlinSignature.innerSuite());
             suite.addTestSuite(Library.class);
             suite.addTestSuite(Modality.class);
+            suite.addTestSuite(Mutability.class);
             suite.addTestSuite(NotNull.class);
             suite.addTestSuite(Vararg.class);
             return suite;